FLAG INVESTORS FUNDS INC, N-30D, 2000-10-25

FLAG INVESTORS FUNDS INC
N-30D, 2000-10-25

Previous: GALILEO INTERNATIONAL INC, POS AM, 2000-10-25

Next: ORBITAL IMAGING CORP, 8-K, 2000-10-25

<PAGE>

[LOGO]
Flag Investors
Investing With A Difference(R)

European Mid-Cap
Fund

Annual Report

August 31, 2000
<PAGE>

Report Highlights
--------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 45.74% (excluding sales
charges) for the year ended August 31, 2000, outperforming the MDAX Index
return of -0.44% for the same time period.

. The Fund's strong outperformance was primarily due to its positioning during
the first half of the fiscal year. These positions included an overweighting
in the Internet, media and telecommunications sectors. Strong stock selection
across the market sectors also benefited the Fund, as we seek only those
smaller and mid-size European companies that offer what we believe to be the
greatest value and growth potential.

. The European mid-cap equity markets saw polarized investor sentiment from the
first half of the fiscal year to the second. Technology, media and
telecommunications (TMT) stocks strongly outperformed in the first half. In
the second half of the year, TMT stocks experienced a significant correction,
and the equity markets were dominated instead by stock-specific stories.

. While volatility will likely continue for the near term, we expect mid-cap
European equity market performance to gain strength over the longer term based
primarily on robust GDP growth prospects for the region and double-digit
earnings growth expectations for many European companies with strong
management and competitive products. Opportunities created by Economic
Monetary Union, Europe's move toward creating greater shareholder value, and
strong ongoing merger and acquisition activity also bode well for the mid-cap
European markets.

<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Growth of a $10,000 Investment in Class A Shares/1/
October 17, 1997 - August 31, 2000

$10,000 invested in the Flag Investors European Mid-Cap Fund
Class A Shares at inception on October 17, 1997
was worth $18,049 on August 31, 2000.

[GRAPH APPEARS HERE]

10/17/97 $10,000
$ 9,552
$10,552
$12,568
8/31/98 $11,376
$11,576
$11,695
$11,363
8/31/99 $12,384
$13,276
$20,875
$17,109
8/31/2000 $18,049

Flag Investors European Mid-Cap Fund -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ----------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/17/97 1 year 10/17/97
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Mid-Cap Fund --
Class A Shares/1/ 45.74% 80.49% 45.74% 22.83%
-----------------------------------------------------------------------------------------------------------
MDAX Index/2/ -0.44% 4.27%/4/ -0.44% 1.49%/4/
-----------------------------------------------------------------------------------------------------------
Lipper European Region
Funds Average/3/ 25.06% 54.45%/4/ 25.06% 16.01%/4/
-----------------------------------------------------------------------------------------------------------
</TABLE>

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified period if certain fees and expenses had
not been waived by the Fund.
/2/ The MDAX Index is an unmanaged broad-based market index of 70 medium sized
German companies. Index returns do not reflect expenses, which have been
deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning October 31, 1997.

1
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Flag Investors European Mid-Cap Fund -- Class B

Cumulative Total Return Average Annual Total Return
----------------------- ------------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 3/30/98 1 year 3/30/98
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Mid-Cap Fund --
Class B Shares/1/ 44.33% 56.68% 44.33% 20.36%
-------------------------------------------------------------------------------------------
MDAX Index/2/ -0.44% -6.93%/4/ -0.44% -2.92%/4/
Lipper European Region
-------------------------------------------------------------------------------------------
Funds Average/3/ 25.06% 27.19%/4/ 25.06% 9.83%/4/
---------------------------------------------------------------------------------------------
</TABLE>

-----------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified period if certain fees and expenses had
not been waived by the Fund.
/2/ The MDAX Index is an unmanaged broad-based market index of 70 medium sized
German companies. Index returns do not reflect expenses, which have been
deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning March 31, 1998.

Flag Investors European Mid-Cap Fund -- Class C

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
-------------------------- -----------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 9/2/98 1 year 9/2/98
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
European Mid-Cap Fund --
Class C Shares/1/ 44.42% 59.08% 44.42% 26.19%
--------------------------------------------------------------------------------------------------------------------
MDAX Index/2/ -0.44% -1.72%/4/ -0.44% -0.86%/4/
--------------------------------------------------------------------------------------------------------------------
Lipper European Region
Funds Average/3/ 25.06% 36.17%/4/ 25.06% 16.12%/4/
--------------------------------------------------------------------------------------------------------------------
</TABLE>

2
<PAGE>

Flag Investors European Mid-Cap 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 performance of each
of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.

Both the line graph and the SEC standardized total return figures include the
impact of the 5.50% maximum initial sales charge for the Class A Shares and the
contingent deferred sales charge applicable to the specified time period for the
Class B and Class C Shares. Returns would be higher for Class A Shares investors
who qualified for a lower initial sales charge or for Class B or Class C Shares
investors who continued to hold their shares past the end of the specified time
period.

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 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.

3
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 17, 1997 - August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
--Flag Investors European Mid-Cap Fund--Class A Shares $17,056
--MDAX Index/2/ $10,427

Flag European Mid-Cap Equity - A MDAX Index
<S> <C> <C>
10/17/97 $ 9,450 $10,000
$ 9,027 $ 9,819
$ 9,972 $10,595
$11,877 $12,317
8/31/98 $10,750 $10,610
$10,939 $11,059
$11,052 $10,081
$10,738 $ 9,683
8/31/99 $11,703 $10,473
$12,546 $ 9,876
$19,727 $ 9,876
$16,168 $10,061
8/31/2000 $17,056 $10,427
</TABLE>

Average Annual Total Return/1/

<TABLE>
<CAPTION>
Periods Ended August 31, 2000 1 Year Since Inception/3/
-------------------------------------------------------------
<S> <C> <C>
Class A Shares 37.73% 20.43%
-------------------------------------------------------------
</TABLE>

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's maximum 5.50% sales charge. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure. Performance would have been lower during the specified period if
certain fees and expenses had not been waived by the Fund.
/2/ The MDAX Index is an unmanaged broad-based market index of 70 medium sized
German companies. Benchmark returns are for the period beginning October 31,
1997.
/3/ October 17, 1997.

4
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
March 30, 1998 - August 31, 2000

[GRAPH APPEARS HERE]

--Flag Investors European Mid-Cap Fund--Class B Shares $15,368
--MDAX Index/2/ $9,307

Flag European Mid-Cap Equity - B MDAX Index
<S> <C> <C>
3/30/98 $10,000 $10,000
$10,556 $10,994
8/31/98 $ 9,538 $ 9,470
$ 9,698 $ 9,871
$ 9,780 $ 8,999
$ 9,579 $ 8,643
8/31/99 $10,421 $ 9,348
$11,153 $ 8,815
$17,504 $ 8,815
$14,435 $ 8,981
8/31/2000 $15,368 $ 9,307
</TABLE>

Average Annual Total Return/1/

<TABLE>
<CAPTION>
Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------
<S> <C> <C>
Class B Shares 39.34% 19.40%
--------------------------------------------------------------
</TABLE>

--------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance figures
for the classes differ because each class maintains a distinct sales charge
and expense structure. Performance would have been lower during the
specified period if certain fees and expenses had not been waived by the
Fund.
/2/ The MDAX Index is an unmanaged broad-based market index of 70 medium sized
German companies. Benchmark returns are for the period beginning March 31,
1998.
/3/ March 30, 1998.

5
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Additional Performance Information (concluded)

Change in Value of a $10,000 Investment in Class C Shares/1/
September 2, 1998 - August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
--Flag Investors European Mid-Cap Fund--Class C Shares $15,908
--MDAX Index/2/ $9,828

Flag European Mid-Cap Equity - C C MDAX Index
<S> <C> <C>
9/2/98 $10,000 $10,000
$10,256 $10,423
$10,343 $ 9,502
$10,021 $ 9,127
8/31/99 $10,905 $ 9,871
$11,786 $ 9,308
$18,505 $ 9,308
$15,114 $ 9,483
8/31/2000 $15,908 $ 9,828

</TABLE>

Average Annual Total Return/1/

<TABLE>
<CAPTION>
Periods Ended August 31, 2000 1 Year Since Inception/3/
-----------------------------------------------------------------------------
<S> <C> <C>
Class C Shares 43.42% 26.19%
-----------------------------------------------------------------------------
</TABLE>

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class C shares is 1.00% for
shares redeemed within one year of purchase. Performance figures for the
classes differ because each class maintains a distinct sales charge and
expense structure. Performance would have been lower during the specified
period if certain fees and expenses had not been waived by the Fund.
/2/ The MDAX Index is an unmanaged broad-based market index of 70 medium sized
German companies. Benchmark returns are for the period beginning August 31,
1998.
/3/ September 2, 1998.

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors
European Mid-Cap Fund (the "Fund"), providing a detailed review of the markets,
the portfolio in which the Fund invests (the "Portfolio"), and our outlook.
Included are a complete financial summary of the Fund's operations and listing
of the Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund significantly outperformed its benchmark. The
Fund's Class A shares produced a return of 45.74% for the twelve months ended
August 31, 2000, as compared to -0.44% for the MDAX Index. The Fund's Class B
and Class C shares produced annual returns of 44.33% and 44.42%, respectively.

This strong outperformance was primarily due to the Fund's positioning during
the first half of the fiscal year. These positions included an overweighting in
the Internet, media and telecommunications sectors and investments in smaller as
well as mid-cap companies. Strong stock selection across the market sectors also
benefited the Fund. During the second half of the fiscal year, the Fund was
impacted by its exposure to the technology sector, which experienced a
significant correction during these months. Still, we successfully sold certain
technology positions that we considered overvalued in a timely manner, and we
also focused on holding the more traditional technology stocks. Holdings in the
biotechnology sector positively contributed to Fund performance.

Some of the Fund's best performers for the fiscal period were smaller, high-
growth Neuer Markt stocks. The Neuer Markt is the regulated market segment of
the German Stock Exchange specializing in younger, innovative companies. These
Portfolio positions included Qiagen and Intershop Communications, which each
jumped more than 400% during the fiscal year. Qiagen provides technologies for
separating and purifying DNA and RNA. Intershop develops and markets software
for Internet commerce. Another Neuer Markt outperformer was D. Logistics, which
rose over 900% during the annual period. D. Logistics is a consulting firm that
helps companies, airports and hospitals manage warehousing problems, loading
logistics and supplies. It is important to keep in mind that these types of
returns are not typical and are unlikely to reoccur. Among MDAX stocks, Altana
and Porsche were the strongest contributors to Fund performance, up 70% and 67%,
respectively, for the twelve months. Altana is a specialty chemicals and
pharmaceutical company with an

7
<PAGE>

Letter to Shareholders (continued)
--------------------------------------------------------------------------------

interesting, newly emerging biotech pipeline. Porsche is the well-known niche
car manufacturer.

Investment Environment

As a whole, Europe rose 10.08% in US dollar terms during the fiscal period.
Most of this performance can be attributed to the first half of the fiscal year,
with the region's markets as a whole down 3.43% in the latter half. The markets
were impacted by only slowly improving domestic growth rates, increased
competition, concerns about interest rate hikes both from the US Federal Reserve
Board and the European Central Bank, and a weakening Euro currency. Later in the
fiscal year, there were signs that the economies of "core Europe" were finally
picking up, including the mainly export-driven growth of Germany and France.
Also, while the European Central Bank did raise interest rates four times in the
first six months of 2000 in response to global inflation worries, it did not
succumb to the temptation to dramatically raise rates in an effort to stabilize
the currency. Instead, it pursued a policy of moderate growth.

Mid-cap European stocks, however, including members of the MDAX, disappointed
and lost ground in US dollar terms. The MDAX was down 0.44% for the annual
reporting period, as high volatility and divergent development of "New Economy"
vs. "Old Economy" stocks dominated. During the first half of the reporting
period, markets were driven by enthusiasm for technology, media and
telecommunications stocks.

During the second half of the fiscal year, many European investors began to
doubt the valuations implied by stock prices and looked instead for sales and
earnings visibility. Quality became increasingly important, and those companies
missing published earnings targets were severely punished. There was a global
correction of technology, media and telecommunications stocks in general and of
Internet-related stocks in particular during these months. The result was a
rotation into more traditional defensive sectors, such as pharmaceuticals,
financial services and consumer goods, and a subsequent recovery for the MDAX
Index. Financial stocks in the German mid-cap equity market particularly
benefited from the approval of German tax reform, which puts into effect a
decrease in corporate taxation and allows for the tax-efficient sale of company
holdings.

8
<PAGE>

--------------------------------------------------------------------------------

Neuer Markt stocks turned in mixed performance, with some companies gaining
ten-fold during the annual period and others losing 90% of their value. The best
performing sectors within the Neuer Markt were biotechnology,
logistics/transport, and selective technology stocks. During the second calendar
quarter, four of the Fund's holdings were among the 10 best-performing stocks of
the more than 300-member Neuer Markt Index.

European mid-cap markets continued to respond positively to rising merger
activity, as companies sought to take advantage of the new opportunities created
by an enlarged "domestic" market. Corporate restructuring, privatization and
deregulation are also combining to create a new investment frontier--and greater
value for shareholders. For example, among the Portfolio's holdings, Kiekert, a
German car-lock manufacturer, advanced heavily based on expectations of a
takeover by a group led by the venture capital arm of Schroders for 35 euros per
share. While no two economies are alike, we believe the current environment in
Europe offers some parallels to the US corporate environment in the 1980s, which
among other things, helped propel the US stock market to record highs through
the late 1980s and the 1990s.

Looking Ahead

In the near term, we believe there will likely be continued volatility in the
European mid-cap equity markets. However, several factors lead us to a generally
optimistic outlook for these markets more long term. In our view, favorable
signs include ongoing deregulation and corporate restructuring, which in turn
should lead to higher corporate efficiency and a more positive earnings outlook.
Upcoming pension reform could also lead to increased demand for equities within
several European countries. We believe MDAX members in particular could profit
ahead from the recent sector rotation and the re-discovery of "Old Economy"
stocks and their comparatively low valuations. The impact of Economic Monetary
Union will continue to ripple through the various nations of Europe's economies.
Mergers and acquisitions are likely to continue and perhaps even accelerate
across most sectors, providing upward price momentum. Earnings growth prospects
are favorable for many European companies across the sector spectrum.

The primary risk to Europe's equity markets is negative sentiment from the US,
particularly regarding the technology sector. High oil prices and a weak euro
leading to inflation, which in turn could lead to further interest

9
<PAGE>

Letter to Shareholders (concluded)
--------------------------------------------------------------------------------

rate hikes by the European Central Bank and dampened economic growth, are also
conditions to monitor carefully. Global economic growth weakening unexpectedly
poses a risk to the markets as well. It is important to keep in mind that we
remain disciplined in our investment process. Not all companies will benefit
equally from the new era of competition in Europe. This makes the knowledge and
insight of the Fund's management team to select an effective mix of promising
technology stocks, special situations within the more traditional sectors, EMU
winners, and selective European stocks that are leaders in their industries more
crucial than ever.

We believe the Fund's investment strategy positions the Portfolio well to
continue to pursue its objective of seeking a high level of capital
appreciation, and as a secondary objective, reasonable dividend income. We
appreciate your support of the Fund, and we look forward to continuing to serve
your investment needs for many years ahead.

Sincerely,

/s/ Klaus Martini /s/ Claudia Rathgeb

Klaus Martini
Claudia Rathgeb
on behalf of the Portfolio Management Team
August 31, 2000

10
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

<TABLE>
--------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Provesta Portfolio (the "Portfolio"), at value................ $39,744,749
Receivable from Manager for expense reimbursement........................... 28,683
Receivable for capital shares sold.......................................... 180,178
Receivable from Provesta Portfolio for withdrawals.......................... 70,603
Foreign tax reclaim receivable.............................................. 31,792
Deferred organization costs................................................. 5,343
-----------
Total assets............................................................... 40,061,348
-----------
Liabilities:
Payable for capital shares redeemed......................................... 102,450
Payable to Provesta Portfolio for contributions............................. 110,363
Transfer agent fees payable................................................. 7,185
Distribution and service fees payable....................................... 17,432
Accounting fees payable..................................................... 1,900
Administration fees payable................................................. 6,282
Other accrued expenses...................................................... 25,428
-----------
Total liabilities.......................................................... 271,040
-----------
Net assets................................................................. $39,790,308
===========
Net Assets Consist of:
Capital stock, $0.001 par value............................................. $ 1,913
Paid-in capital............................................................. 28,912,515
Accumulated net investment income........................................... 219,444
Accumulated net realized gain on investments
and foreign currency transactions.......................................... 906,596
Net unrealized appreciation of investments, foreign currency
translations and foreign currency contracts................................ 9,749,840
-----------
Net assets................................................................. $39,790,308
===========
Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets................................................................. $23,536,366
===========
Shares outstanding......................................................... 1,065,579
===========
Net asset value and redemption price per share............................. $ 22.09
===========
Offering price per share ($22.09 / .945)................................... $ 23.38
===========
Class B Shares
Net assets................................................................. $12,656,105
===========
Shares outstanding......................................................... 661,974
===========
Net asset value and offering price per share............................... $ 19.12
===========
Minimum redemption price per share ($19.12 x .95).......................... $ 18.16
===========

Class C Shares
Net assets................................................................. $ 3,597,837
===========
Shares outstanding......................................................... 185,189
===========
Net asset value and offering price per share............................... $ 19.43
===========
Minimum redemption price per share ($19.43 x .99).......................... $ 19.24
===========
</TABLE>

See Notes to Financial Statements.

11
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Statement of Operations

<TABLE>
<CAPTION>
For the
Year Ended
August 31,
-----------------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses Allocated from Provesta Portfolio:
Dividend income................................................................. $ 232,506
Less: Foreign withholding taxes................................................. (22,075)
-----------
Net dividend income.......................................................... 210,431
Interest income................................................................. 52,367
Expenses........................................................................ (465,568)
-----------
Expenses in excess of income allocated from Provesta Portfolio............... (202,770)
-----------
Expenses:
Transfer agent fees............................................................. 79,458
Administration fees............................................................. 74,811
Accounting fees................................................................. 22,800
Professional fees............................................................... 21,672
Registration fees............................................................... 29,104
Reports to shareholders......................................................... 25,928
Directors' fees................................................................. 2,516
Amortization of organization costs.............................................. 2,525
Distribution fees
Class A Shares(a).............................................................. 34,939
Class B Shares................................................................. 75,271
Class C Shares................................................................. 18,500
Service fees
Class A Shares(a).............................................................. 14,065
Class B Shares................................................................. 25,090
Class C Shares................................................................. 6,167
Other expenses.................................................................. 6,481
-----------
Total expenses.......................................................... 439,327
Less: Fees waivers or expense reimbursements.................................... (297,143)
-----------
Net expenses................................................................. 142,184
-----------
Expenses in excess of income................................................. (344,954)
-----------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies Allocated from Provesta Portfolio:
Net realized gain (loss) on:
Investments.................................................................... 1,292,134
Foreign currency transactions and forward foreign
currency contracts........................................................... 11,355
Net change in unrealized appreciation/depreciation on:
Investments.................................................................... 9,246,074
Foreign currency translations and forward foreign
currency contracts........................................................... (21,030)
-----------
Net Realized and Unrealized Gain on Investments and
Foreign Currencies Allocated from Provesta Portfolio............................ 10,528,533
-----------
Net Increase in Net Assets Resulting from Operations............................. $10,183,579
===========
</TABLE>

(a) As of January 18, 2000, Class A Shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.

See Notes to Financial Statements.

12
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, August 31,
--------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income................... $ (344,954) $ (78,989)
Net realized gain (loss) on investment and
foreign currency transactions allocated from
Provesta Portfolio............................ 1,303,489 (116,147)
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations allocated from
Provesta Portfolio............................ 9,225,044 1,377,810
------------ -----------
Net increase in net assets resulting
from operations............................... 10,183,579 1,182,674
------------ -----------
Distributions to Shareholders:
Distributions from realized gains:
Class A Shares................................ (120,211) (51,423)
Class B Shares................................ (72,818) (76,047)
Class C Shares................................ (16,864) (9,584)
------------ -----------
Total distributions............................ (209,893) (137,054)
------------ -----------
Capital Share Transactions:
Net proceeds from shares sold.................. 76,874,729 23,243,388
Net proceeds from dividends and distributions
reinvested.................................... 191,144 122,669
Net cost of shares redeemed.................... (69,794,272) (8,555,403)
------------ -----------
Net increase in net assets resulting from
capital share transactions.................... 7,271,601 14,810,654
------------ -----------
Total increase in net assets................ 17,245,287 15,856,274
Net Assets:
Beginning of year.............................. 22,545,021 6,688,747
------------ -----------
End of year (includes accumulated
undistributed net investment income and
accumulated expenses in excess of income
of $219,444 and $(86,639), respectively)...... $ 39,790,308 $22,545,021
============ ===========
</TABLE>

See Notes to Financial Statements.

13
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Financial Highlights--Class A Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Oct. 17, 1997/1/
August 31, August 31, to August 31,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.................... $ 15.28 $ 14.22 $ 12.50
------- ------- ------------
Investment Operations:
Net investment (expenses in excess of) income............. (0.14) (0.01) 0.01
Net realized and unrealized gain on investments and
foreign currencies allocated from Provesta Portfolio..... 7.09 1.26 1.71
------- ------- ------------
Increase from investment operations....................... 6.95 1.25 1.72
------- ------- ------------
Distributions to Shareholders:
Distributions from net realized gains..................... (0.14) (0.19) --
------- ------- ------------
Total distributions....................................... (0.14) (0.19) --
------- ------- ------------
Net Asset Value at End of Period........................... $ 22.09 $ 15.28 $ 14.22
======= ======= ============
Total Return (based on net asset value)/2/................. 45.73% 8.86% 13.76%
Ratios and Supplemental Data:
Net assets, end of period (000's)......................... $23,536 $13,907 $ 2,402
Ratios to average net assets:
Expenses/3/.............................................. 1.60% 1.60% 1.60%/4/
Net investment (expenses in excess of) income/3/......... (0.78)% (0.10)% 0.23%/4/
Portfolio turnover of Provesta Portfolio.................. 72% 89% 82%
</TABLE>

-----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Provesta Portfolio's expenses
net of expense reimbursements. Had the Manager not undertaken to reimburse
such expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:
Expenses to average net assets 2.52% 4.12% 18.86%/4/
Expenses in excess of income to
average net assets (1.70)% (2.62)% (17.03)%/4/
/4/ Annualized.

See Notes to Financial Statements.

14
<PAGE>

Flag Investors European Mid-Cap Fund
-------------------------------------------------------------------------------

Financial Highlights--Class B Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the Forthe Period
Year Ended Year Ended Mar. 30, 1998/1/
August 31, August 31, to August 31,
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning of Period......................................... $ 13.37 $ 12.55 $ 12.50
------- ------- --------
Investment Operations:
Expenses in excess of income.................................................. (0.20) (0.11) (0.02)
Net realized and unrealized gain on investments and foreign
currencies allocated from Provesta Portfolio................................ 6.09 1.12 0.07
------- ------- --------

Increase from investment operations .......................................... 5.89 1.01 0.05
------- ------- --------
Distributions to Shareholders:
Distributions from net realized gains......................................... (0.14) (0.19) --
------- ------- --------
Total distributions........................................................... (0.14) (0.19) --
------- ------- --------
Net Asset Value at End of Period............................................... $ 19.12 $ 13.37 $ 12.55
======= ======= ========
Total Return (based on net asset value)/2/..................................... 44.32% 8.12% 0.40%
Ratios and Supplemental Data:
Net assets, end of period (000's)............................................. $12,656 $ 6,940 $ 4,287
Ratios to average net assets:
Expenses/3/.................................................................. 2.35% 2.35% 2.35%/4/
Expenses in excess of income/3/.............................................. (1.53)% (1.06)% (0.70)%/4/
Portfolio turnover of Provesta Portfolio...................................... 72% 89% 82%
</TABLE>

____________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Provesta Portfolio's expenses
net of expense reimbursements. Had the Manager not undertaken to reimburse
such expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:
Expenses to average net assets 3.28% 4.37% 19.61%/4/
Expenses in excess of income to
average net assets (2.46)% (3.08)% (17.96)%/4/
/4/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------
Financial Highlights--Class C Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the For the Period
Year Ended Sept. 2, 1998/1/
August 31, to August 31,
--------------------------------------------------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Net Asset Value at Beginning of Period....................................................... $ 13.57 $ 12.50
-------- --------
Investment Operations:
Expenses in excess of income................................................................ (0.18) (0.06)
Net realized and unrealized gain on investments and foreign currencies
allocated from Provesta Portfolio......................................................... 6.18 1.32
-------- --------
Increase from investment operations......................................................... 6.00 1.26
-------- --------
Distributions to Shareholders:
Distributions from net realized gains....................................................... (0.14) (0.19)
-------- --------
Total distributions......................................................................... (0.14) (0.19)
-------- --------
Net Asset Value at End of Period............................................................. $ 19.43 $ 13.57
======== ========
Total Return (based on net asset value)/2/................................................... 44.42% 10.15%
Ratios and Supplemental Data:
Net assets, end of period (000's)........................................................... $ 3,598 $ 1,698
Ratios to average net assets:
Expenses/3/................................................................................ 2.35% 2.35%/4/
Expenses in excess of income/3/............................................................ (1.52)% (0.73)%/4/
Portfolio turnover of Provesta Portfolio.................................................... 72% 89%
</TABLE>

____________________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1999.
/3/ Includes the Fund's allocated portion of the Provesta Portfolio's expenses
net of expense reimbursements. Had the Manager not undertaken to reimburse
such expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:
Expenses to average net assets 3.28% 4.89%/4/
Expenses in excess of income to
average net assets (2.45)% (3.27)%/4/
/4/ Annualized.

See Notes to Financial Statements.

16
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

Flag Investors Funds, Inc. (the "Company") (formerly Deutsche Funds, Inc.)
was incorporated in Maryland on May 22, 1997. The Company is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, consisting of six separate investment series (the
"Funds"). The accompanying financial statements and notes relate to Flag
Investors European Mid-Cap Fund (the "Fund").

The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Provesta Portfolio (formerly the Deutsche
Provesta Portfolio, the "Portfolio") which has substantially the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio,
which was 58.8% on August 31, 2000. At August 31, 2000 the remaining interest in
the portfolio was held by Deutsche European Mid-Cap (one of the series
constituting Deutsche Global Funds, Ltd., an offshore company and affiliate of
the Company). The financial statements of the Portfolio, including its portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C shares. Each class of shares is subject to a Distribution fee, and Class
B and Class C Shares are also subject to a Service fee. Each Class will bear its
respective portion of the Service and Distribution fees. Effective January 18,
2000, the Class A Service fee was eliminated and replaced by a Distribution fee.

NOTE 2 -- Significant Accounting Policies

When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with accounting principles generally accepted in the
United States of America. 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:

17
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- continued

Valuation of Securities

Valuation of securities by the portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included elsewhere
in this report.

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income, expenses
and realized and unrealized gains and losses recorded by the Portfolio on a
daily basis based upon the amount of its investment in the Portfolio. The
Company accounts separately for the assets, liabilities and operations of each
fund. Expenses attributable to each fund are charged directly to the
respective fund, while general Company expenses are allocated among the funds.
The expenses of each fund (other than class specific expenses) are further
allocated to each class of shares based on their relative net asset value.

Federal Income Taxes

The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of the Fund to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended. Accordingly, the
Fund would not be subject to US federal income taxes to the extent it
distributes substantially all of its net taxable income including any net
capital gains for each fiscal year. In addition, by distributing, during each
calendar year, substantially all of its net investment income and capital
gains, the Fund would not be subject to US federal excise tax. Accordingly, no
provision for US federal income and excise tax is required.

Distributions to Shareholders

Dividends from net investment income are declared and paid at least
annually. Capital gains, if any, are distributed at least annually. However,
to the extent that the net realized gains can be reduced by any capital loss
carryforwards, such gains will not be distributed. The Fund records all
dividends and distributions to shareholders on ex-dividend date.

Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from accounting

18
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

NOTE 2 -- concluded

principles generally accepted in the United States of America. These
differences, which could be temporary or permanent in nature, may result in
reclassification of distributions; however, net investment income, net
realized gains and net assets are not affected.

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Fund were paid initially by Deutsche Funds
Management, Inc. ("DFM") and are being reimbursed by the Fund. Such
organization costs have been deferred and are being amortized ratably over
a period of sixty months from the commencement of operations of the Fund.
The amount paid by the Fund on any redemption by ICC Distributors, Inc. (or
any subsequent holder) of such Fund's initial shares will be reduced by the
pro-rata portion of any unamortized organization costs of the Fund.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche BankAG, serves as Administrator. Under the Administration
Agreement, ICCC assists in the operations of the Fund, subject to the direction
and control of the Board of Directors of the Company. For its services, ICCC
receives a fee from the Fund, which is calculated daily and paid monthly, at an
annual rate of 0.065% of the average daily net assets of the Fund up to $200
million and 0.0525% of such assets in excess of $200 million, subject to a
minimum fee of $75,000 annually. For the period April 7, 2000 through August 31,
2000 ICCC's fee was $29,934. Prior to April 7, 2000, Federated Services Company
("Federated") served as Administrator and operated under a similar fee
structure.

Investors Bank and Trust (Canada) ("IBT") provides accounting services to
the Fund for which the Fund pays IBT an annual fee that is calculated daily and
paid monthly from the Fund's average daily net assets.

As of April 7, 2000, ICCC serves as the transfer agent and dividend
disbursing agent for the Fund. The Fund pays ICCC a per account fee that is
calculated daily and paid monthly. For the period April 7, 2000 through August
31, 2000 ICCC's fee was $32,787. Prior to April 7, 2000, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund and operated under a similar fee structure.

19
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 3 -- concluded

ICC Distributors, Inc. (ICCD), a non-affiliated entity, provides
distribution services to the Fund for which the Fund pays ICCD an annual fee
pursuant to Rule 12b-1, that is calculated daily and paid monthly at the annual
rate of: 0.25% of the Class A Shares' average daily net assets and 0.75% of the
Class B and Class C Shares' average daily net assets. Class B and Class C Shares
are subject to a 0.25% shareholder servicing fee. Prior to January 18, 2000
Edgewood Services Inc. served as distributor and shareholder servicing agent for
the Fund and operated under a similar fee structure.

By an Expense Limitation agreement effective June 1, 2000, between the
Company and DFM, DFMhas agreed to waive its fees and reimburse expenses of the
Fund in order to limit the total operating expenses of the Fund (which includes
expenses of the Fund and its pro-rata portion of expenses of the Portfolio), to
not more than 1.60% of the average daily net assets of the Class AShares and
2.35% of the average daily net assets of the Class B Shares and Class C Shares,
through June 1, 2001.

Certain officers and directors of the Funds are also officers and directors
of ICCC or affiliated with Deutsche Bank. These persons are not paid by the
Funds.

NOTE 4 -- Concentration of Ownership

From time to time the Fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund and the Portfolio.

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
----------- -------------
Deutsche Bank Securities, Inc. 1 28.07%
Merrill Lynch Pierce Fenner &Smith 3 32.97%

20
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

NOTE 5 -- Capital Share Transactions

The Fund is authorized to issue up to 250,000,000 shares of $0.001 par value
capital stock. Transactions in capital stock were as follows for the following
periods:

<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 2000 August 31, 1999
--------------------- -----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold....................... 3,268,141 $ 69,518,527 1,197,311 $17,754,423
Reinvestment of dividends
and distributions............... 6,386 112,774 3,201 46,741
Shares redeemed................... (3,118,971) (66,703,148) (459,377) (6,838,703)
---------- ------------ --------- -----------
Net increase...................... 155,556 $ 2,928,153 741,135 $10,962,461
---------- ------------ --------- -----------
Class B Shares
Shares sold....................... 279,468 $ 5,482,920 269,748 $ 3,415,267
Reinvestment of dividends
and distributions............... 4,076 62,810 5,232 67,185
Shares redeemed................... (140,502) (2,461,508) (97,624) (1,239,901)
---------- ------------ --------- -----------
Net increase...................... 143,042 $ 3,084,222 177,356 $ 2,242,551
---------- ------------ --------- -----------

For the Period
Year Ended Sept. 2, 1998/1/to
August 31, 2000 August 31, 1999
--------------------- -----------------------
Shares Amount Shares Amount
------ ------ ------ ------
Class C Shares
Shares sold....................... 95,325 $ 1,873,282 161,281 $ 2,073,698
Reinvestment of dividends
and distributions............... 995 15,560 671 8,743
Shares redeemed................... (36,203) (629,616) (36,880) (476,799)
---------- ------------ --------- -----------
Net increase...................... 60,117 $ 1,259,226 125,072 $ 1,605,642
---------- ------------ --------- -----------
</TABLE>

_____________
/1/ Inception date.

NOTE 6 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Portfolio included elsewhere in
this report for discussion of off-balance sheet risk and concentration of credit
risk.

21
<PAGE>

Flag Investors European Mid-Cap Fund
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors European Mid-Cap Fund:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors European Mid-Cap Fund, formerly Deutsche European Mid-Cap Fund
(one of the funds constituting a series of Flag Investors Funds, Inc., formerly
Deutsche Funds, Inc., hereafter referred to as the "Fund") at August 31, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

================================================================================
Tax Information (Unaudited)
For the Tax Year Ended August 31, 2000

The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund received income from foreign sources in the amount of $232,506. The
Fund has paid foreign taxes in the amount of $22,075. Such amounts are eligible
for the foreign tax credit. You should consult your tax advisor relating to the
appropriate treatment of foreign taxes paid.

22
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Portfolio of Investments August 31, 2000

<TABLE>
<CAPTION>
Shares Security Market Value
-------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK -- 88.3%
Bermuda -- 0.0%
2,000 Flag Telecom Holdings Ltd./1/............................. $ 31,787
----------
Denmark -- 0.5%
2,750 GN Store Nord A/S......................................... 367,656
----------
Finland -- 1.3%
10,000 Elcoteq Network Corp. -- Class A/1/....................... 330,184
20,000 Stonesoft Oyj............................................. 304,922
9,500 Teleste Oyj............................................... 266,939
----------
902,045
----------
France -- 7.9%
24,900 Business Objects SA -- ADR/1/............................. 2,851,050
6,050 Cap Gemini SA............................................. 1,260,239
483 Compagnie Industrielle et Financiere d'Entreprises/1/..... 26,972
9,950 Dassault Systemes SA...................................... 853,745
850 Publicis SA............................................... 332,267
----------
5,324,273
----------
Germany -- 57.9%
18,400 ACG AG/1/................................................. 1,329,245
14,000 Aixtron AG................................................ 1,886,259
15,000 Altana AG................................................. 1,424,666
1,500 AVA Allgemeine Handels der Verbraucher.................... 638,341
12,400 Balda AG/1/............................................... 430,861
25,750 BDAG Balcke-Duerr AG...................................... 310,417
16,000 Adcapital AG.............................................. 207,063
7,800 BERU AG................................................... 241,849
2,350 Biodata Infomation Technology AG/1/....................... 724,898
2,600 CE Computer Equipment AG.................................. 374,504
3,504 CE Consumer Electronics AG................................ 425,483
3,000 Concept! AG/1/............................................ 97,061
7,000 Condat AG/1/.............................................. 344,366
3,750 Constantin Film AG/1/..................................... 131,298
21,500 Continental AG............................................ 389,728
3,000 Das Werk AG/1/............................................ 72,064
10,550 Deutsche Babcock Borsig AG/1/............................. 454,484
9,750 Deutsche Pfandbrief-und Hypothekenbank AG................. 821,028
</TABLE>

See Notes to Financial Statements.

23
<PAGE>

Provesta Portfolio
----------------------------------------------------------------------------

Portfolio of Investments (continued) August 31, 2000

<TABLE>
<CAPTION>
Shares Security Market Value
----------------------------------------------------------------------------
<S> <C>
COMMON STOCK (continued)
Germany -- (continued)
19,125 D. Logistics AG/1/......................... $ 1,817,297
5,100 Edel Music AG/1/........................... 88,152
9,500 EM.TV Merchandising AG..................... 471,565
6,000 Epcos AG/1/................................ 612,680
5,000 Ergo Versicherungs Gruppe AG............... 629,344
1,800 Escada AG.................................. 186,692
10,014 Evotec Biosystems AG/1/.................... 514,743
30,000 FAG Kugelfischer Georg Schaefer AG......... 198,110
3,500 Foris AG/1/................................ 100,208
3,350 Freenet.de AG/1/........................... 225,084
1,750 Fresenius AG............................... 308,689
2,500 Fuchs Petrolub AG Oel & Chemie............. 129,636
27,000 Gerry Weber International AG............... 150,298
6,000 GFT Technologies AG/1/..................... 409,517
34,000 Gold-Zack AG............................... 798,646
4,850 Heidelberger Druckmaschinen AG............. 279,438
2,000 Heyde AG Beratung Software/1/.............. 326,195
2,250 I-D Media AG/1/............................ 95,412
10,000 Infineon Technologies AG/1/................ 662,584
9,360 In-Motion AG/1/............................ 311,126
4,000 Intershop Communications AG/1/............. 363,424
5,000 Intertainment AG/1/........................ 301,376
10,000 Ision Internet AG/1/....................... 378,493
10,000 IWKA AG.................................... 121,437
10,700 Jenoptik Ag................................ 322,472
150 Jobs & Adverts AG/1/....................... 2,593
22,500 Kamps AG................................... 488,229
22,700 Kinowelt Medien AG/1/...................... 1,076,488
44,500 Kloeckner-Werke AG/1/...................... 832,285
2,000 Kontron Embedded Computers AG/1/........... 224,259
9,000 LEONISCHE DRAHTWERKE AG/1/................. 219,783
1,700 LPKF Laser & Electronics................... 67,810
6,000 Masterflex Ag/1/........................... 190,931
6,750 Maxdata AG................................. 105,903
6,000 Media [netCom] AG/1/....................... 105,304
10,000 Media! AG/1/............................... 187,030
7,975 Medion AG.................................. 827,078
</TABLE>

See Notes to Financial Statements.

24
<PAGE>

Provesta Portfolio
-----------------------------------------------------------------------------

Shares Security Market Value
-----------------------------------------------------------------------------
COMMON STOCK (continued)

Germany -- (continued)
14,000 Metallgesellschaft AG......................... $ 167,654
3,500 Microlog Logistics AG/1/...................... 336,610
2,500 MIS AG/1/..................................... 252,624
10,250 MobilCom AG................................... 976,702
7,500 Muehl Product & Service Ag.................... 281,875
15,500 NorCom Information Technology AG/1/........... 1,126,614
1,700 OAR Consulting AG/1/.......................... 328,349
950 Parsytec Pattern AG/1/........................ 179,363
10,719 PC-Ware AG/1/................................. 261,286
6,200 Pfeiffer Vacuum Technology AG................. 255,549
6,500 Rhoen-Klinikum AG............................. 278,861
13,000 Rinol AG...................................... 113,504
10,700 RTV Family Entertainment AG/1/................ 200,312
9,175 SAP AG........................................ 1,789,198
6,000 Schneider Rundfunkwerke AG/1/................. 361,651
13,000 SGL Carbon AG/1/.............................. 898,810
17,600 Singulus Technologies AG...................... 936,038
3,000 Sixt AG....................................... 71,665
80,000 SKW Trostberg AG.............................. 501,348
11,500 Software AG................................... 1,121,296
1,165 Springer (Axel) Verlag AG..................... 1,135,922
13,000 Suess MicroTec AG/1/.......................... 466,690
53,000 Takkt AG...................................... 446,303
4,500 Telesens AG/1/................................ 242,120
9,500 Trius AG/1/................................... 143,238
14,500 United Internet AG/1/......................... 217,855
15,000 WCM Beteiligungs-und Grundbesitz AG........... 374,283
37,500 Wella AG...................................... 1,130,160
7,000 WMF-Wuerttembergische Metallwarenfabrik AG.... 97,415
-----------
39,127,221
-----------
Ireland -- 1.8%
7,900 SmartForce Plc -- ADR/1/...................... 410,800
12,000 Trintech Group Plc -- ADR/1/.................. 324,000
18,000 Trintech Group Plc -- ADR/1/.................. 480,252
-----------
1,215,052
-----------

See Notes to Financial Statements.

25
<PAGE>

Provesta Portfolio
------------------------------------------------------------------------------

Portfolio of Investments (concluded) August 31, 2000

<TABLE>
<CAPTION>
Shares Security Market Value
--------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK (continued)

Italy -- 1.2%
44,000 Banca Popolare Di Verona.............................. $ 503,511
4,000 Cairo Communications S.p.A./1/........................ 304,638
-----------
808,149
-----------
Netherlands -- 9.3%
38,500 ASM Lithography Holding NV/1/......................... 1,451,396
10,550 Equant NV/1/.......................................... 407,726
33,275 Getronics NV.......................................... 416,469
73,800 Qiagen NV/1/.......................................... 3,519,398
1,000 Rhein Biotech NV/1/................................... 144,926
13,000 United Pan-Europe Communications NV/1/................ 317,003
-----------
6,256,918
-----------
Norway -- 0.5%
9,000 Eltek ASA............................................. 329,118
-----------
Spain -- 0.2%
6,000 Baron de Ley, SA/1/................................... 125,036
-----------
Sweden -- 1.4%
20,000 Adcore AB............................................. 211,227
13,500 Assa Abloy AB -- Class B.............................. 257,353
10,000 Icon Medialab International AB/1/..................... 190,104
45,000 Ledstiernan AB -- Class B/1/.......................... 137,825
13,000 Tele1 Europe Holding AB/1/............................ 159,265
-----------
955,774
-----------
Switzerland -- 1.1%
14,000 Highlight Communications AG/1/........................ 335,059
1,600 Unaxis Holding AG/1/.................................. 392,745
-----------
727,804
-----------
United Kingdom -- 4.6%
50,000 Abbey National Plc.................................... 605,255
8,450 COLT Telecom Group Plc/1/............................. 284,542
20,000 Dialog Semiconductor Plc/1/........................... 985,677
9,000 International Quantum Epitaxy Plc/1/.................. 920,945
11,000 Telecity Plc/1/....................................... 318,521
-----------
3,114,940
-----------
</TABLE>

See Notes to Financial Statements.

26
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Shares Security Market Value
-------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK (concluded)

United States -- 0.6%
16,500 Global TeleSystems Group, Inc./1/..................................... $ 142,313
5,500 MIH Ltd./1/........................................................... 205,563
1,600 OpenTV Corp./1/....................................................... 88,800
-------------
436,676
-------------
Total Common Stock
(Cost $48,159,529)................................................. 59,722,449
-------------

PREFERRED STOCK -- 8.9%

Germany -- 8.9%
3,000 Berliner Elektro Holding AG........................................... 32,575
17,425 Draegerwerk AG........................................................ 139,010
11,000 Dyckerhoff AG......................................................... 217,434
8,350 Fresenius AG.......................................................... 1,961,382
1,700 Fuchs Petrolub AG Oel & Chemie........................................ 82,878
600 Marschollek, Lautenschlaeger und Partner AG........................... 81,106
360 Porsche AG............................................................ 1,238,124
11,000 Rhoen-Klinikum AG..................................................... 485,570
3,000 SAP AG................................................................ 760,531
22,000 Sixt AG............................................................... 323,713
15,000 Wella AG.............................................................. 515,885
15,000 WMF-Wuerttembergische Metallwarenfabrik AG............................ 180,826
-------------
Total Preferred Stock
(Cost -- $5,579,771)............................................... 6,019,034
-------------

Total Investments (Cost -- $53,739,300)/2/................................. 97.2% 65,741,483
Other Assets in Excess of Liabilities...................................... 2.8% 1,891,262
------ -------------
Net Assets................................................................. 100.0% $ 67,632,745
====== =============
</TABLE>
_________________
/1/ Non-income producing security.
/2/ Aggregate cost for federal tax purposes was $54,123,419.
ADR -- American Depository Receipt

See Notes to Financial Statements.

27
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

August 31, 2000

Percentage of Total
Industry Sector (Unaudited) Investments
-------------------------------------------------------------------------------

Technology......................................................... 29.0%
Consumer Cyclicals................................................. 21.1
Health Care........................................................ 13.1
Capital Goods...................................................... 9.5
Consumer Staples................................................... 6.9
Financials......................................................... 6.8
Other.............................................................. 6.3
Basic Materials.................................................... 4.6
Communication Services............................................. 2.4
Energy............................................................. 0.3
-----
100.0%
=====

28
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

-------------------------------------------------------------------------------
Assets:
Investments, at value............................................. $65,741,483
Cash.............................................................. 6,821,775
Receivable for investments sold................................... 6,834,725
Receivable from advisor........................................... 68,299
Receivable for beneficial interest for contributions.............. 110,363
Interest receivable............................................... 21,926
Deferred organization costs....................................... 27,986
-----------
Total assets.................................................... 79,626,557
-----------
Liabilities:
Payable for investments purchased................................. 11,445,589
Bank overdraft.................................................... 350,503
Payable to beneficial interest for withdrawals.................... 70,603
Organization costs payable........................................ 29,107
Unrealized depreciation on forward foreign
currency contracts.............................................. 38,317
Custody and accounting fees payable............................... 12,226
Administrative agent fees payable................................. 9,180
Other accrued expenses............................................ 38,287
-----------
Total liabilities............................................... 11,993,812
-----------
Net assets...................................................... $67,632,745
===========
Net Assets:
Applicable to beneficial interests................................ $67,632,745
===========
Cost of investments............................................... $53,739,300
===========

See Notes to Financial Statements.

29
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Statement of Operations

For the
Year Ended
August 31,
-------------------------------------------------------------------------------
2000
Investment Income:
Dividend income................................................ $ 395,878
Less: Foreign withholding taxes................................ (95,394)
-----------
Net dividend income.......................................... 300,484
Interest income................................................ 89,157
-----------
Total investment income...................................... 389,641
-----------
Expenses:
Investment management fees..................................... 435,338
Operations agent fees.......................................... 59,916
Administrative agent fees...................................... 49,583
Custody and accounting fees.................................... 100,857
Professional fees.............................................. 41,058
Interest expense............................................... 14,418
Amortization of organization expense........................... 13,220
Trustees' fees................................................. 2,582
Other expenses................................................. 15,087
-----------
Total expenses............................................... 732,059
-----------
Expenses in excess of income................................. (342,418)
-----------
Realized and Unrealized Gain (Loss) on Investments, Foreign
Currencies and Forward Foreign Currency Contracts:
Net realized gain on:
Investment transactions...................................... 1,763,771
Foreign currency transactions and forward
foreign currency contracts................................. 25,950
Net change in unrealized appreciation/depreciation on:
Investments.................................................. 11,017,534
Foreign currency translations and forward
foreign currency contracts................................. (23,681)
-----------
Net Realized and Unrealized Gain on Investments, Foreign
Currencies and Forward Foreign Currency Contracts.............. 12,783,574
-----------
Net Increase in Net Assets Resulting from Operations............. $12,441,156
===========

See Notes to Financial Statements.

30
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Statements of Changes in Net Assets

See Notes to Financial Statements.

31
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Financial Highlights

_______________

/1/ Commencement of operations.
/2/ Annualized.

See Notes to Financial Statements.

32
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

Flag Investors Portfolios Trust ("Portfolio Trust") (formerly Deutsche
Portfolios) was organized on June 20, 1997, as a business trust under the laws
of the State of New York. The Portfolio Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, consisting of seven separate investment series (the
"Portfolios"), each of which is, in effect, a separate mutual fund. The
accompanying financial statements and notes relate to the Provesta Portfolio
(the "Portfolio").

The investment manager (the "Advisor") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM"), an indirect subsidiary of Deutsche Bank AG. The
investment objective of the Portfolio is high capital appreciation and as a
secondary objective reasonable dividend income. The Portfolio began operations
on October 17, 1997.

The Portfolio operates under a structure where the beneficial interest
holders of the Portfolio invest substantially all of their investable assets in
the Portfolio. From time to time, a beneficial interest holder of the Portfolio
may own a significant percentage of the Portfolio. Investment activities of the
beneficial interest holders could have a material impact on the Portfolio.

NOTE 2 -- Significant Accounting Policies

When preparing the Portfolio's financial statements, management makes
estimates and assumptions to comply with accounting principles generally
accepted in the United States of America. 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 Portfolio's
significant accounting policies are:

Valuation of Securities

33
<PAGE>

Provesta Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- continued

time when net assets are valued. Unlisted securities, and securities for
which the Manager determines the listing exchange is not the primary
market, are valued at the average of the quoted bid-and-ask prices in the
over-the-counter market. Debt securities with a remaining maturity of less
than 60 days and money market instruments are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing
a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the amount due
at maturity and cost.

Securities for which market quotations are not readily available, are
valued in good faith in accordance with fair valuation procedures adopted
by the Trustees of the Portfolio Trust. At August 31, 2000 there were no
fair valued securities.

Cash

Deposits held at Investors Bank and Trust Company ("IBT"), the
Portfolio's custodian, in a variable rate account are classified as cash.At
August 31, 2000 the interest rate was 5.20%, which resets on a periodic
basis. Amounts on deposit are generally available on the same business day.

Investment Transactions

Investment transactions are recorded on a trade date basis. Cost of
securities sold is calculated using the identified cost method. Dividend
income is recorded on ex-dividend date and interest income, including the
accretion of discounts and amortization of premiums is recorded daily on an
accrual basis. Such dividend and interest income is recorded net of the
unrecoverable portion of any applicable foreign withholding tax.

Forward Foreign Currency Contracts

34
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

NOTE 2 -- continued

traded on organized exchanges and generally can be terminated or closed-out
only by agreement of both parties to the contract. During the period the
forward contract is open, changes in the value of the contract are
recognized as unrealized gains or losses. When the forward contract is
closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or payments to) the close-out of the
contract and the original contract price.

Futures Contracts

The Portfolio may enter into futures contracts to hedge against market
fluctuations or to speculate on future market conditions. A futures
contract is an agreement between a buyer and a seller and an established
futures exchange or its clearinghouse in which the buyer or seller agrees
to take or make a delivery of a specific amount of an item at a specified
price on a specific date (settlement date) or to make or receive a cash
payment based on the value of a securities index. Upon entering into a
futures contract, the Portfolio is required to deposit with a financial
intermediary an amount equal to a certain percentage of the face value
indicated in the futures contract ("initial margin"). Subsequent payments
("variation margin") are made or received by the Portfolio each day,
dependent on the daily fluctuations in the value of the underlying security
or index. When entering into a closing transaction, the Portfolio will
realize a gain or loss equal to the difference between the value of the
futures contract to sell and the contract to buy.

Foreign Currency Translation

The books and records of the Portfolio are maintained in US dollars.
Assets and liabilities denominated in foreign currency amounts are
translated at the spot foreign currency exchange rate in effect at the time
net assets are valued. Purchases and sales of investment securities, income
and expenses are reported at the prevailing exchange rate on the days of
such transactions. The resultant realized and unrealized gains and losses
arising from exchange rate fluctuations are identified separately in the
Statements of Operations, except for such amounts attributable to
investments which are included in net realized and unrealized gains and
losses on investments.

35
<PAGE>

Provesta Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- concluded

Foreign investments may involve certain considerations and risks not
typically associated with those of domestic origin. These include, among
others, the possibility of political and economic developments and the level
of governmental supervision and regulation of foreign securities markets.

Federal Income Taxes

The Portfolio is treated as a partnership under the US Internal Revenue
Code (the "Code"). Accordingly, it is expected that the Portfolio will not be
subject to any US federal income tax on its income and net realized gains (if
any). However, each investor in the Portfolio may be taxed on its allocable
share of the partnership's income and capital gains for purposes of
determining its federal tax liability. It is intended that the Portfolio's
assets, income and expense allocation will be managed in such a way that a
regulated investment company investing in the Portfolio will satisfy the
requirements of Subchapter M of the Code, assuming that such investment
company invests substantially all of its assets in the corresponding
Portfolio.

Expenses

Expenses are recorded on an accrual basis. Expenses of a portfolio are
charged to that portfolio. Expenses attributable to the Portfolio Trust are
allocated among the portfolios based on relative net asset value.

Deferred Organization Costs

Organization costs incurred in connection with the organization and initial
registration of the Portfolio Trust were paid initially by DFM and are being
reimbursed by the Portfolio. Such organization costs have been deferred and
are being amortized ratably over a period of sixty months from the
commencement of operations of the Portfolio.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

36
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

NOTE 3 -- continued

Portfolio but has delegated the day-to-day management of the investment
operations of the Portfolio to DWS International Portfolio Management GmbH
("DWS") as investment sub-advisor (the "Sub-Advisor") to the Portfolio. As
compensation for the services rendered by DFM, DFM receives a fee at an
annualized rate of 0.85% of the Portfolio's average daily net assets, which is
computed daily and paid monthly. As compensation for its services, DWS receives
a fee, paid by DFM which is based on the average daily net assets of the
Portfolio. The Advisor and Sub-Advisor are indirect subsidiaries of Deutsche
Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned subsidiary
of Deutsche Bank AG, serves as operations agent to the portfolio. For its
services, ICCC receives a fee which is computed daily and paid monthly at the
annual rate of 0.035% of the averaged daily net assets of the Portfolio, subject
to a minimum fee of $60,000 annually. For the period April 7, 2000 through
August 31, 2000 ICCC's fee was $24,014. Prior to April 7, 2000, Federated
Services Company ("Federated") served as operations agent to the Portfolio and
operated under a similar fee structure.

The Portfolio Trust has entered into an agreement with IBT Trust Company
(Cayman) Ltd. ("IBT (Cayman)"). Pursuant to that agreement, IBT (Cayman)
provides sub-administrative services to the Portfolio, for which it receives a
fee, which is computed daily and paid monthly, at an annual rate of 0.025% on
the first $200 million, 0.02% on the next $800 million and 0.01% on assets in
excess of $1 billion, subject to a minimum of $40,000 during the first year of
the Portfolio's operations, $45,000 in the second year of operations and $50,000
in the third year. Investors Bank and Trust Company (Boston) acts as the
custodian of the Portfolio's assets.

The Portfolio Trust entered into an agreement with Investors Bank and Trust
(Canada) Ltd. ("IBT (Canada)"). Pursuant to that agreement, IBT (Canada)
provides fund accounting services to the Portfolio, for which it receives a fee,
which is computed daily and paid monthly, at an annual rate of 0.02% on the
first $200 million, 0.015% on the next $800 million, and 0.01% on assets in
excess of $1 billion, subject to a minimum of $30,000 during the first year of
the Portfolio's operations, $35,000 in the second year of operations, and
$40,000 in the third year.

37
<PAGE>

Provesta Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 3 -- concluded

For the year ended August 31, 2000, affiliates of Deutsche Bank AG received
$67,463 in brokerage commissions from the Portfolio as a result of executing
agency transactions in portfolio securities.

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government................ $ --
Non-US Government............ 59,695,638
-----------
Total........................ $59,695,638
-----------

Sales
US Government................ $ --
Non-US Government............ 35,535,084
-----------
Total........................ $35,535,084
===========

On August 31, 2000, aggregate gross unrealized appreciation for all securities
in which there is an excess value over tax cost was $15,833,299 and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value was $4,215,235.

NOTE 5 -- Line of Credit Agreement

38
<PAGE>

Provesta Portfolio
------------------------------------------------------------------------------

NOTE 5 -- concluded

average daily amount of outstanding borrowings. During the year ended August 31,
2000, the Portfolio periodically utilized the line of credit and incurred
interest expense as disclosed in the Statement of Operations. The weighted
average interest rate paid by the Portfolio was 5.92% and the maximum and
average amounts of the loans outstanding during the borrowing period were
$2,734,205 and $685,263, respectively. At August 31, 2000, the Portfolio had no
debt outstanding under the line of credit agreement. Commitment fees paid by the
Portfolio during the year were $1,622.

NOTE 6 -- Forward Foreign Currency Contracts

The following contracts were open at August 31, 2000:

<TABLE>
<CAPTION>
In Exchange Current
for US Settlement Value Unrealized
Purchase Dollars Date (US$) Depreciation
-------------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Euro $4,712,246 9/1/00 $4,673,480 $(38,766)
Euro 1,827,827 9/1/00 1,812,790 (15,037)
Euro 1,533,022 9/1/00 1,520,410 (12,612)
Swedish Krona 903,423 9/1/00 898,099 (5,324)
Euro 808,374 9/1/00 801,724 (6,650)
Swiss Franc 389,810 9/5/00 387,370 (2,440)
Norwegian Krone 332,115 9/1/00 330,101 (2,014)
Danish Krone 331,662 9/1/00 328,943 (2,719)
British Pound 207,573 9/6/00 207,530 (43)
--------
$(85,605)
In Exchange Current
for US Settlement Value Unrealized
Sale Dollars Date (US$) Appreciation
--------------- ---------- ------ ---------- ------------
Euro $3,063,447 9/1/00 $3,038,245 $ 25,202
Euro 1,586,226 9/5/00 1,573,334 12,892
Euro 1,031,564 9/1/00 1,023,078 8,486
Euro 59,016 9/1/00 58,530 486
Euro 16,580 9/1/00 16,444 136
Euro 10,501 9/1/00 10,415 86
--------
$47,288
</TABLE>
39
<PAGE>

Provesta Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 7--Off-Balance Sheet Risk and Concentration of Credit Risk

The Statement of Assets and Liabilities includes the market or fair value of
contractual commitments involving forward settlement and futures contracts.
These instruments involve elements of market risk in excess of amounts reflected
on the Statement of Assets and Liabilities.

Market risk is influenced by the nature of the items that comprise a
particular category of financial instruments and by the relationship among
various off-balance sheet categories as well as the relationship between off-
balance sheet items and items recorded on the Portfolio's Statement of Assets
and Liabilities. Credit risk is measured by the loss the Portfolio would record
if its counterparties failed to perform pursuant to terms of their obligations
to the Portfolio. Because the Portfolio enters into forward foreign currency
contracts, credit risk exists with counterparties. It is the policy of the
Portfolio to transact the majority of its securities activity with broker-
dealers, banks and regulated exchanges that the Advisor considers to be well
established.

Note 8--Subsequent Event

On September 26, 2000, the Portfolio will change its name from Provesta
Portfolio to European Mid-Cap Portfolio.

40
<PAGE>

Provesta Portfolio
-------------------------------------------------------------------------------

Report of Independent Accountants

To the Trustees of Flag Investors Portfolio Trust and
Beneficial Interest Holders of Provesta Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Provesta Portfolio (one of the
portfolios constituting a series of Flag Investors Portfolios Trust, formerly
Deutsche Portfolios, hereafter referred to as the "Portfolio") at August 31,
2000, and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

41
<PAGE>

This page intentionally left blank.
<PAGE>

This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.

For more complete information regarding other Flag Investors funds, including
charges and expenses, obtain a prospectus from your investment representative or
directly from the Fund at 1-800-767-FLAG. Read it carefully before you invest.
<PAGE>

[LOGO]
Flag Investors
Investing With A Difference(R)

Domestic Equity

Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity

European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income

Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market

Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.
<PAGE>

[LOGO OF FLAG INVESTORS]

Top 50 Europe

Annual Report

August 31, 2000
<PAGE>

Report Highlights
--------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 22.91% (excluding sales
charges) for the twelve months ended August 31, 2000, outperforming the MSCI
Europe Index return of 10.08% for the same time period.

. The Fund's strong outperformance was primarily due to its positioning during
the first half of the fiscal year. These positions included an overweighting
in the technology and telecommunications equipment sectors. Strong stock
selection across the market sectors also benefited the Fund, as we seek only
the most competitive, high quality companies and maintain a focused portfolio
of approximately 50 stocks.

. As was the case in much of the world, the European equity markets saw
polarized investor sentiment from the first half of the fiscal year to the
second. Technology, media and telecommunications (TMT) stocks strongly
outperformed in the first half. In the second half of the year, TMT stocks
experienced a significant correction, and the equity markets were dominated
instead by stock-specific stories.

. While volatility will likely continue for the near term, we expect European
equity markets to continue to gain strength over the longer term based
primarily on robust GDP growth prospects for the region and double-digit
earnings growth expectations for many European companies with strong
management and competitive products. Opportunities created by Economic and
Monetary Union, Europe's move toward creating greater shareholder value, and
strong ongoing merger and acquisition activity also bode well for the
European markets.
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Growth of a $10,000 Investment in Class A Shares/1/
October 2, 1997 - August 31, 2000

$10,000 invested in the Flag Investors Top 50 Europe Class A Shares at inception
on October 2, 1997 was worth $13,176 on August 31, 2000.

10/2/97 $10,000
$9,688
$10,712
$12,008
8/31/98 $10,424
$10,608
$10,432
$10,216
8/31/99 $10,720
$11,664
$14,064
$13,056
8/31/2000 $13,176

Flag Investors Top 50 Europe -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
<S> <C> <C> <C> <C>
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/2/97 1 year 10/2/97
------------------------------------------------------------------------------------------------------
Top 50 Europe - Class A Shares/1/ 122.91% 31.76% 22.91% 9.93%
------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 10.08% 48.96%/4/ 10.08% 15.10%/4/
------------------------------------------------------------------------------------------------------
Lipper European Region Funds Average/3/ 25.06% 54.45%/4/ 25.06% 16.01%/4/
------------------------------------------------------------------------------------------------------
</TABLE>

-------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified periods if certain fees and expenses
had not been waived by the Fund.

/2/ The MSCI Europe Index is an unmanaged index that measures the performance of
more than 500 securities listed on the stock exchanges of 14 European
countries. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.

/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.

/4/ Benchmark returns are for the period beginning September 30, 1997.

1
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Flag Investors Top 50 Europe -- Class B

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
<S> <C> <C> <C> <C>
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 3/30/98 1 year 3/30/98
------------------------------------------------------------------------------------------------------
Top 50 Europe - Class B Shares/1/ 22.04% 16.08% 22.04% 6.35%
------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 10.08% 17.50%/4/ 10.08% 6.90%/4/
------------------------------------------------------------------------------------------------------
Lipper European Region Funds Average/3/ 25.06% 27.19%/4/ 25.06% 9.83%/4/
------------------------------------------------------------------------------------------------------
</TABLE>
------------

/4/ Benchmark returns are for the period beginning March 31, 1998.

Flag Investors Top 50 Europe -- Class C

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
<S> <C> <C> <C> <C>
Since Since
Past inception Past inception

Periods ended August 31, 2000 1 year 9/2/98 1 year 9/2/98
------------------------------------------------------------------------------------------------------
Top 50 Europe - Class C Shares/1/ 22.01% 26.40% 22.01% 12.45%
------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 10.08% 25.21%/4/ 10.08% 11.90%/4/
------------------------------------------------------------------------------------------------------
Lipper European Region Funds Average/3/ 25.06% 36.17%/4/ 25.06% 16.12%/4/
------------------------------------------------------------------------------------------------------
</TABLE>

/4/ Benchmark returns are for the period beginning August 31, 1998.

2
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

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 performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.

3
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 2, 1997 - August 31, 2000

Flag Investors MSCI
Top 50 Europe-- Europe
Class A Shares $12,451 Index/2/ $14,775
10/2/97 $9,450 $10,000
$9,155 $10,154
$10,123 $11,820
$11,348 $13,169
8/31/98 $9,851 $11,868
$10,025 $12,961
$9,858 $13,099
$9,654 $12,982
8/31/99 $10,130 $13,459
$11,022 $14,220
$13,290 $15,320
$12,338 $14,875
8/31/00 $12,451 $14,775

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class A Shares 16.15% 7.82%
--------------------------------------------------------------------------------

/2/ The MSCI Europe Index is an unmanaged index that measures the performance of
more than 500 securities listed on the stock exchanges of 14 European
countries. Benchmark returns are for the period beginning September 30,
1997.

/3/ October 2, 1997.

4
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
March 30, 1998 - August 31, 2000

Flag Investors MSCI
Top 50 Europe-- Europe
Class A Shares Index/2/
3/30/98 $10,000 $10,000
$10,214 $10,400
8/31/98 $8,854 $9,373
$8,991 $10,236
$8,824 $10,345
$8,717 $10,253
8/31/99 $9,132 $10,630
$9,915 $11,231
$11,935 $12,100
$11,167 $11,748
8/31/00 $11,260 $11,669

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class B Shares 17.04% 5.20%
--------------------------------------------------------------------------------

-------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance figures
for the classes differ because each class maintains a distinct sales charge
and expense structure. Performance would have been lower during the
specified periods if certain fees and expenses had not been waived by the
Fund.

/3/ March 30, 1998.

5
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

Additional Performance Information (concluded)

Change in Value of a $10,000 Investment in Class C Shares/1/
September 2, 1998 - August 31, 2000

Flag Investors MSCI
Top 50 Europe-- Europe
Class C Shares $12,640 Index/2/ $12,449
9/2/98 $10,000 $10,000
$10,209 $10,920
$10,019 $11,037
$9,797 $10,938
8/31/99 $10,256 $11,340
$11,256 $11,981
$13,544 $12,908
$12,544 $12,533
8/31/00 $12,640 $12,449

Average Annual Total Return1

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class C Shares 21.01% 12.45%
--------------------------------------------------------------------------------

/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class C shares is 1.00% for
shares redeemed within one year of purchase. Performance figures for the
classes differ because each class maintains a distinct sales charge and
expense structure. Performance would have been lower during the specified
periods if certain fees and expenses had not been waived by the Fund.

/3/ September 2, 1998.

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors Top
50 Europe (the "Fund"), providing a detailed review of the markets, the
portfolio in which the Fund invests (the "Portfolio"), and our outlook. Included
are a complete financial summary of the Fund's operations and listing of the
Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund significantly outperformed its benchmark. The
Fund's Class A shares produced a return of 22.91% for the twelve months ended
August 31, 2000, as compared to 10.08% for the MSCI Europe Index. The Fund's
Class B and Class C shares produced annual returns of 22.04% and 22.01%,
respectively.

This strong outperformance was primarily due to the Fund's positioning during
the first half of the fiscal year. These positions included an overweighting in
the technology and telecommunications equipment sectors. Select biotechnology
and pharmaceutical stocks also boosted Fund performance during this time. During
the second half of the fiscal year, the Fund was impacted by its exposure to the
technology sector, which experienced a significant correction. Still, we
successfully sold certain technology positions in a timely manner, and we
focused on holding the more traditional technology stocks. We also built
positions in financial stocks as interest rate uncertainty gradually eased.

Strong stock selection across the market sectors also benefited the Fund. We
continued to seek Europe's market-leading, blue chip companies that dominate
their respective industries within Europe, that are participating in
opportunities resulting from Economic and Monetary Union (EMU), and that are
committed to creating shareholder value in this new EMU frontier. Based on
careful monitoring of the ever-shifting group of what we believe to be the top
50 European companies, portfolio activity during the annual period was somewhat
higher than usual.

For example, during the first half of the fiscal year, we sold Germany's
Gehe, France's Groupe Danone, and Norway's Getinge and bought German media
company Kinowelt Medien, German cyclical company Thyssen Krupp, Finland's
telecommunications company Sonera and the United Kingdom's British Telecom. We
sold Italian life insurance company INA at a profit, and we added Germany's
Dresdner Bank and Allianz.

7
<PAGE>

Letter to Shareholders (continued)
--------------------------------------------------------------------------------

During the second half of the fiscal year, we added Switzerland's SGS
Surveillance to the Portfolio to replace Mannesmann, which was taken over by
Vodafone and thus left the Portfolio. SGS is the global leader in analysis,
review and certification of goods with over 140 worldwide agencies. We sold Bank
Austria due to limited potential for further price appreciation and replaced it
with the UK's WPP, which after its merger with Young & Rubicam is the world's
largest advertising company. Swiss pharmaceutical company Roche was replaced by
British biotech company Celltech. Germany's Duerr was replaced by the
Netherlands' integrated oil company Royal Dutch.

One of the Fund's strongest performers was Finland's Nokia. In fact, in June
and July, after strong year-to-date performance, we took some profits from this
globally-leading mobile phone company, reducing the Portfolio's position in this
stock. Other strong performers for the Fund included Ericsson, AXA, Qiagen,
Altana, Total Fina Elf, Fresenius, Credit Suisse, Depfa Deutsche Pfandbriefbank,
Aventis and ING. Weaker performers in the Portfolio included BASF, Sonera,
British Telecom, Aegon and Rentokil.

Investment Environment

As a whole, Europe rose 10.08% in US dollar terms during the twelve month
period ended August 31, 2000. Most of this performance can be attributed to the
first half of the fiscal year, with the region's markets as a whole down 3.43%
in the latter half. The markets were impacted by slowly improving domestic
growth rates, increased competition, concerns about interest rate hikes both
from the US Federal Reserve Board and the European Central Bank, and a weakening
euro currency. There was also a global correction of technology, media and
telecommunications stocks in general and of Internet-related stocks in
particular during the second half of the fiscal year. The result was a rotation
into more traditional value-oriented sectors such as pharmaceuticals, financial
services, and consumer goods. Late in the fiscal year, there were signs that the
economies of "core Europe" were finally picking up, including the mainly export-
driven growth of Germany and France, prompting a strong rebound in technology
and media stocks.

While the European Central Bank did raise interest rates four times in the
first six months of 2000 in response to global inflation worries, it did not
succumb to the temptation to dramatically raise rates in an effort to stabilize
the currency. Instead, it pursued a policy of moderate growth. In fact, since
the European Central Bank started raising rates in November 1999, the euro's
weakness more than offset

8
<PAGE>

--------------------------------------------------------------------------------

the 1.75% of rate increases. Thus, monetary conditions within Europe remained
fairly stimulative, and European economic growth remained strong.

Several European markets were negatively impacted by various macro-economic
concerns, while strength in company earnings boosted other markets to positive
returns. For example, Sweden and Finland were among the strongest performing
equity markets, driven by the continued strength of Ericsson and Nokia, two of
the world's largest cellular phone providers. Banks, insurers and financial
service companies rallied in Switzerland as expectations for earnings in 2000
improved. Credit Suisse was up 25% in March alone after ratings agency Standard
& Poor's Corp. raised the company from "negative" to "stable." Heavyweight Dutch
insurance company Aegon, in contrast, felt the pressure of European Central Bank
interest rate fears, leading the Dutch market lower. Although there was strong
performance from some of the "Old Economy" stocks in the UK, economic activity
in this nation continued to slow.

European markets responded well to merger and acquisition activity that
continued in high gear throughout the period, as companies sought economies of
scale in an enlarged "domestic" market. For example, during the first calendar
quarter, Vodafone Airtouch of the UK completed its merger with Mannesmann of
Germany (both included in the Top 50 Europe Portfolio). Prospects for further
consolidation across telecommunications and Internet-related companies also
helped fuel market strength across Europe, especially in Italy, Spain and
Portugal. Among other Portfolio holdings, Securitas performed well after
announcing an acquisition in Spain; Equant and Telefonica benefited from
takeover rumors; and Cap Gemini performed well after merger talks with Ernst &
Young in the US. During the latter part of the fiscal year, corporate merger
activity continued to be a significant factor, as companies juggled for position
within the "New Economy" or were forced to seek economies of scale in the "Old
Economy." While no two economies are alike, we believe the current environment
in Europe offers some parallels to the US corporate environment in the 1980s,
which among other things, helped propel the US stock market to record highs
through the late 1980s and the 1990s.

Looking Ahead

In the near term, we believe there will likely be continued volatility in the
European equity markets. However, several factors lead us to a generally
optimistic outlook for these markets more long term. In our view, favorable
signs include ongoing deregulation and corporate restructuring, which in turn
should

9
<PAGE>

Letter to Shareholders (concluded)
--------------------------------------------------------------------------------

lead to higher corporate efficiency and a more positive earnings outlook.
Upcoming pension reform could also lead to increased demand for equities within
several European countries. The impact of Economic and Monetary Union will
continue to ripple through the various nations of Europe's economies. Mergers
and acquisitions are likely to continue and perhaps even accelerate across most
sectors, providing upward price momentum. GDP growth prospects for Europe are
quite positive, and earnings growth prospects are favorable for many European
companies across the sector spectrum.

The primary risk to Europe's equity markets is negative sentiment from the
US, particularly regarding the technology sector. High oil prices and a weak
euro could lead to inflation, which in turn could lead to further interest rate
hikes by the European Central Bank and dampened economic growth. Thus, these are
also conditions to monitor carefully. Global economic growth weakening
unexpectedly poses a risk to the markets as well. It is important to keep in
mind that we remain disciplined in our investment process. Not all companies
will benefit equally from the new era of competition in Europe. This makes the
knowledge and insight of the Fund's management team to select the top 50
European growth stocks that we believe are leaders in their industries with
strong managements and competitive products more crucial than ever.

Given this outlook, we believe the Fund's focused investment strategy
positions the Portfolio well to continue to pursue its objective of seeking a
high level of capital appreciation, and as a secondary objective, reasonable
dividend income. We appreciate your support of the Fund, and we look forward to
continuing to serve your investment needs for many years ahead.

Sincerely,

/s/ Klaus Martini /s/ Udo Rosendahl

Klaus Martini
Udo Rosendahl
on behalf of the Portfolio Management Team
August 31, 2000

10
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
<TABLE>

<S> <C>
Assets:
Investment in Top 50 Europe Portfolio (the "Portfolio"), at value...... $19,191,009
Receivable from Manager for expense reimbursement, net................. 32,611
Receivable for capital shares sold..................................... 55,121
Receivable from Top 50 Europe Portfolio for withdrawals................ 29,246
Foreign tax reclaim receivable......................................... 22,702
Deferred organization costs............................................ 5,239
-----------
Total assets....................................................... 19,335,928
-----------
Liabilities:
Payable for capital shares redeemed.................................... 38,429
Payable to Top 50 Europe Portfolio for contributions................... 52,001
Transfer agent fees payable............................................ 6,177
Distribution and service fees payable.................................. 8,650
Accounting fees payable................................................ 1,900
Administration fees payable............................................ 6,281
Other accrued expenses................................................. 23,083
-----------
Total liabilities.................................................. 136,521
-----------
Net assets......................................................... $19,199,407
===========
Net Assets Consist of:
Capital stock, $0.001 par value........................................ $ 1,228
Paid-in capital........................................................ 16,754,292
Accumulated expenses in excess of income............................... (2,696)
Accumulated net realized gain on investments, futures contracts
and foreign currency transactions.................................. 575,928
Net unrealized appreciation of investments, futures contracts
and foreign currency translations.................................. 1,870,655
-----------
Net assets......................................................... $19,199,407
===========
Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets......................................................... $10,912,417
===========
Shares outstanding................................................. 662,381
===========
Net asset value and redemption price per share..................... $16.47
======
Offering price per share ($16.47 / .945)........................... $17.43
======
Class B Shares
Net assets......................................................... $ 7,234,479
===========
Shares outstanding................................................. 498,730
===========
Net asset value and offering price per share....................... $14.51
======
Minimum redemption price per share ($14.51 x .95).................. $13.78
======
Class C Shares
Net assets......................................................... $ 1,052,511
===========
Shares outstanding................................................. 66,602
===========
Net asset value and offering price per share....................... $15.80
======
Minimum redemption price per share ($15.80 x .99).................. $15.64
======
</TABLE>
See Notes to Financial Statements.

11
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Statement of Operations

For the
Year Ended
August 31,
------------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses Allocated from Top 50 Europe
Portfolio:
Dividend income ........................................................ $ 181,868
Less: Foreign withholding taxes ........................................ (11,764)
-----------
Net dividend income ............................................... 170,104
Interest income ........................................................ 47,221
Expenses ............................................................... (229,797)
-----------
Expenses in excess of income allocated from Top 50 Europe Portfolio .. (12,472)
-----------
Expenses:
Transfer agent fees .................................................... 75,853
Administration fees .................................................... 74,814
Registration fees ...................................................... 30,928
Reports to shareholders ................................................ 30,678
Accounting fees ........................................................ 22,800
Professional fees ...................................................... 20,957
Directors' fees ........................................................ 2,515
Amortization of organization costs ..................................... 2,525
Distribution fees
Class A Shares(a) .................................................... 9,666
Class B Shares ....................................................... 52,839
Class C Shares ....................................................... 8,141
Service fees
Class A Shares(a) .................................................... 4,305
Class B Shares ....................................................... 17,613
Class C Shares ....................................................... 2,714
Other expenses ......................................................... 4,221
-----------
Total expenses ....................................................... 360,569
Less: Fee waivers or expense reimbursements ............................ (309,877)
Net expenses ......................................................... 50,692
-----------
Expenses in excess of income ...................................... (63,164)
-----------
Net Realized and Unrealized Gain (Loss) on Investments, Futures
Contracts and Foreign Currencies Allocated from Top 50 Europe Portfolio:
Net realized gain (loss) on:
Investments .......................................................... 1,258,813
Futures contracts .................................................... 194,743
Foreign currency transactions ........................................ (33,232)
Net change in unrealized appreciation/depreciation on:
Investments .......................................................... 1,503,347
Futures contracts .................................................... (12,162)
Foreign currency translations ........................................ 155
-----------
Net Realized and Unrealized Gain on Investments, Futures Contracts
and Foreign Currencies allocated from Top 50 Europe Portfolio .......... 2,911,664
-----------
Net Increase in Net Assets Resulting from Operations ...................... $2,848,500
===========
</TABLE>

(a) As of January 18, 2000 Class A Shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.

See Notes to Financial Statements.

12
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, August 31
---------------------------------------------------------------------------------------
2000 1999

<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income.......................... $ (63,164) $ (13,040)
Net realized gain (loss) on investment, futures
contracts and foreign currency transactions
allocated from Top 50 Europe Portfolio.............. 1,420,324 (569,828)
Net change in unrealized appreciation/
depreciation on investments, futures contracts
and foreign currency translation allocated from
Top 50 Europe Portfolio............................. 1,491,340 946,392
------------ ------------
Net increase in net assets resulting from
operations.......................................... 2,848,500 363,524
------------ ------------
Capital Share Transactions:
Net proceeds from shares sold......................... 34,474,317 20,516,777
Net cost of shares redeemed........................... (29,282,014) (14,050,235)
------------ ------------
Net increase in net assets resulting from
capital share transactions.......................... 5,192,303 6,466,542
------------ ------------
Total increase in net assets..................... 8,040,803 6,830,066
Net Assets:
Beginning of year..................................... 11,158,604 4,328,538
------------ ------------
End of year (includes accumulated expenses in
excess of income of $(2,696) and $(13,228),
respectively........................................ $ 19,199,407 $ 11,158,604
============ ============
</TABLE>

See Notes to Financial Statements.

13
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)

For the For the For the Period
Year Ended Year Ended Oct. 2, 1997/1/
August 31, August 31, to August 31,
--------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period.............................. $ 13.40 $ 13.03 $ 12.50
-------- -------- --------
Investment Operations:
Net investment (expenses in
excess of) income.................... (0.03) 0.04 0.02
Net realized and unrealized gain on
investments, futures contracts and
foreign currencies allocated from
Top 50 Europe Portfolio.............. 3.10 0.33 0.51
-------- -------- --------
Increase from investment operations.... 3.07 0.37 0.53
-------- -------- --------
Net Asset Value at End of Period.......... $ 16.47 $13.40 $ 13.03
======== ======== ========

Total Return
(based on net asset value)/2/.......... 22.91% 2.84% 4.24%
Ratios and Supplemental Data:
Net assets, end of period (000's)...... $ 10,912 $3,796 $ 1,208
Ratios to average net assets:
Expenses/3/.......................... 1.60% 1.60% 1.60%/4/
Net investment income/3/............. 0.02% 0.44% 0.50%/4/
Portfolio turnover of
Top 50 Europe Portfolio.............. 65% 61% 27%
</TABLE>

--------------
/1/ Commencement of operations.

/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.

/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
<TABLE>

<S> <C> <C> <C>
Expenses to average net assets 3.86% 4.73% 16.53%4
Expenses in excess of income to average
net assets (2.24)% (2.69)% (14.43)%4
</TABLE>
/4/ Annualized.

See Notes to Financial Statements.

14
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)

For the For the For the Period
Year Ended Year Ended Mar. 30, 1998/1/
August 31, August 31, to August 31,
--------------------------------------------------------------------------------------------
2000 1999 1998

<S> <C> <C> <C>
Investment Operations:
Net Asset Value at Beginning
of Period.............................. $ 11.89 $ 11.65 $ 12.50
-------- -------- --------

Investment Operations:
Expenses in excess of income........... (0.12) (0.04) (0.01)
Net realized and unrealized gain (loss)
on investments, futures contracts
and foreign currencies allocated
from Top 50 Europe Portfolio......... 2.74 0.28 (0.84)
-------- -------- --------

Increase (decrease) from investment
operations........................... 2.62 0.24 (0.85)
-------- -------- --------

Net Asset Value at End of Period.......... $ 14.51 $ 11.89 $ 11.65
======== ======== ========

Total Return
(based on net asset value)/2/.......... 22.04% 2.06% (6.80)%
Ratios and Supplemental Data:
Net assets, end of period (000's)...... $ 7,234 $ 6,395 $ 3,120
Ratios to average net assets:
Expenses/3/.......................... 2.35% 2.35% 2.35%/4/
Expenses in excess of income/3/...... (0.79)% (0.46)% (0.46)%/4/
Portfolio turnover of
Top 50 Europe Portfolio.............. 65% 61% 27%
</TABLE>

--------------
/1/ Commencement of operations.

/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.

/3/ Includes the Fund's allocated portion of the portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
<TABLE>

<S> <C> <C> <C>
Expenses to average net assets 4.61% 5.39% 17.28%/4/
Expenses in excess of income to average
net assets (3.05)% (3.50)% (15.39)%/4/
</TABLE>
/4/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)

For the For the Period
Year Ended Sept. 2, 1998/1/
August 31, to August 31,
-------------------------------------------------------------------------------------
2000 1999

<S> <C> <C>
Net Asset Value at Beginning of Period............ $12.95 $12.50
------ ------

Investment Operations:
Expenses in excess of income................... (0.13) (0.03)
Net realized and unrealized gain on
investments, futures contracts and foreign
currencies allocated from Top 50 Europe
Portfolio.................................... 2.98 0.48
------ ------

Increase from investment operations............ 2.85 0.45
------ ------

Net Asset Value at End of Period.................. $15.80 $12.95
====== ======

Total Return
(based on net asset value)/2/.................. 22.01% 3.60%
Ratios and Supplemental Data:
Net assets, end of period (000's).............. $1,053 $ 967
Ratios to average net assets:
Expenses/3/.................................. 2.35% 2.35%/4/
Expenses in excess of income/3/.............. (0.79)% (0.31)%/4/
Portfolio turnover of Top 50 Europe Portfolio.. 65% 61%
</TABLE>

-------------
/1/ Commencement of operations.

/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1999.

Expenses to average net assets 4.61% 5.97%4
Expenses in excess of income to average net assets (3.05)% (3.93)%4

/4/ Annualized.

See Notes to Financial Statements.

16
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Notes to Financial Statements

NOTE 1-- Organization

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Top 50 Europe Portfolio (formerly, the Deutsche Top 50
Europe Portfolio, the "Portfolio"), which has substantially the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio,
which was 41.4% on August 31, 2000. At August 31, 2000, the remaining interest
in the portfolio was held by Deutsche Top 50 Europe, (one of the series
constituting Deutsche Global Funds Ltd., an offshore company and affiliate of
the Company). The financial statements of the Portfolio, including its portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C shares. Each class of shares is subject to a Distribution fee and Class
B Shares and Class C Shares are also subject to a Service fee. Each Class will
bear its respective portion of the expenses under the Service and Distribution
fee. Effective January 18, 2000, the Class A Service fee was eliminated and
replaced by a Distribution fee.

NOTE 2-- Significant Accounting Policies

Valuation of Securities

Valuation of securities by the portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included elsewhere
in this report.

17
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
Portfolio on a daily basis based upon the amount of its investment in the
Portfolio. The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses attributable to each fund are charged
directly to the respective fund, while general Company expenses are allocated
among the funds. The expenses of each fund (other than class specific
expenses) are further allocated to each class of shares based on their
relative net asset value.

Federal Income Taxes

Distributions to Shareholders

Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences, which
could be temporary or permanent in nature, may result in

18
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

NOTE 2 -- concluded

reclassification of distributions; however, net investment income, net
realized gains and net assets are not affected.

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Fund were paid initially by Deutsche Funds
Management, Inc. ("DFM") and are being reimbursed by the Fund. Such
organization costs have been deferred and are being amortized ratably over a
period of sixty months from the commencement of operations of the Fund. The
amount paid by the Fund on any redemption by ICC Distributors, Inc. (or any
subsequent holder) of such Fund's initial shares will be reduced by the pro-
rata portion of any unamortized organization costs of the Fund.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as Administrator. Under the
Administration Agreement, ICCC assists in the operations of the Fund, subject to
the direction and control of the Board of Directors of the Company. For its
services, ICCC receives a fee from the Fund, which is calculated daily and paid
monthly, at an annual rate of 0.065% of the average daily net assets of the Fund
up to $200 million and 0.0525% of such assets in excess of $200 million, subject
to a minimum fee of $75,000 annually. For the period April 7, 2000 through
August 31, 2000 ICCC's fee was $29,937. Prior to April 7, 2000, Federated
Services Company ("Federated") served as Administrator and operated under a
similar fee structure.

Investors Bank and Trust (Canada) ("IBT") provides accounting services to the
Fund for which the Fund pays IBT an annual fee that is calculated daily and paid
monthly from the Fund's average daily net assets.

As of April 7, 2000, ICCC serves as the transfer agent and dividend
disbursing agent for the Fund. The Fund pays ICCC a per account fee that is
calculated daily and paid monthly. For the period April 7, 2000 through August
31, 2000 ICCC's fee was $29,182. Prior to April 7, 2000, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund and operated under a similar fee structure.

19
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 3 -- concluded

ICC Distributors, Inc. (ICCD), a non affiliated entity provides distribution
services to the Fund for which the Fund pays ICCD an annual fee pursuant to Rule
12b-1, that is calculated daily and paid monthly at the annual rate of: 0.25% of
the Class A Shares' average daily net assets and 0.75% of the Class B and Class
C Shares' average daily net assets. Class B and Class C Shares are subject to a
0.25% shareholder servicing fee. Prior to January 18, 2000 Edgewood Services
Inc. served as distributor and shareholder servicing agent for the Fund and
operated under a similar fee structure.

By an Expense Limitation agreement effective June 1, 2000, between the
Company and DFM, DFM has agreed to waive its fees and reimburse expenses of the
Fund in order to limit the total operating expenses of the Fund (which includes
expenses of the Fund and its pro-rata portion of expenses of the Portfolio), at
not more than 1.60% of the average daily net assets of the Class A Shares and
2.35% of the average daily net assets of the Class B Shares and Class C Shares
through June 1, 2001.

Certain officers and directors of the Funds are also officers and directors
of ICCC or affiliated with Deutsche Bank. These persons are not paid by the
Funds.

NOTE 4 -- Concentration of Ownership

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
------------ -------------
Charles Schwab & Co., Inc. 1 23.73%
Fidelity Investments Institutional
Operations Co., Inc. 1 12.05%
Merrill Lynch Pierce Fenner & Smith 2 24.65%

20
<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------

NOTE 5 -- Capital Share Transactions

The Fund is authorized to issue up to 250,000,000 shares of $0.001 par value
capital stock. Transactions in capital stock were as follows for the following
periods:

Year Ended Year Ended
August 31, 2000 August 31, 1999
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold................ 2,054,016 $ 32,304,863 1,093,777 $ 14,427,570
Shares redeemed............ (1,675,017) (26,465,128) (903,100) (12,054,080)
----------- ------------ ----------- ------------
Net increase............... 378,999 $ 5,839,735 190,677 $ 2,373,490
----------- ------------ ----------- ------------

Class B Shares
Shares sold................ 140,209 $ 1,986,274 379,025 $ 4,442,161
Shares redeemed............ (179,337) (2,511,108) (109,012) (1,292,761)
----------- ------------ ----------- ------------
Net increase (decrease).... (39,128) $ (524,834) 270,013 $ 3,149,400
----------- ------------ ----------- ------------

For the period
Year Ended Sept. 2, 1998/1/ to
August 31, 2000 August 31, 1999
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class C Shares
Shares sold................ 12,595 $ 183,180 128,947 $ 1,647,046
Shares redeemed............ (20,658) (305,778) (54,282) (703,394)
----------- ------------ ----------- ------------
Net increase (decrease).... (8,063) $ (122,598) 74,665 $ 943,652
----------- ------------ ----------- ------------
</TABLE>

---------
/1/ Inception date.

NOTE 6 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See notes to the financial Statements of the Portfolio included elsewhere in
this report for discussion of off-balance sheet risk and concentration of credit
risk.

<PAGE>

Flag Investors Top 50 Europe
--------------------------------------------------------------------------------
Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors Top 50 Europe:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Top 50 Europe, formerly Deutsche Top 50 Europe, (one of the funds
constituting a series of Flag Investors Funds, Inc., formerly Deutsche Funds,
Inc., hereafter referred to as the "Fund") at August 31, 2000, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

================================================================================
Tax Information (Unaudited)
For the Tax Year Ended August 31, 2000

The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.

The Fund received income from foreign sources in the amount of $181,868. The
Fund has paid foreign taxes in the amount of $11,764. Such amounts are eligible
for the foreign tax credit. You should consult your tax advisor relating to the
appropriate treatment of foreign taxes paid.

22
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Portfolio of Investments August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- 79.8%

Denmark -- 0.7%
7,000 Coloplast A/S -- B ................................ $ 307,791
----------
Finland -- 3.5%
24,000 Nokia Oyj ......................................... 1,050,278
17,000 Sonera Corp. ...................................... 566,587
----------
1,616,865
----------
France -- 12.3%
19,500 Aventis SA ........................................ 1,460,566
6,208 AXA Co. ........................................... 882,094
6,600 Cap Gemini SA ..................................... 1,374,806
2,700 Suez Lyonnaise des Eaux -- Dumex .................. 399,438
8,600 Total Fina Elf SA -- B ............................ 1,273,810
4,000 Vivendi ........................................... 326,195
----------
5,716,909
----------

Germany -- 21.0%
1,700 Allianz AG Holding Ger Reg ........................ 572,614
11,000 Altana AG Ind-Aktien .............................. 1,044,755
19,000 BASF AG ........................................... 710,715
100 Buderus AG ........................................ 1,622
9,000 Daimler-Chrysler AG ............................... 463,499
7,400 Deutsche Pfandbrief-und Hypothekenbank AG.......... 623,139
35,000 Dresdner Bank AG .................................. 1,576,019
10,900 E, On AG .......................................... 521,349
12,000 Fresenius Medical Care AG ......................... 1,034,961
6,000 Kinowelt Medien AG1 ............................... 284,534
1,677 Rhoen-Klinikum AG ................................. 71,946
8,250 SAP AG2 ........................................... 1,608,816
11,000 Schering AG ....................................... 585,999
10,000 SGL Carbon AG1 .................................... 691,392
1,200 Thyssen Krupp AG .................................. 18,295
----------
9,809,655
----------

See Notes to Financial Statements.

23
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Portfolio of Investments (concluded) August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (continued)

Netherlands -- 12.5%
24,000 Aegon NV ............................................. $ 933,911
24,000 Aegon NV -- Stock Dividend Coupons ................... 6,382
55,000 Elsevier ............................................. 664,002
2,200 Equant NV ............................................ 85,023
14,500 ING Groep NV ......................................... 969,101
14,500 ING Groep NV -- Stock Dividend Coupons ............... 10,539
8,670 Koninklijke Ahold NV ................................. 244,540
30,800 Qiagen NV1 ........................................... 1,468,800
15,000 Royal Dutch Petroleum Co. ............................ 910,776
10,400 Unilever NV -- CVA ................................... 491,349
------------
5,784,423
------------

Norway -- 1.8%
28,000 Tomra Systems ASA .................................... 830,208
------------

Spain -- 4.6%
111,000 Telefonica SA1 ....................................... 2,125,234

Sweden -- 6.2%
117,500 Ericsson AB B Free ................................... 2,364,023
23,000 Securitas AB -- B Shares ............................. 510,112
------------
2,874,135
------------

Switzerland -- 5.8%
2,500 Credit Suisse Group .................................. 520,684
420 Novartis AG .......................................... 632,992
350 SGS Societe Genenerale de Surveillance Holding
SA -- Class B ........................................ 626,824
6,200 UBS AG ............................................... 899,296
------------
2,679,796
------------

United Kingdom -- 11.4%
55,000 British Telecom Plc .................................. 698,511
27,500 Celltech Group Plc/1/ ................................ 582,757
53,000 Imperial Chemical Industries Plc ..................... 357,710
217,000 Invensys ............................................. 847,255
43,000 Lloyds TSB Group Plc ................................. 404,432

See Notes to Financial Statements.

24
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (concluded)

United Kingdom -- (continued)
35,000 Rentokil Initial Plc................................. $ 81,789
43,000 Reuters Group Plc.................................... 861,290
279,999 Vodafone Group Plc................................... 1,130,822
23,000 WPP Group Plc........................................ 326,489
-------------
5,291,055
-------------
Total Common Stock (Cost -- $32,522,312)............. 37,036,071
-------------

PREFERRED STOCK -- 5.9%

Germany -- 5.9%
4,900 Fresenius AG......................................... 1,150,991
8,361 Rhoen-Klinikum AG-Veraugsakt......................... 369,078
4,800 SAP AG-Voraug........................................ 1,216,850
-------------
Total Preferred Stock (Cost -- $1,753,096)........... 2,736,919
-------------

Total Investments (Cost -- $34,275,408)/3/......... 85.7% 39,772,990
Other Assets in Excess of Liabilities.............. 14.3% 6,620,293
------ -------------
Net Assets......................................... 100.0% $46,393,283
====== =============
----------
/1/ Non-income producing security.
/2/ 3,822 shares represent initial margin for futures contracts.
/3/ Aggregate cost for federal tax purposes was $34,486,530.

See Notes to Financial Statements.

25
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
August 31, 2000

Percentage of Total
Industry Sector (Unaudited) Investments
--------------------------------------------------------------------------------

Health Care ........................................................ 21.9%
Technology ......................................................... 21.5
Financials ......................................................... 18.5
Communication Services ............................................. 11.3
Consumer Cyclicals ................................................. 9.8
Energy ............................................................. 5.5
Capital Goods ...................................................... 4.4
Basic Materials .................................................... 4.4
Consumer Staples ................................................... 2.7
-----
100.0%
=====
See Notes to Financial Statements.

26
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
Assets:
Investments, at value........................................ $39,772,990
Cash......................................................... 6,728,803
Dividends receivable......................................... 44,038
Interest receivable.......................................... 16,844
Receivable for beneficial interest for contributions......... 52,000
Variation margin receivable.................................. 4,484
Deferred organization costs.................................. 27,444
--------------
Total assets............................................... 46,646,603
--------------
Liabilities:
Payable for securities purchased............................. 140,576
Payable to beneficial interest for withdrawals............... 29,246
Unrealized depreciation on forward foreign currency contracts 2,046
Due to advisor............................................... 8,138
Administrative agent fees payable............................ 9,179
Custody and accounting fees payable.......................... 11,808
Organization costs payable................................... 28,564
Other accrued expenses....................................... 23,763
--------------
Total liabilities.......................................... 253,320
--------------
Net assets................................................. $46,393,283
==============
Net Assets:
Applicable to beneficial interests........................... $46,393,283
==============
Cost of investments.......................................... $34,275,408
==============

See Notes to Financial Statements.

27
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Statement of Operations

For the
Year Ended
August 31,
2000
-------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividend income ......................................................... $ 524,002
Less: Foreign withholding taxes ......................................... (111,367)
-----------
Net dividend income ................................................ 412,635
Interest income ......................................................... 136,113
-----------
Total investment income ............................................ 548,748
-----------
Expenses:
Investment management fees .............................................. 397,086
Custody and accounting fees ............................................. 102,450
Operations agent fees ................................................... 59,926
Administrative agent fees ............................................... 49,583
Professional fees ....................................................... 26,557
Amortization of organization costs ...................................... 13,220
Trustees' fees .......................................................... 2,582
Interest expense ........................................................ 86
Other expenses .......................................................... 15,832
-----------
Total expenses ........................................................ 667,322
-----------
Expenses in excess of income .......................................... (118,574)
-----------
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts,
Forward Foreign Currency Contracts and Foreign Currencies:
Net realized gain (loss) on:
Investment transactions ............................................... 3,725,880
Futures contract transactions ......................................... 570,942
Foreign currency transactions and forward foreign
currency contracts ................................................. (91,062)
Net change in unrealized appreciation/depreciation on:
Investments ........................................................... 3,670,648
Futures contracts ..................................................... (28,787)
Foreign currency translations and forward foreign
currency contracts ................................................. (729)
-----------
Net Realized and Unrealized Gain on Investments, Futures Contracts,
Forward Foreign Currency Contracts and Foreign Currencies ............... 7,846,892
-----------
Net Increase in Net Assets Resulting from Operations ....................... $ 7,728,318
===========
</TABLE>

See Notes to Financial Statements.

28
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
---------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income .................... $ (118,574) $ (140,949)
Net realized gain (loss) on investment, futures
contract, forward foreign currency contracts
and foreign currency transactions ............. 4,205,760 (1,887,399)
Net change in unrealized appreciation/
depreciation on investments, futures contracts,
forward foreign currency contracts and
foreign currency translation .................. 3,641,132 2,828,599
------------ ------------
Net increase in net assets resulting from
operations .................................... 7,728,318 800,251
------------ ------------
Capital Transactions:
Proceeds from contributions ..................... 48,132,759 31,411,385
Withdrawals ..................................... (42,018,389) (18,442,917)
------------ ------------
Net increase in net assets resulting
from capital transactions ..................... 6,114,370 12,968,468
------------ ------------
Total increase in net assets .................. 13,842,688 13,768,719
------------ ------------
Net Assets:
Beginning of year ............................... 32,550,595 18,781,876
------------ ------------
End of year ..................................... $ 46,393,283 $ 32,550,595
============ ============
</TABLE>

See Notes to Financial Statements.

29
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Financial Highlights

<S> <C> <C> <C>
Ratios and Supplemental Data:
Net assets, end of period (000's).. $ 46,393 $ 32,551 $ 18,782
Ratios of expenses to average
net assets before interest
expense ......................... 1.68% 2.09% 3.49%/2/
Ratio of interest expense
to average net assets ........... 0.00%/3/ 0.00%/3/ --
Ratio of expenses to average
net assets after interest
expense ......................... 1.68% 2.09% 3.49%/2/
Ratio of expenses in excess
of income to average
net assets ...................... (0.30)% (0.52)% (1.49)%/2/
Portfolio turnover ................ 65% 61% 27%
</TABLE>

----------
/1/ Commencement of operations.
/2/ Annualized.
/3/ Amount rounds to less than 0.01%.

See Notes to Financial Statements.

30
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements

NOTE 1 -- Organization

The investment manager (the "Advisor") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM"), an indirect subsidiary of Deutsche Bank AG. The Fund
seeks high capital appreciation and, as a secondary objective, reasonable
dividend income. The Portfolio began operations on October 2, 1997.

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

Securities listed on a US securities exchange are valued at the last
quoted sales price on the securities exchange or national securities market
on which such securities are primarily traded. Securities listed on a foreign
exchange considered by the Manager to be the primary market for the
securities are valued at the last quoted sale price available before the time
when net assets are valued. Unlisted securities, and securities for which the
Manager determines the listing exchange is not the primary market, are valued
at the average of the quoted bid-and-ask prices in the

31
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- continued

over-the-counter market. Debt securities with a remaining maturity of less
than 60 days and money market instruments are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the amount due at
maturity and cost.

Debt securities with a maturity of 60 days or more are valued based on the
last sales price on a national securities exchange or in the absence of
recorded sales, at the average of readily available closing bid-and-asked
prices on such exchanges or at the average of the readily available closing
bid and asked prices in the over-the-counter market, if such exchange or
market constitutes the broadest and most representative market for the
security. Securities for which market quotations are not readily available,
are valued in good faith in accordance with fair valuation procedures adopted
by the Trustees of the Portfolio Trust. At August 31, 2000 there were no fair
valued securities.

Cash

Deposits held at Investors Bank and Trust Company ("IBT"), the Portfolio's
custodian, in a variable rate account are classified as cash. At August 31,
2000 the interest rate was 5.20%, which resets on a periodic basis. Amounts
on deposit are generally available on the same business day.

Investment Transactions

Forward Foreign Currency Contracts

32
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- continued

to deliver a specified currency at a specified price on a specified date.
Because the terms of forward contracts are not standardized, they are not
traded on organized exchanges and generally can be terminated or closed-out
only by agreement of both parties to the contract. During the period the
forward contract is open, changes in the value of the contract are recognized
as unrealized gains or losses. When the forward contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
proceeds from (or payments to) the close-out of the contract and the original
contract price.

Futures Contracts

The Portfolio may enter into futures contracts to hedge against market
fluctuations or to speculate on future market conditions. A futures contract
is an agreement between a buyer and a seller and an established futures
exchange or its clearinghouse in which the buyer or seller agrees to take or
make a delivery of a specific amount of an item at a specified price on a
specific date (settlement date) or to make or receive a cash payment based on
the value of a securities index. Upon entering into a futures contract, the
Portfolio is required to deposit with a financial intermediary an amount equal
to a certain percentage of the face value indicated in the futures contract
("initial margin"). Subsequent payments ("variation margin") are made or
received by the Portfolio each day, dependent on the daily fluctuations in the
value of the underlying security or index. When entering into a closing
transaction, the Portfolio will realize a gain or loss equal to the difference
between the value of the futures contract to sell and the contract to buy.

Foreign Currency Translation

The books and records of the Portfolio are maintained in US dollars.
Assets and liabilities denominated in foreign currency amounts are translated
at the spot foreign currency exchange rate in effect at the time net assets
are valued. Purchases and sales of investment securities, income and expenses
are reported at the prevailing exchange rate on the days of such transactions.
The resultant realized and unrealized gains and losses arising from exchange
rate fluctuations are identified separately in the Statement of Operations,
except for such amounts attributable to investments which are included in net
realized and unrealized gains and losses on investments.

33
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- concluded

Federal Income Taxes

Expenses

Expenses are recorded on an accrual basis. Expenses of a portfolio are
charged to that portfolio. Expenses attributable to the trust are allocated
among the portfolios based on relative net asset value.

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Portfolio Trust were paid initially by DFM and
are being reimbursed by the Portfolios. Such organization costs have been
deferred and are being amortized ratably over a period of sixty months from
the commencement of operations of the Portfolios.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

34
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------

NOTE 3 -- continued

to the Portfolio. As compensation for the services rendered by DFM, DFM receives
a fee at an annualized rate of 1.00% of the Portfolios average daily net assets,
which is computed daily and paid monthly. As compensation for its services, DWS
receives a fee, paid by DFM which is based on the average daily net assets of
the Portfolio. The Advisor and Sub-Advisor are indirect subsidiaries of Deutsche
Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as operations agent to the Portfolio. For
its services, ICCC receives a fee which is computed daily and paid monthly at
the annual rate of 0.035% of the averaged daily net assets of the Portfolio,
subject to a minimum fee of $60,000 annually. For the period April 7, 2000
through August 31, 2000 ICCC's fee was $24,025. Prior to April 7, 2000,
Federated Services Company ("Federated") served as operations agent to the
Portfolio and operated under a similar fee structure.

The Portfolio Trust entered into an agreement with Investors Bank and Trust
Company (Canada) Ltd. ("IBT (Canada)"). Pursuant to that agreement, IBT (Canada)
provides fund accounting services to the Portfolio, for which it receives a fee,
which is computed daily and paid monthly, at an annual rate of 0.02% on the
first $200 million, 0.015% on the next $800 million, and 0.01% on assets in
excess of $1 billion, subject to a minimum of $30,000 during the first year of
the Portfolio's operations, $35,000 in the second year of operations, and
$40,000 in the third year.

For the year ended August 31, 2000, affiliates of Deutsche Bank AG received
$4,869 in brokerage commissions from the Portfolio as a result of executing
agency transactions in portfolio securities.

35
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 3 -- concluded

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible Directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government...................................... $ --
Non-US Government.................................. 23,702,405
------------
Total.............................................. $ 23,702,405
============

Sales
US Government...................................... $ --
Non-US Government.................................. 23,619,846
------------
Total.............................................. $ 23,619,846
============

On August 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess value over the cost was $7,501,385 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $2,214,925.

NOTE 5 -- Line of Credit Agreement

The Portfolio Trust has established a revolving line of credit with IBT.
Borrowing under the line of Credit may not exceed the lesser of $15,000,000 or
10% of the total assets of the Portfolio. Interest is payable on outstanding
borrowings at the Federal Funds Rate plus 0.50%. Additionally, the line of
credit includes an annual commitment fee equal to 0.07% per annum on the
difference between $15,000,000 and the average daily amount of outstanding
borrowings. During the year ended August 31, 2000, the Portfolio periodically
utilized the line of credit and incurred interest expense as disclosed in the
Statement of Operations. The weighted average interest rate paid by the
Portfolio was 5.75% and the maximum and average amount of the loans out-

36
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------

NOTE 5 -- concluded

standing during the borrowing period were $536,089 and $536,089, respectively.
At August 31, 2000, the Portfolio had no debt outstanding under the line of
credit agreement. Commitment fees paid by the Portfolio Trust during the year
were $1,622.

NOTE 6 -- Forward Foreign Currency Contracts

The following contract was open at August 31, 2000:

In Exchange Current
for US Settlement Value Unrealized
Purchase Dollars Date (US$) Depreciation
------------- ----------- ---------- -------- ------------
British Pound $142,625 9/1/00 $140,579 $(2,046)

NOTE 7 -- Futures Contracts

At August 31, 2000, the Top 50 Europe Portfolio had entered into the
following futures contract:

Type of Unrealized
Future Expiration Contracts Position Depreciation
------------- ---------- --------- -------- ------------
DJ Euro Stoxx 9/15/2000 120 Long $(28,787)

Note 8 -- Off-Balance Sheet Risk and Concentration of Credit Risk

37
<PAGE>

Top 50 Europe Portfolio
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Trustees of Flag Investors Portfolios Trust and
Beneficial Interest Holders of Top 50 Europe Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Top 50 Europe Portfolio (one of
the portfolios constituting a series of Flag Investors Portfolios Trust,
formerly Deutsche Portfolios, hereafter referred to as the "Portfolio") at
August 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

38
<PAGE>

This page intentionally left blank.
<PAGE>

This report is prepared for the general information of
shareholders. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective
prospectus.

For more complete information regarding other Flag Investors
funds, including charges and expenses, obtain a prospectus from your
investment representative or directly from the Fund at
1-800-767-FLAG. Read it carefully before you invest.
<PAGE>

--------------------------------------------------------------------------------
[LOGO OF FLAG INVESTORS]

Domestic Equity
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market
Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.

TOP50EANN(10/00)
--------------------------------------------------------------------------------
<PAGE>

---------------------------------------------------------------------

[LOGO]

Flag Investors
Investing With A Difference(R)

Top 50 US

Annual Report

August 31, 2000

---------------------------------------------------------------------
<PAGE>

Report Highlights
--------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 24.87% (excluding
sales charges) for the twelve months ended August 31, 2000, outperforming
the S&P 500 Index return of 16.32% for the same time period.

. The Fund's strong outperformance was primarily due to its concentration in
the technology and financial services sectors throughout the fiscal year,
to effective sector allocation and to strong stock selection, as we seek
only the most competitive, high quality companies and maintain a focused
portfolio of approximately 50 stocks.

. Overall, the S&P 500 technology constituents were the strongest performers
during the fiscal year with a gain of 45.7%, followed in second place by
the financial services sector, which appreciated by 21.3%. Utility stocks
scored third.

. We expect optical, semiconductor and networking companies in the technology
sector to experience dynamic growth ahead, and we believe health care
stocks should benefit in the coming months from a rotation toward more
defensive sectors of the US equity market.
<PAGE>

Fund Performance
-------------------------------------------------------------------------------

Growth of a $10,000 Investment in Class A Shares/1/
October 2, 1997 - August 31, 2000

$10,000 invested in the Flag Investors Top 50 US Class A
Shares at inception on October 2, 1997 was worth $17,872
on August 31, 2000.

[GRAPH APPEARS HERE]

10/2/97 10000
9976
11152
11408

8/31/98 10096
12408
13440
13864

8/31/99 14312
15544
16784
15864

8/31/2000 17872

Flag Investors Top 50 US -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/2/97 1 year 10/2/97
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Top 50 US - Class A Shares/1/ 24.87% 78.72% 24.87% 22.06%
-------------------------------------------------------------------------------------------
S&P 500 Index/2/ 16.32% 66.68%/4/ 16.32% 19.14%/4/
-------------------------------------------------------------------------------------------
Lipper Large Cap Growth Average/3/ 39.48% 108.31%/4/ 39.48% 27.94%/4/
-------------------------------------------------------------------------------------------
</TABLE>
_____________________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The S&P 500 Index is an unmanaged broad-based market index of US equity
securities. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning September 30, 1997.

1
<PAGE>

Fund Performance
-------------------------------------------------------------------------------

Flag Investors Top 50 US -- Class B

____________________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The S&P 500 Index is an unmanaged broad-based market index of US equity
securities. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning March 31, 1998.

Flag Investors Top 50 US -- Class C

________________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The S&P 500 Index is is an unmanaged broad-based market index of US equity
securities. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning August 31, 1998.

2
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

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 performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.

Both the line graph and the SEC standardized total return figures include
the impact of the 5.50% maximum initial sales charge for the Class A Shares and
the contingent deferred sales charge applicable to the specified time period for
the Class B and Class C Shares. Returns would be higher for Class A Shares
investors who qualified for a lower initial sales charge or for Class B or Class
C Shares investors who continued to hold their shares past the end of the
specified time period.

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.

3
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 2, 1997-August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
---Flag Investors Top 50 US--Class A Shares $16,889
---S&P 500 Index/2/ $16,668

Flag Top 50 US - A S&P 500 Index
<S> <C> <C>
0/2/97 $ 9,450 $10,000
$ 9,427 $10,113
$10,539 $11,151
$10,781 $11,637

8/31/98 $ 9,541 $10,251
$11,726 $12,507
$12,701 $13,352
$13,101 $14,083

8/31/99 $13,525 $14,329
$14,689 $15,123
$15,861 $14,918
$14,991 $15,559

8/31/2000 $16,889 $16,668
</TABLE>

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
-------------------------------------------------------------------------------
Class A Shares 18.01% 19.71%
-------------------------------------------------------------------------------

------------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's maximum 5.50% sales charge. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure. Performance would have been lower during the specified periods
if certain fees and expenses had not been waived by the Fund.
/2/ The S&P 500 is an unmanaged broad-based market index of US equity
securities. Benchmark returns are for the period beginning September 30,
1997.
/3/ October 2, 1997.

4
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
March 18, 1998-August 31, 2000

[GRAPH APPEARS HERE]

-- Flag Investors Top 50 US--Class B Shares $14,996
-- S&P 500 Index/2/ $14,219

Flag Top 50 US - B S&P 500 Index
<S> <C> <C>
3/18/98 $10,000 $10,000
$9,447 $9,927

8/31/98 $8,330 $8,745
$10,214 $10,670
$11,058 $11,390
$11,512 $12,014

8/31/99 $11,858 $12,224
$12,849 $12,901
$13,847 $12,726
$13,192 $13,273
8/31/2000 $14,996 $14,219
</TABLE>

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class B Shares 18.83% 17.94%

--------------------------------------------------------------------------------

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance
figures for the classes differ because each class maintains a distinct
sales charge and expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund.
/2/ The S&P 500 is an unmanaged broad-based market index of US equity
securities. Benchmark returns are for the period beginning March 31, 1998.
/3/ March 18, 1998.

5
<PAGE>

Flag Investors Top 50 US
-------------------------------------------------------------------------------

Additional Performance Information (concluded)

Change in Value of a $10,000 Investment in Class C Shares/1/
September 2, 1998-August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
-- Flag Investors Top 50 US--Class C Shares $16,688
-- S&P 500 Index/2/ $16,260

Flag Top 50 US - C US - C S&P 500 Index
<S> <C> <C>
9/2/98 $10,000 $10,000
$11,642 $12,201
$12,640 $13,025
$12,941 $13,738
8/31/99 $13,329 $13,979
$14,600 $14,753
$15,736 $14,553
$14,832 $15,178
8/31/2000 $16,688 $16,260
</TABLE>

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
-------------------------------------------------------------------------------
Class C Shares 22.95% 29.25%
-------------------------------------------------------------------------------

--------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class C shares is 1.00%
for shares redeemed within one year of purchase. Performance figures for
the classes differ because each class maintains a distinct sales charge and
expense structure. Performance would have been lower during the specified
periods if certain fees and expenses had not been waived by the Fund.
/2/ The S&P 500 is an unmanaged broad-based market index of US equity
securities. Benchmark returns are for the period beginning August 31, 1998.
/3/ September 2, 1998.

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors
Top 50 US (the "Fund"), providing a detailed review of the markets, the
portfolio in which the Fund invests (the "Portfolio"), and our outlook. Included
are a complete financial summary of the Fund's operations and listing of the
Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund significantly outperformed its benchmark. The
Fund's Class A shares produced a return of 24.87% for the twelve months ended
August 31, 2000, as compared to 16.32% for the S&P 500 Index. The Fund's Class B
and Class C shares produced annual returns of 23.83% and 23.95%, respectively.

This strong outperformance was primarily due to the Fund's concentration in
the technology and financial services sectors throughout the fiscal year, to
effective sector allocation and to strong stock selection. We continued to seek
aggressive and tenacious US companies that dominate their markets and maintain a
leadership position through a combination of management talent, innovation,
product or service differentiation, economies of scale and financial strength.
Based on careful monitoring of the ever-shifting group of what we believe to be
the top 50 US companies, portfolio activity during the annual period was
somewhat higher than usual.

For example, in the technology sector, we sold such "Old Economy," slower
growth names as International Business Machines, Xerox and Lucent Technologies.
We then redeployed those proceeds into optical networking companies, such as JDS
Uniphase, Nortel Networks and Corning. All three of these companies are
experiencing dynamic growth driven by the tremendous demand for bandwidth from
voice, data and video streaming.

We increased the Fund's weighting in the utilities sector, primarily
through stock appreciation driven by industry consolidation and deregulation. We
also established holdings for the Portfolio in the energy sector with Exxon
Mobil and oil services giant, Schlumberger. We believe these companies should
benefit from higher oil prices, which, in turn may exert upward pressure on
earnings going forward.

7
<PAGE>

Letter to Shareholders (concluded)
-------------------------------------------------------------------------------

On the other hand, we pared back the Fund's exposure to the consumer
cyclical sector, particularly in the second half of the fiscal year. The Fund's
move to an underweighted position was based on concerns over softer consumer
spending in the face of rising interest rates, higher energy costs and
moderating economic growth. Other significant changes in the Fund took place in
the consumer staples area, where we sold several large multi-national stocks,
such as Avon Products, Colgate, Procter & Gamble and McDonald's. Concerns about
sluggish domestic growth, higher input costs and currency headwinds continue
unabated with the euro hitting new lows against the dollar. The Fund's
performance was negatively impacted by its overweighted position in the
underperforming health care sector.

Investment Environment

Overall, the S&P 500's technology constituents were the strongest
performers during the fiscal year, gaining 45.7%. Financial services stocks
followed in second place, appreciating by 21.3%, and the utilities sector placed
third. The health care sector underperformed the S&P 500 Index, as the industry
struggled with decelerating top line growth, a lack of new blockbuster drugs,
patent expiration issues and political pressure resulting from the debate over a
Medicare prescription proposal. Volatility within the US equity markets remained
high.

As the Fund's fiscal year began in September, the S&P 500 Index was going
through a corrective phase, brought on in large part by fears of economic
overheating and concerns over higher interest rates. The Federal Reserve Board
had already raised interest rates in June and August, and the anticipation was
that it would do so again. During the third calendar quarter, technology stocks
were the only group of the eleven S&P 500 sectors that outperformed.

Technology stocks led the subsequent market surge that catapulted the S&P
500 technology sector ahead by 34% in the fourth calendar quarter. During the
fourth quarter, the equity market broadened out, and the consumer cyclicals and
capital goods sectors also saw sharp gains.

Once the new year began, we witnessed sharp corrections in virtually all
segments of the equity market, including the technology sector. Arguing that the
pace of the economy could not be indefinitely supported by labor force growth
and thus may rekindle inflation, the Federal Reserve Board raised interest rates
on November 16, February 2, March 21 and May 16. The dramatic correction in the
NASDAQ Composite that began in March and April and the Justice

8
<PAGE>

Department's ruling in the Microsoft antitrust case also impacted the major US
equity indices. The S&P 500 Index fell almost 10% from March 24 through May 23,
and large cap stocks underperformed small and mid cap stocks for the first six
months of 2000. But the large cap stock market finally found its footing in June
when it seemed that the Fed could be induced to delay additional interest rate
hikes based on signs of a slowing economy. With persistent concerns about
corporate earnings and profit growth in a slowing economic environment,
volatility remained high through the summer months.

Looking Ahead

Going forward, we believe that the large cap US equity market will continue
to focus on interest rates and corporate earnings. We agree with the consensus
outlook that the Federal Reserve Board is nearing the end of its tightening
bias. We further believe that earnings growth has peaked and may moderate into
2001. While the price/earnings multiple compression witnessed during the March
through May period was severe, we believe it is not likely to be repeated for
the balance of the year.

Within the US equity sectors, our outlook for optical, semiconductor and
networking companies in the technology sector is quite positive. We also believe
that as economic growth slows in the remaining months of the year, health care
stocks should benefit from a rotation in investor sentiment from high growth
companies and toward more defensive sectors.

Sincerely,

/s/ Owen B. Fitzpatrick & Leo Grohowski

Owen B. Fitzpatrick and Leo Grohowski
on behalf of the Portfolio Management Team
August 31, 2000

9
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in Top 50 US Portfolio (the "Portfolio"), at value............... $15,601,366
Receivable from Manager for expense reimbursement, net...................... 41,469
Receivable for capital shares sold.......................................... 48,343
Receivable from Top 50 US Portfolio for withdrawals......................... 600
Deferred organization costs................................................. 5,240
-----------
Total assets.............................................................. 15,697,018
-----------
Liabilities:
Payable for capital shares redeemed......................................... 6,621
Payable to Top 50 US Portfolio for contributions............................ 9,995
Transfer agent fees payable................................................. 4,920
Distribution and service fees payable....................................... 5,666
Accounting fees payable..................................................... 1,900
Administration fees payable................................................. 6,278
Other accrued expenses...................................................... 22,178
-----------
Total liabilities......................................................... 57,558
-----------
Net assets................................................................ $15,639,460
===========
Net Assets Consist of:
Capital stock, $0.001 par value............................................. $ 735
Paid-in capital............................................................. 12,939,696
Accumulated net realized loss on investment................................. (136,688)
Net unrealized appreciation of investments.................................. 2,835,717
-----------
Net assets................................................................ $15,639,460
===========

Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets.................................................................. $10,783,769
===========
Shares outstanding.......................................................... 482,646
===========
Net asset value and redemption price per share.............................. $ 22.34
===========
Offering price per share ($22.34 / .945).................................... $ 23.64
===========

Class B Shares
Net assets.................................................................. $ 4,575,922
===========
Shares outstanding.......................................................... 239,404
===========
Net asset value and offering price per share................................ $ 19.11
===========
Minimum redemption price per share ($19.11 x .95)........................... $ 18.15
===========

Class C Shares
Net assets.................................................................. $ 279,769
===========
Shares outstanding.......................................................... 13,414
===========
Net asset value and offering price per share................................ $ 20.86
===========
Minimum redemption price per share ($20.86 x .99)........................... $ 20.65
===========
</TABLE>

See Notes to Financial Statements.

10
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------
Statement of Operations

<TABLE>
<CAPTION>
For the
Year Ended
August 31,
------------------------------------------------------------------------------------------------------
2000
<S> <C>

Investment Income:
Investment Income and Expenses Allocated from Top 50 US Portfolio:
Dividend income................................................................ $ 45,889
Interest income................................................................ 11,314
Expenses....................................................................... (143,245)
-------------
Expenses in excess of income allocated from Top 50 US Portfolio................ (86,042)
-------------
Expenses:
Administration fees............................................................ 74,833
Transfer agent fees............................................................ 62,890
Registration fees.............................................................. 31,181
Reports to shareholders........................................................ 29,306
Accounting fees................................................................ 22,800
Professional fees.............................................................. 20,957
Amortization of organization costs............................................. 2,525
Directors' fees................................................................ 2,515
Distribution fees
Class A Shares(a)............................................................ 8,949
Class B Shares............................................................... 25,218
Class C Shares............................................................... 1,498
Service fees

Class A Shares(a)............................................................ 3,641
Class B Shares............................................................... 8,406
Class C Shares............................................................... 499
Other expenses................................................................. 1,350
-------------
Total expenses............................................................... 296,568
Less: fees waivers or expense reimbursements................................... (299,517)
-------------
Net expenses................................................................. (2,949)
-------------
Expenses in excess of income.............................................. (83,093)
-------------
NetRealized and Unrealized Gain on Investments Allocated from Top 50 US
Portfolio:

Net realized gain on investments............................................. 389,428
Net change in unrealized appreciation/
depreciation on investments............................................... 1,549,421
-------------
Net Realized and Unrealized Gain on Investments Allocated from
Top 50 US Portfolio............................................................ 1,938,849
-------------
Net Increase in Net Assets Resulting from Operations.............................. $ 1,855,756
=============
</TABLE>

________________
(a) As of January 18, 2000 Class A shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.

See Notes to Financial Statements.

11
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
-------------------------------------------------------------------------------
2000 1999
Increase in Net Assets:
Operations:
Expenses in excess of income....................... $ (83,093) $ (40,481)
Net realized gain (loss) on investments allocated
from Top 50 US Portfolio......................... 389,428 (145,703)
Net change in unrealized appreciation/
depreciation on investments allocated from
Top 50 US Portfolio.............................. 1,549,421 1,454,911
---------- ----------
Net increase in net assets resulting
from operations.................................. 1,855,756 1,268,727
---------- ----------
Capital Share Transactions:
Net proceeds from shares sold...................... 7,978,688 6,730,640
Shares issued for securities transferred in-kind... 2,408,952 --
Net cost of shares redeemed........................ (2,872,585) (4,223,573)
---------- ----------
Net increase in net assets resulting from capital
share transactions............................... 7,515,055 2,507,067
---------- ----------
Total increase in net assets................. 9,370,811 3,775,794

Net Assets:
Beginning of year.................................. 6,268,649 2,492,855
---------- ----------
End of year........................................ $15,639,460 $6,268,649
========== ==========

See Notes to Financial Statements.

12
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)

For the For the For the Period
Year Ended Year Ended Oct. 2, 1997/1/
August 31, August 31, to August 31,
----------------------------------------------------------------------------
2000 1999 1998
Net Asset Value at Beginning
of Period ......................... $ 17.89 $12.62 $12.50
------- ------ -------
Investment Operations:
Expenses in excess of income ...... (0.10) (0.08) (0.03)
Net realized and unrealized gain
on investments allocate
from Top 50 US Portfolio ........ 4.55 5.35 0.15
------- ------ -------
Increase from investment
operations ...................... 4.45 5.27 0.12
------- ------ -------
Net Asset Value at End of Period ..... $ 22.34 $17.89 $12.62
======= ====== =======

Total Return
(based on net asset value)/2/...... 24.87% 41.76% 0.96%
Ratios and Supplemental Data:
Net assets, end of period (000's) $10,784 $3,370 $2,056
Ratios to average net assets:
Expenses/3/ ..................... 1.31% 1.50% 1.50%/4/
Expenses in excess of income/3/ (0.65)% (0.52)% (0.44)%/4/
Portfolio turnover of Top 50
US Portfolio .................... 68% 58% 24%

_____________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:

Expenses to average net assets 4.81% 5.71% 11.58%/4/
Expenses in excess of income to average
net assets (4.15)% (4.73)% (10.52)%/4/
/4/ Annualized.

See Notes to Financial Statements.

13
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Mar. 18, 1998/1/
August 31, August 31, to August 31,
-----------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period......................... $ 15.44 $ 10.96 $ 12.50
-------- -------- -------
Investment Operations:
Expenses in excess of income...... (0.18) (0.12) (0.06)
Net realized and unrealized gain
(loss) on investments allocated
from Top 50 US Portfolio........ 3.85 4.60 (1.48)
-------- -------- -------
Increase (decrease) from
investment operations .......... 3.67 4.48 (1.54)
-------- -------- -------
Net Asset Value at End of Period .... $ 19.11 $ 15.44 $ 10.96
======== ======== =======
Total Return
(based on net asset value)/2/..... 23.77% 40.88% (12.32)%
Ratios and Supplemental Data:
Net assets, end of period
(000's)........................... $ 4,576 $ 2,764 $ 436
Ratios to average net assets:
Expenses/3/..................... 2.09% 2.25% 2.25%/4/
Expenses in excess of
income/3/....................... (1.42)% (1.30)% (1.35)%/4/
Portfolio turnover of Top 50
US Portfolio ................... 68% 58% 24%
</TABLE>

________________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
Expenses to average net assets 5.55% 6.83% 12.33%/4/
Expenses in excess of income to average
net assets (4.88)% (5.88)% (11.43)%/4/
/4/ Annualized.

See Notes to Financial Statements.

<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the Period
Year Ended Sept. 2, 1998/1/
August 31, to August 31,
----------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Net Asset Value at Beginning of Period.............. $ 16.83 $ 12.50
-------- --------
Investment Operations:
Expenses in excess of income..................... (0.17) (0.09)
Net realized and unrealized gain
on investments allocated from
Top 50 US Portfolio............................ 4.20 4.42
-------- --------
Increase from investment operations.............. 4.03 4.33
-------- --------
Net Asset Value at End of Period.................... $ 20.86 $ 16.83
======== ========

Total Return (based on net asset value)/2/.......... 23.95% 34.64%
Ratios and Supplemental Data:
Net assets, end of period (000's)................ $ 280 $ 136
Ratios to average net assets:
Expenses/3/.................................... 2.07% 2.25%/4/
Expenses in excess of income/3/................ (1.41)% (1.31)%/4/
Portfolio turnover of Top 50 US Portfolio........ 68% 58%
</TABLE>

___________________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1999.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
Expenses to average net assets 5.53% 7.15%/4/
Expenses in excess of income to average net assets (4.87)% (6.21)%/4/
/4/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Top 50 US Portfolio (formerly, the
Deutsche Top 50 US Portfolio, the "Portfolio"), which has substantially the same
investment objective as the Fund. The value of the Fund's investment in the
Portfolio included in the accompanying Statement of Assets and Liabilities
reflects the Fund's proportionate beneficial interest in the net assets of the
Portfolio, which was 43.0% on August 31, 2000. At August 31, 2000, the remaining
interest in the Portfolio was held by Deutsche Top 50 US (one of the series
constituting Deutsche Global Funds Ltd., an offshore company and affiliate of
the company). The financial statements of the Portfolio, including its portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C Shares. Each class of shares is subject to a Distribution fee, and Class
B and Class C Shares are also subject to a Service fee. Each Class will bear its
respective portion of the expenses under the Service and Distribution fees.
Effective January 18, 2000, the Class A Service fee was eliminated and replaced
by a Distribution fee.

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

Valuation of securities by the portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included
elsewhere in this report.

16
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

NOTE 2-- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
Portfolio on a daily basis based upon the amount of its investment in the
Portfolio. The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses attributable to each fund are charged
directly to the respective fund, while general Company expenses are
allocated among the funds. The expenses of each fund (other than class
specific expenses) are further allocated to each class of shares based on
their relative net asset value.

Federal Income Taxes

The Fund is treated as a separate entity for federal income tax
purposes. It is the policy of the fund to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as
amended. Accordingly, the Fund would not be subject to US federal income
taxes to the extent it distributes substantially all of its net taxable
income including any net capital gains for each fiscal year. In addition,
by distributing, during each calendar year, substantially all of its net
investment income and capital gains, the Fund would not be subject to US
federal excise tax. Accordingly, no provision for US federal income and
excise tax is required. The Fund has capital loss carryovers of $193,
$72,593, and $38,097 expiring in 2006, 2007 and 2008, respectively.

Distributions to Shareholders

Dividends from net investment income are declared and paid at least
annually. Capital gains, if any, are distributed at least annually.
However, to the extent that the net realized gains can be reduced by any
capital loss carryforwards, such gains will not be distributed. The Fund
records all dividends and distributions to shareholders on ex-dividend
date.

Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which could be temporary or permanent in nature, may result in
reclassification of distributions; however, net investment income, net
realized gains and net assets are not affected.

17
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2-- concluded

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Company were paid initially by Deutsche Funds
Management, Inc. ("DFM") and are being reimbursed by the Funds. Such
organization costs have been deferred and are being amortized ratably over
a period of sixty months from the commencement of operations of the Fund.
The amount paid by the Fund on any redemption by ICC Distributors, Inc. (or
any subsequent holder) of such Fund's initial shares will be reduced by a
pro-rata portion of any unamortized organization costs of the Fund.

Subscriptions In-Kind

Shareholders may contribute securities as their subscription into the
Fund. During 2000, certain securities contributed were subject to a taxable
event prior to the in-kind transfer to the Fund and had the same market
value as of the date of transfer. Accordingly, for purposes of generally
accepted accounting principles, the book cost of any securities contributed
in-kind to the Fund was equal to the market value of such securities on
their respective dates of contribution to the Fund resulting in no
difference between book cost and tax cost.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as Administrator. Under the
Administration Agreement, ICCC assists in the operations of the Fund, subject to
the direction and control of the Board of Directors of the Company. For its
services, ICCC receives a fee from the Fund, which is calculated daily and paid
monthly, at an annual rate of 0.065% of the average daily net assets of the Fund
up to $200 million and 0.0525% of such assets in excess of $200 million, subject
to a minimum fee of $75,000 annually. For the period April 7, 2000 through
August 31, 2000, ICCC's fee was $29,956. Prior to April 7, 2000, Federated
Services Company ("Federated") served as Administrator and operated under a
similar fee structure.

As of April 7, 2000, ICCC serves as the transfer agent and dividend
disbursing agent for the Fund. The Fund pays ICCC a per account fee that is

18
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

NOTE 3-- concluded

calculated daily and paid monthly. For the period April 7, 2000 through August
31, 2000 ICCC's fee was $30,579. Prior to April 7, 2000, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund and operated under a similar fee structure.

ICC Distributors, Inc. (ICCD), a non-affiliated entity, provides
distribution services to the Fund for which the Fund pays ICCD an annual fee
pursuant to Rule 12b-1, that is calculated daily and paid monthly at the annual
rate of: 0.25% of the Class A Shares' average daily net assets and 0.75% of the
Class B and Class C Shares' average daily net assets. Class B and Class C Shares
are subject to a 0.25% shareholder servicing fee. Prior to December 20, 1999,
Edgewood Services Inc., served as distribution and shareholder servicing agent
for the Fund and operated under a similar fee structure.

By an Expense Limitation agreement effective April 1, 2000, between the
Company and DFM, DFMhad agreed to waive its fees and reimburse expenses of the
Fund in order to limit the total operating expenses of the Fund (which includes
expenses of the Fund and its pro-rata portion of expenses of the Portfolio), to
not more than 1.15% of the average daily net assets of the Class A Shares and
1.90% of the average daily net assets of the Class B and Class C Shares through
June 1, 2001. Prior to April 1, 2000, total operating expenses of the fund were
limited to 1.50%, 2.25% and 2.25% of the average daily net assets of Class A
Shares, Class B Shares and Class C Shares, respectively.

Certain officers and directors of the Funds are also officers and directors
of ICCC or affiliated with Deutsche Bank. These persons are not paid by the
Funds.

NOTE 4 -- Concentration of Ownership

From time to time the Funds may have a concentration of several
shareholders holding a significant percentage of shares outstanding. Investment
activities of these shareholders could have a material impact on the Fund and
the Portfolio.

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

<TABLE>
<CAPTION>
Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
------------ --------------
<S> <C> <C>
Bankers Trust Co. 1 16.34%
Fidelity Investments Institutional
Operations Co., Inc. 1 10.24%
</TABLE>

19
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 5 -- Capital Share Transactions

The Fund is authorized to issue up to 250,000,000 shares of $0.001 par
value capital stock. Transactions in capital stock were as follows for the
following periods:

<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 2000 August 31, 1999
------------------------ ----------------------
Shares Amount Shares Amount
--------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold.......................... 276,184 $ 5,830,101 245,592 $ 4,215,805
Securities transferred in-kind....... 108,855 2,408,952 -- --
Shares redeemed...................... (90,752) (1,899,838) (220,175) (3,728,094)
--------- ----------- --------- -----------
Net increase......................... 294,287 $ 6,339,215 25,417 487,711
--------- ----------- --------- -----------

Class B Shares
Shares sold.......................... 115,380 $ 2,036,428 157,403 $ 2,177,200
Shares redeemed...................... (54,997) (965,545) (18,199) (288,524)
--------- ----------- --------- -----------
Net increase......................... 60,383 $ 1,070,883 139,204 $ 1,888,676
--------- ----------- --------- -----------

<CAPTION>
For the Period
Year Ended Sept. 2, 1998/1/ to
August 31, 2000 August 31, 1999
------------------------- -----------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Class C Shares
Shares sold.......................... 5,722 $ 112,159 19,925 $ 337,635
Shares redeemed...................... (358) (7,202) (11,875) (206,955)
--------- ----------- --------- -----------
Net increase......................... 5,364 $ 104,957 8,050 $ 130,680
--------- ----------- --------- -----------
</TABLE>

_______________
/1/ Inception date.

20
<PAGE>

Flag Investors Top 50 US
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors Top 50 US:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Top 50 US, formerly Deutsche Top 50 US, (one of the funds
constituting a series of Flag Investors Funds, Inc., formerly Deutsche Funds
Inc., hereafter referred to as the "Fund") at August 31, 2000, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

21
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments August 31, 2000

<TABLE>
<CAPTION>
Shares Security Market Value
----------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK-- 98.1%

Capital Goods-- 8.2%
20,310 General Electric Co.................................... $ 1,191,943
3,500 Sanmina Corp/1/........................................ 413,000
14,530 Symbol Technologies, Inc............................... 601,179
13,200 Tyco International Ltd................................. 752,400
----------
2,958,522
----------

Communication Services-- 3.7%
6,900 Alltel Corp............................................ 348,881
13,200 Nextlink Communications, Inc.-- Class A/1/............. 462,825
14,800 Worldcom, Inc./1/...................................... 540,200
----------
1,351,906
----------

Consumer Cyclicals-- 6.5%
9,300 Costco Wholesale Corp./1/.............................. 320,269
10,170 Home Depot, Inc........................................ 488,796
6,125 McGraw-Hill Companies Inc. (The)....................... 379,367
5,000 Omnicom Group Inc...................................... 417,187
15,740 Wal-Mart Stores, Inc................................... 746,666
----------
2,352,285
----------

Consumer Staples-- 5.7%
21,200 Comcast Corp.-- Class A/1/............................. 789,700
12,075 CVS Corp./1/........................................... 448,284
13,500 Infinity Broadasting Corp.-- Class A/1/................ 511,313
3,600 Time Warner Inc........................................ 307,800
----------
2,057,097
----------

Energy-- 3.9%
8,800 Exxon Mobil Corp....................................... 718,300
8,000 Schlumberger Ltd....................................... 682,500
----------
1,400,800
----------
</TABLE>

See Notes to Financial Statements.

22
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Shares Security Market Value
-----------------------------------------------------------------------------------
<S> <C>
COMMON STOCK-- (continued)

Financials-- 16.9%
12,400 American Express Co................................. $ 733,150
8,900 American International Group, Inc................... 793,213
11,000 AXA Financial Inc................................... 569,250
11,800 Bank of New York Co. Inc. (The)..................... 618,762
13,050 Chase Manhattan Corp................................ 729,169
18,533 Citigroup, Inc...................................... 1,081,883
2,500 Lehman Brothers Holding Inc......................... 362,500
6,000 Marsh & McLennan Co., Inc........................... 712,500
5,100 Morgan Stanley Dean Witter & Co..................... 548,569
----------
6,148,996
----------

Health Care-- 11.3%
7,950 Amgen, Inc./1/...................................... 602,709
8,900 Bristol-Myers Squibb Co............................. 471,700
5,670 Johnson & Johnson................................... 521,286
7,700 Eli Lilly & Co...................................... 562,100
12,170 Medtronic, Inc...................................... 623,712
19,627 Pfizer, Inc......................................... 848,868
8,250 Pharmacia Corp...................................... 483,141
----------
4,113,516
----------

Technology-- 37.1%
23,650 Cisco Systems, Inc./1/.............................. 1,620,025
3,200 Corning Inc......................................... 1,049,400
3,000 Corvis Corp./1/..................................... 311,437
18,200 EMC Corp./1/........................................ 1,783,600
16,420 Intel Corp.......................................... 1,229,447
6,975 JDS Uniphase Corp./1/............................... 869,259
15,800 LSI Logic Corp./1/.................................. 567,813
10,300 Microsoft Corp./1/.................................. 719,069
16,000 Nortel Networks Corp................................ 1,305,000
5,400 QUALCOMM, Inc./1/................................... 323,325
13,250 Sun Microsystems, Inc./1/........................... 1,681,922
</TABLE>

See Notes to Financial Statements.

23
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments (concluded) August 31, 2000

<TABLE>
<CAPTION>
Shares Security Market Value
-----------------------------------------------------------------------------------
<S> <C>
COMMON STOCK-- (concluded)

Technology-- (continued)
16,600 Texas Instruments, Inc............................. $ 1,111,163
4,100 Veritas Software Corp./1/.......................... 494,306
3,400 Yahoo!, Inc./1/.................................... 413,100
-----------
13,478,866
-----------

Utilities-- 4.8%
14,900 AES Corp./1/....................................... 949,875
9,400 Enron Corp......................................... 797,825
-----------
1,747,700
-----------
Total Investments (Cost-- $23,628,607)/2/.................. 98.1% 35,609,688
Other Assets in Excess of Liabilities...................... 1.9% 678,028
------ -----------
Net Assets 100.0% $36,287,716
====== ===========
</TABLE>

______________
/1/ Non-income producing security.
/2/ Aggregate cost for federal tax purposes is $23,716,077.

See Notes to Financial Statements.

24
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value.......................................... $35,609,688
Cash........................................................... 1,636,557
Dividends receivable........................................... 12,002
Interest receivable............................................ 4,548
Receivable for investments sold................................ 231,901
Deferred organization costs.................................... 27,443
Receivable for beneficial interest for contributions........... 9,995
-------------
Total assets................................................. 37,532,134
-------------
Liabilities:
Payable for investments purchased.............................. 883,742
Payable for beneficial interest for withdrawals................ 260,094
Investment management fees payable............................. 32,774
Custody and accounting fees payable............................ 6,316
Administrative agent fees payable.............................. 9,170
Organization cost payable...................................... 28,564
Other accrued expenses......................................... 23,758
-------------
Total liabilities............................................ 1,244,418
=============
Net assets................................................... $36,287,716
=============
Net Assets:
Applicable to beneficial interests............................. $36,287,716
=============
Cost of investments............................................ $23,628,607
=============
</TABLE>

See Notes to Financial Statements.
25
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Statement of Operations

<TABLE>
<CAPTION>
For the
Year Ended
August 31,
-----------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Dividend income................................................... $ 151,540
Interest income................................................... 37,292
-----------
Total income.................................................... 188,832
-----------
Expenses:
Investment management fees........................................ 240,525
Custody and accounting fees....................................... 62,702
Operations agent fees............................................. 59,980
Administrative agent fees......................................... 49,583
Professional fees................................................. 26,557
Amortization of organization costs................................ 13,220
Trustees' fees.................................................... 2,582
Interest expense.................................................. 1,595
Other expenses.................................................... 15,073
-----------
Total expenses.................................................. 471,817
-----------
Expenses in excess of income.................................... (282,985)
-----------
Net Realized and Unrealized Gain on Investments

Net realized gain on investments.................................. 1,361,803
Net change in unrealized appreciation/depreciation
on investments.................................................. 4,972,523
-----------
Net Realized and Unrealized Gain on Investments...................... 6,334,326
-----------
Net Increase in Net Assets Resulting from Operations................. $6,051,341
===========
</TABLE>

See Notes to Financial Statements.

26
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, August 31,
------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income.................... $ (282,985) $ (247,773)
Net realized gain (loss) on investment.......... 1,361,803 (872,169)
Net change in unrealized appreciation/
depreciation on investments................... 4,972,523 7,983,805
------------ ------------
Net increase in net assets resulting
from operations............................... 6,051,341 6,863,863
------------ ------------
Capital Transactions:
Proceeds from contributions..................... 23,720,168 22,490,394
Withdrawals..................................... (17,670,470) (19,487,950)
------------ ------------
Net increase in net assets resulting from
capital transactions.......................... 6,049,698 3,002,444
------------ ------------
Total increase in net assets.................. 12,101,039 9,866,307
Net Assets:
Beginning of year............................... 24,186,677 14,320,370
------------ ------------
End of year..................................... $ 36,287,716 $ 24,186,677
============ ============
</TABLE>
See Notes to Financial Statements.
27
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Financial Highlights

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Oct. 2, 1997/1/
August 31, August 31, to August 31,
------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's).. $36,288 $24,187 $14,320
Ratios of expenses to average
net assets before interest
expense.......................... 1.67% 1.98% 3.24%/2/
Ratio of interest expense
to average net assets............ 0.00%/3/ 0.00%/3/ --
Ratio of expenses to average
net assets after interest
expense.......................... 1.67% 1.98% 3.24%/2/
Ratio of expenses in excess
of income to average
net assets....................... (1.00)% (1.00)% (2.18)%/2/
Portfolio turnover................. 68% 58% 24%
</TABLE>
___________________________
/1/ Commencement of operations.
/2/ Annualized.
/3/ Amount rounds to less than 0.01%.

See Notes to Financial Statements.

28
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements

NOTE 1 -- Organization

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

Securities listed on a US securities exchange are valued at the last
quoted sales price on the securities exchange or national securities market
on which such securities are primarily traded. Securities listed on a
foreign exchange considered by the Manager to be the primary market for the
securities are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities, and securities for
which the Manager determines the listing exchange is not the primary
market, are valued at the average of the quoted bid-and-ask prices in the

29
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- continued

over-the-counter market. Debt securities with a remaining maturity of less
than 60 days and money market instruments are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing
a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the amount due
at maturity and cost.

Cash

Investment Transactions

Investment transactions are recorded on a trade date. Cost of
securities sold is calculated using the identified cost method. Dividend
income is recorded on ex-dividend date and interest income, including the
accretion of discounts and amortization of premium is recorded daily on an
accrual basis.

Futures Contracts

30
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- concluded

equal to the difference between the value of the futures contract to sell
and the contract to buy.

Federal Income Taxes

The Portfolio is treated as a partnership under the US Internal Revenue
Code (the "Code"). Accordingly, it is expected that the Portfolio will not
be subject to any US federal income tax on its income and net realized
gains (if any). However, each investor in the Portfolio may be taxed on its
allocable share of the partnership's income and capital gains for purposes
of determining its federal tax liability. It is intended that the
Portfolio's assets, income and expense allocation will be managed in such a
way that a regulated investment company investing in the Portfolio will
satisfy the requirements of Subchapter M of the Code, assuming that such
investment company invests substantially all of its assets in the
corresponding Portfolio.

Expenses

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Portfolio Trust were paid initially by DFM and
are being reimbursed by the Portfolios. Such organization costs have been
deferred and are being amortized ratably over a period of sixty months from
the commencement of operations of the Portfolio.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

The Portfolio Trust has entered into an Investment Management Agreement
(the "Management Agreement") with DFM (the "Advisor"). DFM retains overall
responsibility for supervision of the investment management program for the
Portfolio but has delegated the day-to-day management of the investment
operations of the Portfolio to Deutsche Asset Management, Inc. ("DeAM, Inc.") as
investment sub-advisor (the "Sub-Advisor") to the Portfolio. As compensation for
the services rendered by DFM, DFM receives a fee at an annualized rate of 0.85%
of the Portfolio's average daily net assets, which is computed daily and paid
monthly. As compensation for its services,

31
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 3 -- concluded

DeAM, Inc. receives a fee, paid by DFM which is based on the average daily net
assets of the Portfolio. The advisor and Sub-Advisor are indirect subsidiaries
of Deutsche Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly-owned
subsidiary of Deutsche Bank AG, serves as operations agent to the portfolio. For
its services, ICCC receives a fee which is computed daily and paid monthly at
the annual rate of 0.035% of the average daily net assets of the Portfolio,
subject to a minimum fee of $60,000 annually. For the period April 7, 2000
through August 31, 2000, ICCC's fee was $24,079. Prior to April 7, 2000,
Federated Services Company ("Federated") served as operations agent to the
Portfolio and operated under a similar fee structure.

For the year ended August 31, 2000, affiliates of Deutsche Bank AG received
$189 in brokerage commissions from the Portfolio as a result of executing agency
transactions in portfolio securities.

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

32
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-
term securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government....................................... $ --
Non-US Government................................... 24,150,561
-----------
Total............................................... $24,150,561
===========

Sales
US Government....................................... $ --
Non-US Government................................... 18,802,946
-----------
Total............................................... $18,802,946
===========

On August 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess value over tax cost was $12,563,178 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $669,567.

Note 5 -- Line of Credit Agreement

The Portfolio Trust has established a revolving line of credit with IBT.
Borrowing under the line of Credit may not exceed the lesser of $15,000,000 or
33% of the total assets of the Portfolio. Interest is payable on outstanding
borrowings at the Federal Funds Rate plus 0.50%. Additionally, the line of
credit includes an annual commitment fee equal to 0.07% per annum on the
difference between $15,000,000 and the average daily amount of outstanding
borrowings. During the year ended August 31, 2000, the Portfolio periodically
utilized the line of credit and incurred interest expense as disclosed in the
Statement of Operations. The weighted average interest rate paid by the
Portfolio was 6.12% and the maximum and average amounts of the loans outstanding
during the borrowing period were $1,676,209 and $852,376, respectively. At
August 31, 2000, the Portfolio had no debt outstanding under the line of credit
agreement. Commitment fees paid by the Portfolio Trust during the year were
$1,622.

33
<PAGE>

Top 50 US Portfolio
--------------------------------------------------------------------------------
Report of Independent Accountants

To the Trustees of the Flag Investors Portfolios Trust and
Beneficial Interest Holders of Top 50 US Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Top 50 US Portfolio (one of the
portfolios constituting a series of Flag Investors Portfolios Trust, formerly
Deutsche Portfolios, hereafter referred to as the "Portfolio") at August 31,
2000, and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

34
<PAGE>

This page intentionally left blank
<PAGE>

This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.

For more complete information regarding other Flag Investors funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
<PAGE>

---------------------------------------------------------------------

[LOGO]

Flag Investors
Investing With A Difference(R)

Domestic Equity

Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity

European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income

Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market

Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.

---------------------------------------------------------------------
<PAGE>

[LOGO]
Flag Investors
Investing With A Difference(R)

Top 50 World

Annual Report

August 31, 2000
<PAGE>

Report Highlights
-------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 12.95% (excluding
sales charges) for the twelve months ended August 31, 2000, slightly
underperforming the MSCI World Index return of 13.46% for the same
time period.

. World equity markets were stuck in a trendless and volatile
environment for most of the fiscal year. The MSCI World Index, as well
as the country indices for the US, Japan, the UK, Germany and France,
all finished 1999 at their twelve-month highs after a dramatic
December rally. As the year 2000 began, however, the world markets
were increasingly volatile, with the global focus on the US Federal
Reserve Board's, the European Central Bank's, and the Bank of
England's tightening policy for interest rates. The technology sector
also experienced a global correction during the second half of the
fiscal year.

. The Fund was impacted by the volatility of world equity markets.
Still, we actively took advantage of favorable movements in various
sectors. For example, we overweighted the Portfolio in the technology
sector during a very strong market, built positions in financial
stocks as interest rate uncertainty gradually eased, and added to
energy holdings as rising oil prices boosted share prices in this
sector. Strong stock selection across the market sectors also helped
the Fund's performance, as we seek only the most competitive, high
quality companies and maintain a focused portfolio of approximately 50
stocks.

. We expect the US equity markets to perform well over the near- to mid-
term, as the economy continues to benefit from what we believe is the
end of an interest rate cycle and from the increasingly visible "soft
landing." We are generally positive on Europe, although the region is
suffering from a weak euro and potential interest rate increases. We
are more cautious on the Asian region and Japan in particular.
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Growth of a $10,000 Investment in Class A Shares/1/
October 2, 1997 - August 31, 2000

$10,000 invested in the Flag Investors Top 50 World
Class A Shares at inception on October 2, 1997
was worth $15,868 on August 31, 2000.

[GRAPH APPEARS HERE]

10/2/97 $10,000
11/30/97 $ 9,704
$10,776
$11,128
8/31/98 $ 9,880
$11,840
$12,445
$13,271
8/31/99 $14,048
$15,238
$16,023
$15,198
8/31/2000 $15,868

Flag Investors Top 50 World -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ------------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/2/97 1 year 10/2/97
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Top 50 World - Class A Shares/1/ 12.95% 58.68% 12.95% 17.17%
-----------------------------------------------------------------------------------------------------
MSCI World Index/2/ 13.46% 49.59%/4/ 13.46% 14.81%/4/
-----------------------------------------------------------------------------------------------------
Lipper Global Equity Average/3/ 24.31% 52.35%/4/ 24.31% 14.73%/4/
-----------------------------------------------------------------------------------------------------
</TABLE>

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified period if certain fees and expenses had
not been waived by the Fund.
/2/ The MSCI World Index is an unmanaged broad-based market index of foreign
equity securities. Index returns do not reflect expenses, which have been
deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning September 30, 1997.

1
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Flag Investors Top 50 World -- Class B

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
Since Since
Past inception Past inception
<S> <C> <C> <C> <C>
Periods ended August 31, 2000 1 year 5/4/98 1 year 5/4/98
------------------------------------------------------------------------------------------------
Top 50 World - Class B Shares/1/ 12.10% 40.23% 12.10% 15.64%
------------------------------------------------------------------------------------------------
MSCI World Index/2/ 13.46% 32.58%/4/ 13.46% 12.85%/4/
------------------------------------------------------------------------------------------------
Lipper Global Equity Average/3/ 24.31% 38.61%/4/ 24.31% 14.21%/4/
------------------------------------------------------------------------------------------------
</TABLE>

---------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified period if certain fees and expenses had
not been waived by the Fund.
/2/ The MSCI World Index is an unmanaged broad-based market index of foreign
equity securities. Index returns do not reflect expenses, which have been
deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning April 30, 1998.

Flag Investors Top 50 World -- Class C

____________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance would
have been lower during the specified period if certain fees and expenses had
not been waived by the Fund.
/2/ The MSCI World Index is an unmanaged broad-based market index of foreign
equity securities. Index returns do not reflect expenses, which have been
deducted from the Fund's return.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning May 31, 2000.

<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Additional Performance Information

3
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 2, 1997-August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
-- Flag Investors Top 50 World--Class A Shares $14,995
-- MSCI World Index/2/ $14,812

Flag Top 50 World - A MSCI World Index
<S> <C> <C>
10/2/97 $ 9,450 $10,000
$ 9,170 $ 9,638
$10,183 $10,701
$10,516 $11,115
8/31/98 $ 9,337 $ 9,841
$11,189 $11,565
$11,761 $12,060
$12,541 $12,575
8/31/99 $13,275 $13,094
$14,400 $14,019
$15,142 $14,319
$14,362 $14,285
8/31/2000 $14,995 $14,812
</TABLE>

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------
Class A Shares 6.74% 14.92%
--------------------------------------------------------------------------
-------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's maximum 5.50% sales charge. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure. Performance would have been lower during the specified period if
certain fees and expenses had not been waived by the Fund.
/2/ The MSCI World Index is an unmanaged broad-based market index of foreign
equity securities. Benchmark returns are for the period beginning September
30, 1997.
/3/ October 2, 1997.

4
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
May 4, 1998-August 31, 2000

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
--Flag Investors Top 50 World--Class B Shares $13,723
--MSCI World Index/2/ $13,157

Flag Top 50 World - B World - B MSCI World Index
<S> <C> <C>
5/4/98 $10,000 $ 9,873
8/31/98 $ 8,421 $ 8,741
$10,070 $10,272
$10,568 $10,713
$11,364 $11,170
8/31/99 $12,010 $11,630
$12,998 $12,452
$13,644 $12,719
$13,055 $12,689
8/31/2000 $13,723 $13,157
</TABLE>

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------
Class B Shares 7.09% 14.57%
--------------------------------------------------------------------------
_______________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance
figures for the classes differ because each class maintains a distinct
sales charge and expense structure. Performance would have been lower
during the specified period if certain fees and expenses had not been
waived by the Fund.
/2/ The MSCI World Index is an unmanaged broad-based market index of foreign
securities. Benchmark returns are for the period beginning April 30, 1998.
/3/ May 4, 1998.

5
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Additional Performance Information (concluded)

Cumulative Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/2/
--------------------------------------------------------------------------------
Class C Shares -- 3.20%
--------------------------------------------------------------------------------

____________
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class C shares is 1.00%
for shares redeemed within one year of purchase. Performance figures for
the classes differ because each class maintains a distinct sales charge and
expense structure. Performance would have been lower during the specified
period if certain fees and expenses had not been waived by the Fund.
/2/ May 31, 2000.

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors Top
50 World (the "Fund"), providing a detailed review of the markets, the portfolio
in which the Fund invests (the "Portfolio"), and our outlook. Included are a
complete financial summary of the Fund's operations and listing of the
Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund slightly underperformed its benchmark. The
Fund's Class A shares produced a return of 12.95% for the twelve months ended
August 31, 2000, as compared to 13.46% for the MSCI World Index. The Fund's
Class B shares produced an annual return of 12.10%. The Fund introduced Class C
shares on May 31, 2000.

The Fund was impacted by the volatility of world equity markets. Still, we
actively took advantage of favorable movements in various sectors. For example,
we overweighted the Portfolio in the technology sector during a very strong
market. Technology and communications stocks comprised approximately 40% of the
Fund, and the tech-heavy NASDAQ Composite Index returned nearly 50% for the
annual period. We also built positions in financial stocks as interest rate
uncertainty gradually eased and added to energy holdings as rising oil prices
boosted share prices in this sector.

Strong stock selection across the market sectors also helped the Fund's
performance. For example, our picks in the German equity market, namely SAP,
Schering, and Allianz, performed even better than the strongly performing German
market overall. In Japan, Fund holdings Yamanouchi Pharmaceuticals and Fujitsu
were weak, as was the market as a whole, but Sony gained 68% over the annual
period.

We continued to seek global blue chip companies that dominated their
respective industries, that demonstrated strong market position, exceptional
ability to compete worldwide and excellent growth potential, and that were
poised to benefit from powerful long-term trends in the world economy. Such
trends include strong population growth in emerging markets, aging populations
in industrialized nations, transitions to an information/communication society,
expanding markets for brand-name products, and growing oil/energy consumption
worldwide.
7
<PAGE>

Letter to Shareholders (continued)
--------------------------------------------------------------------------------

We stayed disciplined to our quality-oriented approach throughout the annual
period, focusing on strong, growing companies in established industries and
carefully monitoring the ever-shifting group of top 50 companies in the world.
Based on this approach, several changes were made to the Portfolio during the
fiscal year.

. In September, we bought Taiwan Semiconductor and Finland's Nokia and sold
Singapore Airlines and France's Elf Aquitaine.

. In October, we exchanged US stocks, selling the struggling Philip Morris and
replacing it with Johnson & Johnson.

. Five companies were exchanged in January. Germany's Allianz AG replaced
Switzerland's UBS, as the insurer was increasingly demonstrating better
strategic positioning. Yamanouchi replaced the US' Merck, as we believe the
Japanese pharmaceuticals company shows more dynamic growth and because we had
concerns that major patent expirations at Merck left its product pipeline
vulnerable. We replaced the US' Merrill Lynch with Australia's News Corp, on
concerns that the broker's margins would be eroding as fees and brokerage
commissions drop due to Internet competition. The United Kingdom's Cable &
Wireless replaced that same nation's SmithKline Beecham, as the pharmaceutical
company announced merger plans with Glaxo Wellcome, another Top 50 World
Portfolio holding. And finally, Germany's Mannesmann replaced the UK's
Vodafone Airtouch, as these two companies agreed to merge, and Mannesmann
traded at a significant valuation discount to Vodafone.

. Several more exchanges were made in March. The Fund bought the US' Oracle,
Yahoo and Sabre Group and sold the Netherlands' Unilever NV, Germany's Allianz
AG, and the US' Halliburton.

. In July, we sold Sabre Group and added to the Fund's position in Oracle. And
we replaced Japan's NTT with Hong Kong's China Mobile, as this cellular
provider is seen to be a key beneficiary of China's economic recovery.

. In August, US oil company Enron and Swiss pharmaceutical company Novartis were
sold after having performed very well for the fiscal year and were replaced
with US biotech company Millennium Pharmaceutical and US investment bank
Morgan Stanley Dean Witter.

8
<PAGE>

--------------------------------------------------------------------------------

Among the Fund's strongest performers were Nokia, Ericsson, Cisco Systems,
Sony, Microsoft, EMC, SAP, Allianz, Enron, Taiwan Semiconductor, Glaxo Wellcome,
Johnson & Johnson, and Oracle. Weaker performers during the annual period
included McDonald's, Cable & Wireless, Sabre Group, and Procter & Gamble.

Investment Environment

World equity markets were stuck in a trendless and volatile environment for
most of the fiscal year, yet the MSCI World Index still produced an annual
return of 13.46%.

The MSCI World Index, as well as the country indices for the US, Japan, the
UK, Germany and France, all finished 1999 at their twelve-month highs after a
dramatic December rally. The US equity market, where the Fund maintains nearly
50% of its total net assets, posted its fifth straight annual return in excess
of 20%, as measured by both the S&P 500 Index and the Dow Jones Industrials
Average. The tech-heavy NASDAQ indices also rose to all-time records. Still,
volatility remained high over the four months of 1999 in the Fund's annual
period, based on global concerns over rising inflation and interest rates.

As the year 2000 began, the equity markets as a whole experienced their worst
January since 1990 and the fourth worst since 1947. The Dow Jones Industrials
Average, for example, lost 4.8% for the month, while the S&P 500 Index fell
5.0%. The NASDAQ market, the MSCI Japan Index, the MSCI Pacific ex-Japan Index,
and the MSCI Europe Index fell as well. February was not much better.

The last six months of the Fund's fiscal year continued to be volatile, as the
world markets' focus was on the US Federal Reserve Board's, the European Central
Bank's, and the Bank of England's tightening policy for interest rates. Other
factors included mixed signals about the health of the Japanese economy and
higher oil prices that remain a major source of inflation concern for central
bankers. In sharp contrast to 1999, technology proved to be one of the worst
performing sectors during these months. World equity markets were buffeted by
NASDAQ Composite volatility. For example, Japan's Nikkei Index fell 15% since
the end of February 2000.

9
<PAGE>

Letter to Shareholders (concluded)
--------------------------------------------------------------------------------

As the possibility of a "soft landing" in the US decreased the chances of
further Federal Reserve Board rate hikes, which investors had feared could
induce a global economic slowdown, the world equity markets recovered a bit.
However, volume of trading on both the S&P 500 and NASDAQ indices was high
toward the end of the annual period, evidence of ongoing investor uncertainty.

Even with all of its ups and downs, the technology sector returned the best
performance for the annual period as a whole. Being seasonal, the consumer goods
sector performed well from August to December 1999, as people prepared for the
holidays, but the sector was weak since the beginning of the calendar year.
Financial stocks were most noticeably affected by interest rate uncertainty in
the US. Since the well-anticipated May interest rate hike, however, this sector
recovered notably. Inflation fears had somewhat abated, and many believed that
the Federal Reserve Board had finished raising rates for the year.

Regionally, the European equity markets outpaced Asian and Pacific Rim
markets. The US market, as measured by the S&P 500 Index, outperformed both
Europe and Asia as a whole with a 12 month return of 16.32% as of August 31,
2000. Within the world regions, the German DAX Mid Cap Index in Germany provided
a return of approximately 37% for the 12 months ended August 31, 2000. Continued
steady growth in the Euro-zone contributed to the success of the German stock
market. In Japan, the Nikkei 225 Index lost 3.3% of its value over the twelve
months. Its poor performance can be attributed primarily to a lagging Japanese
economy and to negative company-specific news.

Looking Ahead

We expect the US equity markets to perform well over the near- to mid-term, as
the economy continues to benefit from what we believe is the end of an interest
rate cycle and from the much talked about and increasingly visible "soft
landing." Economic growth is indeed slowing, reducing pressure on employment and
potential inflation, yet still continues at a healthy, moderate clip. High oil
prices act as a natural tax on consumer spending, but in our view should not
trigger material fears of higher inflation. Advancements achieved by the
technology, communications and industrial sectors should continue showing high
productivity gains. And finally, presidential election years have historically
been strong years for the US stock market.

10
<PAGE>

--------------------------------------------------------------------------------

In Europe, inflationary concerns center around the weak euro, accelerating
economic growth, and buoyant money supply. Yet pricing pressures have been
remarkably dormant, and there seems to be ample spare capacity in both the goods
and labor markets. At the same time, we believe more tightening is required by
the European Central Bank over the next twelve months as is a stronger euro in a
supportive role. Key positives for Europe include strong economic growth,
falling unemployment, tax cuts, and further prospects for corporate
consolidation across the continent. We are more cautious in our outlook for the
Asian equity markets, as Japan in particular continues to suffer from new
bankruptcies and a weak financial framework.

Given this outlook, we intend to increase the Fund's weightings in the
financial services, energy, and biotechnology sectors and to reduce its
weightings in consumer and pharmaceutical stocks. We also expect the technology
sector to pick up again, as this area continues to offer high growth potential.
Thus, the Fund remains overweighted in technology.

We believe the Fund's focused investment strategy positions the Portfolio well
to continue to pursue its objective of seeking a high level of capital
appreciation, and as a secondary objective, reasonable dividend income. We
appreciate your support of the Fund, and we look forward to continuing to serve
your investment needs for many years ahead.

Sincerely,

/s/ Klaus Kaldemorgen /s/ Rainer Vermehren
Klaus Kaldemorgen
Rainer Vermehren
on behalf of the Portfolio Management Team
August 31, 2000

11
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in Top 50 World Portfolio (the "Portfolio"), at value................... $7,321,016
Receivable from Manager for expense reimbursement, net............................. 29,990
Receivable for capital shares sold................................................. 69,111
Receivable from Top 50 World Portfolio for withdrawals............................. 13,798
Foreign tax reclaim receivable..................................................... 2,786
Deferred organization costs........................................................ 5,240
----------
Total assets...................................................................... 7,441,941
==========
Liabilities:
Payable for capital shares redeemed................................................ 32,413
Transfer agent fees payable........................................................ 3,728
Distribution and service fees payable.............................................. 4,145
Accounting fees payable............................................................ 1,898
Administration fees payable........................................................ 6,274
Other accrued expenses............................................................. 25,613
----------
Total liabilities................................................................. 74,071
----------
Net assets........................................................................ $7,367,870
==========
Net Assets Consist of:
Capital stock, $0.001 par value.................................................... $ 408
Paid-in capital.................................................................... 6,467,641
Accumulated net realized gain on investments
and foreign currency transactions............................................... 138,983
Net unrealized appreciation of investments
and foreign currency translations............................................... 760,838
----------
Net assets........................................................................ $7,367,870
==========
Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets........................................................................ $3,235,964
==========
Shares outstanding................................................................ 166,447
==========
Net asset value and redemption price per share.................................... $ 19.44
==========
Offering price per share ($19.44 / .945).......................................... $ 20.57
==========
Class B Shares
Net assets........................................................................ $4,029,256
==========
Shares outstanding................................................................ 235,044
==========
Net asset value and offering price per share...................................... $ 17.14
==========
Minimum redemption price per share ($17.14 x .95)................................. $ 16.28
==========
Class C Shares(a)
Net assets........................................................................ $ 102,650
==========
Shares outstanding................................................................ 5,989
==========
Net asset value and offering price per share...................................... $ 17.14
==========
Minimum redemption price per share ($17.14 x .99)................................. $ 16.97
==========
</TABLE>

___________
(a) On May 31, 2000, Flag Investors Top 50 World Class C Shares began
operations.

See Notes to Financial Statements.

12
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Statement of Operations

<TABLE>
<CAPTION>
For the
Year Ended
August 31,
-------------------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses Allocated from Top 50 World Portfolio:
Dividend income.................................................................. $ 55,803
Less: Foreign withholding taxes.................................................. (2,998)
---------
Net dividend income........................................................... 52,805
Interest income.................................................................. 11,469
Expenses......................................................................... (106,606)
---------
Expenses in excess of income allocated from
Top 50 World Portfolio........................................................ (42,332)
---------
Expenses:
Administration fees.............................................................. 74,857
Transfer agent fees.............................................................. 54,999
Registration fees................................................................ 34,440
Reports to shareholders.......................................................... 29,723
Professional fees................................................................ 21,672
Accounting fees.................................................................. 20,998
Amortization of organization costs............................................... 2,525
Directors' fees.................................................................. 2,515
Distribution fees
Class A Shares(a)............................................................... 5,144
Class B Shares.................................................................. 19,290
Class C Shares(b)............................................................... 69
Service fees
Class A Shares(a)............................................................... 2,898
Class B Shares.................................................................. 6,430
Class C Shares(b)............................................................... 23
Other expenses................................................................... 1,364
---------
Total expenses................................................................ 276,947
Less: Fee waivers or expense reimbursements...................................... (271,429)
---------
Net expenses.................................................................. 5,518
---------
Expenses in excess of income.................................................. (47,850)
---------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies Allocated from Top 50 World Portfolio:
Net realized gain (loss) on:
Investments..................................................................... 212,382
Foreign currency transactions................................................... (15,680)
Net change in unrealized appreciation/depreciation on:
Investments..................................................................... 488,431
Foreign currency translation.................................................... (338)
---------
Net Realized and Unrealized Gain on Investments and Foreign
Currencies Allocated from Top 50 World Portfolio................................. 684,795
---------
Net Increase in Net Assets Resulting from Operations.............................. $ 636,945
=========
</TABLE>
_____________
(a) As of January 18, 2000 Class A Shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.
(b) On May 31, 2000, Flag Investors Top 50 World Class C Shares began
operations.

See Notes to Financial Statements.

13
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, August 31,
----------------------------------------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income........................................................ $ (47,850) $ (4,411)
Net realized gain on investment and foreign
currency transactions allocated from
Top 50 World Portfolio............................................................... 196,702 72,822
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translation allocated from
Top 50 World Portfolio............................................................. 488,093 312,328
----------- -----------
Net increase in net assets resulting from operations................................ 636,945 380,739
----------- -----------
Distributions to Shareholders:
Distributions from net investment income:
Class A Shares..................................................................... -- (29)
Class B Shares..................................................................... -- (5)
Class C Shares(a).................................................................. -- --
Distributions from realized gains:
Class A Shares..................................................................... (27,102) (3,696)
Class B Shares..................................................................... (22,873) (2,250)
Class C Shares(a).................................................................. -- --
----------- -----------
Total distributions................................................................. (49,975) (5,980)
----------- -----------
Capital Share Transactions:
Net proceeds from shares sold....................................................... 4,382,527 5,644,684
Net proceeds from dividends and distributions
reinvested......................................................................... 48,152 5,761
Net cost of shares redeemed......................................................... (2,556,590) (1,388,830)
----------- -----------
Net increase in net assets resulting from
capital share transactions......................................................... 1,874,089 4,261,615
----------- -----------
Total increase in net assets....................................................... 2,461,059 4,636,374
Net Assets:
Beginning of year................................................................... 4,906,811 270,437
----------- -----------
End of year (includes accumulated expenses in excess
of income of $0 and $2,101, respectively).......................................... $ 7,367,870 $ 4,906,811
=========== ===========
</TABLE>
----------------------

(a) On May 31, 2000, Flag Investors Top 50 World Class C Shares began
operations.

See Notes to Financial Statements.

14
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Oct. 2, 1997/1/
August 31, August 31, to August 31,
--------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning of Period...................... $17.35 $12.35 $12.50
------ ------ ------
Investment Operations:
Net investment (expenses in excess of) income.............. (0.09) 0.01 0.01
Net realized and unrealized gain (loss) on investments and
foreign currencies allocated from Top 50 World
Portfolio................................................ 2.34 5.18 (0.16)
------ ------ ------
Increase (decrease) from investment operations............. 2.25 5.19 (0.15)
------ ------ ------
Distributions to Shareholders:
Distributions from net investment income................... -- 0.00/4/ --
Distributions from net realized gains...................... (0.16) (0.19) --
------ ------- ------
Total distributions........................................ (0.16) (0.19) --
------ ------ ------
Net Asset Value at End of Period............................ $19.44 $17.35 $12.35
====== ====== ======

Total Return (based on net asset value)/2/.................. 12.95% 42.19% (1.20)%

Ratios and Supplemental Data:
Net assets, end of period (000's)........................... $3,236 $2,776 $ 181
Ratios to average net assets: Expenses/3/................... 1.60% 1.60% 1.60%/5/
Net investment (expenses in excess of) income/3/............ (0.49)% 0.13% 0.13%/5/
Portfolio turnover of Top 50 World Portfolio................ 101% 79% 125%
</TABLE>

----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursement. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
Expenses to average net assets 6.25% 10.56% 127.49%/5/
Expenses in excess of
income to average net assets (5.14)% (8.83)% (125.76)%/5/
/4/ Amount rounds to less than $0.01.
/5/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended May 4, 1998/1/
August 31, August 31, to August 31,
-----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.................................. $ 15.43 $ 11.08 $12.50
------- ------- ------
Investment Operations:
Expenses in excess of income................................................ (0.12) (0.02) (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currencies allocated from Top 50 World Portfolio.................. 1.99 4.56 (1.41)
------- ------- ------
Increase (decrease) from investment operations.............................. 1.87 4.54 (1.42)
------- ------- ------
Distributions to Shareholders:
Distributions from net investment income.................................... -- 0.00/4/ --
Distributions from net realized gains....................................... (0.16) (0.19) --
------- -------- -------
Total distributions......................................................... (0.16) (0.19) --
------- -------- -------
Net Asset Value at End of Period............................................. $ 17.14 $ 15.43 $ 11.08
======= ======== =======

Total Return (based on net asset value)/2/................................... 12.10% 41.14% (11.36)%
Ratios and Supplemental Data:
Net assets, end of period (000's)........................................... $ 4,029 $ 2,131 $ 90
Ratios to average net assets: Expenses/3/................................... 2.35% 2.35% 2.35%/5/
Expenses in excess of income/3/........................................... (1.25)% (0.64)% (0.84)%/5/
Portfolio turnover of Top 50 World Portfolio................................ 101% 79% 125%
</TABLE>

__________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to average
net assets would have been as follows:
Expenses to average net assets 7.07% 12.29% 128.24%/5/
Expenses in excess of income to average
net assets (5.97)% (10.58)% (126.73)%/5/
/4/ Amount rounds to less than $0.01.
/5/ Annualized.

See Notes to Financial Statements.

16
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)

For the Period
May 31, 2000/1/
to August 31,
--------------------------------------------------------------------------------
2000

Net Asset Value at Beginning of Period....................... $ 16.44
----------
Investment Operations:
Expenses in excess of income................................ (0.01)
Net realized and unrealized gain on investments and foreign
currencies allocated from the Top 50 World Portfolio...... 0.71
----------
Increase from investment operations......................... 0.70
----------
Distributions to Shareholders:
Distributions from net realized gains....................... --
----------
Total distributions......................................... --
----------
Net Asset Value at End of Period............................. $ 17.14
----------
Total Return
(based on net asset value)/2/............................... 4.20%

Ratios and Supplemental Data:
Net assets, end of period (000's)........................... 103
Ratios to average net assets:
Expenses/3/............................................... 2.35%/4/
Expenses in excess of income/3/........................... (0.77)%/4/
Portfolio turnover of Top 50 World Portfolio................ 101%

___________________
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 2000.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses. Had the
Manager not undertaken to reimburse such expenses, the ratios of expenses
and expenses in excess of income to average net assets would have been as
follows:
Expenses to average net assets 8.24%/4/
Expenses in excess of income to average net assets (6.66)%/4/
/4/ Annualized.

See Notes to Financial Statements.

17
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

Flag Investors Funds, Inc. (the "Company") (formerly Deutsche Funds, Inc.) was
incorporated in Maryland on May 22, 1997. The Company is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, consisting of six separate investment series (the
"Funds"). The accompanying financial statements and notes relate to Flag
Investors Top 50 World (the "Fund").

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Top 50 World Portfolio (formerly the Deutsche Top 50
World Portfolio, the "Portfolio"), which has substantially the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio,
which was 20.4% on August 31, 2000. At August 31, 2000, the remaining interest
in the portfolio was held by Deutsche Top 50 World (one of the series
constituting Deutsche Global Funds Ltd., an offshore company and affiliate of
the Company). The financial statements of the Portfolio, including its portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C Shares. Each class of shares is subject to a Distribution fee and Class
B and Class C Shares are also subject to a Service fee. Each Class will bear its
respective portion of the Service and Distribution fees. Effective January 18,
2000, the Class A Service fee was eliminated and replaced by a Distribution fee.

NOTE 2 -- Significant Accounting Policies

When preparing the Fund's financial statements, management makes estimates and
assumptions to comply with accounting principles generally accepted in the
United States of America. 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:

Valuation of Securities

Valuation of securities by the Portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included elsewhere
in this report.

18
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

NOTE 2 -- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

Federal Income Taxes

Distributions to Shareholders

19
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- concluded

Deferred Organization Costs

Organization costs incurred in connection with the organization and initial
registration of the Fund were paid initially by Deutsche Funds Management,
Inc. ("DFM") and are being reimbursed by the Fund. Such organization costs
have been deferred and are being amortized ratably over a period of sixty
months from the commencement of operations of the Fund. The amount paid by the
Fund on any redemption by ICC Distributors, Inc. (or any subsequent holder) of
the Fund's initial shares will be reduced by the pro-rata portion of any
unamortized organization costs of the Fund.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned subsidiary
of Deutsche Bank AG, serves as Administrator. Under the Administration
Agreement, ICCC assists in the operations of the Fund, subject to the direction
and control of the Board of Directors of the Company. For its services, ICCC
receives a fee from the Fund, which is calculated daily and paid monthly, at an
annual rate of 0.065% of the average daily net assets of the Fund up to $200
million and 0.0525% of such assets in excess of $200 million, subject to a
minimum fee of $75,000 annually. For the period April 7, 2000 through August 31,
2000 ICCC's fee was $29,980. Prior to April 7, 2000, Federated Services Company
("Federated") served as Administrator and operated under a similar fee
structure.

Investors Bank and Trust (Canada) ("IBT") provides accounting services to the
Fund for which the Fund pays IBT an annual fee that is calculated daily and paid
monthly from the Fund's average daily net assets.

As of April 7, 2000, ICCC serves as the transfer agent and dividend disbursing
agent for the Fund. The Fund pays ICCC a per account fee that is calculated
daily and paid monthly. For the period April 7, 2000 through August 31, 2000
ICCC's fee was $22,090. Prior to April 7, 2000, Federated Shareholder Services
Company served as the transfer agent and dividend disbursing agent for the Fund
and operated under a similar fee structure.

20
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

NOTE 3 -- concluded

ICC Distributors, Inc. (ICCD), a non-affiliated entity, provides distribution
services to the Fund for which the Fund pays ICCD an annual fee pursuant to Rule
12b-1, that is calculated daily and paid monthly at the annual rate of: 0.25% of
the Class A Shares' average daily net assets and 0.75% of the Class B and Class
C Shares' average daily net assets. Class B and Class C Shares are subject to a
0.25% shareholder servicing fee. Prior to January 18, 2000 Edgewood Services
Inc. served as distribution and shareholder servicing agent for the Fund and
operated under a similar fee structure.

By an Expense Limitation agreement effective June 1, 2000, between the Company
and DFM, DFM has agreed to waive its fees and reimburse expenses of the Fund in
order to limit the total operating expenses of the Fund (which includes expenses
of the Fund and its pro-rata portion of expenses of the Portfolio), to not more
than 1.60% of the average daily net assets of Class A Shares and 2.35% of the
average daily net assets of the Class B Shares and Class C Shares through June
1, 2001.

Certain officers and directors of the Funds are also officers and directors of
ICCC or affiliated with Deutsche Bank. These persons are not paid by the Funds.

NOTE 4 -- Concentration of Ownership

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
----------- -------------
Fidelity Investments Institutional
Operations Co., Inc. 1 12.36%
Merrill Lynch Pierce Fenner & Smith 1 23.13%

21
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 5 -- Capital Share Transactions

The Fund is authorized to issue up to 250,000,000 shares of $0.001 par value
capital stock. Transactions in capital stock were as follows for the following
periods:

<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 2000 August 31, 1999
---------------------- ---------------------
Shares Amount Shares Amount
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold..................................... 111,290 $ 2,049,750 225,999 $ 3,695,241
Reinvestment of dividends
and distributions.............................. 1,395 26,667 224 3,508
Shares redeemed................................. (106,264) (1,972,672) (80,839) (1,325,130)
-------- ----------- ------- -----------
Net increase.................................... 6,421 $ 103,745 145,384 $ 2,373,619
-------- ----------- ------- -----------

Class B Shares
Shares sold..................................... 131,922 $ 2,232,724 134,071 $ 1,949,443
Reinvestment of dividends
and distributions.............................. 1,268 21,485 161 2,253
Shares redeemed................................. (36,292) (583,918) (4,175) (63,700)
-------- ----------- ------- -----------
Net increase.................................... 96,898 $ 1,670,291 130,057 $ 1,887,996
-------- ----------- ------- -----------

Class C Shares(a)
Shares sold..................................... 5,989 $ 100,053
Reinvestment of dividends
and distributions.............................. -- --
Shares redeemed................................. -- --
-------- -----------
Net increase.................................... 5,989 $ 100,053
-------- -----------
</TABLE>

_____________
(a) On May 31, 2000, Flag Investors Top 50 World Class C Shares began
operations.

22
<PAGE>

Flag Investors Top 50 World
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors Top 50 World:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Top 50 World, formerly Deutsche Top 50 World, (one of the funds
constituting a series of Flag Investors Funds, Inc., formerly Deutsche Funds,
Inc., hereafter referred to as the "Fund") at August 31, 2000, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

================================================================================
Tax Information (Unaudited)
For the Tax Year Ended August 31, 2000

The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund's distributions to shareholders included $1,691 from long-term
capital gains, all of which is taxable at the 20% capital gains rate. Of
ordinary distributions made during the fiscal year ended August 31, 2000, 49.33%
qualifies for the dividends received deduction available to corporate
shareholders.

23
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- 98.6%

Australia -- 2.7%
75,044 News Corporation Ltd. (The)......................... $ 979,671
-----------

Finland -- 1.8%
15,000 Nokia Oyj........................................... 656,424
-----------

France -- 6.1%
5,591 AXA................................................. 794,425
9,000 L'Oreal SA.......................................... 649,377
5,000 Total SA -- Series B/1/............................. 740,587
-----------
2,184,389
-----------

Germany -- 7.8%
2,600 Allianz AG.......................................... 875,763
5,400 Daimler-Chrysler AG................................. 278,099
5,600 SAP AG.............................................. 1,092,045
10,800 Schering AG......................................... 575,345
-----------
2,821,252
-----------

Hong Kong -- 4.3%
70,000 China Telecom (Hong Kong) Limited/1/................ 538,510
69,600 HSBC Holdings Plc................................... 990,550
-----------
1,529,060
-----------

Japan -- 7.2%
32,000 Fujitsu Ltd......................................... 927,014
9,700 Sony Corp........................................... 1,082,174
12,000 Yamanouchi Pharmaceutical Co., Ltd.................. 594,009
-----------
2,603,197
-----------

Sweden -- 2.9%
51,200 Telefonaktiebolaget LM Ericsson/1/.................. 1,030,110
-----------

Switzerland -- 2.3%
245 Nestle SA........................................... 526,251
33 Roche Holding AG.................................... 294,559
----------
820,810
----------

See Notes to Financial Statements.

24
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (continued)

Taiwan -- 2.3%
23,504 Taiwan Semiconductor Manufacturing
Co. Ltd. -- ADR/1/..................................... $ 822,640
----------

United Kingdom -- 11.1%
108,500 BP Amoco Plc........................................... 992,926
67,000 Cable & Wireless Plc................................... 1,237,956
14,000 Glaxo Wellcome Plc..................................... 402,545
106,185 Shell Transport & Trading Co........................... 906,239
112,294 Vodafone Group Plc..................................... 453,517
---------
3,993,183
---------

United States -- 50.1%
14,000 Abbott Laboratories.................................... 612,500
14,000 America Online, Inc./1/................................ 820,750
13,000 American Express Co.................................... 768,625
8,000 Bristol-Myers Squibb Co................................ 424,000
4,400 Chevron Corp........................................... 371,800
8,200 Cisco Systems, Inc./1/................................. 561,700
15,867 Citigroup, Inc......................................... 926,217
15,200 Coca-Cola Co. (The).................................... 799,900
10,500 Colgate-Palmolive Co................................... 534,844
14,000 EMC Corp./1/........................................... 1,372,000
9,900 Exxon Mobil Corp....................................... 808,088
8,800 Gillette Co............................................ 264,000
6,500 International Business Machines Corp................... 858,000
9,300 Johnson & Johnson...................................... 855,019
15,000 Lucent Technologies, Inc............................... 627,188
18,000 McDonald's Corp........................................ 537,750
8,000 Medtronic, Inc......................................... 410,000
14,250 Microsoft Corp./1/..................................... 994,828
5,500 Millennium Pharmaceuticals/1/.......................... 787,188
4,000 Morgan Stanley Dean Witter & Co........................ 430,250
10,000 Oracle Corp./1/........................................ 909,375

See Notes to Financial Statements.

25
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments (concluded) August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (concluded)

United States -- (continued)
12,000 Pfizer, Inc........................................ $ 519,000
8,000 Procter & Gamble Co. (The)......................... 494,500
7,200 Schlumberger Ltd................................... 614,250
22,000 Walt Disney Co. (The).............................. 856,625
14,000 Worldcom, Inc./1/.................................. 511,000
2,700 Yahoo! Inc./1/..................................... 328,048
-----------
17,997,445
===========

Total Investments (Cost -- $29,853,475)/2/................ 98.6% 35,438,181
Other Assets in Excess of Liabilities..................... 1.4% 508,173
----- -----------
Net Assets................................................ 100.0% $35,946,354
===== ===========

__________________
/1/ Non-income producing security.
/2/ Aggregate cost for federal tax purposes was $30,652,730.
ADR -- American Depository Receipt

See Notes to Financial Statements.

26
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

August 31, 2000

27
<PAGE>

Top 50 World Portfolio
-------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------

Assets:
Investments, at value............................................ $35,438,181
Cash............................................................. 428,834
Dividends receivable............................................. 44,415
Interest receivable.............................................. 8,507
Receivable for investments sold.................................. 98,097
Deferred organization costs...................................... 27,444
-----------
Total assets.................................................... 36,045,478
-----------
Liabilities:
Payable to beneficial interest for withdrawals................... 13,798
Investment management fees payable............................... 11,249
Administrative agent fees payable................................ 9,205
Custody and accounting fees payable.............................. 13,558
Organization costs payable....................................... 28,564
Other accrued expenses........................................... 22,750
-----------
Total liabilities............................................... 99,124
-----------
Net assets...................................................... $35,946,354
-----------
Net Assets:
Applicable to beneficial interests............................... $35,946,354
-----------
Cost of investments.............................................. $29,853,475
-----------

See Notes to Financial Statements.

28
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------

Statement of Operations

For the
Year Ended
August 31,
---------------------------------------------------------------------------
2000

Investment Income:
Dividend income............................................. $ 306,183
Less: Foreign withholding taxes............................. (29,933)
-----------
Net dividend income.................................... 276,250
Interest income............................................. 61,363
-----------
Total investment income.................................... 337,613
-----------
Expenses:
Investment management fees.................................. 318,965
Custody and accounting fees................................. 94,926
Operations agent fees....................................... 59,865
Administrative agent fees................................... 49,486
Professional fees........................................... 26,557
Amortization of organization costs.......................... 13,220
Interest expense............................................ 4,362
Trustees' fees.............................................. 1,713
Other expenses.............................................. 16,382
-----------
Total expenses............................................. 585,476
-----------
Expenses in excess of income............................... (247,863)
-----------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currencies:
Net realized gain (loss) on:
Investment transactions.................................... 1,237,306
Foreign currency transactions.............................. (87,133)
Net change in unrealized appreciation/depreciation on:
Investments................................................ 2,273,209
Foreign currency translation............................... (454)
-----------
Net Realized and Unrealized Gain on Investments
and Foreign Currencies...................................... 3,422,928
-----------
Net Increase in Net Assets Resulting from Operations......... $ 3,175,065
===========

See Notes to Financial Statements.

29
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
August 31, August 31,
----------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income...................... $ (247,863) $ (228,732)
Net realized gain on investment
and foreign currency transactions................ 1,150,173 440,601
Net change in unrealized appreciation/
depreciation on investments and
foreign currency translation..................... 2,272,755 4,022,817
------------ ------------
Net increase in net assets resulting from
operations....................................... 3,175,065 4,234,686
------------ ------------
Capital Transactions:
Proceeds from contributions....................... 19,435,068 13,610,609
Withdrawals....................................... (10,064,518) (4,245,807)
------------ ------------
Net increase in net assets resulting
from capital transactions........................ 9,370,550 9,364,802
------------ ------------
Total increase in net assets..................... 12,545,615 13,599,488
Net Assets:
Beginning of year................................. 23,400,739 9,801,251
------------ ------------
End of year....................................... $ 35,946,354 $ 23,400,739
============ ============
</TABLE>

See Notes to Financial Statements.

30
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Financial Highlights

For the For the For the Period
Year Ended Year Ended Oct. 2, 1997/1/
August 31, August 31, to August 31,
--------------------------------------------------------------------------------
2000 1999 1998
Ratios and Supplemental Data:
Net assets, end of period (000's).... $35,946 $ 23,401 $ 9,801
Ratios of expenses to average net
assets before interest expense...... 1.83% 2.98% 3.75%/2/
Ratio of interest expense to
average net assets.................. 0.01% 0.00%/3/ --
Ratio of expenses to average
net assets after interest
expense............................. 1.84% 2.98% 3.75%/2/
Ratio of expenses in excess of
income to average net assets........ (0.78)% (1.49)% (1.75)%/2/
Portfolio turnover................... 101% 79% 125%

_________________
/1/ Commencement of operations.
/2/ Annualized.
/3/ Amount rounds to less than 0.01%.

See Notes to Financial Statements.

31
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

Flag Investors Portfolios Trust ("Portfolio Trust") (formerly Deutsche
Portfolios) was organized on June 20, 1997, as a business trust under the laws
of the State of New York. The Portfolio Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, consisting of seven separate investment series
(the "Portfolios"), each of which is, in effect, a separate mutual fund. The
accompanying financial statements and notes relate to the Top 50 World Portfolio
(the "Portfolio").

The investment manager (the "Advisor") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM"), an indirect subsidiary of Deutsche Bank AG. The
investment objective of the Portfolio is high capital appreciation, and as a
secondary objective, reasonable dividend income. The Portfolio began operations
on October 2, 1997.

The Portfolio operates under a structure where the beneficial interest holders
of the Portfolio invest substantially all of their investable assets in the
Portfolio. From time to time, a beneficial interest holder of the Portfolio may
own a significant percentage of the Portfolio. Investment activities of the
beneficial interest holders could have a material impact on the Portfolio.

NOTE 2 -- Significant Accounting Policies

When preparing the Portfolio's financial statements, management makes
estimates and assumptions to comply with accounting principles generally
accepted in the United States of America. 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 Portfolio's
significant accounting policies are:

Valuation of Securities

32
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- continued

time when net assets are valued. Unlisted securities, and securities for which
the Manager determines the listing exchange is not the primary market, are
valued at the average of the quoted bid-and-ask prices in the over-the-counter
market. Debt securities with a remaining maturity of less than 60 days and
money market instruments are valued at amortized cost, which approximates
market value. The amortized cost method involves valuing a security at its
cost on the date of purchase and thereafter assuming a constant amortization
to maturity of the difference between the amount due at maturity and cost.

Cash

Deposits held at Investors Bank and Trust Company ("IBT"), the Portfolio's
custodian, in a variable rate account are classified as cash.At August 31,
2000 the interest rate was 5.20%, which resets on a periodic basis. Amounts on
deposit are generally available on the same business day.

Investment Transactions

Forward Foreign Currency Contracts

The Portfolio may enter into forward foreign currency contracts with
various counterparties for purposes of hedging its existing portfolio of

33
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- continued

investments and settling foreign investment transactions. Forward foreign
currency contracts are over-the-counter contracts for delayed delivery of
securities or currency in which the buyer agrees to buy and the seller agrees
to deliver a specified currency at a specified price on a specified date.
Because the terms of forward contracts are not standardized, they are not
traded on organized exchanges and generally can be terminated or closed-out
only by agreement of both parties to the contract. During the period the
forward contract is open, changes in the value of the contract are recognized
as unrealized gains or losses. When the forward contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
proceeds from (or payments to) the close-out of the contract and the original
contract price.

Futures Contracts

The Portfolio may enter into futures contracts to hedge against market
fluctuations or to speculate on future market conditions. A futures contract
is an agreement between a buyer and a seller and an established futures
exchange or its clearinghouse in which the buyer or seller agrees to take or
make a delivery of a specific amount of an item at a specified price on a
specific date (settlement date) or to make or receive a cash payment based on
the value of a securities index. Upon entering into a futures contract, the
Portfolio is required to deposit with a financial intermediary an amount equal
to a certain percentage of the face value indicated in the futures contract
("initial margin"). Subsequent payments ("variation margin") are made or
received by the Portfolio each day, dependent on the daily fluctuations in the
value of the underlying security or index. When entering into a closing
transaction, the Portfolio will realize a gain or loss equal to the difference
between the value of the futures contract to sell and the contract to buy.

Foreign Currency Translation

34
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- concluded

tive days of such transactions. The resultant realized and unrealized gains
and losses arising from exchange rate fluctuations are identified separately
in the Statements of Operations, except for such amounts attributable to
investments which are included in net realized and unrealized gains and losses
on investments.

Federal Income Taxes

Expenses

Deferred Organization Costs

35
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 3 -- Significant Agreements and Transactions with Affiliates

The Portfolio Trust has entered into an Investment Management Agreement (the
"Management Agreement") with DFM ("the Advisor"). DFM retains overall
responsibility for supervision of the investment management program for the
Portfolio but has delegated the day-to-day management of the investment
operations of the Portfolio to DWS International Portfolio Management GmbH
("DWS") as investment sub-advisor (the "Sub-Advisor") to the Portfolio. As
compensation for the services rendered by DFM, DFM receives a fee at an
annualized rate of 1.00% of the Portfolio's average daily net assets, which is
computed daily and paid monthly. As compensation for its services, DWS receives
a fee, paid by DFM which is based on the average daily net assets of the
Portfolio. The Advisor and Sub-Advisor are indirect subsidiaries of Deutsche
Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned subsidiary
of Deutsche Bank AG, serves as operations agent to the portfolio. For its
services, ICCC receives a fee which is computed daily and paid monthly at the
annual rate of 0.035% of the averaged daily net assets of the Portfolio,
subject to a minimum fee of $60,000 annually. For the period April 7, 2000
through August 31, 2000 ICCC's fee was $23,964. Prior to April 7, 2000,
Federated Services Company ("Federated") served as operations agent to the
Portfolio and operated under a similar fee structure.

The Portfolio Trust entered into an agreement with IBT Trust Company (Cayman)
Ltd. ("IBT (Cayman)"). Pursuant to that agreement, IBT (Cayman) provides sub-
administrative services to the Portfolio, for which it receives a fee, which is
computed daily and paid monthly, at an annual rate of 0.025% on the first $200
million, 0.02% on the next $800 million and 0.01% on assets in excess of $1
billion, subject to a minimum of $40,000 during the first year of the
Portfolio's operations, $45,000 in the second year of operations and $50,000 in
the third year. Investors Bank and Trust Company (Boston) acts as the custodian
of the Portfolio's assets.

36
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

NOTE 3 -- concluded

0.02% on the first $200 million, 0.015% on the next $800 million, and 0.01% on
assets in excess of $1 billion, subject to a minimum of $30,000 during the first
year of the Portfolio's operations, $35,000 in the second year of operations,
and $40,000 in the third year.

For the year ended August 31, 2000, affiliates of Deutsche Bank AG received
$3,214 in brokerage commissions from the Portfolio as a result of executing
agency transactions in portfolio securities.

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government.................... $ --
Non-US Government................ 41,207,089
-----------
Total............................ $41,207,089
===========

Sales
US Government.................... $ --
Non-US Government................ 30,683,571
-----------
Total............................ $30,683,571
===========

On August 31, 2000, aggregate gross unrealized appreciation for all securities
in which there is an excess value over tax cost was $6,447,339 and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value was $1,661,888.

37
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 5 -- Line of Credit Agreement

The Portfolio Trust has established a revolving line of credit with IBT.
Borrowing under the line of Credit may not exceed the lesser of $15,000,000 or
10% of the total assets of the Portfolio. Interest is payable on outstanding
borrowings at the Federal Funds Rate plus 0.50%. Additionally, the line of
credit includes an annual commitment fee equal to 0.07% per annum on the
difference between $15,000,000 and the average daily amount of outstanding
borrowings. During the year ended August 31, 2000, the Portfolio periodically
utilized the line of credit and incurred interest expense as disclosed in the
Statement of Operations. The weighted average interest rate paid by the
Portfolio was 6.33% and the maximum and average amounts of the loans outstanding
during the borrowing period were $2,232,569 and $619,796, respectively. At
August 31, 2000, the Portfolio had no debt outstanding under the line of credit
agreement. Commitment fees paid by the Portfolio during the year were $1,622.

38
<PAGE>

Top 50 World Portfolio
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Trustees of Flag Investors Portfolios Trust and
Beneficial Interest Holders of Top 50 World Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Top 50 World Portfolio (one of
the portfolios constituting a series of Flag Investors Portfolios Trust,
formerly Deutsche Portfolios, hereafter referred to as the "Portfolio Trust") at
August 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

39
<PAGE>

This page intentionally left blank.
<PAGE>

This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.

[LOGO]
Flag Investors
Investing With A Difference(R)

Domestic Equity
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market
Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.

<PAGE>

[LOGO OF FLAG INVESTORS]

Top 50 Asia

Annual Report

August 31, 2000
<PAGE>

Report Highlights
--------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 17.54% (excluding
sales charges) for the twelve months ended August 31, 2000, outperforming
the MSCI Pacific Ex-Japan Index return of 7.28% for the same time period.

. The Fund's strong outperformance was primarily due to its overweighting in
the technology and telecommunications sectors, to its build-up of the
financial services sectors as global interest rate uncertainty gradually
eased, and to strong stock selection across the market sectors, as we seek
only the most competitive, high quality companies and maintain a focused
portfolio of approximately 50 stocks.

. The Asian and Pacific Rim markets closed 1999 on a rally back from 1998's
global economic woes primarily due to falling domestic interest rates,
stable currencies, strong domestic consumption, and improving exports.
However, results for the Asian equity markets were mixed in the year 2000
to date, impacted heavily by NASDAQ volatility, US Federal Reserve Board
action, and a divergence between "New Economy" and "Old Economy" sectors.

. The outlook for the Hong Kong/China market is bright. As for Japan, we
believe that despite its current economic struggle, its recovery story is
in place. In the near term, we believe Japan's equity market could continue
to be weak, but in the longer term, we believe private consumption should
recover. The rest of developed Asia, in our view, will continue to look to
the US, both as a market for its exports and as an economic bellwether.
<PAGE>

Fund Performance
--------------------------------------------------------------------------------
Growth of a $10,000 Investment in Class A Shares/1/
October 14, 1997 - August 31, 2000

[GRAPH]

$10,000 invested in the Flag Investors Top 50 Asia Class A Shares at inception
on October 14, 1997 was worth $17,690 on August 31, 2000.

10/14/97 $10,000
11/30/97 $8,800
$9,352
$7,912
8/31/98 $6,544
$8,776
$8,867
$11,294
8/31/99 $15,051
$17,967
$21,429
$17,321
8/31/2000 $17,690

Flag Investors Top 50 Asia -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ----------------------------
<S> <C> <C> <C> <C>
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/14/97 1 year 10/14/97
----------------------------------------------------------------------------------------------------
Top 50 Asia - Class A Shares/1/ 17.54% 76.90% 17.54% 21.90%
----------------------------------------------------------------------------------------------------
MSCI Pacific Ex-Japan Index/2/ 7.28% 19.51%/4/ 7.28% 6.49%/4/
----------------------------------------------------------------------------------------------------
Lipper Pacific Region Funds Average/3/ 10.44% 30.45%/4/ 10.44% 9.39%/4/
----------------------------------------------------------------------------------------------------
</TABLE>
---------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Pacific ex-Japan Index is an unmanaged market value-weighted
average of the performance of securities listed on the stock exchange of
five countries in the Pacific region, excluding Japan. Index returns do not
reflect expenses which have been deducted from the Funds returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning October 31, 1997.

1
<PAGE>

Fund Performance
--------------------------------------------------------------------------------
Flag Investors Top 50 Asia -- Class B

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ----------------------------
<S> <C> <C> <C> <C>
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 5/5/98 1 year 5/5/98
----------------------------------------------------------------------------------------------------
Top 50 Asia - Class B Shares/1/ 16.68% 98.06% 16.68% 34.18%
----------------------------------------------------------------------------------------------------
MSCI Pacific Ex-Japan Index/2/ 7.28% 23.47%/4/ 7.28% 9.46%/4/
----------------------------------------------------------------------------------------------------
Lipper Pacific Region Funds Average/3/ 10.44% 50.12%/4/ 10.44% 18.39%/4/
----------------------------------------------------------------------------------------------------
</TABLE>
---------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Pacific ex-Japan Index is an unmanaged market value-weighted
average of the performance of securities listed on the stock exchange of
five countries in the Pacific region, excluding Japan. Index returns do not
reflect expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning April 30, 1998.

Flag Investors Top 50 Asia -- Class C

Cumulative Total Return
-----------------------
Since
inception
Period ended August 31, 2000 5/31/00
--------------------------------------------------------------------------------
Top 50 Asia - Class C Shares/1/ 1.97%
--------------------------------------------------------------------------------
MSCI Pacific Ex-Japan Index/2/ 12.61%/4/
--------------------------------------------------------------------------------
Lipper Pacific Region Funds Average/3/ 2.39%/4/
--------------------------------------------------------------------------------

---------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Pacific ex-Japan Index is an unmanaged market value-weighted
average of the performance of securities listed on the stock exchange of
five countries in the Pacific region, excluding Japan. Index returns do not
reflect expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning May 31, 2000.

2
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------

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 performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.

Both the line graph and the SEC standardized total return figures include
the impact of the 5.50% maximum initial sales charge for the Class A Shares and
the contingent deferred sales charge applicable to the specified time period for
the Class B and Class C Shares. Returns would be higher for Class A Shares
investors who qualified for a lower initial sales charge or for Class B or Class
C Shares investors who continued to hold their shares past the end of the
specified time period.

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.

3
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 14, 1997 - August 31, 2000

[GRAPH]

Flag Investors Top 50 Asia
--Class A Shares MSCI Pacific Ex-Japan Index/2/

10/14/97 $9,450 $10,000
11/30/97 $8,316 $9,684
$8,838 $10,510
$7,477 $8,576
8/31/98 $6,184 $6,730
$8,293 $9,171
$8,379 $9,031
$10,673 $10,547
8/31/99 $14,223 $11,050
$16,979 $11,962
$20,250 $11,968
$16,368 $10,495
8/31/2000 $16,717 $11,803

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class A Shares 11.07% 19.53%
--------------------------------------------------------------------------------

---------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
fund's maximum 5.50% sales charges. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure. Performance would have been lower during the specified periods
if certain fees and expenses had not been waived by the Fund.
/2/ The MSCI Pacific ex-Japan Index is an unmanaged, market value-weighted
average of the performance of securities listed on the stock exchange of
five countries in the Pacific region, excluding Japan. Benchmark returns
are for the period beginning October 31, 1997.
/3/ October 14, 1997.

4
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
May 5, 1998 - August 31, 2000

[GRAPH]

Flag Investors Top 50 Asia--Class B Shares $19,506 MSCI Pacific Ex-Japan
Index/2/ $12,219

Flag Top 50 Asia - B MSCI Pacific Ex-Japan Index
5/5/98 $10,000 $8,878
8/31/98 $7,053 $6,967
$9,447 $9,494
$9,527 $9,349
$12,247 $10,919
8/31/99 $16,296 $11,440
$19,415 $12,384
$23,124 $12,389
$18,848 $10,865
8/31/2000 $19,212 $12,219

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class B Shares 11.68% 33.30%
--------------------------------------------------------------------------------

---------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance
figures for the classes differ because each class maintains a distinct
sales charge and expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund.
/2/ The MSCI Pacific ex-Japan Index is an unmanaged, market value-weighted
average of the performance of securities listed on the stock exchange of
five countries in the Pacific region, excluding Japan. Benchmark returns
are for the period beginning April 30, 1998.
/3/ May 5, 1998.

5
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Additional Performance Information (concluded)

Cumulative Annual Total Return/1/

Period Ended August 31, 2000 1 Year Since Inception/2/
--------------------------------------------------------------------------------
Class C Shares -- 0.97%
--------------------------------------------------------------------------------

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors
Top 50 Asia (the "Fund"), providing a detailed review of the markets, the
portfolio in which the Fund invests (the "Portfolio"), and our outlook. Included
are a complete financial summary of the Fund's operations and listing of the
Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund significantly outperformed its benchmark. The
Fund's Class A shares produced a return of 17.54% for the twelve months ended
August 31, 2000, as compared to 7.28% for the MSCI Pacific Ex-Japan Index. The
Fund's Class B shares produced an annual return of 16.68%. The Fund introduced
Class C shares on May 31, 2000.

This strong outperformance was primarily due to the Fund's overweighting in
the technology and telecommunications sectors, to its build-up of the financial
services sectors as global interest rate uncertainty gradually eased, and to
strong stock selection across the market sectors. We continued to seek Asia's
highest quality companies that are best poised to capitalize on the competitive
positioning of their country, that tap Asia's growth potential, and that will
lead their respective industries within Asia. Based on careful monitoring of the
ever-shifting group of what we believe to be the top 50 Asian companies,
portfolio activity during the annual period was somewhat higher than usual.

For example, we sold Hong Kong's Cheung Kong Infrastructure and replaced it
with India's Infosys Technologies, Ltd., the third largest software company in
Asia. Within Japan, we sold Bridgestone and Minebea and replaced those holdings
with Murata Manufacturing and Rohm, both of which benefited from the strong
demand for telecommunications equipment products. Outside of the technology and
telecommunications sectors, we sold Australia's AMP, Hong Kong's Jardine
Matheson, Korea's Samsung Display Devices, and Japan's Shiseido. We replaced
these stocks with Australia's News Corporation, a well-positioned media company;
Australia's Rio Tinto, an international mining company; Australia's National
Mutual, a subsidiary of France's insurance company AXA; and Japan's Yamanouchi
Pharmaceutical, which has an outstanding production pipeline. We also replaced
Korea Electric Power with India's Infosys Technologies, Ltd.

7
<PAGE>

Letter to Shareholders (continued)
--------------------------------------------------------------------------------

Performance winners for the Portfolio were largely found among the Fund's
telecommunications and technology holdings. These included Samsung Electronics,
Taiwan Semiconductor Manufacturing, China Mobile, formerly known as China
Telecom, Sony and Infosys Technologies. Within the financial services sector,
Nomura Securities was one of the top performers later in the fiscal period.
Weaker performers in the Portfolio included Japan's Murata Manufacturing,
Yamanouchi Pharmaceutical, and Fujitsu, Korea's LG Electronics, and Malaysia's
Nylex. We continue to hold these stocks in the Portfolio.

Investment Environment

As a whole, Asia ex-Japan rose a modest 7.28% in US dollar terms and Japan
rose 9.36% in US dollar terms during the twelve month period ended August 31,
2000.

The Asian and Pacific Rim markets closed 1999 on a rally back from 1998's
global economic woes primarily due to falling domestic interest rates, stable
currencies, strong domestic consumption, and improving exports. Japan had a
particularly strong showing, with its equity market rising on strong foreign
buying and ongoing gains in business sentiment.

Results for the Asian equity markets were mixed as the year 2000 began, as
external events from the US dominated. The Dow Jones Industrials Average
experienced a significant correction in January and continued to slide into
March, which brought down "Old Economy" stocks across Asia. On the other hand, a
surging NASDAQ Composite Index in February lifted "New Economy" stocks across
Asia. For example, regional telecommunications stocks rose 23.0% for the month,
Asian internet plays gained an average of 19.2%, and the software sector in Asia
soared 46.5%. Among the individual Asian stock markets, those with the largest
technology, media and telecommunications (TMT) allocations fared best. Hong Kong
gained 10.5% on the back of outperformance by China Mobile and Hutchison
Whampoa. India was also a regional outperformer, rising 4.6% due to stellar
returns from its software sector. A similar preference for "New" over "Old" was
seen in Korea, where the traditional KOSPI lost 12.2%, while the tech-heavy
KOSDAQ climbed 40.0%. The rest of the region's markets lost ground as the US
Federal Reserve Board implemented its first interest rate hike for the year.

8
<PAGE>

--------------------------------------------------------------------------------

The "New Economy" bubble burst in March, when the NASDAQ crossed the 5000
mark briefly only to plummet 9.4% over the remainder of the month and continue
its downward volatility through April and May. Asian TMT stocks were hurt as a
consequence. The Indian, Korean, Hong Kong and Taiwanese markets were most
affected by the NASDAQ decline. Regional cellular stocks proved the exception to
the rule, as they began to decouple from the NASDAQ. The region's markets--
especially the property and bank sectors--were also impacted during these months
by two additional Federal Reserve Board interest rate hikes. The smaller Asian
markets, including Singapore, Thailand, Indonesia, and the Philippines, also
suffered during these months as a result of mounting political risk, little
progress in restructuring, a global electronic components shortage, and a lack
of exciting technology plays. Malaysia rose due primarily to its impending MSCI
re-inclusion in May.

In June, Asian markets ended months of setbacks, rising 5.0% for the month,
but there was wide divergence in the performance of individual markets. The
interest-rate sensitive markets of Hong Kong and Singapore outperformed, as the
US rate cycle appeared to be nearing its peak. Korea also performed well,
responding in part to NASDAQ's strong performance for the month. India produced
strong monthly returns, led by the software sector, which rallied on the basis
of the NASDAQ rebound and expectations of strong earnings results. In contrast,
the Taiwan market fell in reaction to a local interest rate hike and to news
that the government was considering tax increases for the semiconductor sector.

Hong Kong/China was the best performing equity market for the last two
months of the fiscal period. Higher than expected real economic growth, monetary
reflation, the opening of the economy through the World Trade Organization, and
increased institutional buying all contributed to the rally. Telecommunications,
bank, and property stocks did particularly well. On the other hand, the
Taiwanese market was volatile, because investors began to question how long the
global technology cycle would last, and the Korean market lost momentum because
of the slow restructuring in its financial sector.

In contrast to 1999's impressive showing, the Japanese equity market fell
back to levels not seen since August 1999 during the second half of the fiscal
year, as the divergence between "New Japan" and "Old Japan" stocks narrowed. As
the Japanese economy and Japanese companies' business improved, many foreign

9
<PAGE>

Letter to Shareholders (concluded)
--------------------------------------------------------------------------------

investors began to fear that corporations would slow down their restructuring
efforts. This led to doubts about the Japanese recovery story and to notable
foreign selling. It also seems that much of the earnings growth expectations
were priced in the first half of the year. Even though most Japanese companies
reported earnings that were either in line with or better than expected in April
and May 2000, these favorable earnings reports did not trigger additional
foreign buying.

Other factors that impacted the Japanese market during the second half of the
fiscal year were a global correction of TMT stocks in general and
Internet-related stocks in particular; a major corporate bankruptcy, i.e. Sogo
Corp., that re-triggered doubts about the banking sector; and concerns about the
negative effect of the strengthening yen on the Japanese export industry.
Further adding to the negative foreign investor sentiment toward the Japanese
stock market was the Bank of Japan's increase in interest rates for the first
time in ten years on August 11. The central bank's raising the target rate for
overnight lending to 0.25% was seen as a normalization of Japanese monetary
policy, which had been exceptional since the lowering of the interest rate to
0.00% in February 1999. However the rate hike was simultaneously criticized as
an action taken too soon given the rather slowly recovering domestic economy.

Looking Ahead

The outlook for the Hong Kong/China market is bright, based on ongoing strong
GDP growth, monetary reflation, and the opening of the Chinese economy to world
trade.

As for Japan, we believe that despite its current economic struggle, its
recovery story is in place. In the near term, we believe Japan's equity market
could continue to be weak based on negative investor sentiment about the slow
speed of corporate restructuring, the further unwinding of cross-shareholdings,
and the possibility of additional bankruptcies. In the longer term, however, we
believe private consumption should recover due to companies' rising
profitability and thus rising salaries, a pick-up in GDP growth, and ongoing
restructuring due to pressure by the strong yen. The primary risks to Japan's
equity market are misjudgments in its fiscal/monetary policy mix, Japan's
national debt getting out of control and/or its currency strengthening
excessively, and global economic growth weakening unexpectedly.

10
<PAGE>

The rest of developed Asia, in our view, will continue to look to the US,
both as a market for its exports and as an economic bellwether, especially given
the strong links between their currencies and the dollar. The outlook for
Indonesia and the Philippines remains poor, and so we intend to continue to stay
out of these markets with respect to new investments.

As for sectors, analysts have begun to question whether the semiconductor
cycle will last, and as a result we could see high volatility in this sector.
However, we believe foundries will continue to benefit from ongoing strong
fundamentals and from the trend to outsourcing in the semiconductor industry.
Thus, we intend to maintain the Fund's focus on the technology,
telecommunications and industrial sectors.

We believe the Fund's focused investment strategy positions the Portfolio
well to continue to pursue its objective of seeking a high level of capital
appreciation, and as a secondary objective, reasonable dividend income. We
appreciate your support of the Fund, and we look forward to continuing to serve
your investment needs for many years ahead.

Sincerely,

/s/ Klaus Kaldemorgen /s/ Thomas Gerhardt

Klaus Kaldemorgen
Thomas Gerhardt
on behalf of the Portfolio Management Team
August 31, 2000

11
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S> <C>
Assets:
Investment in Top 50 Asia Portfolio (the "Portfolio"), at value ........... $35,164,977
Receivable from Manager for expense reimbursement, net .................... 29,672
Receivable for capital shares sold ........................................ 236,676
Receivable from Top 50 Asia Portfolio for withdrawals ..................... 866,185
Deferred organization costs ............................................... 5,322
-----------
Total assets ............................................................ 36,302,832
-----------
Liabilities:
Payable for capital shares redeemed ....................................... 945,713
Payable to Top 50 Asia Portfolio for contributions ........................ 200,700
Transfer agent fees payable ............................................... 3,740
Distribution and service fees payable ..................................... 11,122
Accounting fees payable ................................................... 1,898
Administration fees payable ............................................... 6,275
Other accrued expenses .................................................... 22,096
-----------
Total liabilities ....................................................... 1,191,544
-----------

Net assets .............................................................. $35,111,288
===========
Net Assets Consist of:
Capital stock, $0.001 par value ........................................... $ 1,640
Paid-in capital ........................................................... 24,586,840
Distributions in excess of income ......................................... (511,753)
Accumulated net realized gain on investments and
foreign currency transactions ........................................... 3,307,140
Net unrealized appreciation of investments and
foreign currency translations ........................................... 7,727,421
-----------
Net assets .............................................................. $35,111,288
===========
Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets .............................................................. $30,120,096
===========
Shares outstanding ...................................................... 1,430,343
===========
Net asset value and redemption price per share .......................... $ 21.06
===========
Offering price per share ($21.06 / .945) ................................ $ 22.29
===========
Class B Shares
Net assets .............................................................. $ 4,867,248
===========
Shares outstanding ...................................................... 204,636
===========
Net asset value and offering price per share ............................ $ 23.78
===========

Minimum redemption price per share ($23.78 x .95) ....................... $ 22.59
===========
Class C Shares(a)
Net assets .............................................................. $ 123,944
===========
Shares outstanding ...................................................... 5,210
===========
Net asset value and offering price per share ............................ $ 23.79
===========
Minimum redemption price per share ($23.79 x .99) ....................... $ 23.55
===========
</TABLE>

-------
(a) On May 31, 2000, Flag Investors Top 50 Asia Class C Shares began operations.

See Notes to Financial Statements.

12
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Statement of Operations

For the
Year Ended
August 31,
---------------------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses Allocated from Top 50 Asia Portfolio:
Dividend income ................................................................. $ 405,396
Less: Foreign withholding taxes ................................................. (60,680)
----------
Net dividend income ........................................................ 344,716
Interest income ................................................................. 41,711
Expenses ........................................................................ (517,023)
----------
Expenses in excess of income allocated from
Top 50 Asia Portfolio ...................................................... (130,596)
----------
Expenses:
Administration fees ............................................................. 74,854
Transfer agent fees ............................................................. 54,000
Registration fees ............................................................... 38,448
Reports to shareholders ......................................................... 31,482
Accounting fees ................................................................. 20,998
Professional fees ............................................................... 19,847
Amortization of organization costs .............................................. 2,525
Directors' fees ................................................................. 2,515
Distribution fees
Class A Shares(a) ............................................................. 51,432
Class B Shares ................................................................ 48,418
Class C Shares(b) ............................................................. 91
Service fees
Class A Shares(a) ............................................................. 26,482
Class B Shares ................................................................ 16,139
Class C Shares(b) ............................................................. 30
Other expenses .................................................................. 1,606
----------
Total expenses ................................................................ 388,867
Less: Fee waivers or expense reimbursements ..................................... (255,169)
----------
Net expenses .................................................................. 133,698
----------
Expenses in excess of income .................................................. (264,294)
----------
Net Realized and Unrealized Gain (Loss) on Investments, Foreign
Currencies and Forward Foreign Currency Contracts Allocated from
Top 50 Asia Portfolio:
Net realized gain (loss) on:
Investments ................................................................... 5,101,243
Foreign currency transactions and forward foreign currency contracts .......... (22,127)
Net change in unrealized appreciation/depreciation on:
Investments ................................................................... (19,694)
Foreign currency translations and forward foreign currency contracts .......... (412)
----------
Net Realized and Unrealized Gain on Investments, Foreign Currencies
and Forward Foreign Currency Contracts Allocated from Top 50
Asia Portfolio .................................................................. 5,059,010
----------
Net Increase in Net Assets Resulting from Operations ............................... $4,794,716
==========
</TABLE>

-----------
(a) As of January 18, 2000 Class A Shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.

(b) On May 31, 2000, Flag Investors Top 50 Asia Class C Shares began operations.

See Notes to Financial Statements.

13
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
--------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income ....................... $ (264,294) $ (46,031)
Net realized gain on investment, foreign
currency transactions and foward foreign
currency contracts allocated from Top 50
Asia Portfolio ..................................... 5,079,116 357,038
Net change in unrealized appreciation/
depreciation on investments, foreign currency
translations and forward foreign currency
contracts allocated from Top 50 Asia Portfolio.... (20,106) 7,762,530
------------ -----------
Net increase in net assets resulting from
operations ....................................... 4,794,716 8,073,537
------------ -----------
Distributions to Shareholders:
Distributions from net investment income:
Class A Shares ................................... (348,693) (217)
Class B Shares ................................... (51,370) (102)
Class C Shares(a) ................................ -- --
Distributions from realized gains:
Class A Shares ................................... (1,052,806) --
Class B Shares ................................... (197,139) --
Class C Shares(a) ................................ -- --
------------ -----------
Total distributions ................................ (1,650,008) (319)
------------ -----------
Capital Share Transactions:
Net proceeds from shares sold ...................... 42,718,418 21,563,670

Net proceeds from dividends and distributions
reinvested ....................................... 1,554,094 319
Net cost of shares redeemed ........................ (39,927,255) (2,106,011)
------------ -----------
Net increase in net assets resulting
from capital share transactions .................. 4,345,257 19,457,978
------------ -----------
Total increase in net assets .................. 7,489,965 27,531,196

Net Assets:
Beginning of year .................................. 27,621,323 90,127
------------ -----------
End of year (Includes distributions in excess
of income of $(511,753) and $(42,068),
respectively) .................................... $ 35,111,288 $27,621,323
============ ===========
</TABLE>

------------
(a) On May 31, 2000, Flag Investors Top 50 Asia Class C shares began operations.

See Notes to Financial Statements.

14
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Financial Highlights -- Class A Shares

(For a share outstanding throughout each period)

For the For the For the Period
Year Ended Year Ended Oct. 14, 1997/1/
August 31, August 31, to August 31,
---------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period ............................... $ 18.79 $ 8.18 $ 12.50
----------- ----------- -----------
Investment Operations:
Net investment (expenses
in excess of) income .................. (0.10) (0.10) 0.01
Net realized and unrealized gain
(loss) on investments, foreign
currencies and forward foreign
currency contracts allocated from
Top 50 Asia Portfolio ........... 3.46 10.72 (4.33)
----------- ----------- -----------
Increase (decrease) from
investment operations ........... 3.36 10.62 (4.32)
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net investment
income .......................... (0.26) (0.01) --
Distributions from net realized
gains ........................... (0.83) -- --
----------- ----------- -----------
Total distributions ............... (1.09) (0.01) --
----------- ----------- -----------
Net Asset Value at End of Period ..... $ 21.06 $ 18.79 $ 8.18
=========== =========== ===========

Total Return
(based on net asset value)/2/ ..... 17.54% 130.00% (34.56)%
Ratios and Supplemental Data:
Net assets, end of period (000's).. $ 30,120 $ 23,954 $ 41
Ratios to average net assets:
Expenses/3/ .................. 1.60% 1.60% 1.60%/4/
Net investment (expenses in
excess of) income/3/ ....... (0.58)% (0.34)% 0.15%/4/
Portfolio turnover of Top 50 Asia
Portfolio ....................... 48% 51% 54%
</TABLE>

---------
/1/ Commencement of operations.

/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expenses to average net assets 2.28% 3.50% 247.05%/4/
Expenses in excess of income to
average net assets (1.26)% (2.24)% (245.30)%/4/
</TABLE>

/4/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)

For the For the For the Period
Year Ended Year Ended May 5, 1998/1/
August 31, August 31, to August 31,
----------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period ............................. $ 21.21 $ 9.28 $ 12.50
-------- --------- ---------
Investment Operations:
Expenses in excess of income .......... (0.45) (0.12) (0.02)
Net realized and unrealized gain
(loss) on investments, foreign
currencies and forward foreign
currency contracts allocated from
Top 50 Asia Portfolio ............... 4.05 12.06 (3.20)
-------- --------- ---------
Increase (decrease) from investment
operations .......................... 3.60 11.94 (3.22)
-------- --------- ---------
Distributions to Shareholders:
Distributions from net investment
income .............................. (0.20) (0.01) --
Distributions from net realized
gains ............................... (0.83) -- --
-------- --------- ---------

Total distributions ................... (1.03) (0.01) --
-------- --------- ---------
Net Asset Value at End of Period ......... $ 23.78 $ 21.21 $ 9.28
======== ========= =========

Total Return
(based on net asset value)/2/ ......... 16.68% 128.65% (25.76)%
Ratios and Supplemental Data:
Net assets, end of period (000's) ..... $ 4,867 $ 3,667 $ 50
Ratios to average net assets:
Expenses/3/ ......................... 2.35% 2.35% 2.35%/4/
Expenses in excess of income/3/ ..... (1.31)% (1.32)% (0.51)%/4/
Portfolio turnover of Top 50 Asia
Portfolio ........................... 48% 51% 54%
</TABLE>

----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:

Expenses to average net assets 3.02% 3.75% 247.80%/4/
Expenses in excess of income to
average net assets (1.98)% (2.72)% (245.96)%/4/

/4/ Annualized.

See Notes to Financial Statements.

16
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Financial Highlights -- Class C Shares

(For a share outstanding throughout each period)

For the Period
May 31, 2000/1/
to August 31,
---------------------------------------------------------------------------------------
2000
<S> <C>
Net Asset Value at Beginning of Period ..................................... $ 23.33
-------
Investment Operations:
Expenses in excess of income ............................................ (0.02)
Net realized and unrealized gain on investments, foreign currencies
and forward foreign currency contracts allocated from Top 50
Asia Portfolio ........................................................ 0.48
-------
Increase from investment operations ..................................... 0.46
-------
Distributions to Shareholders:
Distributions from net investment income ................................ --
Distributions from net realized gains ................................... --
-------
Total distributions ..................................................... --
-------
Net Asset Value at End of Period ........................................... $ 23.79
=======
Total Return (based on net asset value)/2/ ................................. 1.97%
Ratios and Supplemental Data:
Net assets, end of period (000's) ....................................... $ 124
Ratios to average net assets:
Expenses/3/ ........................................................... 2.35%/4/
Expenses in excess of income/3/ ....................................... (0.99)%/4/
Portfolio turnover of Top 50 Asia Portfolio ............................. 48%
</TABLE>

----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 2000.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:

Expenses to average net assets 3.54%/4/
Expenses in excess of income to average net assets (2.18)%/4/

/4/ Annualized.

See Notes to Financial Statements.
17
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Notes to Financial Statements

NOTE 1 -- Organization

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Top 50 Asia Portfolio (formerly the Deutsche Top 50
Asia Portfolio, the "Portfolio"), which has substantially the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio,
which was 45.6% on August 31, 2000. At August 31, 2000, the remaining interest
in the portfolio was held by Deutsche Top 50 Asia (one of the series
constituting Deutsche Global Funds Ltd., an offshore company and affiliate of
the Company). The financial statements of the Portfolio, including its portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C shares. Each Class of shares is subject to a Distribution fee, and Class
B and Class C Shares are also subject to a Service fee. Each Class will bear its
respective portion of the Service and Distribution fees. Effective January 18,
2000, the Class A Service fee was eliminated and replaced by a Distribution fee.

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

Valuation of securities by the portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included elsewhere
in this report.

18
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------

NOTE 2 -- continued

Investment Income, Expenses and Realized and Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
Portfolio on a daily basis based upon the amount of its investment in the
Portfolio. The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses attributable to each fund are charged
directly to the respective fund, while general Company expenses are allocated
among the funds. The expenses of each fund (other than class specific
expenses) are further allocated to each class of shares based on their
relative net asset value.

Federal Income Taxes

The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of the Fund to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended. Accordingly, the
Fund would not be subject to US federal income taxes to the extent it
distributes substantially all of its net taxable income including any net
capital gains for each fiscal year. In addition, by distributing, during each
calendar year, substantially all of its net investment income and capital
gains, the Fund would not be subject to US federal excise tax. Accordingly,
no provision for US federal income and excise tax is required.

Distributions to Shareholders

19
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- concluded

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Fund were paid initially by Deutsche Funds
Management, Inc. ("DFM") and are being reimbursed by the Fund. Such
organization costs have been deferred and are being amortized ratably over a
period of sixty months from the commencement of operations of the Fund. The
amount paid by the Fund on any redemption by ICC Distributors, Inc. (or any
subsequent holder) of such Fund's initial shares will be reduced by the
pro-rata portion of any unamortized organization costs of the Fund.

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as Administrator. Under the
Administration Agreement, ICCC assisted in the operations of the Fund, subject
to the direction and control of the Board of Directors of the Company. For its
services, ICCC receives a fee from the Fund, which is calculated daily and paid
monthly, at an annual rate of 0.065% of the average daily net assets of the Fund
up to $200 million and 0.0525% of such assets in excess of $200 million, subject
to a minimum fee of $75,000 annually. For the period April 7, 2000 through
August 31, 2000, ICCC's fee was $29,977. Prior to April 7, 2000, Federated
Services Company ("Federated") served as Administrator and operated under a
similar fee structure.

Investors Bank and Trust (Canada) ("IBT") provides accounting services to the
Fund for which the Fund pays IBT an annual fee that is calculated daily and paid
monthly from the Fund's average daily net assets.

As of April 7, 2000, ICCC serves as the transfer agent and dividend
disbursing agent for the Fund. The Fund pays ICCC a per account fee that is
calculated daily and paid monthly. For the period April 7, 2000 through August
31, 2000 ICCC's fee was $21,689. Prior to April 7, 2000, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund and operated under a similar fee structure.

ICC Distributors, Inc. (ICCD), a non-affiliated entity, provides distribution
services to the Fund for which the Fund pays ICCD an annual fee

20
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------

NOTE 3 -- concluded

pursuant to Rule 12b-1, that is calculated daily and paid monthly at the annual
rate of: 0.25% of the Class A Shares' average daily net assets and 0.75% of the
Class B and Class C Shares' average daily net assets. Class B and Class C Shares
are subject to a 0.25% shareholder servicing fee. Prior to January 18, 2000,
Edgewood Services Inc. served as distributor and shareholder servicing agent for
the Fund and operated under a similar fee structure.

By an Expense Limitation agreement effective June 1, 2000, between the
Company and DFM, DFM has agreed to waive its fees and reimburse expenses to the
Fund in order to limit the total operating expenses of the Fund (which includes
expenses of the Fund and its pro-rata portion of expenses of the Portfolio), to
not more than 1.60% of the average daily net assets of Class A Shares and 2.35%
of the average daily net assets of the Class B Shares and Class C Shares through
June 1, 2001.

Certain officers and directors of the Funds are also officers and directors
of ICCC or affiliated with Deutsche Bank. These persons are not paid by the
Funds.

NOTE 4 -- Concentration of Ownership

From time to time the Funds may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the Fund and the Portfolio.

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
------------- --------------
Deutsche Bank Securities, Inc. 1 51.74%
Fidelity Investments Institutional
Operations Co. Inc. 1 9.68%
Merrill Lynch Pierce Fenner & Smith 2 17.83%

21
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 5 -- Capital Share Transactions

The Fund is authorized to issue up to 250,000,000 shares of $0.001 par value
capital stock. Transactions in capital stock were as follows for the following
periods:

<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 2000 August 31, 1999
--------------------------- ---------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold ............... 1,756,153 $ 37,328,484 1,376,077 $ 18,173,485
Reinvestment of dividends
and distributions ...... 59,436 1,342,742 19 216
Shares redeemed ........... (1,659,805) (35,242,279) (106,497) (1,681,431)
----------- ------------ ----------- ------------
Net increase .............. 155,784 $ 3,428,947 1,269,599 $ 16,492,270
----------- ------------ ----------- ------------
Class B Shares
Shares sold ............... 213,209 $ 5,268,898 191,167 $ 3,390,185
Reinvestment of dividends
and distributions ...... 8,295 211,352 8 103
Shares redeemed ........... (189,747) (4,684,976) (23,633) (424,580)
----------- ------------ ----------- ------------
Net increase .............. 31,757 $ 795,274 167,542 $ 2,965,708
----------- ------------ ----------- ------------
Class C Shares(a):
Shares sold ............... 5,210 $ 121,036 -- --
Reinvestment of dividends
and distributions ...... -- -- -- --
Shares redeemed ........... -- -- -- --
----------- ------------ ----------- ------------
Net increase .............. 5,210 $ 121,036 -- --
----------- ------------ ----------- ------------
</TABLE>

-----------
(a) On May 31, 2000, Flag Investors Top 50 Asia Class C shares began operations.

22
<PAGE>

Flag Investors Top 50 Asia
--------------------------------------------------------------------------------
Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors Top 50 Asia:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Top 50 Asia, formerly Deutsche Top 50 Asia, (one of the funds
constituting a series of Flag Investors Funds, Inc., formerly Deutsche Funds,
Inc., hereafter referred to as the "Fund") at August 31, 2000, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

================================================================================
Tax Information (Unaudited)
For the Tax Year Ended August 31, 2000

The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund's distributions to shareholders included $266,883 from long-term
capital gains, all of which is taxable at the 20% capital gains rate.
The Fund received income from foreign sources in the amount of $405,396. The
Fund has paid foreign taxes in the amount of $60,680. Such amounts are eligible
for the foreign tax credit. You should consult your tax advisor relating to the
appropriate treatment of foreign taxes paid.

23
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Portfolio of Investments August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- 99.0%

Australia -- 6.1%
71,662 Australia & New Zealand Banking Group Ltd........ $ 538,777
73,337 Broken Hill Proprietary Co., Ltd. ............... 802,597
170,116 News Corporation Ltd. (The) ..................... 2,220,801
500,000 AXA Asia Pacific Holdings ....................... 776,065
10,000 Rio Tinto Ltd. .................................. 154,249
30,000 Woodside Petroleum Ltd. ......................... 247,533
------------
4,740,022
------------

China -- 2.8%
9,000,000 Petrochina Co. Ltd./1/........................... 2,146,346
------------

Hong Kong -- 15.9%
800,000 Cathay Pacific Airways .......................... 1,553,986
50,000 Cheung Kong Holdings Ltd. ....................... 650,699
500,000 China Mobile (Hong Kong) Ltd./1/................. 3,846,499
252,400 HSBC Holdings Plc ............................... 3,592,169
1,500,000 Legend Holdings Ltd. ............................ 1,596,297
1,000,000 Star Cruises Plc ................................ 1,000,000
------------
12,239,650
------------

India -- 6.9%
50,000 Dr. Reddy's Laboratories Ltd. -- GDR............. 1,447,000
18,000 Infosys Technologies Ltd. -- ADR ................ 2,808,281
57,000 ITC Ltd. -- GDR ................................. 1,090,125
------------
5,345,406
------------

Indonesia -- 0.0%
108,000 PT Telekomunikasi Indonesia...................... 37,492
------------

Japan -- 27.1%
37,000 Canon, Inc. ..................................... 1,654,620
40,000 Fujitsu Ltd. .................................... 1,158,768
5,000 Murata Manufacturing Co., Ltd. .................. 765,481
210 Nippon Telegraph & Telephone Corp................ 2,500,352
130,000 Nomura Securities Co., Ltd. ..................... 3,040,829

See Notes to Financial Statements.

24
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------

Shares Security Market Value
-------------------------------------------------------------------------------
COMMON STOCK -- (continued)

Japan -- (continued)
40 NTT Mobile Communications Network, Inc............ $ 1,057,517
6,000 Rohm Co., Ltd. ................................... 1,707,214
15,000 Softbank Corp. ................................... 1,981,437
27,000 Sony Corp. ....................................... 3,012,235
16,000 Takeda Chemical Industries ....................... 946,515
25,000 Toyota Motor Co. ................................. 1,087,516
40,000 Yamanouchi Pharmaceutical Co., Ltd. .............. 1,980,030
------------
20,892,514
------------

Korea -- 12.0%
35,000 Korea Electric Power Corp. ....................... 1,029,087
35,408 LG Electronics ................................... 900,569
9,000 Pohang Iron & Steel Co., Ltd...................... 665,614
26,955 Samsung Electronics .............................. 6,649,103
------------
9,244,373
------------

Malaysia -- 1.8%
149,000 Malaysian Oxygen Bhd. ............................ 411,711
620,000 Nylex (Malaysia) Bhd. ............................ 339,368
188,200 O.Y.L. Industries Bhd. ........................... 624,032
------------
1,375,111
------------

Philippines -- 0.2%
353,600 Ayala Corp. ...................................... 56,444
58,000 Benpres Holdings Corp. -- GDR/1/ ................. 102,871
------------
159,315
------------

Singapore -- 13.0%
280,000 City Developments ................................ 1,391,052
232,600 DBS Group Holdings Ltd. .......................... 2,811,203
900,000 DBS Land Ltd. .................................... 1,453,806
200,000 GP Batteries International Ltd. .................. 228,937
510,350 Overseas Union Bank Ltd. ......................... 2,579,921
160,000 Singapore Airlines Ltd. .......................... 1,543,288
------------
10,008,207
------------

See Notes to Financial Statements.
25
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Portfolio of Investments (concluded) August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK-- (concluded)

Taiwan -- 10.9%
57,500 Acer, Inc.-- GDR .................................. $ 357,938
74,145 Advanced Semiconducter Engineering
Inc.-- GDR ..................................... 683,988
148 Asustek Computer Inc.-- GDR-- 144A/3/ ............. 969
285,869 Asustek Computer Inc.-- GDR-- Reg. S .............. 1,872,442
156,985 Taiwan Semiconductor Manufacturing
Co. Ltd.-- ADR ................................. 5,494,475
3,960 Uni-President Enterprises Co.-- GDR-- 144A/1/,/3/.. 27,301
------------
8,437,113
------------

United Kingdom -- 2.3%
126,059 Standard Chartered Plc............................. 1,745,518
------------

Total Investments (Cost -- $51,012,444)/2/............. 99.0% 76,371,067
Other Assets in Excess of Liabilities.................. 1.0% 766,890
------ ------------
Net Assets 100.0% $ 77,137,957
====== ============

------------
/1/ Non-income producing security.
/2/ Aggregate cost for federal tax purposes was $52,307,239.
/3/ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutions. Represent 0.04% of net
assets at year end.
ADR -- American Depository Receipt
GDR -- Global Depositary Receipt

See Notes to Financial Statements.

26
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
August 31, 2000

Percentage of Total
Industry Sector (Unaudited) Investments
--------------------------------------------------------------------------------
Technology ............................................................ 26.3%
Financials ............................................................ 24.5
Consumer Cyclicals .................................................... 17.5
Communication Services................................................. 9.8
Consumer Staples ...................................................... 4.3
Transportation ........................................................ 4.1
HealthCare ............................................................ 3.9
Energy ................................................................ 3.1
Basic Materials ....................................................... 2.7
Other ................................................................. 1.8
Utilities ............................................................. 1.3
Capital Goods ......................................................... 0.7
-----
100.0%
=====

27
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
Assets:
Investments, at value ...................................... $76,371,067
Cash ....................................................... 1,370,256
Foreign currency ........................................... 675
Dividends receivable ....................................... 83,056
Interest receivable ........................................ 5,645
Receivable for beneficial interest for contributions ....... 337,136
Receivable from advisor .................................... 10,587
Deferred organization costs ................................ 27,877
-----------
Total assets ............................................. 78,206,299
-----------
Liabilities:
Payable to beneficial interest for withdrawals ............. 990,748
Custody and accounting fees payable ........................ 15,631
Administrative agent fees payable .......................... 9,138
Organization costs payable ................................. 28,997
Other accrued expenses ..................................... 23,828
-----------
Total liabilities ........................................ 1,068,342
-----------
Net assets ............................................... $77,137,957
===========
Net Assets:
Applicable to beneficial interests ......................... $77,137,957
===========
Cost of investments ........................................ $51,012,444
===========
Cost of foreign currency ................................... $ 674
===========

See Notes to Financial Statements

28
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Statement of Operations

For the
Year Ended
August 31,
--------------------------------------------------------------------------------
2000
Investment Income:
Dividend income ............................................ $ 882,690
Less: Foreign withholding taxes ............................ (131,816)
------------
Net dividend income ...................................... 750,874
Interest income ............................................ 90,642
------------
Total investment income .................................. 841,516
------------
Expenses:
Investment management fees ................................. 826,934
Custody and accounting fees ................................ 129,456
Operations agent fees ...................................... 60,166
Administrative agent fees .................................. 49,583
Professional fees .......................................... 26,557
Amortization of organization costs ......................... 13,220
Interest expense ........................................... 10,378
Trustees' fees ............................................. 2,582
Other expenses ............................................. 15,829
------------
Total expenses ........................................... 1,134,705
------------
Expenses in excess of income ............................. (293,189)
------------
Realized and Unrealized Gain (Loss) on Investments, Foreign
Currencies and Forward Foreign Currency Contracts:
Net realized gain (loss) on:
Investment transactions .................................. 11,199,910
Foreign currency transactions and forward
foreign currency contracts ............................. (47,332)
Net change in unrealized appreciation/depreciation on:
Investments .............................................. 174,586
Foreign currency translations and forward
foreign currency contracts ............................. (1,111)
------------
Net Realized and Unrealized Gain on Investments, Foreign
Currencies and Forward Foreign Currency Contracts ........ 11,326,053
------------
Net Increase in Net Assets Resulting
from Operations ............................................ $ 11,032,864
============

See Notes to Financial Statements.
29
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income .................... $ (293,189) $ (193,923)
Net realized gain on investment, foreign currency
and forward foreign currency contracts
transactions .................................. 11,152,578 131,580
Net change in unrealized appreciation/
depreciation on investments, foreign
currency translations and forward foreign
currency contracts ............................ 173,475 30,665,134
------------ ------------
Net increase in net assets resulting
from operations ............................... 11,032,864 30,602,791
------------ ------------
Capital Transactions:
Proceeds from contributions ..................... 63,431,276 33,066,820
Withdrawals ..................................... (67,458,206) (11,485,568)
------------ ------------
Net increase (decrease) in net assets from
capital transactions ............................ (4,026,930) 21,581,252
------------ ------------
Total increase in net assets .................. 7,005,934 52,184,043
Net Assets:
Beginning of year ............................... 70,132,023 17,947,980
------------ ------------
End of year ..................................... $ 77,137,957 $ 70,132,023
============ ============
</TABLE>

See Notes to Financial Statements.

30
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Financial Highlights

For the For the For the Period
Year Ended Year Ended Oct. 14, 1997/1/
August 31, August 31, to August 31,
--------------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's)... $ 77,138 $ 70,132 $ 17,948
Ratio of expenses to average
net assets before interest
expense ......................... 1.36% 1.80% 2.19%/2/
Ratio of interest expense
to average net assets ........... 0.01% 0.01% --
Ratio of expenses to average
net assets after interest
expense ......................... 1.37% 1.81% 2.19%/2/
Ratio of expenses in excess of
income to average net assets .... (0.35)% (0.50)% (0.15)%/2/
Portfolio turnover ................. 48% 51% 54%
</TABLE>

---------------
/1/ Commencement of operations.
/2/ Annualized.

See Notes to Financial Statements.

31
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements

NOTE 1 -- Organization

The investment manager (the "Advisor") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM") an indirect subsidiary of Deutsche Bank AG. The
investment objective of the Portfolio is high capital appreciation, and as a
secondary objective, reasonable dividend income. The Portfolio began operations
on October 14, 1997.

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

32
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- continued

rities are valued at the last quoted sale price available before the time when
net assets are valued. Unlisted securities, and securities for which the Manager
determines the listing exchange is not the primary market, are valued at the
average of the quoted bid-and-ask prices in the over-the-counter market. Debt
securities with a remaining maturity of less than 60 days and money market
instruments are valued at amortized cost, which approximates market value. The
amortized cost method involves valuing a security at its cost on the date of
purchase and thereafter assuming a constant amortization to maturity of the
difference between the amount due at maturity and cost.

Debt securities with a maturity of 60 days or more are valued based on the
last sales price on a national securities exchange or in the absence of recorded
sales, at the average of readily available closing bid-and-asked prices on such
exchanges or at the average of the readily available closing bid and asked
prices in the over-the-counter market, if such exchange or market constitutes
the broadest and most representative market for the security. Securities for
which market quotations are not readily available, are valued in good faith in
accordance with fair valuation procedures adopted by the Trustees of the
Portfolio Trust. At August 31, 2000, there were no fair valued securities.

Cash

Deposits held at Investors Bank and Trust Company ("IBT"), the Portfolio's
custodian, in a variable rate account are classified as cash. At August 31, 2000
the interest rate was 5.20%, which resets on a periodic basis. Amounts on
deposit are generally available on the same business day.

Investment Transactions

Investment transactions are recorded on a trade date basis. Cost of
securities sold is calculated using the identified cost method. Dividend income
is recorded on ex-dividend date and interest income, including the accretion of
discounts and amortization of premiums is recorded daily on an accrual basis.
Such dividend and interest income is recorded net of the unrecoverable portion
of any applicable foreign withholding tax.

33
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- continued

Forward Foreign Currency Contracts

The Portfolio may enter into forward foreign currency contracts with various
counterparties for purposes of hedging its existing portfolio of investments and
settling foreign investment transactions. Forward foreign currency contracts are
over-the-counter contracts for delayed delivery of securities or currency in
which the buyer agrees to buy and the seller agrees to deliver a specified
currency at a specified price on a specified date. Because the terms of forward
contracts are not standardized, they are not traded on organized exchanges and
generally can be terminated or closed-out only by agreement of both parties to
the contract. During the period the forward contract is open, changes in the
value of the contract are recognized as unrealized gains or losses. When the
forward contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the proceeds from (or payments to) the close-out of
the contract and the original contract price.

Futures Contracts

The Portfolio may enter into futures contracts to hedge against market
fluctuations or to speculate on future market conditions. A futures contract is
an agreement between a buyer and a seller and an established futures exchange or
its clearinghouse in which the buyer or seller agrees to take or make a delivery
of a specific amount of an item at a specified price on a specific date
(settlement date) or to make or receive a cash payment based on the value of a
securities index. Upon entering into a futures contract, the Portfolio is
required to deposit with a financial intermediary an amount equal to a certain
percentage of the face value indicated in the futures contract ("initial
margin"). Subsequent payments ("variation margin") are made or received by the
Portfolio each day, dependent on the daily fluctuations in the value of the
underlying security or index. When entering into a closing transaction, the
Portfolio will realize a gain or loss equal to the difference between the value
of the futures contract to sell and the contract to buy.

Foreign Currency Translation

The books and records of the Portfolio are maintained in US Dollars. Assets
and liabilities denominated in foreign currency amounts are translated at the
spot foreign currency exchange rate in effect at the time net

34
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- concluded

assets are valued. Purchases and sales of investment securities, income and
expenses are reported at the prevailing exchange rate on the respective days
of such transactions. The resultant realized and unrealized gains and losses
arising from exchange rate fluctuations are identified separately in the
Statements of Operations, except for such amounts attributable to investments
which are included in net realized and unrealized gains and losses on
investments.

Federal Income Taxes

Expenses

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Portfolio Trust were paid initially by DFM and
are being reimbursed by the Portfolios. Such organization costs have been
deferred and are being amortized ratably over a period of sixty months from
the commencement of operations of the Portfolio.

35
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 3 -- Significant Agreements and Transactions with Affiliates

The Portfolio Trust has entered into an Investment Management Agreement (the
"Management Agreement") with DFM (the "Advisor"). DFM retains overall
responsibility for supervision of the investment management program for the
Portfolio but has delegated the day-to-day management of the investment
operations of the Portfolio to DWS International Portfolio Management GmbH
("DWS") as investment sub-advisor (the "Sub-Advisor") to the Portfolio. As
compensation for the services rendered by DFM, DFM receives a fee at an
annualized rate of 1.00% of the Portfolio's average daily net assets, which is
computed daily and paid monthly. As compensation for its services, DWS receives
a fee, paid by DFM which is based on the average daily net assets of the
Portfolio. The Advisor and Sub-Advisor are indirect subsidiaries of Deutsche
Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as operations agent to the Portfolio. For
its services, ICCC receives a fee which is computed daily and paid monthly at
the annual rate of 0.035% of the averaged daily net assets of the Portfolio,
subject to a minimum fee of $60,000 annually. For the period April 7, 2000
through August 31, 2000 ICCC's fee was $24,266. Prior to April 7, 2000,
Federated Services Company ("Federated") served as operations agent to the
Portfolio and operated under a similar fee structure.

36
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------

NOTE 3 -- concluded

first year of the Portfolio's operations, $35,000 in the second year of
operations, and $40,000 in the third year.

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government...................................... $ --
Non-US Government.................................. 38,314,682
------------
Total.............................................. $ 38,314,682
============

Sales
US Government...................................... $ --
Non-US Government.................................. 43,166,745
------------
Total.............................................. $ 43,166,745
============

On August 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess value over tax cost was $26,550,717 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $2,486,889.

NOTE 5 -- Line of Credit Agreement

37
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 5 -- concluded

line of credit and incurred interest expense as disclosed in the Statement of
Operations. The weighted average interest rate paid by the Portfolio was 6.09%
and the maximum and average amounts of the loans outstanding during the
borrowing period were $4,952,976 and $1,076,314, respectively. At August 31,
2000, the Portfolio had no debt outstanding under the line of credit agreement.
Commitment fees paid by the Portfolio during the year were $1,622.

NOTE 6 -- Forward Foreign Currency Contracts

The following contract was open at August 31, 2000:

In Exchange Current
for US Settlement Value Unrealized
Sale Dollars Date (US$) Depreciation
--------------- ----------- ---------- ------- ------------
Philippine Peso $674 9/1/00 $675 $(1)

38
<PAGE>

Top 50 Asia Portfolio
--------------------------------------------------------------------------------

Report of Independent Accountants
To the Trustees of Flag Investors Portfolio Trust and
Beneficial Interest Holders of Top 50 Asia Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Top 50 Asia Portfolio (one of
the portfolios constituting a series of Flag Investors Portfolios Trust,
formerly Deutsche Portfolios, hereafter referred to as the "Portfolio") at
August 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

39
<PAGE>

This page intentionally left blank.
<PAGE>

This report is prepared for the general information of shareholders. It
is authorized for distribution to prospective investors only when preceded
or accompanied by an effective prospectus.

For more complete information regarding other Flag Investors funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it
carefully before you invest.
<PAGE>

[LOGO OF FLAG INVESTORS]

Domestic Equity

Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity

European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income

Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market

Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.

TOP50AANN(10/00)
<PAGE>

[LOGO OF FLAG INVESTORS]
FLAG INVESTORS
Investing With A Difference(R)

Japanese Equity
Fund

Annual Report

August 31, 2000
<PAGE>

Report Highlights
--------------------------------------------------------------------------------

. The Fund's Class A shares produced a total return of 25.57% (excluding
sales charges) for the twelve months ended August 31, 2000, outperforming
the MSCI Japan Index return of 9.36% for the same time period.

. The Fund's strong outperformance was primarily due to its positioning
during the first half of the fiscal year. These positions included an
overweighting in the telecommunications and services sectors. Strong stock
selection across the market sectors also benefited the Fund, as we seek
only the most competitive, high quality, internationally known Japanese
companies.

. The Japanese equity market had significantly divergent performance from the
first half of the fiscal year to the second. Technology, media, and
telecommunications stocks strongly outperformed in the first half, as
investors favored "New Japan" over "Old Japan" stocks. In the second half
of the year, the extreme segmentation between "New Japan" and "Old Japan"
stocks somewhat normalized, and the equity market was dominated instead by
stock-specific stories. Overall, those companies involved in optical fiber
networks and components produced the strongest performance.

. We believe the recovery story for Japan is in place. In the near term, we
believe the equity market could be weak based on negative investor
sentiment about the slow speed of corporate restructuring, the further
unwinding of cross-shareholdings and the possibility of additional
bankruptcies. In the longer term, however, we believe GDP growth should
steadily pick up, due to companies' ongoing restructuring and thus rising
profitability as well as a recovery in private consumption.
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Growth of a $10,000 Investment in Class A Shares/1/
October 20, 1997 - August 31, 2000

$10,000 invested in the Flag Investors Japanese Equity Fund Class A Shares at
inception on October 20, 1997 was worth $20,211 on August 31, 2000.

10/20/97 $10,000
$ 8,872
$ 8,680
$ 8,200
8/31/98 $ 7,880
$ 8,512
$ 9,240
$11,240
8/31/99 $16,096
$21,952
$23,958
$19,560
8/31/2000 $20,211

Flag Investors Japanese Equity Fund -- Class A

<TABLE>
<CAPTION>
Cumulative Total Return Average Annual Total Return
----------------------- ---------------------------
Since Since
Past inception Past inception
Periods ended August 31, 2000 1 year 10/20/97 1 year 10/20/97
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Equity Fund -
Class A Shares/1/ 25.57% 102.11% 25.57% 27.85%
-----------------------------------------------------------------------------------
MSCI Japan Index/2/ 9.36% 34.47%/4/ 9.36% 11.02%/4/
-----------------------------------------------------------------------------------
Lipper Japanese Funds Average/3/ 8.08% 68.30%/4/ 8.08% 19.20%/4/
-----------------------------------------------------------------------------------
</TABLE>
------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Japan Index is an unmanaged broad-based market index of equity
securities listed on the Tokyo Stock Exchange. Index returns do not reflect
expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning October 31, 1997.

1
<PAGE>

Fund Performance
--------------------------------------------------------------------------------

Flag Investors Japanese Equity Fund -- Class B

/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Japan Index is an unmanaged broad-based market index of equity
securities listed on the Tokyo Stock Exchange. Index returns do not reflect
expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper, Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning August 31, 1998.

Flag Investors Japanese Equity Fund -- Class C

Cumulative Total Return
-------------------------------------------------------
Since
inception
Period ended August 31, 2000 5/31/00
-------------------------------------------------------
Japanese Equity Fund -
Class C Shares1 3.11%
MSCI Japan Index2 0.72%/4/
Lipper Japanese Funds Average3 0.59%/4/
-------------------------------------------------------

------------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and exclude the
impact of any sales charges. Performance figures for the classes differ
because each class maintains a distinct expense structure. Performance
would have been lower during the specified periods if certain fees and
expenses had not been waived by the Fund.
/2/ The MSCI Japan Index is an unmanaged broad-based market index of equity
securities listed on the Tokyo Stock Exchange. Index returns do not reflect
expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the period beginning May 31, 2000.

2
<PAGE>

Flag Investors Japanese Equity 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 performance of
each of the Fund's classes to that of an appropriate market index. This graph
measures the growth of a $10,000 hypothetical investment from the inception date
of the respective class through the end of the most recent fiscal year-end. The
SEC also requires that we report the total return of each class, according to a
standardized formula, for various time periods through the end of the most
recent fiscal year.

Both the line graph and the SEC standardized total return figures include
the impact of the 5.50% maximum initial sales charge for the Class A Shares and
the contingent deferred sales charge applicable to the specified time period for
the Class B and Class C Shares. Returns would be higher for Class A Shares
investors who qualified for a lower initial sales charge or for Class B or Class
C Shares investors who continued to hold their shares past the end of the
specified time period.

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.

3
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Additional Performance Information (continued)

Change in Value of a $10,000 Investment in Class A Shares/1/
October 20, 1997 - August 31, 2000

Flag Investors Japanese Equity
Fund -- Class A Shares MSCI Japan Index/2/

10/20/97 $10,000 $10,000
$ 9,450 $9,386
$ 8,203 $9,689
$ 7,749 $8,499
8/31/98 $ 7,447 $7,535
$ 8,044 $8,950
$ 8,732 $9,158
$10,622 $10,251
8/31/99 $15,211 $12,256
$20,745 $14,138
$22,640 $13,993
$18,484 $13,295
8/31/00 $19,099 $13,387

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class A Shares 18.66% 25.35%
--------------------------------------------------------------------------------

----------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's maximum 5.50% sales charge. Performance figures for the classes
differ because each class maintains a distinct sales charge and expense
structure. Performance would have been lower during the specified periods
if certain fees and expenses had not been waived by the Fund.
/2/ The MSCI Japan Index is an unmanaged broad-based market index of equity
securities listed on the Tokyo Stock Exchange. Benchmark returns are for
the period beginning October 31, 1997.
/3/ October 20, 1997.

4
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment in Class B Shares/1/
August 10, 1998 - August 31, 2000

Flag Japanese Equity Fund MSCI Japan Index/2/
-- Class B Shares

8/10/98 $10,000 $10,000
$ 9,933 $11,878
$10,769 $12,154
$13,072 $13,605
8/31/99 $18,877 $16,265
$25,697 $18,763
$27,981 $18,571
$22,456 $17,644
8/31/2000 $23,820 $17,766

Average Annual Total Return/1/

Periods Ended August 31, 2000 1 Year Since Inception/3/
--------------------------------------------------------------------------------
Class B Shares 17.66% 52.43%
--------------------------------------------------------------------------------

--------
/1/ Past performance is not indicative of future results. Investment return and
principal value will 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 dividend and capital gain distributions and include the
Fund's contingent deferred sales charge applicable to the specified time
period. The contingent deferred sales charge for Class B shares declines
over time from a maximum of 5.00% to 0% after six years. Performance
figures for the classes differ because each class maintains a distinct
sales charge and expense structure. Performance figures would have been
lower during the specified periods if certain fees and expenses had not
been waived by the Fund.
/2/ The MSCI Japan Index is an unmanaged broad-based market index of equity
securities listed on the Tokyo Stock Exchange. Benchmark returns are for
the period beginning August 31, 1997.
/3/ August 10, 1998.

5
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Additional Performance Information (concluded)

Cumulative Total Return/1/

Period Ended August 31, 2000 1 Year Since Inception/2/
--------------------------------------------------------------------------------
Class C Shares -- 2.11%
--------------------------------------------------------------------------------

6
<PAGE>

Letter to Shareholders
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this annual report for Flag Investors
Japanese Equity Fund (the "Fund"), providing a detailed review of the markets,
the portfolio in which the Fund invests (the "Portfolio"), and our outlook.
Included are a complete financial summary of the Fund's operations and listing
of the Portfolio's holdings.

Fund Performance

For the fiscal year, the Fund significantly outperformed its benchmark. The
Fund's Class A shares produced a return of 25.57% for the twelve months ended
August 31, 2000, as compared to 9.36% for the MSCI Japan Index. The Fund's Class
B shares produced an annual return of 22.66%. The Fund introduced Class C shares
on May 31, 2000.

This strong outperformance was primarily due to the Fund's positioning
during the first half of the fiscal year. These positions included an
overweighting in the telecommunications and services sectors, a concentration on
information technology- and software-related stocks within the services sector,
an overweighting in the electrical equipment, electronics and financial services
sectors, and an underweighting in what are known as "Old Japan" sectors, such as
steel, shipbuilding, and construction. Strong stock selection across the market
sectors also benefited the Fund. During the second half of the fiscal year, the
Fund was impacted by a remarkable closing of the divergence between "New Japan"
and "Old Japan" stocks so dominant during the first half. The result was that
the winners of the first six months, including the technology and small cap
stocks that drove performance, turned into the losers of the latter six months.

Based on this closing gap between "New Japan" and "Old Japan" stocks, we
increased the Fund's cash position, reduced its overweighting in
telecommunications, media and technology (TMT) stocks, and increased weightings
in select defensive sectors such as pharmaceuticals and food. At the same time,
we continued to believe that the fundamentals of several technology and services
stocks, including Sony, NTT Mobile Communications, NEC Corp. and Nomura
Securities, remain strong, and so we maintained our overall strategy of being
underweight in "Old Japan" and overweight in "New Japan" sectors.

7
<PAGE>

Letter to Shareholders (continued)
--------------------------------------------------------------------------------

Throughout, we continued to seek those internationally known Japanese
companies with a clearly defined competitive edge based upon quality of
management, product, service, balance sheet, innovation and low costs. We also
sought those companies best positioned to benefit from the trends of
deregulation and trade liberalization and those that are focused on enhancing
shareholder value through restructuring and other corporate strategies.

Investment Environment

Dramatic polarization during the first half of the fiscal year between "New
Japan," e.g. technology, media and telecommunications stocks, and "Old Japan,"
e.g. retail, iron and steel, and ship building, led to strong market performance
through February 2000. Supporting positive market performance was significant
optimism about Japan's economic recovery story. Japan seemed to be on track
toward ongoing corporate restructuring, a more stable currency, increased
industrial production, and better than expected GDP growth. The result was
strong buying, especially by foreign investors.

During the second half of the fiscal year, the Japanese equity market fell
4.27%--back to levels not seen since August 1999, as the divergence between "New
Japan" and "Old Japan" stocks narrowed. As the Japanese economy as well as
Japanese companies' business improved, many foreign investors began to fear that
corporations would slow down their restructuring efforts. This led to doubts
about the Japanese recovery story as well as to significant foreign selling. It
also seems that much of the earnings growth expectations were priced in the
first half of the year. Even though most Japanese companies reported earnings
that were either in line with or better than expected in April and May 2000,
these favorable earnings reports did not trigger additional foreign buying.

Other factors that impacted the Japanese market during the second half of
the fiscal year were a global correction of TMT stocks in general and
Internet-related stocks in particular; a major corporate bankruptcy, i.e. Sogo
Corp., that re-triggered doubts about the banking sector; and concerns about the
negative effect of the strengthening yen on the Japanese export industry.
Further adding to the negative foreign investor sentiment toward the Japanese
stock market was the Bank of Japan's increase in interest rates for the first
time in ten years on August 11th. The central bank's raising the target rate for
overnight lending to 0.25% was seen as a normalization of

8
<PAGE>

Japanese monetary policy, which had been exceptional since the lowering of the
interest rate to 0% in February 1999. However the rate hike was simultaneously
criticized as an action taken too soon given the rather slowly recovering
domestic economy.

Overall, the best performing sectors of Japan's equity market for the
fiscal year were non-ferrous metals and glass/ceramic. In Japan, these sectors
include the majority of companies involved in optical fiber networks and
components, such as Furukawa Electric, Sumitomo Electric, Nippon Sheet Glass,
and Asahi Glass. The electrical machinery sector also performed well, primarily
due to the strong performance of chip-related companies such as NEC and consumer
companies such as Pioneer and Sony. The poorest performing sectors overall were
"Old Japan" industries with a lack of positive growth prospects, including
mining, fishing, farming, and iron and steel.

Looking Ahead

Going forward, we believe that despite its current economic struggle, the
recovery story for Japan is in place. In the near term, we believe the equity
market could continue to be weak based on negative investor sentiment about the
slow speed of corporate restructuring, the further unwinding of
cross-shareholdings, and the possibility of additional bankruptcies. In the
longer term, however, we believe GDP growth should steadily pick up. Pressure by
the strong yen will likely lead to companies' ongoing restructuring and thus in
turn to rising profitability and rising salaries. Private consumption should
recover as well. We also believe that deregulation and tax reform policies will
likely continue and that accounting rule changes will make Japanese companies
more transparent.

The primary risks to Japan's equity market are misjudgments in its
fiscal/monetary policy mix, Japan's national debt getting out of control and/or
its currency strengthening excessively, and global economic growth weakening
unexpectedly. Acutely higher oil prices especially heighten this latter risk.
The Fund's active currency management program strives to allow investors to
capitalize on the long-term growth potential of Japanese equities while reducing
the impact of fluctuation in the yen's value.1 It is also important to keep in
mind that we remain disciplined in our process. Not all companies will benefit
equally from the new era of competition in Japan. This makes the

9
<PAGE>

Letter to Shareholders (concluded)
--------------------------------------------------------------------------------

knowledge and insight of the Fund's management team to select individual
companies perceived to be internationally competitive, to focus on companies
with strong earnings growth, and to use the volatility of the marketplace to our
investors' advantage by initiating or adding to positions on weakness more
crucial than ever.

We believe the Fund's high quality investment strategy positions the
Portfolio well to continue to pursue its objective of seeking a high level of
capital appreciation. We appreciate your support of the Fund, and we look
forward to continuing to serve your investment needs for many years ahead.

Sincerely,

/s/ Klaus Martini /s/ Lilian Haag

Klaus Martini
Lilian Haag
on behalf of the Portfolio Management Team
August 31, 2000

---------
1 Hedging strategies are subject to special risk and success of such
strategies cannot be guaranteed.

10
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
Assets:
Investment in Japanese Equity Portfolio (the "Portfolio"),
at value....................................................... $8,044,518
Receivable from manager for expense reimbursement, net.......... 36,886
Receivable for capital shares sold.............................. 954,981
Receivable from Japanese Equity Portfolio for withdrawals....... 1,904
Deferred organization costs..................................... 5,350
----------
Total assets.................................................. 9,043,639
----------
Liabilities:
Payable for capital shares redeemed............................. 1,904
Payable to Japanese Equity Portfolio for contributions.......... 5,000
Transfer agent fees payable..................................... 4,337
Distribution and service fees payable........................... 5,356
Accounting fees payable......................................... 1,898
Administration fees payable..................................... 6,274
Other accrued expenses.......................................... 25,893
----------
Total liabilities............................................. 50,662
----------
Net assets.................................................... $8,992,977
==========
Net Assets Consist of:
Capital stock, $0.001 par value................................. $ 395
Paid-in capital................................................. 2,196,753
Accumulated net realized gain on investments,
foreign currency transactions and forward foreign
currency transactions......................................... 2,412,941
Net unrealized appreciation of investments
and foreign currency translations............................. 4,382,888
----------
Net assets.................................................... $8,992,977
==========

Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Class A Shares
Net assets.................................................... $3,261,878
==========
Shares outstanding............................................ 164,288
==========
Net asset value and redemption price per share................ $19.85
======
Offering price per share ($19.85 / .945)...................... $21.01
======

Class B Shares
Net assets.................................................... $5,620,851
==========
Shares outstanding............................................ 226,227
==========
Net asset value and offering price per share.................. $24.85
======
Minimum redemption price per share ($24.85 x .95)............. $23.60
======
Class C Shares(a)
Net assets.................................................... $ 110,248
==========
Shares outstanding............................................ 4,437
==========
Net asset value and offering price per share.................. $24.85
======
Minimum redemption price per share ($24.85 x .99)............. $24.60
======
-----------
(a) On May 31, 2000, Flag Investors Japanese Equity Fund Class C shares began
operations.

See Notes to Financial Statements.

11
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Statement of Operations

For the
Year Ended
August 31,
--------------------------------------------------------------------------------
2000
Investment Income:
Investment Income and Expenses Allocated from Japanese Equity
Portfolio:
Dividend income................................................. $ 32,841
Less: Foreign withholding taxes................................. (4,926)
----------
Net dividend income....................................... 27,915
Interest income................................................. 20,770
Expenses........................................................ (249,391)
----------
Expenses in excess of income allocated from
Japanese Equity Portfolio.................................. (200,706)
----------
Expenses:
Administration fees............................................. 74,857
Transfer agent fees............................................. 55,366
Registration fees............................................... 32,098
Reports to shareholders......................................... 27,409
Professional fees............................................... 21,672
Accounting fees................................................. 20,998
Amortization of organization costs.............................. 2,525
Directors' fees................................................. 2,515
Distribution fees
Class A Shares(a)............................................. 5,041
Class B Shares................................................ 56,176
Class C Shares(b)............................................. 71
Service fees
Class A Shares(a)............................................. 4,965
Class B Shares................................................ 18,725
Class C Shares(b)............................................. 24
Other expenses.................................................. 2,873
----------
Total expenses............................................. 325,315
Less: Fee waivers or expense reimbursements..................... (334,465)
----------
Net expenses.................................................. (9,150)
----------
Expenses in excess of income............................... (191,556)
----------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies Allocated from Japanese Equity Portfolio:
Net realized gain on:
Investments................................................ 3,628,516
Foreign currency transactions and forward foreign currency
contracts................................................ 21,673
Net change in unrealized appreciation/depreciation on:
Investments................................................ 626,683
Foreign currency translations and forward foreign currency
contracts................................................ (7,099)
----------
Net Realized and Unrealized Gain on Investments and
Foreign Currencies Allocated from Japanese Equity Portfolio..... 4,269,773
----------
Net Increase in Net Assets Resulting from Operations............... $4,078,217
==========

---------
(a) As of January 18, 2000, Class A shares are subject to a 0.25% distribution
fee and are no longer subject to a 0.25% service fee.
(b) On May 31, 2000, Flag Investors Japanese Equity Fund Class C Shares began
operations.

See Notes to Financial Statements.

12
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
--------------------------------------------------------------------------------
2000 1999

Increase (Decrease) in Net Assets:
Operations:
Expenses in excess of income..................... $ (191,556) $ (59,289)
Net realized gain on investment,
foreign currency transactions and forward
foreign currency contracts allocated from
Japanese Equity Portfolio...................... 3,650,189 442,411
Net change in unrealized appreciation/
depreciation on investments,
foreign currency translations and forward
foreign currency contracts allocated from
Japanese Equity Portfolio...................... 619,584 3,771,153
------------ -----------
Net increase in net assets resulting
from operations................................ 4,078,217 4,154,275
------------ -----------
Distributions to Shareholders:
Distributions from realized gains:
Class A Shares................................. (1,301,081) --
Class B Shares................................. (1,663,439) --
Class C Shares(a).............................. -- --
------------ -----------
Total distributions.............................. (2,964,520) --
------------ -----------
Capital Share Transactions:
Net proceeds from shares sold.................... 28,826,697 16,293,920
Net proceeds from dividends
and distributions reinvested................... 2,454,865 --
Net cost of shares redeemed...................... (39,016,835) (5,130,586)
------------ -----------
Net increase (decrease) in net assets
resulting from capital share transactions...... (7,735,273) 11,163,334
------------ -----------
Total increase (decrease) in net assets........ (6,621,576) 15,317,609
Net Assets:
Beginning of year.............................. 15,614,553 296,944
------------ -----------
End of year (includes accumulated expenses
in excess of income of $0 and $(1,757),
respectively)............................... $ 8,992,977 $15,614,553
============ ===========

--------------
(a) On May 31, 2000, Flag Investors Japanese Equity Fund Class C Shares began
operations.

See Notes to Financial Statements.

13
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Oct. 20, 1997/1/
August 31, August 31, to August 31,
------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period............................ $20.12 $ 9.85 $ 12.50
------ ------- -------
Investment Operations:
Net investment (expenses in
excess of) income.................. (0.28) 0.004 (0.07)
Net realized and unrealized gain
(loss) on investments, foreign
currencies and forward foreign
currency contracts allocated
from Japanese Equity Portfolio..... 5.82 10.27 (2.58)
------ ------- -------
Increase (decrease) from
investment operations.............. 5.54 10.27 (2.65)
------ ------- -------
Distributions to Shareholders:
Distributions from net realized
gains.............................. (5.81) -- --
------ ------- -------
Total distributions.................. (5.81) -- --
------ ------- -------
Net Asset Value at End of Period........ $19.85 $ 20.12 $ 9.85
====== ======= =======
Total Return
(based on net asset value)/2/........ 25.57% 104.26% (21.20)%
Ratios and Supplemental Data:
Net assets, end of period (000's).... $3,262 $11,010 $14
Ratios to average net assets:
Expenses/3/........................ 1.60% 1.60% 1.60%/5/
Expenses in excess of income/3/.... (1.23)% (1.29)% (1.00)%/5/
Portfolio turnover of
Japanese Equity Portfolio.......... 120% 133% 95%
</TABLE>

---------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:
Expenses to average net assets 4.32% 5.88% 454.24%/5/
Expenses in excess of income to average
net assets (3.95)% (5.57)% (453.64)%/5/
/4/ Amount rounds to less than $0.01.
/5/ Annualized.

See Notes to Financial Statements.

14
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Aug. 10, 1998/1/
August 31, August 31, to August 31,
------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Net Asset Value at Beginning
of Period............................ $24.58 $12.11 $12.50
------ ------ ------
Investment Operations:
Expenses in excess of income......... (0.63) (0.12) (0.01)
Net realized and unrealized gain
(loss) on investments, foreign
currencies and forward foreign
currency contracts allocated
from Japanese Equity Portfolio..... 6.71 12.59 (0.38)
------ ------ ------
Increase (decrease) from investment
operations......................... 6.08 12.47 (0.39)
------ ------ ------
Distributions to Shareholders:
Distributions from net realized
gains.............................. (5.81) -- --
------ ------ ------
Total distributions.................. (5.81) -- --
------ ------ ------
Net Asset Value at End of Period........ $24.85 $24.58 $12.11
====== ====== ======
Total Return
(based on net asset value)/2/........ 22.66% 102.97% (3.12)%
Ratios and Supplemental Data:
Net assets, end of period (000's).... $5,621 $4,604 $283
Ratios to average net assets:
Expenses3.......................... 2.35% 2.35% 2.35%/4/
Expenses in excess of income/3/.... (1.90)% (1.74)% (1.25)%/4/
Portfolio turnover of
Japanese Equity Portfolio.......... 120% 133% 95%
</TABLE>
-----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 1998.
/3/ Includes the Fund's allocated portion of the corresponding Portfolio's
expenses net of expense reimbursments. Had the Manager not undertaken to
reimburse such expenses, the ratios of expenses and expenses in excess of
income to average net assets would have been as follows:
Expenses to average net assets 5.35% 14.99% 454.99%4
Expenses in excess of income to average
net assets (4.90)% (14.38)% (453.89)%4
/4/ Annualized.

See Notes to Financial Statements.

15
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Financial Highlights--Class C Shares
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the Period
May 31, 20001
to August 31,
--------------------------------------------------------------------------------
2000

<S> <C>
Net Asset Value at Beginning of Period.............................. $24.10
------
Investment Operations:
Expenses in excess of income..................................... (0.04)
Net realized and unrealized gain on investments, foreign
currencies and forward foreign currency contracts allocated
from Japanese Equity Portfolio...................................... 0.79
------
Increase from investment operations.............................. 0.75
------
Distributions to Shareholders:
Distributions from net realized gains............................ --
------
Total distributions.............................................. --
------
Net asset value at end of period.................................... $24.85
======
Total Return (based on net asset value)/2/.......................... 3.11%
Ratios and Supplemental Data:
Net assets, end of period (000's)................................ $110
Ratios to average net assets:
Expenses/3/.................................................... 2.35%/4/
Expenses in excess of income/3/................................ (2.07)%/4/
Portfolio turnover of
Japanese Equity Portfolio...................................... 120%
</TABLE>
-----------
/1/ Commencement of operations.
/2/ Total return would have been lower had certain expenses not been reimbursed
by the Manager. Total return has not been annualized for the period ended
August 31, 2000.
/3/ Includes the Fund's allocated portion of the Portfolio's expenses net of
expense reimbursements. Had the Manager not undertaken to reimburse such
expenses, the ratios of expenses and expenses in excess of income to
average net assets would have been as follows:
Expenses to average net assets 8.74%/4/
Expenses in excess of income to average net assets (8.46)%/4/
/4/ Annualized.

See Notes to Financial Statements.

16
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Japanese Equity Portfolio (formerly, the
Deutsche Japanese Equity Portfolio, the "Portfolio") which has substantially the
same investment objective as the Fund. The value of the Fund's investment in the
Portfolio included in the accompanying Statement of Assets and Liabilities
reflects the Fund's proportionate beneficial interest in the net assets of the
Portfolio, which was 51.6% on August 31, 2000. At August 31, 2000, the remaining
interest in the Portfolio was held by Deutsche Japanese Equity Fund (one of the
series constituting Deutsche Global Funds Ltd., an offshore company and
affiliate of the Company). The financial statements of the Portfolio, including
its portfolio of investments, are included elsewhere within this report and
should be read in conjunction with this report.

The Fund offers three classes of shares to investors, Class A, Class B and
Class C shares. Each class of shares is subject to a Distribution fee and Class
B and Class C shares are also subject to a Service fee. Each Class will bear its
respective portion of the Service and Distribution fees. Effective January 18,
2000, the Class A Service fee was eliminated and replaced by a Distribution fee.

NOTE 2 -- Significant Accounting Policies

17
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- continued

Valuation of Securities

Valuation of securities by the Portfolio is discussed in Note 2 of the
Notes to Financial Statements of the Portfolio, which are included
elsewhere in this report.

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
Portfolio on a daily basis based upon the amount of its investment in the
Portfolio. The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses attributable to each fund are charged
directly to the respective fund, while general Company expenses are
allocated among the funds. The expenses of each fund (other than class
specific expenses), are further allocated to each class of shares based on
their relative net asset value.

Federal Income Taxes

Distributions to Shareholders

Dividends from net investment income are declared and paid at least
annually. Capital gains, if any, are distributed at least annually.
However, to the extent that the net realized gains can be reduced by any
capital loss carryforwards, such gains will not be distributed. The Fund
records all dividends and distributions to shareholders on ex-dividend
date.

18
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

NOTE 2 -- concluded

Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which could be temporary or permanent in nature, may result in
reclassification of distributions; however, net investment income, net
realized gains and net assets are not affected.

Deferred Organization Costs

NOTE 3 -- Significant Agreements and Transactions with Affiliates

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as Administrator. Under the
Administration Agreement, ICCC assists in the operations of the Fund, subject to
the direction and control of the Board of Directors of the Company. For its
services, ICCC receives a fee from the Fund, which is calculated daily and paid
monthly, at an annual rate of 0.065% of the average daily net assets of the Fund
up to $200 million and 0.0525% of such assets in excess of $200 million, subject
to a minimum fee of $75,000 annually. For the period April 7, 2000 through
August 31, 2000 ICCC's fee was $29,980. Prior to April 7, 2000, Federated
Services Company ("Federated") served as Administrator and operated under a
similar fee structure.

19
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 3 -- concluded

August 31, 2000 ICCC's fee was $23,653. Prior to April 7, 2000, Federated
Shareholder Services Company served as the transfer agent and dividend
disbursing agent for the Fund and operated under a similar fee structure.

By an Expense Limitation agreement effective June 1, 2000, between the
Company and DFM, DFM has agreed to waive its fees and reimburse expenses of the
Fund in order to limit the total operating expenses of the Fund (which includes
expenses of the Fund and its pro-rata portion of expenses of the Portfolio), to
not more than 1.60%, of the average daily net assets of the Class A Shares and
2.35% of the average daily net assets of the Class B and Class C Shares, through
June 1, 2001.

Certain officers and directors of the Funds are also officers and directors
of ICCC or affiliated with Deutsche Bank. These persons are not paid by the
Funds.

NOTE 4 -- Concentration of Ownership

On August 31, 2000, the number of shareholders that held 5% or more of the
outstanding shares are as follows:

Approximate
Number of Percentage of
Shareholder Outstanding
Accounts Shares
------------- --------------
Merrill Lynch Pierce Fenner & Smith 2 68.79%

20
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

NOTE 5 -- Capital Share Transactions
The Fund is authorized to issue up to 250,000,000 shares of $0.001 par
value capital stock. Transactions in capital stock were as follows for the
following periods:

<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 2000 August 31, 1999
--------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
Class A Shares
<S> <C> <C> <C> <C>
Shares sold 1,020,676 $ 22,851,892 775,493 $12,552,723
Reinvestment of dividends
and distributions 46,077 980,977 -- --
Shares redeemed (1,449,804) (32,729,261) (229,605) (4,506,823)
--------- ------------ ------- -----------
Net increase (decrease) (383,051) $ (8,896,392) 545,888 $ 8,045,900
--------- ------------ ------- -----------
Class B Shares
Shares sold 209,037 $ 5,874,805 191,425 $ 3,741,197
Reinvestment of dividends
and distributions 54,127 1,473,888 -- --
Shares redeemed (224,289) (6,287,574) (27,405) (623,763)
--------- ------------ ------- -----------
Net increase 38,875 $ 1,061,119 164,020 $ 3,117,434
--------- ------------ ------- -----------
Class C Shares(a)
Shares sold 4,437 $ 100,000
Reinvestment of dividends
and distributions -- --
Shares redeemed -- --
--------- ------------
Net increase 4,437 $ 100,000
--------- ------------
</TABLE>
-------------
(a) On May 31, 2000, Flag Investors Japanese Equity Fund Class C Shares began
operations.

NOTE 6 -- Off-Balance Sheet Risk and Concentration of Credit Risk
See Notes to the financial Statements of the Portfolio included elsewhere
in the report for discussion of off-balance sheet risk and concentration of
credit risk.

21
<PAGE>

Flag Investors Japanese Equity Fund
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Board of Directors of Flag Investors Funds, Inc. and
Shareholders of Flag Investors Japanese Equity Fund:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Flag Investors Japanese Equity Fund, formerly Deutsche Japanese Equity Fund,
(one of the funds constituting a series of Flag Investors Funds, Inc., formerly
Deutsche Funds, Inc., hereafter referred to as the "Fund") at August 31, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

--------------------------------------------------------------------------------
Tax Information (Unaudited)
For the Tax Year Ended August 31, 2000

The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund's distributions to shareholders included $87,551 from long-term
capital gains, all of which is taxable at the 20% capital gains rate.
The Fund received income from foreign sources in the amount of $32,841. The
Fund has paid foreign taxes in the amount of $4,926. Such amounts are eligible
for the foreign tax credit. You should consult your tax advisor relating to the
appropriate treatment of foreign taxes paid.

22
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- 97.7%

Basic Materials -- 3.4%
4,000 Hoya Corp. ..................................... $ 382,506
3,000 Shin-Etsu Chemical Co., Ltd. ................... 147,377
----------
529,883
----------

Capital Goods -- 9.4%
4,000 Fanuc Ltd. ..................................... 435,007
12,000 Furukawa Electric (The) Co. .................... 385,881
1,500 SMC Corp. ...................................... 265,785
8,000 THK Co., Ltd. .................................. 378,006
----------
1,464,679
----------

Communication Services -- 5.3%
25 Nippon Telegraph & Telephone Corp. ............. 297,661
20 NTT Docomo Inc./1/ ............................. 528,758
----------
826,419
----------

Consumer Cyclicals -- 16.9%
100 Aoi Advertising Promotion, Inc. ................ 1,491
15,000 Bridgestone Corp. .............................. 194,066
10,000 Marui Co. Ltd. ................................. 157,596
10,000 NGK Spark Plug Co., Ltd. ....................... 180,847
1,500 Nintendo Co., Ltd. ............................. 259,317
17,000 Nippon Sheet Glass Co. ......................... 308,874
40 Obic Co., Ltd. ................................. 17,682
20 Paris Miki, Inc. ............................... 1,104
4,000 People Co., Ltd. ............................... 284,629
5,200 Sony Corp. ..................................... 580,134
15,000 Toyota Motor Co. ............................... 652,510
----------
2,638,250
----------

See Notes to Financial Statements.

23
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Portfolio of Investments (concluded) August 31, 2000

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (continued)
--------------------------------------------------------------------------------

Consumer Staples -- 5.1%
50 Fancl Corp ..................................... $ 4,341
10,000 Kao Corp. ...................................... 274,692
30,000 Mitsubishi Corp. ............................... 219,378
5,200 Saizeriya Co., Ltd. ............................ 302,742
----------
801,153
----------

Financials -- 11.1%
3,350 Aiful Corp. .................................... 288,942
15,000 Mitsubishi Estate Co., Ltd. .................... 147,659
30,000 Nomura Securities Co., Ltd. .................... 701,730
2,500 Orix Corp. ..................................... 332,818
27,000 Sanwa Bank ..................................... 255,407
----------
1,726,556
----------

Health Care -- 5.9%
6,000 Fujisawa Pharmaceutical Co., Ltd. .............. 204,191
10,000 Olympus Optical Co., Ltd. ...................... 175,315
5,000 Takeda Chemical Ind., Ltd. .................... 295,786
5,000 Yamanouchi Pharmaceutical Co., Ltd. ............ 247,504
----------
922,796
----------

Technology -- 40.6%
15,000 Alps Electric Co. Ltd. ......................... 316,411
8,000 Canon, Inc. .................................... 357,756
5,000 Cimeo Precision Co. Ltd./3/ .................... 173,440
10,000 Fujitsu Ltd. ................................... 289,692
2,000 Fujitsu Support and Service, Inc. .............. 278,629
15,000 Ibiden Co., Ltd. ............................... 315,708
1,000 InterQ, Inc./1/ ................................ 36,094
5,000 Konami Co., Ltd. ............................... 413,444
1,700 Kyocera Corp. .................................. 303,455
2,000 Matsushita Communication Industrial Co., Ltd. .. 276,567
35,000 Mitsubishi Electric Corp. ...................... 326,489

See Notes to Financial Statements.

24
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Shares Security Market Value
--------------------------------------------------------------------------------
COMMON STOCK -- (concluded)
--------------------------------------------------------------------------------

Technology -- (continued)
2,000 Murata Manufacturing Co., Ltd. ................. $ 306,192
12,000 NEC Corp. ...................................... 343,130
8,000 Nikon Corp. .................................... 245,254
15 NTT Data Corp. ................................. 165,940
15,000 Ricoh Co., Ltd. ................................ 262,270
1,000 Rohm Co., Ltd. ................................. 284,536
40,000 Sanyo Electric Co., Ltd. ....................... 339,380
2,500 Softbank Corp. ................................. 330,240
21 Sotec Company Ltd./3/ .......................... 354,381
12,000 Star Micronics Co. Ltd. ........................ 166,502
3,000 Tokyo Electron Ltd. ............................ 421,318
-----------
6,306,828
-----------
Total Investments (Cost -- $11,383,317)/2/ ........ 97.7% 15,216,564
Other Assets in Excess of Liabilities ............. 2.3% 359,692
----- -----------
Net Assets 100.0% $15,576,256
===== ===========

-------
/1/ Non-income producing security.
/2/ Also aggregate cost for federal tax purposes.
/3/ Restricted illiquid securities purchased as part of an initial public
offering.

See Notes to Financial Statements.

25
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Statement of Assets and Liabilities August 31, 2000

--------------------------------------------------------------------------------
Assets:
Investments, at value ........................................ $15,216,564
Cash ......................................................... 392,402
Dividends receivable ......................................... 2,909
Interest receivable .......................................... 2,105
Receivable for investments sold .............................. 620,190
Receivable for beneficial interest for contributions ......... 11,055
Deferred organization costs .................................. 28,022
-----------
Total assets ........................................ 16,273,247
-----------
Liabilities:
Payable for investments purchased ............................ 592,592
Payable to beneficial interest for withdrawals ............... 1,904
Investment management fees payable ........................... 8,527
Custody and portfolio accounting fees payable ................ 17,290
Administrative agent fees payable ............................ 9,185
Organization costs payable ................................... 29,142
Other accrued expenses ....................................... 38,351
-----------
Total liabilities ................................... 696,991
-----------
Net assets .......................................... $15,576,256
===========
Net Assets:
Applicable to beneficial interests ........................... $15,576,256
===========
Cost of investments .......................................... $11,383,317
===========

See Notes to Financial Statements.

26
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Statement of Operations

For the
Year Ended
August 31,
--------------------------------------------------------------------------------
2000
Investment Income:
Dividend income .............................................. $ 70,736
Less: Foreign withholding taxes .............................. (10,610)
-----------
Net dividend income ........................................ 60,126
Interest income .............................................. 39,764
-----------
Total investment income ................................... 99,890
-----------
Expenses:
Investment management fees ................................... 192,297
Custody and accounting fees .................................. 100,941
Operations agent fees ........................................ 59,883
Administrative agent fees .................................... 49,583
Professional fees ............................................ 41,058
Interest expense ............................................. 18,314
Amortization of organization costs ........................... 13,220
Trustees' fees ............................................... 2,582
Other expenses ............................................... 14,641
-----------
Total expenses ............................................. 492,519
-----------
Expenses in excess of income ............................... (392,629)
-----------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currencies and Forward Foreign Currency Contracts:
Net realized gain on:
Investment transactions .................................... 7,029,641
Foreign currency transactions and forward foreign
currency contracts ...................................... 31,805
Net change in unrealized appreciation/depreciation on:
Investments ................................................ (1,503,278)
Foreign currency translations and forward foreign
currency contracts ...................................... (889)
-----------
Net Realized and Unrealized Gain on Investments,
Foreign Currency and Forward Foreign Currency Contracts ...... 5,557,279
-----------
Net Increase in Net Assets Resulting from Operations ............ $ 5,164,650
===========

See Notes to Financial Statements.

27
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Statements of Changes in Net Assets

For the For the
Year Ended Year Ended
August 31, August 31,
--------------------------------------------------------------------------------
2000 1999
Increase (Decrease) in Net Assets:
Operations: .....................................
Expenses in excess of income ................. $ (392,629) $ (335,364)
Net realized gain on investments,
foreign currency transactions and forward
foreign currency contracts ................. 7,061,446 499,081
Net change in unrealized appreciation/
depreciation on investments,
foreign currency translations and forward
foreign currency contracts ................. (1,504,167) 5,583,030
------------ -----------
Net increase in net assets
resulting from operations .................. 5,164,650 5,746,747
------------ -----------
Capital Transactions:
Proceeds from contributions .................. 42,980,409 22,319,656
Withdrawals .................................. (53,468,829) (8,815,452)
------------ -----------
Net increase (decrease) in net assets
from capital transactions .................. (10,488,420) 13,504,204
------------ -----------
Total increase (decrease) in net assets . (5,323,770) 19,250,951
------------ -----------
Net Assets:
Beginning of year ............................ 20,900,026 1,649,075
------------ -----------
End of year .................................. $ 15,576,256 $20,900,026
============ ===========

See Notes to Financial Statements.

28
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Financial Highlights

<TABLE>
<CAPTION>
For the For the For the Period
Year Ended Year Ended Oct. 20, 1997/1/
August 31, August 31, to August 31,
------------------------------------------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's) .... $15,576 $20,900 $1,649
Ratio of expenses to average
net assets before interest
expense ...................... 2.16% 5.72% 15.44%/2/
Ratio of interest expense
to average net assets ........ 0.02% 0.03% --
Ratio of expenses to average
net assets after interest
expense ...................... 2.18% 5.75% 15.44%/2/
Ratio of expenses in excess
of income to average
net assets ................... (1.74)% (5.22)% (14.46)%/2/
Portfolio turnover ............ 120% 133% 95%
</TABLE>
---------
/1/ Commencement of operations.
/2/ Annualized.

See Notes to Financial Statements.

29
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements

NOTE 1 -- Organization

The investment manager (the "Advisor") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM") an indirect subsidiary of Deutsche Bank AG. The
investment objective of the Fund is high capital appreciation. The Portfolio
began operations on October 20, 1997.

NOTE 2 -- Significant Accounting Policies

Valuation of Securities

30
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- continued

when net assets are valued. Unlisted securities, and securities for which
the Manager determines the listing exchange is not the primary market, are
valued at the average of the quoted bid-and-ask prices in the
over-the-counter market. Debt securities with a remaining maturity of less
than

60 days and money market instruments are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the amount due
at maturity and cost.

Debt securities with a maturity of 60 days or more are valued based on
the last sales price on a national securities exchange or in the absence of
recorded sales, at the average of readily available closing bid-and-asked
prices on such exchanges or at the average of the readily available closing
bid and asked prices in the over-the-counter market, if such exchange or
market constitutes the broadest and most representative market for the
security. Securities for which market quotations are not readily available,
are valued in good faith in accordance with fair valuation procedures
adopted by the Trustees of the Portfolio Trust. At August 31, 2000, there
were no fair valued securities.

Cash

Investment Transactions

31
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 2 -- continued

Forward Foreign Currency Contracts

The Portfolio may enter into forward foreign currency contracts with
various counterparties for purposes of hedging its existing portfolio of
investments and settling foreign investment transactions. Forward foreign
currency contracts are over-the-counter contracts for delayed delivery of
securities or currency in which the buyer agrees to buy and the seller
agrees to deliver a specified currency at a specified price on a specified
date. Because the terms of forward contracts are not standardized, they are
not traded on organized exchanges and generally can be terminated or
closed-out only by agreement of both parties to the contract. During the
period the forward contract is open, changes in the value of the contract
are recognized as unrealized gains or losses. When the forward contract is
closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or payments to) the close-out of the
contract and the original contract price.

Futures Contracts

Foreign Currency Translation

The books and records of the Portfolio are maintained in US Dollars.
Assets and liabilities denominated in foreign currency amounts are trans-

32
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

NOTE 2 -- concluded

lated at the spot foreign currency exchange rate in effect at the time net
assets are valued. Purchases and sales of investment securities, income and
expenses are reported at the prevailing exchange rate on the days of such
transactions. The resultant realized and unrealized gains and losses
arising from exchange rate fluctuations are identified separately in the
Statements of Operations, except for such amounts attributable to
investments which are included in net realized and unrealized gains and
losses on investments.

Foreign investments may involve certain considerations and risks not
typically associated with those of domestic origin. These include, among
others, the possibility of political and economic developments and the
level of governmental supervision and regulation of foreign securities
markets.

Federal Income Taxes

The Portfolio is treated as a partnership under the US Internal Revenue
Code (the "Code"). Accordingly, it is expected that the Portfolio will not
be subject to any US federal income tax on its income and net realized
gains (if any). However, each investor in the Portfolio may be taxed on its
allocable share of the partnership's income and capital gains for purposes
of determining its federal tax liability. It is intended that the
Portfolio's assets, income and expense allocation will be managed in such a
way that a regulated investment company investing in the Portfolio will
satisfy the requirements of Subchapter M of the Code, assuming that such
investment company invests substantially all of its assets in the
corresponding Portfolio.

Expenses

Deferred Organization Costs

Organization costs incurred in connection with the organization and
initial registration of the Portfolio Trust were paid initially by DFM and
are being reimbursed by the Portfolios. Such organization costs have been
deferred and are being amortized ratably over a period of sixty months from
the commencement of operations of the Portfolio.

33
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 3 -- Significant Agreements and Transactions with Affiliates

The Portfolio Trust has entered into an Investment Management Agreement
(the "Management Agreement") with DFM. DFM retains overall responsibility for
supervision of the investment management program for the Portfolio but has
delegated the day-to-day management of the investment operations of the
Portfolio to DWS International Portfolio Management GmbH ("DWS") as investment
sub-advisor (the "Sub-Advisor") to the Portfolio. As compensation for the
services rendered by DFM, DFM receives a fee at an annualized rate of 0.85% of
the Portfolio's average daily net assets, which is computed daily and paid
monthly. As compensation for its services, DWS receives a fee, paid by DFM which
is based on the average daily net assets of the Portfolio. The Advisor and
Sub-Advisor are indirect subsidiaries of Deutsche Bank AG.

Investment Company Capital Corp. ("ICCC"), an indirect wholly owned
subsidiary of Deutsche Bank AG, serves as operations agent to the portfolio. For
its services, ICCC receives a fee which is computed daily and paid monthly at
the annual rate of 0.035% of the averaged daily net assets of the Portfolio,
subject to a minimum fee of $60,000 annually. For the period April 7, 2000
through August 31, 2000 ICCC's fee was $23,982. Prior to April 6, 2000,
Federated Services Company ("Federated") served as operations agent to the
Portfolio and operated under a similar fee structure.

34
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

NOTE 3 -- concluded

annual rate of 0.02% on the first $200 million, 0.015% on the next $800 million
and 0.01% on assets in excess of $1 billion, subject to a minimum of $30,000
during the first year of the Portfolio's operations, $35,000 in the second year
of operations and $40,000 in the third year.

For the year ended August 31, 2000, affiliates of Deutsche Bank AG received
$1,371 in brokerage commissions from the Portfolio as a result of executing
agency transactions in portfolio securities.

The Portfolio participates along with other Flag Investors Funds in a
retirement plan for eligible directors.

Certain Trustees and officers of the Portfolio are affiliated with Deutsche
Bank AG. These persons are not paid by the Portfolio for serving in these
capacities.

NOTE 4 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the year ended August 31, 2000 were as follows:

Purchases
US Government ...................................... $ --
Non-US Government .................................. 26,675,538
-----------
Total .............................................. $26,675,538
===========

Sales
US Government ...................................... $ --
Non-US Government .................................. 37,372,647
-----------
Total .............................................. $37,372,647
===========

On August 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess value over tax cost was $4,061,851 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value was $228,604.

35
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

Note 5 -- Line of Credit Agreement

The Portfolio Trust has established a revolving line of credit with
Investors Bank and Trust Company ("IBT"). Borrowing under the line of Credit may
not exceed the lesser of $15,000,000 or 10% of the total assets of the
Portfolio. Interest is payable on outstanding borrowings at the Federal Funds
Rate plus 0.50%. Additionally, the line of credit includes an annual commitment
fee equal to 0.07% per annum on the difference between $15,000,000 and the
average daily amount of outstanding borrowings. During the year ended August 31,
2000, the Portfolio periodically utilized the line of credit and incurred
interest expense as disclosed in the Statement of Operations. The weighted
average interest rate paid by the Portfolio was 6.11% and the maximum and
average amounts of the loans outstanding during the borrowing period were
$8,328,177 and $1,272,345, respectively. At August 31, 2000, the Portfolio had
no debt outstanding under the line of credit agreement. Commitment fees paid by
the Portfolio Trust during the year were $1,622.

NOTE 6 -- Forward Foreign Currency Contracts

The following contracts were open at August 31, 2000:

In Exchange Contract
for US Settlement Value Unrealized
Purchase Dollars Date (US $) Depreciation
-------- ------- ---- ------ ------------
Japanese Yen $354,264 9/1/00 $354,441 $177
Japanese Yen 64,865 9/5/00 64,826 (39)
Japanese Yen 173,693 9/11/00 173,767 74
-------------
$212

In Exchange Contract
for US Settlement Value Unrealized
Sale Dollars Date (US $) Depreciation
-------- ------- ---- ------ ------------
Japanese Yen $619,987 9/1/00 $620,296 $(309)

36
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Note 7 -- Off-Balance Sheet Risk and Concentration of Credit Risk

The Statement of Assets and Liabilities includes the market or fair value
of contractual commitments involving forward settlement and futures contracts.
These instruments involve elements of market risk in excess of amounts reflected
on the Statement of Assets and Liabilities.

Market risk is influenced by the nature of the items that comprise a
particular category of financial instruments and by the relationship among
various off-balance sheet categories as well as the relationship between
off-balance sheet items and items recorded on the Portfolio's Statement of
Assets and Liabilities. Credit risk is measured by the loss the Portfolio would
record if its counterparties failed to perform pursuant to terms of their
obligations to the Portfolio. Because the Portfolio enters into forward foreign
currency contracts, credit risk exists with counterparties. It is the policy of
the Portfolio to transact the majority of its securities activity with
broker-dealers, banks and regulated exchanges that the Advisor considers to be
well established.

37
<PAGE>

Japanese Equity Portfolio
--------------------------------------------------------------------------------

Report of Independent Accountants

To the Trustees of Flag Investors Portfolios Trust and
Beneficial Interest Holders of Japanese Equity Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Japanese Equity Portfolio (one
of the portfolios constituting a series of Flag Investors Portfolios Trust,
formerly Deutsche Portfolios, hereafter referred to as the "Portfolio") at
August 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
October 13, 2000

38
<PAGE>

This page intentionally left blank.
<PAGE>

This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.

For more complete information regarding other Flag Investors funds,
including charges and expenses, obtain a prospectus from your investment
representative or directly from the Fund at 1-800-767-FLAG. Read it carefully
before you invest.
<PAGE>

[LOGO OF FLAG INVESTORS]

Flag Investors
Investing With A Difference(R)

Domestic Equity
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 US
Value Builder Fund

International Equity
European Mid-Cap Fund
International Equity Fund
Japanese Equity Fund
Top 50 Asia
Top 50 Europe
Top 50 World

Fixed Income
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return US Treasury Fund Shares

Money Market
Cash Reserve Prime Shares

P.O. Box 515
Baltimore, Maryland 21203
800-767-FLAG

www.flaginvestors.com

Distributed by:
ICC Distributors, Inc.

JEFANN(10/00)