FLAG INVESTORS FUNDS INC, N-30D, 2000-05-05

FLAG INVESTORS FUNDS INC
N-30D, 2000-05-05

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<PAGE>

[FLAG INVESTORS LOGO]

European Mid-Cap
Fund

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 68.57% for the six months
ended February 29, 2000, dramatically outperforming the MDAX Index return of
-5.70% for the same time period.

. While volatility remained high in the European mid-cap equity markets due
largely to fears of rising inflation and interest rates in the U.S., many
smaller companies benefited from rising merger and acquisition activity and
better than expected earnings. Overall, growth-oriented media,
telecommunications and Internet companies produced the strongest performance.

. The Fund's strong outperformance was primarily due its overweighting in the
media, Internet and telecommunications sectors and to strong stock selection
across the market sectors, as we seek only those smaller and mid-size European
companies that offer the greatest value and growth potential.

. We expect mid-cap European market performance to gain strength based on robust
growth of the technology industry, improving global economic growth, the
continuing ripple effect of Economic Monetary Union, strong ongoing merger,
acquisition and restructuring activity, and favorable earnings growth
prospects for many European companies across the sector spectrum.
<PAGE>

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

Flag Investors European Mid-Cap Fund -- Class A
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------------ ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 10/17/97 year 10/17/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European Mid-Cap Fund --
Class A Shares/1/ 68.57% 78.50% 108.75% 68.68% 33.20%
- --------------------------------------------------------------------------------------------------------------------
MDAX Index/2/ -5.70% -2.04% -1.24% -2.04% -0.53%
- --------------------------------------------------------------------------------------------------------------------
Lipper European Regions
Fund Average/3/ 32.87% 35.32% 63.24% 35.32% 22.61%
- --------------------------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.
/2/ The MDAX Index is a broad-based market index of 70 Germany blue-chip stocks.
This index is unmanaged, and investments cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

The Fund is not insured by the FDIC and is not a deposit, obligation of, or
guaranteed by Deutsche Bank AG or its affiliates. The Fund is subject to
investment risks, including possible loss of principal amount invested.

Flag Investors European Mid-Cap Fund -- Class B
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
----------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 3/30/98 year 3/30/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European Mid-Cap Fund --
Class B Share/1/ 67.96% 77.10% 82.33% 68.25% 33.84%
- ---------------------------------------------------------------------------------------------------------------------
MDAX Index/2/ -5.70% -2.04% -11.85% -2.04% -6.36%
- ---------------------------------------------------------------------------------------------------------------------
Lipper European Regions
Fund Average/3/ 32.87% 35.32% 34.74% 35.32% 16.01%
- ---------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MDAX Index is a broad-based market index of 70 Germany blue-chip stocks.
This index is unmanaged, and investments cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

1
<PAGE>

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

Flag Investors European Mid-Cap Fund -- Class C
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 9/2/98 year 9/2/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
European Mid-Cap Fund --
Class C Shares/1/ 67.99% 77.13% 85.05% 75.36% 51.01%
- --------------------------------------------------------------------------------------------------------------------
MDAX Index/2/ -5.70% -2.04% -6.92% -2.04% -4.67%
- --------------------------------------------------------------------------------------------------------------------
Lipper European Regions
Fund Average/3/ 32.87% 35.32% 44.55% 35.32% 27.28%
- --------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 1.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MDAX Index is a broad-based market index of 70 Germany blue-chip stocks.
This index is unmanaged, and investments cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

2
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
Flag Investors European Mid-Cap Fund (the "Fund") (formerly Deutsche European
Mid-Cap), providing a more detailed review of the markets, the portfolio in
which the Fund invests (the "Portfolio"), and our outlook -- all in an easier-
to-read format. We continue to include a complete financial summary of the
Fund's operations and listing of the portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 68.57% for the six
months ended February 29, 2000, as compared to -5.70% for the MDAX Index. The
Fund's Class B and C shares produced semi-annual returns of 67.96% and 67.99%,
respectively.

This strong outperformance was primarily due to the Fund's overweighting in
the Internet, media and telecommunications sectors, to investments in smaller as
well as mid-cap companies, and to strong stock selection across the market
sectors. The Fund's weighting in the pharmaceuticals industry also contributed
to Fund performance, as it was one of the top performing sectors in the first
two months of 2000.

We continued to seek smaller and mid-size European companies that we believe
will be Europe's leaders in the next decades, that are participating in
opportunities resulting from Economic Monetary Union (EMU), and that are
committed to creating shareholder value in this new EMU frontier. As investors'
focus has long been on large cap stocks, we particularly seek smaller and mid-
size European companies that have either been ignored or are as yet
undiscovered, and thus may be attractively priced.

For example, some of the Fund's best performers during this semi-annual 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 Poet Holding and Evotec, which
jumped by more than 400% and 500%, respectively, during the two months of
January and February 2000 alone. Neuer Markt stocks Trintech and Intershop each
increased significantly as well, boosting the Fund's returns. Among mid-cap
stocks, MLP, Software AG, SGL Carbon, Business Objects, and Qiagen were the
strongest contributors to Fund performance.

3
<PAGE>

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

Based on careful monitoring of the Fund's holdings and active portfolio
management, we sold a few companies during the semi-annual period, including
Phoenix, Jungheinrich, NYrnberger Beteiligungs AG and Cable & Wireless
Communication. The Fund also took part in the subscription of certain
successful new issues, which were sold within the period at a profit.

At the end of the semi-annual period, the Fund's largest positions were in
Business Objects, Qiagen, SAP and SGL Carbon. Cap Gemini, Aixtron and Getronics
were also among the Fund's biggest holdings through the fourth quarter of 1999.
The Fund stayed fully invested in stocks virtually throughout the period.

Investment Environment

As a whole, Europe rose 13.98% in U.S. dollar terms during the semi-annual
period. The markets were affected by slowly improving domestic growth rates,
increased competition resulting from the January 1, 1999 introduction of the
common Euro currency, and concerns about interest rate hikes both from the U.S.
Federal Reserve Board and the European Central Bank. Even so, the European
markets rallied back from a virtually flat previous six months to double-digit
returns that outperformed the U.S. equity indices for the first half of this
fiscal year.

Mid-cap European stocks, however, especially members of the MDAX, disappointed
and lost ground in U.S. dollar terms. The MDAX was down 5.74% for the semi-
annual period. One of the reasons for this was European investors' continuing
focus on large-cap stocks. Another was the U.S. Federal Reserve Board rate
increases on November 16 and February 2. Investors were concerned that such
increases would contribute to a slowdown in European economic growth amidst an
already soft environment. Global inflation concerns caused further uneasiness
and market volatility, as each new piece of economic data changed inflation
sentiment. Still, certain stocks gained, making the kind of research-intensive
individual stock selection that we conduct all that more critical to Fund
performance.

At the same time, highly capitalized Neuer Markt stocks drove the European
equity markets, increasing significantly. This was especially true in media,
telecommunications, pharmaceuticals and Internet companies. Just one example of
such a successful Fund holding is media company EM.TV & Merchandising, which
produces and distributes children's TV programs for the domestic and
international television markets.

4
<PAGE>

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

European mid-cap markets also responded positively to rising merger activity,
as companies sought to take advantage of the new opportunities created by an
enlarged "domestic" market. For example, amongst the portfolio's holdings, Cap
Gemini performed well after merger talks with Ernst & Young in the U.S.
Corporate restructuring, privatization and deregulation are also combining to
create a new investment frontier -- and greater value for shareholders.

Looking Ahead

Going forward, several factors lead us to a generally optimistic outlook for
the European mid-cap equity markets. The recent strong growth of the technology
industry continues to impact equity investments worldwide. Furthermore,
economic growth continues to improve globally, a positive indicator, in our
view, that corporate profits will do likewise.

The impact of EMU 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. In our opinion, the Euro may recover some of the ground lost against
the dollar during the first tumultuous year or so since its introduction.
Appreciation of the Euro is particularly likely during the months ahead if
European investors take home some of the profits made in 1999 in the U.S. equity
market and if the U.S. economy begins to lose some of its luster.

Given this outlook, we believe the Fund's investment strategy positions the
portfolio well to continue to meet 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/ Elisabeth Weisenhorn
- ------------------------
Elisabeth Weisenhorn
Portfolio Manager
February 29, 2000

5
<PAGE>

Flag Investors European Mid-Cap Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Flag Investors Provesta Portfolio, at value............................. $36,500,199
Receivable from Manager for expense reimbursement..................................... 19,060
Receivable for capital shares sold.................................................... 185,960
Foreign tax reclaim receivable........................................................ 20,993
Deferred organization costs........................................................... 6,612
-----------
Total assets......................................................................... 36,732,824
-----------
Liabilities:
Payable for capital shares redeemed................................................... 6,132
Payable to Flag Investors Provesta Portfolio for contributions........................ 179,828
Transfer Agent fees payable........................................................... 7,171
Distribution fees payable............................................................. 19,783
Custody and portfolio accounting fees payable......................................... 1,839
Administration fees payable........................................................... 5,996
Other accrued expenses................................................................ 34,537
-----------
Total liabilities.................................................................... 255,286
-----------
Net assets........................................................................... $36,477,538
===========
Net Assets Consist of:
Capital stock, $0.001 par value(a).................................................... $ 1,509
Paid-in capital....................................................................... 21,191,684
Accumulated net investment loss....................................................... (309,115)
Undistributed net realized gain on investments
and foreign currency transactions.................................................... 2,478,109
Net unrealized appreciation of investments and
foreign currency transactions........................................................ 13,115,351
-----------
Net assets........................................................................... $36,477,538
===========
Computation of Net Asset Value, Redemption Price
and Offering Price Per Share:
Net assets -- Class A................................................................. $22,186,974
===========
Shares outstanding -- Class A......................................................... 868,480
===========
Net asset value and redemption price per share -- Class A............................. $25.55
======
Offering price per share -- Class A................................................... $27.04
======

Net assets -- Class B................................................................. $11,449,435
===========
Shares outstanding -- Class B......................................................... 514,584
===========
Net asset value and offering price per share -- Class B............................... $22.25
======
Minimum redemption price per share -- Class B......................................... $21.14
======

Net assets -- Class C................................................................. $ 2,841,129
===========
Shares outstanding -- Class C......................................................... 125,770
===========
Net asset value and offering price per share -- Class C............................... $22.59
======
Minimum redemption price per share -- Class C......................................... $22.36
======
</TABLE>
- --------------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements.

6
<PAGE>

Flag Investors European Mid-Cap Fund
- --------------------------------------------------------------------------------
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- -----------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses allocated from Flag Investors
Provesta Portfolio:
Dividend income......................................................... $ 20,688
Less: Foreign withholding taxes......................................... (3,327)
-----------
Net dividend income.................................................. 17,361
Interest income......................................................... 3,549
Expenses................................................................ (210,105)
-----------
Net investment loss allocated from Flag Investors
Provesta Portfolio................................................. (189,195)
-----------
Expenses:
Transfer Agent fees..................................................... 38,786
Administration fees..................................................... 37,295
Portfolio accounting fees............................................... 11,339
Professional fees....................................................... 10,421
Registration fees....................................................... 9,764
Reports to Shareholders................................................. 7,458
Trustees' fees and expenses............................................. 2,239
Amortization of organization costs...................................... 1,256
Distribution fees -- Class B............................................ 29,835
Distribution fees -- Class C............................................ 7,172
Service fees -- Class A................................................. 19,862
Service fees -- Class B................................................. 9,945
Service fees -- Class C................................................. 2,391
Other expenses.......................................................... 4,555
-----------
Total expenses.................................................. 192,318
Less: Expense reimbursement of Fund and Portfolio
allocated expenses................................................... (159,037)
-----------
Net expenses......................................................... 33,281
-----------
Net investment loss.................................................. (222,476)
-----------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency allocated from Flag Investors
Provesta Portfolio:
Net realized gain (loss) on:
Investments............................................................ 2,790,154
Foreign currency transactions.......................................... (12,834)
Net change in unrealized appreciation on:
Investments............................................................ 12,566,783
Foreign currency translations.......................................... 23,772
-----------
Net Realized and Unrealized Gain on Investments and
Foreign Currency allocated from Flag Investors
Provesta Portfolio...................................................... 15,367,875
-----------
Net Increase in Net Assets Resulting From Operations..................... $15,145,399
===========
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

Flag Investors European Mid-Cap Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31,
- -------------------------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment loss........................................ $ (222,476) $ (78,989)
Net realized gain (loss) on investments and
foreign currency transactions allocated from
Flag Investors European Mid-Cap Portfolio................. 2,777,320 (116,147)
Net change in unrealized appreciation on
investments and foreign currency
translations allocated from Flag Investors
European Mid-Cap Portfolio................................ 12,590,555 1,377,810
----------- -----------
Net increase in net assets resulting
from operations........................................... 15,145,399 1,182,674
----------- -----------
Distributions to Shareholders:
Distributions from realized gains:
Class A................................................... (120,211) (51,423)
Class B................................................... (72,818) (76,047)
Class C................................................... (16,865) (9,584)
----------- -----------
Total distributions........................................ (209,894) (137,054)
----------- -----------
Capital Share Transactions:
Net proceeds from shares sold.............................. 18,720,406 23,243,388
Net proceeds from dividends and
distributions reinvested.................................. 191,144 122,669
Net cost of shares redeemed................................ (19,914,538) (8,555,403)
----------- -----------
Net increase (decrease) in net assets
resulting from capital share tranactions.................. (1,002,988) 14,810,654
----------- -----------
Total increase in net assets............................ 13,932,517 15,856,274
Net Assets:
Beginning of period........................................ 22,545,021 6,688,747
----------- -----------
End of period.............................................. $36,477,538 $22,545,021
=========== ===========
Includes accumulated net investment loss of................. $ (309,115) $ (86,639)
----------- -----------
</TABLE>

See Notes to Financial Statements.

8
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Financial Highlights--Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ----------------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period............... $15.28 $14.22 $12.50
------ ------ ------
Investment operations:
Net investment income (loss)........................ (0.13) (0.01) 0.01
Net realized and unrealized gain on
investments and foreign currency
allocated from Flag Investors
Provesta Portfolio................................. 10.54 1.26 1.71
------ ------ ------
Increase from investment operations................. 10.41 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..................... $25.55 $15.28 $14.22
====== ====== ======
Total Return (based on net asset
value)/2/........................................... 68.57%/4/ 8.86% 13.76%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)................... $22,187 $13,907 $2,402
Ratios to average net assets:
Expenses/3/........................................ 1.60%/5/ 1.60% 1.60%/5/
Net investment income (loss)/3/.................... (1.44)%/5/ (0.10)% 0.23%/5/
Portfolio Turnover of Flag Investors
Provesta Portfolio................................. 44%/4/ 89% 82%/4/
</TABLE>
- --------------
/1/ Commencement of operations: 10/17/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not
been reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Provesta
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expenses to average net assets 2.83%/5/ 4.12% 18.86%/5/
Net investment income to average net assets (2.67)%/5/ (2.62)% (17.03)%/5/
</TABLE>

/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

9
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Financial Highlights--Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ----------------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period............... $13.37 $12.55 $12.50
------ ------ ------
Investment operations:
Net investment loss................................. (0.17) (0.11) (0.02)
Net realized and unrealized gain on
investments and foreign currency
allocated from Flag Investors
Provesta Portfolio................................. 9.19 1.12 0.07
------ ------ ------
Increase from investment operations................. 9.02 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..................... $22.25 $13.37 $12.55
====== ====== ======
Total Return (based on net asset
value)/2/........................................... 67.96%/4/ 8.12% 0.40%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)................... $11,449 $6,940 $4,287
Ratios to average net assets:
Expenses/3/........................................ 2.35%/5/ 2.35% 2.35%/5/
Net investment loss/3/............................. (2.19)%/5/ (1.06)% (0.70)%/5/
Portfolio Turnover of Flag Investors
Provesta Portfolio................................. 44%/4/ 89% 82%/4/
</TABLE>
- --------------
/1/ Commencement of operations: 3/30/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Provesta
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expenses to average net assets 3.58%/5/ 4.37% 19.61%/5/
Net investment income to average net assets (3.42)%/5/ (3.08)% (17.96)%/5/
</TABLE>

/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

10
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Financial Highlights--Class C Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended Ended/1/
February 29, August 31,
- -------------------------------------------------------------------------------------------------
1999 1999
(Unaudited)
<S> <C> <C>
Net asset value at beginning of period.................. $13.57 $12.50
------ ------
Investment operations:
Net investment loss..................................... (0.17) (0.06)
Net realized and unrealized gain on investments
and foreign currency allocated from
Flag Investors Provesta Portfolio...................... 9.33 1.32
------ ------

Increase from investment operations..................... 9.16 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......................... $22.59 $13.57
====== ======
Total Return (based on net asset value)/2,4/............. 67.99% 10.15%
Ratios and Supplemental Data:
Net assets, end of period (000's)...................... $2,841 $1,698
Ratios to average net assets:
Expenses/3,5/......................................... 2.35% 2.35%
Net investment loss/3,5/............................... (2.19)% (0.73)%
Portfolio Turnover of Flag Investors
Provesta Portfolio/4/.................................. 44% 89%
</TABLE>
- --------------
/1/ Commencement of operations: 9/2/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Provesta
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Expenses to average net assets/5/ 3.59% 4.89%
Net investment loss to average net assets/5/ (3.43)% (3.27)%
</TABLE>

/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

11
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Funds, Inc. (the "Company") (re-named from Deutsche Funds, Inc.
effective January 18, 2000) was incorporated in Maryland on May 22, 1997. The
Funds are 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 "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 Flag Investors Provesta Portfolio (US Dollar) (formerly
the Deutsche Provesta Portfolio, the "Portfolio") which has substantially the
same investment objective as the Fund. The Portfolio is a series of the Flag
Investors Portfolios Trust (formerly, the Deutsche Portfolios the "Portfolios
Trust"), a New York business trust, registered under the 1940 Act as an open-end
investment management company and comprised of seven portfolios. 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 Service and Distribution fees. The Fund
commenced operations during October 1997.

The Company prepares its financial statements in accordance with generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make certain estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates. The following is
a summary of significant accounting policies followed by the Fund:

Valuation

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. As of
February 29, 2000, the Fund had a beneficial interest of 53.3% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio was held by a similar fund of Deutsche Global Funds Ltd., an
offshore company and an affiliate of the Company.

12
<PAGE>

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

NOTES 1 -- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, 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 the Fund.
Expenses attributable to the Fund are charged directly to the Fund, while
general Company expenses attributable to more than one Fund of the Company are
allocated among the respective Funds. The investment income and expenses of
the Fund (other than Class specific expenses), and realized and unrealized
gains and losses allocated from the Portfolio 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 continue 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 U.S. 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 U.S. federal excise tax.
Accordingly, no provision for U.S. federal income and excise tax is required.

Distributions to Shareholders

Dividends from net investment income of the Fund are declared and paid at
least annually. Capital gains of the Fund, if any, are distributed at least
annually. However, to the extent that the net realized gains of the Fund can
be reduced by any capital loss carryforwards of the Fund, such gains will not
be distributed. Dividends and capital gains distributions are distributed in
U.S. dollars. 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 generally accepted
accounting principles. 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.

13
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 1 -- 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 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company retained the
services of Federated Services Company ("Federated") as administrator. Under the
Administration Agreement, Federated assisted in the operations of the Fund,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated receives a fee from the Fund, which was computed
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 for the Fund's then current fiscal year. Federated, in its
capacity as operations agent for the Portfolio and Administrator of the Fund,
received a minimum fee of $37,500 for the first six months of the Fund's fiscal
year ending August 31, 2000. At a meeting held on January 31, 2000, the Board of
Directors of the Company adopted a resolution to approve an administration
agreement between Investment Company Capital Corp. ("ICCC") and the Company,
replacing Federated Services Company, effective April 7, 2000.

14
<PAGE>

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

NOTE 2 -- concluded

respectively, to finance any activity that is principally intended to result in
the sale of each such Class of Shares. The Fund will pay to ICC Distributors,
for the provision of certain services to the holders of Class B Shares and Class
C Shares, a Service fee computed at an annual rate of 0.25% of the average daily
net assets of each such Class of shares. Prior to December 20, 1999 Edgewood
Services Inc. served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Fund. Investors Bank and Trust Company (Boston) acts as the sub-
administrator for the Fund and as the custodian of the Fund's assets. At a
meeting held on January 31, 2000, the Board of Directors of the Company adopted
a resolution to approve a transfer agent agreement between ICCCCapital, Inc., an
affiliate of Deutsche Bank AG, and the Company, replacing Federated Shareholder
Services Company, effective April 7, 2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60%, 2.35% and 2.35% of the average daily net assets of Class A Shares,
Class B Shares, and Class C Shares, respectively, through the year ending
December 31, 2000.

For the six months ended February 29, 2000, DFM voluntarily reimbursed
$159,037 to the Fund pursuant to this undertaking.

NOTE 3 -- 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.

15
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 4 -- 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>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
--------------------------- -------------------------
Shares Amount Shares Amount
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold...................................... 934,028 $ 17,267,842 1,197,311 $17,754,423
Reinvestment of dividends
and distributions............................... 6,386 112,774 3,201 46,741
Shares redeemed.................................. (981,957) (18,417,248) (459,377) (6,838,703)
-------- ------------ --------- -----------
Net increase (decrease).......................... (41,543) $ (1,036,632) 741,135 $10,962,461
-------- ------------ --------- -----------
Capital Shares -- Class B:
Shares sold...................................... 70,064 $ 1,129,535 269,748 $ 3,415,267
Reinvestment of dividends
and distributions.............................. 4,076 62,810 5,232 67,185
Shares redeemed................................. (78,488) (1,229,360) (97,624) (1,239,901)
-------- ------------ --------- -----------
Net increase (decrease)......................... (4,348) $ (37,015) 177,356 $ 2,242,551
-------- ------------ --------- -----------
<CAPTION>
Period Ended/1/
August 31, 1999
------------------------
<S> <C> <C> <C> <C>
Capital Shares -- Class C:
Shares sold...................................... 17,384 $ 323,029 161,281 $ 2,073,698
Reinvestment of dividends
and distributions.............................. 995 15,560 671 8,743
Shares redeemed.................................. (17,681) (267,930) (36,880) (476,799)
-------- ------------ --------- -----------
Net increase (decrease).......................... 698 $ 70,659 125,072 $ 1,605,642
-------- ------------ --------- -----------
</TABLE>
- --------------
/1/ Inception date: 9/2/98

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

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

16
<PAGE>

Flag Investors European Mid-Cap Fund
- -------------------------------------------------------------------------------
Proxy Results (Unaudited)

The Flag Investors Portfolios Trust shareholders voted on the following
proposals at the annual meeting of shareholders on March 28, 2000. The
description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Withheld
--------- ------------
<S> <C> <C>
Mr. Richard R. Burt 974,434 2,352
Mr. Richard T. Hale 974,434 2,352
Mr. Joseph R. Hardiman 974,434 2,352
Mr. Louis E. Levy 972,707 4,079
Mr. Eugene J. McDonald 973,503 3,283
Ms. Rebecca W. Rimel 974,201 2,585
Mr. Truman T. Semans 973,503 3,283
Mr. Robert H. Wadsworth 974,434 2,352
</TABLE>

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
969,513 5,544 1,729

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
960,407 6,947 9,432

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
957,092 8,967 10,727

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
958,225 12,459 6,102

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
958,879 8,388 9,519

17
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Portfolio of Investments February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
Shares Security Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 90.8%
Austria -- 0.2%
3,900 Beko Holding AG/1/.................................. $ 143,100
-----------
Bermuda -- 0.1%
1,500 Flag Telecom Holdings Ltd./1/....................... 41,145
-----------
France -- 8.9%
25,000 Business Objects SA -- ADR/1/....................... 2,871,875
5,600 Cap Gemini SA....................................... 1,542,421
9,000 Dassault Systemes SA................................ 988,089
900 Integra-Net SA/1/................................... 159,914
1,500 Lagardere S.C.A..................................... 141,135
800 Publicis SA......................................... 407,563
-----------
6,110,997
-----------
Germany -- 55.9%
1,350 1&1 Aktiengesellschaft & Co. KGaA/1/................ 559,051
4,000 ACG AG /1/.......................................... 1,113,286
12,650 AGIV AG............................................. 226,596
8,250 Aixtron AG.......................................... 1,819,442
15,000 Altana AG........................................... 938,974
1,230 AVA Allgemeine Handels der Verbraucher.............. 662,757
2,550 Balda AG/1/......................................... 434,673
10,250 Barmag AG........................................... 126,352
25,750 BDAG Balcke-Duerr AG................................ 259,145
4,500 Beiersdorf AG....................................... 270,858
16,000 BERLINER ELEKTRO Holding AG......................... 229,591
7,200 BERU AG............................................. 225,354
1,100 Biodata Infomation Technology AG/1/................. 307,213
4,000 Buecher.de AG/1/.................................... 91,875
2,375 CE Computer Equipment AG............................ 292,767
1,000 ce Consumer Electronics AG.......................... 233,058
3,500 Constantin Film AG/1/............................... 202,241
18,750 Continental AG...................................... 308,778
3,000 Das Werk AG/1/...................................... 118,455
9,550 Deutsche Babcock AG/1/.............................. 391,798
11,000 Deutsche Pfandbrief-und Hypothekenbank AG........... 879,265
8,500 Duerr AG............................................ 167,811
3,000 D. Logistics AG/1/.................................. 751,179
</TABLE>

See Notes to Financial Statements.

18
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (continued)
Germany -- continued
4,750 Edel Music AG/1/.................................... $ 165,139
8,000 EM.TV Merchandising AG.............................. 797,405
1,350 Escada AG........................................... 131,962
5,900 Evotec Biosystems AG/1/............................. 1,023,327
50,000 FAG Kugelfischer Georg Schaefer AG.................. 418,927
3,500 Foris AG/1/......................................... 178,646
4,250 Freenet.de AG/1/.................................... 825,960
1,750 Fresenius AG........................................ 239,318
1,365 Fuchs Petrolub AG Oel & Chemie...................... 68,423
2,000 GFT Technologies AG/1/.............................. 427,594
6,200 Gold-Zack AG........................................ 635,902
2,100 Haitec AG/1/........................................ 62,897
6,250 Heidelberger Druckmaschinen AG...................... 340,077
18,000 Hucke AG............................................ 60,672
2,250 I-D Media AG/1/..................................... 144,226
4,100 IDS Scheer AG/1/.................................... 110,479
1,300 Infomatec Integrated Information Systems AG/1/...... 54,961
250 Infor Business Solutions AG/1/...................... 10,786
1,300 Intershop Communications AG/1/...................... 676,061
23,750 IWKA AG............................................. 395,693
21,000 Ixos Software AG/1/................................. 1,466,244
2,050 Kabel New Media/1/.................................. 125,365
9,250 Kiekert AG.......................................... 192,417
20,300 Kinowelt Medien AG/1/............................... 1,085,020
8,300 Kloeckner-Werke AG/1/............................... 859,281
25,000 LEONISCHE DRAHTWERKE AG............................. 686,173
14,000 Maxdata AG/1/....................................... 417,964
6,600 Medion AG........................................... 661,038
30,000 Metallgesellschaft AG............................... 564,829
15,500 MobilCom AG......................................... 2,086,087
600 Parsytec Pattern AG/1/.............................. 127,123
6,500 Pfeiffer Vacuum Technology AG....................... 276,935
600 PrimaCom AG......................................... 53,738
10,750 P&I Personal & Infomatik AG/1/...................... 71,434
6,500 Rhoen-Klinikum AG................................... 278,562
13,000 Rinol AG............................................ 122,693
5,000 RTV Family Entertainment AG/1/...................... 358,736
</TABLE>

See Notes to Financial Statements.

19
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Portfolio of Investments February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
Shares Security Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (continued)
Germany -- continued
4,725 SAP AG.............................................. $ 2,957,767
5,500 Schneider Rundfunkwerke AG/1/....................... 241,003
15,500 SGL Carbon AG/1/.................................... 1,494,220
11,250 Singulus Technologies AG............................ 1,191,774
3,000 Sixt AG............................................. 83,785
90,000 SKW Trostberg AG.................................... 537,382
10,250 Software AG/1/...................................... 1,579,402
1,125 Springer (Axel) Verlag AG........................... 1,495,135
14,285 Suess MicroTec AG/1/................................ 564,044
39,000 Takkt AG/1/......................................... 315,495
1,000 Tomorrow Internet AG/1/............................. 80,415
36,000 Wella AG............................................ 761,002
7,000 WMF-Wuerttembergische Metallwarenfabrik AG.......... 101,794
-----------
38,215,831
-----------
Ireland -- 1.4%
8,500 Trintech Group Plc -- ADR/1/........................ 990,497
-----------
Italy -- 2.1%
41,500 Banca Popolare di Milano............................ 306,783
180,000 Seat Pagine Gialle SpA.............................. 1,125,035
-----------
1,431,818
-----------
Netherlands -- 15.0%
11,000 ASM Lithography Holding NV/1/....................... 1,400,997
9,750 Equant NV/1/........................................ 1,102,355
19,500 Getronics NV........................................ 1,633,814
14,000 Libertel NV/1/...................................... 292,575
21,000 Qiagen NV/1/........................................ 3,620,106
4,000 STMicroelectronics NV............................... 793,553
7,400 United Pan-Europe Communications NV --
Class A/1/......................................... 1,458,453
-----------
10,301,853
-----------
Spain -- 0.2%
6,500 Baron de Ley, SA/1/................................. 135,525
-----------
</TABLE>

See Notes to Financial Statements.

20
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (concluded)
Switzerland -- 0.2%
250 Fantastic Corp. -- Certificates/1/.................. $ 114,121
-----------
United Kingdom -- 3.2%
7,750 COLT Telecom Group Plc/1/........................... 444,250
9,000 Dialog Semiconductor Plc/1/......................... 936,085
76,700 EMI Group Plc....................................... 816,727
-----------
2,197,062
-----------
United States -- 3.6%
2,700 FortuneCity.com, Inc./1/............................ 37,183
10,000 Global TeleSystems Group, Inc./1/................... 250,000
2,750 MIH Ltd./1/......................................... 194,906
1,000 OpenTV Corp./1/..................................... 185,000
16,000 Poet Holdings, Inc.................................. 1,479,245
7,500 SmartForce Plc -- ADR/1/............................ 330,469
-----------
2,476,803
-----------
Total Common Stock
(Cost $43,554,162)................................ 62,158,752
-----------
PREFERRED STOCK -- 7.8%
Germany -- 7.8%
1,200 BERLINER ELEKTRO Holding AG......................... 12,019
8,500 Draegerwerk AG...................................... 67,125
12,000 Dyckerhoff AG....................................... 309,139
6,850 Fresenius AG........................................ 1,240,216
1,700 Fuchs Petrolub AG Oel & Chemie...................... 83,660
1,900 Marschollek, Lautenschlaeger und Partner AG......... 969,791
405 Porsche AG.......................................... 1,174,006
10,000 Rhoen-Klinikum AG................................... 462,264
19,000 Sixt AG............................................. 356,810
10,000 Sto AG.............................................. 188,276
15,000 Wella AG............................................ 362,588
11,000 WMF-Wuerttembergische Metallwarenfabrik AG.......... 132,525
-----------
Total Preferred Stock
(Cost -- $5,291,861).............................. 5,358,419
-----------
</TABLE>

See Notes to Financial Statements.

21
<PAGE>

See Notes to Financial Statements.

22
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Provesta Portfolio (US Dollar)
<TABLE>
<CAPTION>
Percentage of
Industry Sector (Unaudited) Net Assets
- -------------------------------------------------------------------------------
<S> <C>
Computer Software & Processing................................. 23.3%
Computers & Information........................................ 9.5%
Health Care Providers.......................................... 8.5%
Media - Broadcasting & Publishing.............................. 7.3%
Heavy Machinery................................................ 6.7%
Electronics.................................................... 5.7%
Telephone Systems.............................................. 4.5%
Automotive..................................................... 3.8%
Industrial - Diversified....................................... 3.3%
Entertainment & Leisure........................................ 3.0%
Chemicals...................................................... 3.0%
Pharmaceuticals................................................ 2.9%
Electrical Equipment........................................... 2.7%
Financial Services............................................. 2.6%
Communications................................................. 2.2%
Cosmetics & Personal Care...................................... 2.0%
Banking........................................................ 1.7%
Retailers...................................................... 1.4%
Commercial Services............................................ 1.1%
Building Materials............................................. 0.9%
Advertising.................................................... 0.8%
Transportation................................................. 0.6%
Household Products............................................. 0.3%
Textiles, Clothing & Fabrics................................... 0.3%
Oil & Gas...................................................... 0.2%
Beverages, Food & Tobacco...................................... 0.2%
Medical Supplies............................................... 0.1%
Other assets in excess of liabilities.......................... 1.4%
-----
100.0%
=====
</TABLE>

23
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)
- -------------------------------------------------------------------------------
Assets:
Investments, at value............................................. $67,529,498
Cash.............................................................. 717,073
Foreign currency.................................................. 7,551,262
Dividends receivable.............................................. 6,709
Interest receivable............................................... 1,730
Receivable for investments sold................................... 2,650,901
Receivable for Investors' Beneficial Interest for contributions... 185,960
Receivable from Advisor........................................... 56,797
Deferred organization costs....................................... 34,632
-----------
Total assets..................................................... 78,734,562
-----------
Liabilities:
Payable for investments purchased................................. 9,905,739
Payable to Investors' Beneficial Interest for withdrawals......... 275,537
Custody and portfolio accounting fees payable..................... 3,648
Administration fees payable....................................... 4,717
Organization costs payable........................................ 35,680
Other accrued expenses............................................ 26,740
-----------
Total liabilities................................................ 10,252,061
-----------
Net assets....................................................... $68,482,501
===========
Net Assets:
Applicable to Investors' Beneficial Interests..................... $68,482,501
===========
Cost of investments............................................... $48,881,730
===========
Cost of foreign currency.......................................... $ 7,616,486
===========

See Notes to Financial Statements.

24
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- -------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Dividend income............................................ $ 29,016
Less: foreign withholding taxes............................ (6,256)
-----------
Net dividend income....................................... 22,760
Interest income............................................ 4,951
Less: interest expense..................................... (14,349)
-----------
Total income.............................................. 13,362
-----------
Expenses:
Investment management fees................................. 150,573
Custody and portfolio accounting fees...................... 31,057
Operations agent fees...................................... 29,835
Administration fees........................................ 24,656
Professional fees.......................................... 20,417
Amortization of organization costs......................... 6,574
Trustees' fees and expenses................................ 2,486
Other expenses............................................. 7,012
-----------
Total expenses............................................ 272,610
-----------
Net investment loss....................................... (259,248)
-----------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency:
Net realized gain (loss) on:
Investments............................................... 4,251,480
Foreign currency transactions............................. (21,541)
Net change in unrealized appreciation on:
Investments............................................... 17,663,119
Foreign currency translations............................. 55,392
-----------
Net Realized and Unrealized Gain on Investments
and Foreign Currency....................................... 21,948,450
-----------
Net Increase in Net Assets Resulting from Operations........ $21,689,202
-----------
</TABLE>

See Notes to Financial Statements.

25
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31,
- -------------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) In Net Assets:
Operations:
Net investment loss.................................... $ (259,248) $ (261,772)
Net realized gain (loss) on investments and
foreign currency transactions......................... 4,229,939 (156,237)
Net change in unrealized appreciation on
investments and foreign currency translations......... 17,718,511 1,969,357
------------ -----------
Net increase in net assets
resulting from operations............................. 21,689,202 1,551,348
------------ -----------
Capital Transactions:
Proceeds from contributions............................ 52,305,849 25,013,744
Withdrawals............................................ (34,343,150) (9,340,555)
------------ -----------
Net increase in net assets from
capital transactions.................................. 17,962,699 15,673,189
------------ -----------
Total increase in net assets.......................... 39,651,901 17,224,537
Net Assets:
Beginning of period.................................... 28,830,600 11,606,063
------------ -----------
End of period.......................................... $ 68,482,501 $28,830,600
============ ===========
</TABLE>

See Notes to Financial Statements.

26
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -----------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's)........... $68,483 $28,831 $11,606
Ratio of expenses to average
net assets before interest................. 1.54%/2/ 2.34% 9.77%/2/
Ratio of interest expense
to average net assets...................... 0.08%/2/ 0.03% --
Ratio of expenses to average
net assets after interest expense.......... 1.62%/2/ 2.37% 9.77%/2/
Ratio of net investment loss
to average net assets...................... (1.46)%/2/ (1.18)% (8.36)%/2/
Portfolio turnover.......................... 44%/3/ 89% 82%/3/
</TABLE>
- --------------
/1/ Commencement of operations: 10/17/97
/2/ Annualized
/3/ Not Annualized

See Notes to Financial Statements.

27
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Portfolios Trust ("Portfolio Trust") (re-named from Deutsche
Portfolios on January 18, 2000) 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 (US Dollar) (the "Portfolio").

The investment manager (the "Manager") 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 commenced
operations on October 14, 1997.

The Portfolio operates under a "Hub and Spoke(R)" structure where the
beneficial interest holders of the Portfolio invest substantially all of their
investable assets in the Portfolio ("Hub and Spoke(R)" is a registered service
mark of Signature Financial Group, Inc.). 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.

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors European Mid-Cap Fund ..... 53.3%
Deutsche Provesta Fund ................... 46.7%
-----
100.0%
=====

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Portfolio:

28
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------

NOTE 1 -- continued

Investment Valuation

Securities listed on a U.S. 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 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.

Investment Transactions

Investment transactions are recorded on 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 accreion 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.

29
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 1 -- 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 U.S. dollars.
Assets and liabilities denominated in foreign currency amounts are translated

30
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------

NOTE 1 -- concluded

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 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.

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 U.S. Internal Revenue
Code (the "Code"). Accordingly, it is expected that the Portfolio will not be
subject to any U.S. 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.

Expenses

Expenses are recorded on an accrual basis. Expenses of the Portfolio Trust
which are directly identifiable to a specific Portfolio are charged to that
Portfolio. Expenses not directly attributable to a specific Portfolio 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 Portfolios 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.

31
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- ------------------------------------------------------------------------------
Notes to Financial Statements (continued)

NOTE 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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
adviser (the "Adviser") to the Portfolio. As compensation for the services
rendered by DFM under the Management Agreement with the Portfolio, DFM receives
a fee from the Portfolio at an annualized rate of 0.85% of the average daily net
assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's advisory fee was $150,573 for
services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation
for its services, DWS receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolios Trust
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at the annual rate of
0.035% of the average daily net assets of the Portfolio for the Portfolio's
then-current fiscal year, subject to a minimum fee of $60,000 annually. At a
meeting held on January 31, 2000, the Board of Trustees of the Portfolios Trust
adopted a resolution to approve an administration agreement between Investment
Company Capital Corp. and the Portfolios Trust, replacing Federated Services
Company, effective April 10, 2000.

The Portfolios 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 from, 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.

32
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------

NOTE 2 -- concluded

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $53,830 in brokerage commissions from Flag Investors Provesta Portfolio
as a result of executing agency transactions in portfolio securities.

During the six months ended February 29, 2000, certain portfolios of the
Portfolios Trust purchased/sold securities to/from other portfolios within the
Portfolios Trust and other entities of the Manager at prevailing market values
and in accordance with procedures approved by the Board of Trustees of the
Portfolio Trust.

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 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government..................... $ --
Non-U.S. Government................. 33,477,655
-----------
Total............................... $33,477,655
===========

Sales
U.S. Government..................... $ --
Non-U.S. Government................. 16,692,837
-----------
Total............................... $16,692,837
===========

At February 29, 2000, the cost of investments, unrealized appreciation, and
unrealized depreciation of investments for U.S. federal income tax purposes was
$48,881,730, $21,592,020 and $2,944,252, respectively.

33
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

The Statements of Assets and Liabilities include 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 Statements of Assets and Liabilities.

Notional amounts are indicative only of the volume of activity; they are not a
measure of market risk. Notional amounts of forward foreign currency and futures
contracts include both purchase and sale commitments. 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 Statements 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 Manager considers to be well established.

NOTE 5 -- Line of Credit Agreement

The Portfolios 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 33% of the total assets of the Portfolios
Trust. 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 six months ended February 29,
2000, the Portfolio periodically utilized the line of credit and incurred
interest expense as disclosed in the Statements of Operations. The weighted
average interest rate paid by the Portfolios Trust was 5.90% and the maximum and
average amount of the loans outstanding during the borrowing period was
$13,985,293 and $1,484,271, respectively. At February 29, 2000, the Portfolio
had no debt outstanding under the line of credit agreement.

34
<PAGE>

Flag Investors Provesta Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Proxy Results (Unaudited)

The Flag Investors Provesta Portfolio (US Dollar) shareholders voted on and
approved the following proposals at the annual meeting of shareholders on March
28, 2000. The description of each proposal and number of shares voted are as
follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Withheld
--------- ------------
<S> <C> <C>
Mr. Richard R. Burt 1,404,939 3,388
Mr. Richard T. Hale 1,404,939 3,388
Mr. Joseph R. Hardiman 1,404,939 3,388
Mr. Louis E. Levy 1,402,436 5,891
Mr. Eugene J. McDonald 1,403,577 4,750
Ms. Rebecca W. Rimel 1,404,620 3,707
Mr. Truman T. Semans 1,403,577 4,750
Mr. Robert H. Wadsworth 1,404,939 3,388
</TABLE>

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
1,397,841 7,993 2,493

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,384,698 10,011 13,618

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
1,379,916 12,937 15,474

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,381,566 17,963 8,798

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
1,382,523 12,099 13,705

35
<PAGE>

This page intentionally left blank.
<PAGE>

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

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

[FLAG INVESTORS LOGO]

Balanced

Value Builder Fund

Growth

Equity Partners Fund
Emerging Growth Fund

Specialty

Communications Fund
Real Estate Securities Fund

International

International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy

Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income

Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income

Managed Municipal Fund Shares

Money Market

Cash Reserve Prime Shares

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

ICC Distributors, Inc.

EMCSA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

US Money Market

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a cumulative total return of 2.57% for the
six months ended February 29, 2000, outperforming the IBC-First Tier Retail
Money Funds Average return of 2.49% for the same time period.

. Three major factors impacted the money markets over the semi-annual period--
the ongoing extraordinary performance of the U.S. economy, the interest rate
hikes of the Federal Reserve Board, and the liquidity concerns surrounding
Y2K. These factors combined to push yields on short-term money markets
securities significantly higher.

. By staying disciplined to the purchase of high quality instruments and
actively adjusting duration and sector allocation as market conditions
changed, we were able to produce highly competitive yields in the Fund.

. We believe that the Federal Reserve Board will continue its trend of monetary
policy tightening in the near term and thus intend to maintain a shorter than
average duration position in the Fund's portfolio.
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
the Flag Investors U.S. Money Market Fund (the "Fund") (formerly the Deutsche
U.S. Money Market Fund), providing a more detailed review of the markets, the
portfolio in which the Fund invests (the "Portfolio"), and our outlook--all in
an easier-to-read format. We continue to include a complete financial summary
of the Fund's operations and listing of the portfolio's holdings.

Fund Performance

By staying disciplined to the purchase of high quality instruments and
actively adjusting the portfolio's duration and securities weightings as market
conditions changed, we were able to produce competitive yields in the Fund.

The Fund maintained its AAA rating, the highest possible rating for a money
market fund, originally awarded to the Fund by Standard & Poor's in September
1998.** The Fund's investment policies adhere to Standard & Poor's standards.
Also, all purchases are consistent with the Fund's objective of generating a
high level of current income for risk-averse investors while providing maximum
liquidity.

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns Annualized
- ------------------------------------------------------------------------------------------------------------------------
7 day 7 day
Periods ended Past 6 Past 1 Since Past 1 Since current effective
February 29, 2000 months year Inception year inception yield yield
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
US Money Market Fund -
Class A Shares* 3/25/98 2.57% 4.87% 9.99% 4.87% 5.05% 5.39% 5.54%
- ------------------------------------------------------------------------------------------------------------------------
IBC First Tier Retail
Money Funds Average 2.49% 4.73% 9.34% 4.73% 4.77% 5.16% 5.30%
- ------------------------------------------------------------------------------------------------------------------------
US Money Market Fund -
Class B Shares* 7/20/99 2.19% -- 2.61% -- 4.30% 4.64% 4.75%
- ------------------------------------------------------------------------------------------------------------------------
IBC First Tier Retail
Money Funds Average 2.49% 4.73% 2.87% 4.73% 4.92% 5.16% 5.30%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------
* Past performance is not indicative of future results. Yields will vary.
Yields quoted for money market funds most closely reflect the fund's current
earnings. Although money market funds seek to maintain a share value of
$1.00, there is no guarantee that they will be able to do so. Class A Shares
are available through your financial advisor or directly from the Fund. Class
B Shares are available only to current shareholders for exchange of other
Flag Investors Funds Class B or C Shares. Returns for Class A Shares differs
from Class B Shares due to differences in sales charge structure, fees and
expenses.

Mutual funds are not bank deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.

** This rating is obtained after Standard & Poor's evaluates a number of
factors, including credit quality, market price exposure and management.
Ratings are subject to change and do not remove market risks.

1
<PAGE>

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

As of February 29, 2000, the Fund held 100% of its investments in corporate
debt and 0% in U.S. government and agency debt. All securities were rated A or
better (A1/P1 for short-term investments) by Standard & Poor's and Moody's. The
portfolio's main sector holdings were asset-backed securities (18%), financial
services (11%) and communications (9%).

Money market issuers were very aggressive prior to the end of 1999, seeking to
extend their maturities into the year 2000 to avoid potential Y2K problems.
This excessive issuance caused both an abnormally steep yield curve in fixed
rate securities and wide yield spreads on floating rate notes. The Fund
maintained the liquidity necessary for potential Y2K problems by purchasing
Treasury bills and other very liquid instruments during the last quarter of
1999. We maintained a shorter than benchmark duration for most of the semi-
annual period. On February 29, 2000, the Fund's weighted average maturity stood
at 32 days.

Investment Environment

Three major factors impacted the money markets over the semi-annual period
ended February 29, 2000--the ongoing extraordinary performance of the U.S.
economy, the actions of the Federal Reserve Board, and the liquidity concerns
surrounding Y2K. These factors combined to push yields on short-term money
markets securities significantly higher.

Rapid U.S. economic growth, benign inflation, the lowest unemployment rate in
a generation, and a spectacular runup in the U.S. equity market gave consumers
the confidence necessary to utilize their purchasing power. Housing, retail
sales, and auto sales were all at historic levels. Subdued wage demands,
competitive pressures, productivity improvements and global overcapacity
combined to keep prices in check. Simultaneously, foreign economies around the
world showed clear signs of recovery, with growth rates in Europe and Asia, in
particular, increasing throughout the period.

The Federal Reserve Board followed up its June 30 and August 24 interest rate
hikes by raising rates two more times during the Fund's semi-annual period. The
Federal Reserve Board argued that the pace of the economy could not be
indefinitely supported by labor force growth and productivity and thus may
rekindle inflation. Consequently, on November 16 and February 2, the Federal
Reserve Board raised interest rates by 0.25% each time, leaving the targeted
federal funds rate at 5.75% at the end of the semi-annual period.

2
<PAGE>

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

Money market investors and issuers alike believed liquidity would be scarce
over year-end, as anticipation of Y2K grew increasingly uncertain over the last
quarter of 1999. Issuers flooded the market with paper early in the fourth
calendar quarter, hoping to secure their year-end financing. Approximately 85%
of this financing was completed by November 1, with much of the issuance taking
place in the asset-backed commercial paper market. To calm the markets, the Fed
announced in October that it would provide the market with several liquidity
facilities, including a repurchase agreement facility with expanded collateral
guidelines and a Standby Financing Facility. As with most other secular Y2K
fears, the money markets' liquidity concerns also turned out to be for naught.
The Fed had done its job in providing liquidity to the markets, and none of the
dealers needed to exercise any of the liquidity options they had purchased from
the Fed.

Looking Ahead

We now know that the concerns and fears surrounding Y2K turned out to be a
non-event. The world at large and the financial markets in particular continued
to hum along without interruption. Looking ahead for the near term, we believe
the U.S. economy still has substantial momentum, with GDP growth high and
inflation, except for oil prices, subdued. It appears that the "Goldilocks"
economy remains strong. Thus, we also feel that the Federal Reserve Board will
likely raise interest rates again at its March meeting, as it seeks to slow real
economic growth to a more sustainable pace.

In addition, 2000 being a presidential election year, we believe the financial
markets may remain focused on the party forerunners and their views toward
Social Security and budget reform. The Treasury market, in particular, may be
impacted one way or the other now that the campaigns have gained momentum,
leading up to the respective party conventions.

Given this view, we intend to maintain a shorter than average duration in the
Fund and to carefully monitor both the degree of tightening and timing of the
Federal Reserve Board's next moves as well as supply and demand factors within
the U.S. money markets.

3
<PAGE>

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

In closing, we want to inform you that on May 1, 2000 the U.S. Money Market
Fund will close. We have appreciated your support of the Fund, and the managers
of the Flag Investors Family of Funds look forward to continuing to serve your
investment needs for many years ahead.

Sincerely,

/s/ Jan Buenner
- ---------------
Jan Buenner
Portfolio Manager
February 29, 2000

4
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Flag Investors US Money Market Portfolio, at value........... $15,302,339
Receivable from Manager for expense reimbursement.......................... 16,079
Deferred organization costs................................................ 2,898
-----------
Total assets........................................................... 15,321,316
Liabilities:
Transfer Agent fees payable................................................ 9,092
Administration fees payable................................................ 5,970
Distribution fees payable.................................................. 4,478
Other accrued expenses..................................................... 28,706
-----------
Total liabilities......................................................... 48,246
-----------
Net assets................................................................ $15,273,070
===========
Net Assets Consist of:
Capital stock, $0.001 par value (a)........................................ $ 15,273
Paid-in capital............................................................ 15,256,850
Accumulated net investment loss............................................ 919
Accumulated net realized gain on investments
and foreign currency transactions......................................... 28
-----------
Net assets.............................................................. $15,273,070
===========
Computation of Net Asset Value, Redemption Price
and Offering Price Per Share:
Net assets -- Class A...................................................... $15,030,603
===========
Shares outstanding -- Class A.............................................. 15,030,578
===========
Net asset value and redemption price per share -- Class A.................. $1.00
=====

Net assets -- Class B...................................................... $ 242,467
===========
Shares outstanding -- Class B.............................................. 242,464
===========
Net asset value and offering price per share -- Class B.................... $1.00
=====
Minimum redemption price per share -- Class B.............................. $1.00
=====
</TABLE>
- -----------
(a) 5,000,000,000 shares authorized.

See Notes to Financial Statements.

5
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

Statement of Operations
(Unaudited)

<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- ---------------------------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Interest income............................................................. $396,209
Expenses.................................................................... (19,097)
---------
Net investment income allocated from Flag Investors
US Money Market Portfolio................................................. 377,112
---------
Expenses:
Administration fees........................................................ 37,295
Transfer Agent fees......................................................... 24,563
Professional fees........................................................... 10,361
Registration fees........................................................... 8,858
Reports to Shareholders..................................................... 7,158
Portfolio accounting fees................................................... 6,748
Trustees' fees and expenses................................................. 2,239
Amortization of organization costs.......................................... 1,590
Distribution fees -- Class B................................................ 1,106
Service fees -- Class A..................................................... 17,116
Service fees -- Class B..................................................... 369
Other expenses.............................................................. 6,044
---------
Total expenses........................................................... 123,447
Less: Expense reimbursement of Fund and Portfolio
allocated expenses......................................................... (102,971)
---------
Net expenses............................................................. 20,476
---------
Net investment income.................................................... 356,636
---------
Net Realized Gain on Investments allocated from
Flag Investors US Money Market Portfolio:
Net realized gain on Investments............................................. 133
---------
Net Increase in Net Assets Resulting From Operations......................... $ 356,769
=========
</TABLE>

See Notes to Financial Statements.

6
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31
- -------------------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income........................................ $ 356,636 $ 516,207
Net realized gain (loss) on investments allocated from
Flag Investors US Money Market Portfolio.................... 133 (105)
------------ ------------
Net increase in net assets resulting from operations......... 356,769 516,102
------------ ------------
Distributions to Shareholders:
Dividends from net investment income:
Class A..................................................... (350,181) (515,990)
Class B..................................................... (6,455) (217)
------------ ------------
Total distributions.......................................... (356,636) (516,207)
------------ ------------
Capital Share Transactions:
Net proceeds from shares sold................................ 40,981,585 63,902,385
Net proceeds from dividends and distributions
reinvested.................................................. 338,776 506,980
Net cost of shares redeemed.................................. (41,251,166) (49,932,814)
------------ ------------
Net increase in net assets resulting from capital
share transactions.......................................... 69,195 14,476,551
------------ ------------
Total increase in net assets............................... 69,328 14,476,446
Net Assets:
Beginning of period.......................................... 15,203,742 727,296
------------ ------------
End of period................................................ $ 15,273,070 $ 15,203,742
============ ============
Includes accumulated net investment income of................. $ 919 $ 919
------------ ------------
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -----------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning
of period............................. $ 1.00 $ 1.00 $1.00
------- ------- -----
Investment operations:
Net investment income................ 0.03 0.05 0.02
------- ------- -----
Increase from investment
operations.......................... 0.03 0.05 0.02
------- ------- -----
Distributions to Shareholders:
Dividends from net
investment income................... (0.03) (0.05) (0.02)
------- ------- -----
Total distributions.................. (0.03) (0.05) (0.02)
------- ------- -----
Net asset value at end of
period................................ $ 1.00 $ 1.00 $1.00
======= ======= =====
Total Return (based on net
asset value)/2/....................... 2.57%/4/ 4.67% 2.46%/4/
Ratios and Supplemental Data:
Net assets, end of period
(000's)............................. $15,031 $15,083 $ 727
Ratios to average net assets:
Expenses/3/......................... 0.55%/5/ 0.55% 0.55%/5/
Net investment income/3/............ 5.11%/5/ 4.55% 5.04%/5/
</TABLE>

- --------------
/1/ Commencement of operations: 3/25/98
/2/ Total Return based on net asset value, excluding transaction charges,
assumes beginning of each a purchase of common stock at net asset value at
the period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors US Money Market
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
Expenses to average net assets 2.02%/5/ 1.95% 43.80%/5/
Net investment income to average net assets 3.64%/5/ 3.15% (38.21)%/5/
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

8
<PAGE>

Flag Investors US Money Market Fund
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
For the Six For the Period
Months Ended Ended/1/
February 29, August 31,
- ----------------------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Net asset value at beginning
of period.......................................... $ 1.00 $ 1.00
------ ------
Investment operations:
Net investment income............................. 0.02 0.00/4/
------ ------
Increase from investment
operations....................................... 0.02 0.00
------ ------
Distributions to Shareholders:
Dividends from net
investment income................................ (0.02) (0.00)/4/
------ ------
Total distributions............................... (0.02) (0.00)/4/
------ ------
Net asset value at end of
period............................................. $ 1.00 $ 1.00
====== ======
Total Return (based on net
asset value)/2,5/.................................. 2.19% 0.42%
Ratios and Supplemental Data:
Net assets, end of period (000's)................. $ 242 $ 121
Ratios to average net assets:
Expenses/3/...................................... 1.30%/6/ 1.30%/6/
Net investment income/3/......................... 4.37%/6/ 3.83%/6/
</TABLE>

- -----------------
/1/ Commencement of operations: 7/20/99.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors US Money Market
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
Expenses to average net assets 2.78%/6/ 2.18%/6/
Net investment income to average net assets 2.89%/6/ 2.95%/6/
/4/ Amount rounds to less than $0.01.
/5/ Not annualized
/6/ Annualized

See Notes to Financial Statements.

9
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Funds, Inc. (the "Company")(re-named from Deutsche Funds, Inc.
effective January 18, 2000) 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 seven
separate investment series (the "Funds"). The accompanying financial statements
and notes relate to Flag Investors Money Market Fund (the "Fund").

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Flag Investors US Money Market Portfolio (US Dollar)
(formerly the Deutsche US Money Market Portfolio, the "Portfolio"), which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, the Deutsche Portfolios
the "Portfolios Trust"), a New York business trust, registered under the 1940
Act as an open-end investment management company and comprised of seven
portfolios. The financial statements of the Portfolio, including the portfolio
of investments, are included elsewhere within this report and should be read in
conjunction with this report.

The Fund offers two classes of shares to investors, Class A and Class B. Each
class of shares is subject to a Distribution fee and Class B Shares are also
subject to a Service fee. Each Class will bear its respective portion of the
Service and Distribution fees. The Fund commenced operations during October
1997.

The Fund prepares its financial statements in accordance with generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make certain estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates. The following is
a summary of significant accounting policies followed by the Fund:

Valuation

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. As of
February 29, 2000, the US Money Market Fund had a beneficial interest of 7.6%
in the net assets of the US Money Market Portfolio (US Dollar). At February
29, 2000, the remaining interest in the Portfolio was held by a similar fund
of Deutsche Global Funds Ltd., an offshore company, and an affiliate of the
Company.

10
<PAGE>

Flag Investors US Money Market Fund
- --------------------------------------------------------------------------------

NOTE 1 -- continued

Investment Income, Expenses and Realized and Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, expenses and
realized and unrealized gains and losses recorded by the Portfolios 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio 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 continue 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 U.S. 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 U.S. federal excise tax.
Accordingly, no provision for U.S. federal income and excise tax is required.

Distributions to Shareholders

All of the Fund's net income and short-term capital gains and losses, if
any, are declared as dividends daily and paid monthly. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. 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.

11
<PAGE>

Flag Investors US Money Market Fund
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- 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 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
each 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company retained the
services of Federated Services Company ("Federated") as administrator. Under the
Administration Agreement, Federated assisted in the operations of the Fund,
subject to the direction and control of the Board of Directors of the Company.
Federated receives a fee from each Fund, which was computed 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 for the
Fund's then current fiscal year. Federated, in its capacity as operations agent
for the Portfolio and Administrator of the Fund, received a minimum fee of
$37,500 for the first six months of the Fund's fiscal year ending August 31,
2000. At a meeting held on January 31, 2000, the Board of Directors of the
Company adopted a resolution to approve an administration agreement between
Investment Company Capital Corp. ("ICCC") and the Company, replacing Federated
Services Company, effective April 7, 2000.

The Company has entered into a distribution agreement with ICC Distributors,
Inc. ("ICC Distributors"). Distributors serves as principal distributor for
shares of the Fund. Class A Shares and Class B Shares pay a distribution fee to
the Distributor in an amount computed at an annual rate of 0.25% and 0.75%,
respectively, of the average daily net assets of the Fund represented by

12
<PAGE>

Flag Investors US Money Market Fund
- --------------------------------------------------------------------------------

NOTE 2 -- concluded

Class A Shares and Class B Shares to finance any activity that is principally
intended to result in the sale of each Class of Shares. The Fund will pay to ICC
Distributors, for the provision of certain services to the holders of Class B
Shares, a Service fee computed at an annual rate of 0.25% of the average daily
net assets of each such Class of shares. Prior to December 20, 1999 Edgewood
Services Inc. served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company serves as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Fund. Investors Bank and Trust Company (Boston) acts as the sub-
administrator for the Fund and as the custodian of the Fund's assets. At a
meeting held on January 31, 2000, the Board of Directors of the Company adopted
a resolution to approve a transfer agent agreement between ICCC, an affiliate of
Deutsche Bank AG, and the Company, replacing Federated Shareholder Services
Company, effective April 7, 2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60% and 2.35% of the average daily net assets of Class A Shares and Class
B Shares, respectively, through the year ending December 31, 2000.

For the six months ended February 29, 2000, DFM voluntarily reimbursed
$102,971 to the Fund pursuant to this undertaking.

NOTE 3 -- Concentration of Ownership

13
<PAGE>

Flag Investors US Money Market Fund
- -------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 4 -- Capital Share Transactions

The Fund is authorized to issue up to 5,000,000,000 shares of $0.001 par value
capital stock. Transactions in capital stock were as follows for the following
periods:

<TABLE>
<CAPTION>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
------------------------- ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold.................................. 38,016,127 $ 38,016,127 63,341,207 $ 63,341,207
Reinvestment of dividends
and distributions........................... 333,627 333,627 506,899 506,899
Shares redeemed.............................. (38,402,477) (38,402,477) (49,492,101) (49,492,101)
----------- ------------ ----------- ------------
Net increase (decrease)...................... (52,723) $ (52,723) 14,356,005 $ 14,356,005
----------- ------------ ----------- ------------
<CAPTION>
Period Ended Period Ended/1/
February 29, 2000 August 31, 1999
------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Capital Shares -- Class B:
Shares sold.................................. 2,965,458 $ 2,965,458 561,178 $ 561,178
Reinvestment of dividends
and distributions........................... 5,149 5,149 81 81
Shares redeemed.............................. (2,848,689) (2,848,689) (440,713) (440,713)
----------- ------------ ----------- ------------
Net increase (decrease)...................... 121,918 $ 121,918 120,546 $ 120,546
----------- ------------ ----------- ------------
</TABLE>

- -------------
/1/ Inception date: 7/20/99

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

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

NOTE 6 -- Fund Closing

The Board of Trustees of the Flag Investors US Money Market Fund have decided
to close the Fund on or about May 1, 2000.

14
<PAGE>

Flag Investors US Money Market Fund
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors US Money Market Fund shareholders voted on and approved the
following proposals at the annual meeting of shareholders on March 28, 2000.
The description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 1,365,606 77,083
Mr. Richard T. Hale 1,365,606 77,083
Mr. Joseph R. Hardiman 1,365,606 77,083
Mr. Louis E. Levy 1,365,606 77,083
Mr. Eugene J. McDonald 1,365,606 77,083
Ms. Rebecca W. Rimel 1,414,215 28,474
Mr. Truman T. Semans 1,365,606 77,083
Mr. Robert H. Wadsworth 1,365,606 77,083

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--------- ------- -------
1,357,478 80,856 4,955

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Asset Management, Inc.

For Against Abstain
--------- ------- -------
1,198,064 240,270 4,355

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--------- ------- -------
1,198,064 240,270 4,355

4.A.(i) To approve a new investment sub-advisory agreement between Bankers
Trust Company and Deutsche Fund Management, Inc.

For Against Abstain
--------- ------- -------
1,197,090 155,178 90,421

4.A.(ii) To approve a new investment sub-advisory agreement between Bankers
Trust Company and Investment Company Capital Corp.

For Against Abstain
--------- ------- -------
1,197,090 154,204 91,395

15
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Portfolio of Investments February 29, 2000
(Unaudited)

<TABLE>
<CAPTION>
Par Maturity Value
Value Security Rate Date (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 2.0%

$4,000,000 Bank of America NT & SA................... 5.88% 4/05/00 $ 3,999,864
------------
Total Certificates of Deposit
(Amortized Cost -- $3,999,864)............ 3,999,864
------------
COMMERCIAL PAPER -- 78.3%

5,000,000 AT&T Corp. ............................... 5.68% 3/02/00 4,999,211
4,250,000 AT&T Corp. ............................... 5.87% 5/10/00 4,201,491
3,261,000 Bell Atlantic Financial Services.......... 5.79% 3/09/00 3,256,804
4,000,000 Bell Atlantic Financial Services.......... 5.75% 3/14/00 3,991,695
4,545,000 Clorox Co. (The).......................... 5.85% 4/14/00 4,512,503
5,000,000 Compass Securitization LLC -- Sec. 4(2)... 5.87% 4/28/00 4,952,714
6,000,000 Corporate Asset Funding Co. -- Sec. 4(2).. 5.85% 4/06/00 5,964,900
5,000,000 Delaware Funding Corp. -- Sec. 4(2)....... 5.80% 3/20/00 4,984,695
4,332,000 Delaware Funding Corp. -- Sec. 4(2)....... 5.85% 4/06/00 4,306,658
3,652,000 Eastman Kodak Co. ........................ 5.70% 3/20/00 3,641,013
3,700,000 Eastman Kodak Co. ........................ 5.73% 3/29/00 3,683,511
6,000,000 Emerson Electric Co. -- Sec. 4(2)......... 5.87% 5/02/00 5,939,343
6,441,000 Estee Lauder Co. -- Sec. 4(2)............. 5.90% 5/09/00 6,368,163
6,000,000 Goldman Sachs Group....................... 5.90% 5/08/00 5,933,133
7,480,000 Heinz (HJ) Co. ........................... 5.80% 4/04/00 7,439,026
5,325,000 International Lease Finance Corp. ........ 5.80% 4/05/00 5,294,973
5,000,000 John Hancock Capital -- Sec. 4(2)......... 5.76% 3/27/00 4,979,200
4,065,000 McDonald's Corp. -- Sec. 4(2)............. 5.80% 3/01/00 4,065,000
5,000,000 Merrill Lynch & Co., Inc. ................ 5.86% 4/18/00 4,960,933
4,548,000 Metlife Funding, Inc. .................... 5.76% 3/15/00 4,537,813
6,000,000 Motorola Credit Corp. .................... 5.77% 3/10/00 5,991,345
4,394,000 Motorola Credit Corp. .................... 5.77% 3/17/00 4,382,732
3,000,000 National Rural Utilities Cooperative
Finance Corp. ........................... 5.77% 3/30/00 2,986,056
5,000,000 National Rural Utilities Cooperative
Finance Corp. ........................... 5.83% 4/07/00 4,970,040
5,000,000 Paccar Financial Corp. ................... 5.76% 3/24/00 4,981,600
4,450,000 Quincy Capital Corp. -- Sec. 4(2)......... 5.87% 4/07/00 4,423,153
5,920,000 SBC Communications, Inc. -- Sec. 4(2)..... 5.75% 3/23/00 5,899,198
4,000,000 Sheffield Receivables Corp. -- Sec. 4(2).. 5.83% 3/08/00 3,995,466
3,500,000 Sysco Corp. -- Sec. 4(2).................. 5.75% 3/10/00 3,494,969
6,000,000 Wal-Mart Stores, Inc. -- Sec. 4(2)........ 5.80% 4/04/00 5,967,133
</TABLE>

See Notes to Financial Statements.

16
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- -------------------------------------------------------------------------------

6,000,000 Warner-Lambert Co. -- Sec. 4(2)............ 5.83% 4/03/00 $ 5,967,935
3,779,000 Windmill Funding Corp. -- Sec. 4(2)........ 5.78% 3/02/00 3,778,393
3,743,000 Windmill Funding Corp. -- Sec. 4(2)........ 5.79% 3/03/00 3,741,796
------------
Total Commercial Paper
(Amortized Cost -- $158,592,595)........... 158,592,595
------------
CORPORATE DEBT -- 18.4%

5,000,000 Bayerische Landesbank (New York) --
Series DPNT............................... 5.80% 4/15/00 5,003,468
5,000,000 Chrysler Financial Co. LLC -- Series MTNR.. 5.95% 4/06/00 5,001,700
5,000,000 E. I. du Pont de Nemours & Co. ............ 5.08% 4/03/00 4,994,814
2,030,000 Florida Power Corp. -- Series MTN.......... 6.33% 7/01/00 2,033,543
1,000,000 General Motors Acceptance Corp. ........... 7.00% 3/01/00 1,000,000
5,000,000 General Motors Acceptance Corp. --
Series MTN................................ 6.63% 4/17/00 5,005,754
3,000,000 J.P. Morgan & Co., Inc. ................... 5.99% 4/06/00 3,000,162
4,500,000 Pacific Gas & Electric Corp. --
Series MTNC............................... 6.14% 3/20/00 4,500,525
6,700,000 Salomon, Inc. ............................. 6.50% 3/01/00 6,700,000
------------
Total Corporate Debt
(Amortized Cost -- $37,239,966)............ 37,239,966
------------
TIME DEPOSITS -- 0.8%

$1,643,249 Chase Manhattan Corp. ..................... 5.75% 3/01/00 1,643,249
------------
Total Time Deposits
(Amortized Cost -- $1,643,249)............. 1,643,249
------------
Total Investments (Amortized Cost -- $201,475,674)......................... 99.5% 201,475,674
Other Assets in Excess of Liabilities...................................... 0.5% 947,432
----- ------------
Net Assets................................................................. 100.0% $202,423,106
===== ============
</TABLE>

- -----------
Sec. 4(2) -- Securities offered pursuant to Section 4(2) of the Securities Act
of 1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Directors.

See Notes to Financial Statements.

17
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

- --------------------------------------------------------------------------------
Assets:
Investments, at value.............................. $201,475,674
Cash............................................... 1,877
Interest receivable................................ 996,770
Deferred organization costs........................ 46,115
------------
Total assets....................................... 202,520,436
============
Liabilities:
Investment management fees payable................. 25,672
Custody and portfolio accounting fees payable...... 13,645
Administration fees payable........................ 3,283
Organization costs payable......................... 46,851
Other accrued expenses............................. 7,879
------------
Total liabilities.................................. 97,330
------------
Net assets......................................... $202,423,106
============
Net Assets:
Applicable to Investors' Beneficial Interests...... $202,423,106
============
Cost of investments................................ $201,475,674
============

See Notes to Financial Statements.

18
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Statements of Operations
(Unaudited)

For the Six
Months Ended
February 29,
- -------------------------------------------------------------------------------
2000
Investment Income:
Interest income............................................ $6,209,053
----------
Total income.............................................. 6,209,053
Expenses:
Investment management fees................................. 165,298
Custody and portfolio accounting fees...................... 47,737
Operations agent fees...................................... 30,855
Administration fees........................................ 26,672
Professional fees.......................................... 13,086
Amortization of organization costs......................... 4,619
Trustees' fees and expenses................................ 2,486
Other expenses............................................. 8,213
----------
Total expenses............................................ 298,966
----------
Net investment income..................................... 5,910,087
----------
Realized and Unrealized Gain on Investments
Net realized gain on Investments........................... 1,890
----------
Net Realized and Unrealized Gain on Investments............. 1,890
----------
Net Increase in Net Assets Resulting from Operations........ $5,911,977
==========

See Notes to Financial Statements.

19
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets

See Notes to Financial Statements.

20
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Financial Highlights

- ------------
/1/ Commencement of operations: 3/25/98.
/2/ Annualized
/3/ Amount rounds to less than 0.01%.

See Notes to Financial Statements.

21
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Portfolios Trust ("Portfolio Trust") (re-named from Deutsche
Portfolios on January 18, 2000) was organized on June 20, 1997, as a business
trust under the laws of the State of New York. The Portfolios Trusts 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 US Money Market Portfolio (US Dollar).

The investment manager (the "Manager") of the Portfolio is Deutsche Fund
Management, Inc. ("DFM"), an indirect subsidiary of Deutsche Bank AG. The
investment objective of the Portfolio is as high a level of current income as is
consistent with the preservation of capital and the maintainence of liquidity.
The Portfolios commenced operations on March 25, 1998.

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors US Money Market.... 7.6%
Deutsche US Money Market.......... 92.4%
-----
100.0%
=====

22
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- continued

Investment Valuation

Money Market instruments are valued at amortized cost, which the Trustees
have determined in good faith to be fair 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.

Investment Transactions

Investment transactions are recorded on trade date. Interest income,
including the accretion of discounts and amortization of premiums is recorded
daily on an accrual basis.

Federal Income Taxes

Expenses

Expenses are recorded on an accrual basis. Expenses of the Portfolios Trust
which are directly identifiable to a specific Portfolio are charged to that
Portfolio. Expenses not directly attributable to a specific Portfolio are
allocated among the Portfolios based on relative net asset value.

Deferred Organization Costs

23
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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 Deutsche Bank Securities Investment Management ("DBSIM") as
investment adviser (the "Adviser") to the Portfolio. As compensation for the
services rendered by DFM under the Management Agreement with the Portfolio, DFM
receives a fee from the Portfolio at an annualized rate of 0.15% of the average
daily net assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's management fee was $165,298
for services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation for
its services, DBSIM receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolios Trust had
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at an annual rate of
0.015% of the average daily net assets of the Portfolio. If after the first
year of operations, the average net assets of the Portfolio had not reached $325
million, the operations agent's fee would increase to an annual rate of 0.035%
of the average daily net assets of the Portfolio. At a meeting held on January
31, 2000, the Board of Trustees of the Portfolios Trust adopted a resolution to
approve an administration agreement between Investment Company Capital Corp. and
the Portfolios Trust, replacing Federated Services Company, effective April 7,
2000.

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $0 in brokerage commissions from Flag Investors US Money Market
Portfolio as a result of executing agency transactions in portfolio securities.

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.

24
<PAGE>

Flag Investors US Money Market Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors US Money Markety Portfolio (US Dollar) shareholders voted
on and approved the following proposals at the annual meeting of shareholders on
March 28, 2000. The description of each proposal and number of shares voted are
as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
----------- ------------
Mr. Richard R. Burt 207,162,152 11,686,565
Mr. Richard T. Hale 207,162,152 11,686,565
Mr. Joseph R. Hardiman 207,162,152 11,686,565
Mr. Louis E. Levy 207,162,152 11,686,565
Mr. Eugene J. McDonald 207,162,152 11,686,565
Ms. Rebecca W. Rimel 214,537,344 4,311,373
Mr. Truman T. Semans 207,162,152 11,686,565
Mr. Robert H. Wadsworth 207,162,152 11,686,565

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
205,914,810 12,277,334 656,573

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Asset Management, Inc.

For Against Abstain
--- ------- -------
181,740,326 36,447,759 660,632

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
181,740,326 36,447,759 660,632

4.A.(i). To approve a new investment sub-advisory agreement between Bankers
Trust Company and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
181,592,575 23,539,728 13,716,414

4.A.(ii). To approve a new investment sub-advisory agreement between Bankers
Trust Company and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
181,592,575 23,391,977 13,864,165

25
<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.

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

[FLAG INVESTORS LOGO]

Balanced

Value Builder Fund

Growth

Equity Partners Fund
Emerging Growth Fund

Specialty

Communications Fund
Real Estate Securities Fund

International

International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy

Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income

Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income

Managed Municipal Fund Shares

Money Market

Cash Reserve Prime Shares

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

ICC Distributors, Inc.

USMMSA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

Top 50 Europe

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 31.19% for the six months
ended February 29, 2000, outperforming the MSCI Europe Index return of 13.98%
for the same time period.

. While volatility remained high in the European equity markets due largely to
fears of rising inflation and interest rates in the U.S., many companies
benefited from rising merger and acquisition activity and better than expected
earnings. Overall, growth-oriented telecommunications and technology companies
produced the strongest performance.

. The Fund's strong outperformance was primarily due to its overweighting in the
technology and telecommunications sectors 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 50 stocks.

. We expect European markets to continue to perform well based on robust growth
of the technology industry, improving global economic growth, the continuing
ripple effect of Economic Monetary Union, strong ongoing merger and
acquisition activity, and favorable earnings growth prospects for many
European companies across the sector spectrum.
<PAGE>

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

Flag Investors Top 50 Europe -- Class A

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 10/2/97 year 10/2/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 Europe - Class A Shares/1/ 31.19% 34.82% 40.64% 27.40% 12.52%
- ---------------------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 213.98% 17.29% 54.24% 17.29% 20.46%
- ---------------------------------------------------------------------------------------------------------------------
Lipper European Regions Fund Average/3/ 32.87% 35.32% 63.24% 35.32% 22.61%
- ---------------------------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.
/2/ The MSCI Europe Index is a broad-based market index of European equity
securities. This index is unmanaged, and investments cannot be made in an
index.
/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 respective
categories indicated. These figures do not reflect sales charges.

Flag Investors Top 50 Europe -- Class B

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 3/30/98 year 3/30/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 Europe - Class B Shares/1/ 30.70% 33.85% 24.32% 27.16% 9.65%
- ---------------------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 13.98% 17.29% 21.67% 17.29% 10.81%
- ---------------------------------------------------------------------------------------------------------------------
Lipper European Regions Fund Average/3/ 32.87% 35.32% 34.74% 35.32% 16.01%
- ---------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MSCI Europe Index is a broad-based market index of European equity
securities. This index is unmanaged, and investments cannot be made in an
index.
/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 respective
categories indicated. These figures do not reflect sales charges.

1
<PAGE>

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

Flag Investors Top 50 Europe -- Class C

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 9/2/98 year 9/2/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 Europe - Class C Shares/1/ 30.73% 33.83% 35.44% 32.50% 22.53%
- ---------------------------------------------------------------------------------------------------------------------
MSCI Europe Index/2/ 13.98% 17.29% 29.65% 17.29% 18.97%
- ---------------------------------------------------------------------------------------------------------------------
Lipper European Regions Fund Average/3/ 32.87% 35.32% 44.55% 35.32% 27.28%
- ---------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 1.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MSCI Europe Index is a broad-based market index of European equity
securities. This index is unmanaged, and investments cannot be made in an
index.
/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 respective
categories indicated. These figures do not reflect sales charges.

2
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
Flag Investors Top 50 Europe (the "Fund") (formerly Deutsche Top 50 Europe),
providing a more detailed review of the markets, the portfolio in which the Fund
invests (the "Portfolio"), and our outlook--all in an easier-to-read format. We
continue to include a complete financial summary of the Fund's operations and
listing of the portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 31.19% for the six
months ended February 29, 2000, as compared to 13.98% for the MSCI Europe Index.
The Fund's Class B and C shares produced semi-annual returns of 30.70% and
30.73%, respectively.

This strong outperformance was primarily due to the Fund's overweighting in
the technology and telecommunications sectors and to strong stock selection
across the market sectors. 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 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 top 50 European
companies, portfolio activity during the semi-annual period was somewhat higher
than usual.

For example, we sold Germany's Gehe and France's Groupe Danone due to their
limited upside potential and also Norway's Getinge as it has not been able to
reach their targets. We bought media company Kinowelt Medien, which is the
largest independent owner of movie rights in Germany, distributing via cinemas,
television, and video stores. Other new entrants to the portfolio were the
telecommunications company Sonera, which is the market leader in mobile phones
in Finland, and British Telecom, the number two mobile-operator in the United
Kingdom. We believe each of these companies has strong upside potential and
managements with clear-cut strategies for growth.

We also purchased German cyclical company Thyssen Krupp during the semi-annual
period. We believe the separate listing of its steel activities, its
concentration on core areas with growth and earnings potential, and its sell-off
of non-core business units should facilitate attractive share price performance
for this company.

3
<PAGE>

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

Other significant changes in the Fund took place in the financial services
sector. INA, the number two company in the Italian life insurance industry,
performed well due to solid earnings and a takeover bid by Generali. In fact,
in December 1999, we sold INA, taking profits after its acquisition. SAP and
Altana were also in demand after broker upgrades, and SAP in particular
appreciated after the announcement of a joint venture with Hewlett Packard in
internet strategies. We added Dresdner Bank and Allianz, as the planned tax
exemption for gains achieved through selling of participations, further
restructures, and their moderate valuations compared to others in the sector
should lead to upside potential for these new portfolio holdings.

One of the Fund's strongest performers was Finland's Nokia, which improved its
already globally-leading market share within the mobile phone sector and
reported stronger than expected earnings results. Other strong performers for
the Fund included Ericsson, Equant, AXA, Mannesmann, Cap Gemini, Qiagen,
Vivendi, and Telefonica. Weaker performers in the portfolio were SGL Carbon,
Unilever, Reuters, Aegon, British Telecom, Rentokil, and BASF. SGL Carbon and
Reuters, however, made strong comebacks toward the end of the semi-annual
period, both among the Fund's five top performers for the month of February, and
the long-term outlook for revenue and earnings growth among the others remains
intact.

Investment Environment

As a whole, Europe rose 13.98% in U.S. dollar terms during the semi-annual
period. The markets were affected by slowly improving domestic growth rates,
increased competition resulting from the January 1, 1999 introduction of the
common Euro currency, and concerns about interest rate hikes both from the U.S.
Federal Reserve Board and the European Central Bank. Even so, the European
markets rallied back from a virtually flat previous six months to double-digits
returns that outperformed the U.S. equity indices for the first half of this
fiscal year.

UK companies were weak after an unexpected interest rate hike coupled with a
strong currency and several disappointing earnings reports. After the Bank of
England raised rates by 0.25% in September, the markets looked toward a possible
interest rate rise by the European Central Bank during the fourth calendar
quarter. Additionally, when the U.S. Federal Reserve Board raised rates on
November 16 and February 2, investors were concerned that such increases would
contribute to a slowdown in European economic growth amidst an already soft

4
<PAGE>

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

environment. Global inflation concerns caused further uneasiness and market
volatility, as each new piece of economic data changed inflation sentiment.

On the other hand, many European companies continued to announce better than
expected earnings. For instance, Finland was a top performing market through
much of the semi-annual period, rising on better than expected earnings from
Nokia, the global telecommunications company whose shares account for more than
70% of the Finnish market. Ericsson of Sweden, the worldwide leader in cellular
infrastructure, fueled strong Scandinavian returns in December.

European markets also responded positively to rising merger activity, as
companies sought economies of scale in an enlarged "domestic" market. Ongoing
merger and acquisition activity also helped to shore up European markets by
limiting redundancy and raising long-term profit expectations within many
industries, perhaps most especially the telecommunications industry. For
example, during the fourth calendar quarter, merger and acquisition speculation
in the telecommunications sector pushed prices higher across Europe. Vodafone's
takeover bid for Mannesmann (both included in the Top 50 Europe portfolio)
particularly fueled investors' interest in telecommunications stocks. Besides
INA's takeover mentioned earlier, other activity during the semi-annual period
included Total-Fina's acquisition of Elf Aquitaine (also both included in the
Top 50 Europe portfolio). Amongst other portfolio holdings, takeover rumors led
to Equant's and Telefonica's strong performance; Securitas performed well after
announcing an acquisition in Spain; and Cap Gemini performed well after merger
talks with Ernst & Young in the U.S.

Overall, growth-oriented telecommunication and technology companies produced
the strongest performance. Investors focused especially during the semi-annual
period on strong Christmas sales and anticipated increased order income in the
year 2000. Biotechnology and media stocks also did well as a whole.

Looking Ahead

Going forward, several factors lead us to a generally optimistic outlook for
the European markets. The recent strong growth of the technology industry
continues to impact equity investments worldwide. Furthermore, economic growth
continues to improve globally, a positive indicator, in our view, that corporate
profits will do likewise.

The impact of EMU will continue to ripple through the various nations of
Europe's economies. Mergers and acquisitions are likely to continue and per-

5
<PAGE>

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

haps even accelerate across most sectors, providing upward price momentum.
Earnings growth prospects are favorable for many European companies across the
sector spectrum. In our opinion, the Euro may recover some of the ground lost
against the dollar during the first tumultuous year or so since its
introduction. Appreciation of the Euro is particularly likely during the months
ahead if European investors take home some of the profits made in 1999 in the
U.S. equity market and if the U.S. economy begins to lose some of its luster.

Given this outlook, we believe the Fund's focused investment strategy
positions the portfolio well to continue to meet 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
- -----------------
Klaus Martini
Co-Portfolio Manager
February 29, 2000

6
<PAGE>

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

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

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

Assets:
Investment in Flag Investors Top 50 Europe Portfolio, at value... $15,067,142
Receivable from Manager for expense reimbursement................ 22,684
Receivable for capital shares sold............................... 10,323
Receivable from Flag Investors Top 50 Europe Portfolio
for withdrawals................................................. 2,241
Foreign tax reclaim receivable................................... 23,209
Deferred organization costs...................................... 6,509
-----------
Total assets................................................... 15,132,108
-----------
Liabilities:
Payable for capital shares redeemed.............................. 12,564
Transfer Agent fees payable...................................... 7,445
Distribution fees payable........................................ 11,455
Custody and portfolio accounting fees payable.................... 1,839
Administration fees payable...................................... 5,992
Other accrued expenses........................................... 26,800
-----------
Total liabilities.............................................. 66,095
-----------
Net assets..................................................... $15,066,013
===========
Net Assets Consist of:
Capital stock, $0.001 par value(a)............................... $ 919
Paid-in capital.................................................. 11,473,419
Accumulated net investment loss.................................. (85,124)
Undistributed net realized gain on investments,
futures contracts and foreign currency transactions............. 1,015,124
Net unrealized appreciation of investments, futures
contracts and foreign currency transactions..................... 2,661,675
-----------
Net assets..................................................... $15,066,013
===========

Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Net assets -- Class A............................................ $ 5,869,125
===========
Shares outstanding -- Class A.................................... 333,898
===========
Net asset value and redemption price per share -- Class A........ $17.58
======
Offering price per share -- Class A.............................. $18.60
======

Net assets -- Class B............................................ $ 7,961,881
===========
Shares outstanding -- Class B.................................... 512,440
===========
Net asset value and offering price per share -- Class B.......... $15.54
======
Minimum redemption price per share -- Class B.................... $14.76
======

Net assets -- Class C............................................ $ 1,235,007
===========
Shares outstanding -- Class C.................................... 72,966
===========
Net asset value and offering price per share -- Class C.......... $16.93
======
Minimum redemption price per share -- Class C.................... $16.76
======

- ----------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements

7
<PAGE>

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

Statement of Operations
(Unaudited)

For the Six
Months Ended
February 29,
- --------------------------------------------------------------------------------
2000
Investment Income:
Investment Income and Expenses allocated
from Flag Investors Top 50 Europe Portfolio:

Dividend income.............................................. $ 47,805
Less: Foreign withholding taxes.............................. (10,864)
----------
Net dividend income........................................ 36,941
Interest income.............................................. 20,590
Expenses..................................................... (104,283)
----------
Net investment loss allocated from the Flag Investors
Top 50 Europe Portfolio................................... (46,752)
----------
Expenses:
Transfer Agent fees.......................................... 38,786
Administration fees.......................................... 37,295
Portfolio accounting fees.................................... 11,339
Registration fees............................................ 10,429
Professional fees............................................ 10,421
Reports to Shareholders...................................... 7,458
Trustees' fees and expenses.................................. 2,239
Amortization of organization costs........................... 1,256
Distribution fees -- Class B................................. 25,291
Distribution fees -- Class C................................. 3,973
Service fees -- Class A...................................... 5,895
Service fees -- Class B...................................... 8,431
Service fees -- Class C...................................... 1,324
Other expenses............................................... 3,646
----------
Total expenses............................................. 167,783
Less: Expense reimbursement of Fund expenses................. (142,639)
----------
Net expenses............................................... 25,144
----------
Net investment loss....................................... (71,896)
----------
Net Realized and Unrealized Gain (Loss) on Investments, Futures
Contracts and Foreign Currency allocated from Flag Investors
Top 50 Europe Portfolio:
Net realized gain (loss) on:
Investments................................................. 1,277,360
Futures contracts........................................... 194,743
Foreign currency transactions............................... (20,039)
Net change in unrealized appreciation/(depreciation) on:
Investments................................................. 2,283,033
Foreign currency translations............................... (673)
----------
Net Realized and Unrealized Gain on Investments, Futures
Contracts and Foreign Currency allocated from Flag Investors
Top 50 Europe Portfolio...................................... 3,734,424
----------
Net Increase in Net Assets Resulting From Operations.......... $3,662,528
==========

See Notes to Financial Statements

8
<PAGE>

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

Statements of Changes in Net Assets

Net change in unrealized appreciation
on investments, futures contracts and foreign
currency translations allocated from
Flag Investors Top 50 Europe Portfolio................ 2,282,360 946,392
------------ ------------
Net increase in net assets resulting from operations... 3,662,528 363,524
------------ ------------
Capital Share Transactions:
Net proceeds from shares sold.......................... 19,884,779 20,516,777
Net cost of shares redeemed............................ (19,639,898) (14,050,235)
------------ ------------
Net increase in net assets resulting from capital
share transactions.................................... 244,881 6,466,542
------------ ------------
Total increase in net assets........................ 3,907,409 6,830,066
Net Assets:
Beginning of period.................................... 11,158,604 4,328,538
------------ ------------
End of period.......................................... $ 15,066,013 $ 11,158,604
============ ============
Includes undistributed (accumulated) net investment
loss of:............................................... $ (85,124) $ (13,228)
----------- ------------
</TABLE>

See Notes to Financial Statements

9
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -----------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period................. $13.40 $13.03 $12.50
------ ------ ------
Investment operations:
Net investment income (loss).......................... (0.06) 0.04 0.02
Net realized and unrealized gain on
investments, futures contracts and
foreign currency allocated from
Flag Investors Top 50 Europe Portfolio............... 4.24 0.33 0.51
------ ------ ------
Increase from investment operations................... 4.18 0.37 0.53
------ ------ ------
Net asset value at end of period....................... $17.58 $13.40 $13.03
====== ====== ======
Total Return (based on net asset value)/2/............. 31.19%/4/ 2.84% 4.24%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)..................... $5,869 $3,796 $1,208
Ratios to average net assets:
Expenses/3/.......................................... 1.60%/5/ 1.60% 1.60%/5/
Net investment income (loss)/3/...................... (0.72)%/5/ 0.44% 0.50%/5/
Portfolio Turnover of Flag Investors
Top 50 Europe Portfolio.............................. 32%/4/ 61% 27%/4/
</TABLE>

- ----------
/1/ Commencement of operations: 10/2/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 Europe
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 3.86%/5/ 4.73% 16.53%/5/
Net investment income to average net assets (2.98)%/5/ (2.69)% (14.43)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

10
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -----------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period.................. $11.89 $11.65 $12.50
------ ------ ------
Investment operations:
Net investment loss.................................... (0.10) (0.04) (0.01)
Net realized and unrealized gain (loss)
on investments, futures contracts
and foreign currency allocated
from Flag Investors Top 50
Europe Portfolio...................................... 3.75 0.28 (0.84)
------ ------ ------
Increase (decrease) from investment
operations............................................ 3.65 0.24 (0.85)
------ ------ ------
Net asset value at end of period........................ $15.54 $11.89 $11.65
====== ====== ======
Total Return (based on net asset value)/2/.............. 30.70%/4/ 2.06% (6.80)%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)...................... $7,962 $6,395 $3,120
Ratios to average net assets:
Expenses/3/.......................................... 2.35%/5/ 2.35% 2.35%/5/
Net investment loss/3/............................... (1.41)%/5/ (0.46)% (0.46)%/5/
Portfolio Turnover of Flag Investors
Top 50 Europe Portfolio............................... 32%/4/ 61% 27%/4/
</TABLE>

- ------------
/1/ Commencement of operations: 3/30/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 Europe
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 4.63%/5/ 5.39% 17.28%/5/
Net investment income to average net assets (3.69)%/5/ (3.50)% (15.39)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

11
<PAGE>

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

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

For the Six For the Period
Months Ended Ended/1/
February 29, August 31,
- -------------------------------------------------------------------------------
2000 1999
(Unaudited)

Net asset value at beginning of period............... $12.95 $12.50
------ ------
Investment operations:
Net investment loss................................. (0.10) (0.03)
Net realized and unrealized gain on investments,
futures contracts and foreign currency allocated
from Flag Investors Top 50 Europe Portfolio........ 4.08 0.48
------ ------
Increase from investment operations................. 3.98 0.45
------ ------
Net asset value at end of period..................... $16.93 $12.95
====== ======
Total Return (based on net asset value)/2,4/......... 30.73% 3.60%
Ratios and Supplemental Data:
Net assets, end of period (000's)................... $1,235 $ 967
Ratios to average net assets:
Expenses/3,5/...................................... 2.35% 2.35%
Net investment loss/3,5/........................... (1.41)% (0.31)%
Portfolio Turnover of Flag Investors
Top 50 Europe Portfolio............................ 32%/4/ 61%

- ------------
/1/ Commencement of operations: 9/2/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 Europe
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
Expenses to average net assets 4.61% 5.97%
Net investment income to average net assets (3.67)% (3.93)%
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

12
<PAGE>

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

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Funds, Inc. (the "Company") (re-named from Deutsche Funds, Inc.
effective January 18, 2000) 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 seven
separate investment series (the "Funds"). The accompanying financial statements
and notes relate to Flag Investors Top 50 Europe (the "Fund").

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Flag Investors Top 50 Europe Portfolio (US Dollar)
(formerly, the Deutsche Top 50 Europe Portfolio, the "Portfolio"), which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, the Deutsche Portfolios
the "Portfolios Trust"), a New York business trust, registered under the 1940
Act as an open-end investment management company comprised of seven portfolios.
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. The Funds commenced operations during October 1997.

Valuation

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. As of
February 29, 2000, the Fund had a beneficial interest of 35.4% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio was held by a similar fund of Deutsche Global Funds Ltd., an
offshore company and an affiliate of the Company.

13
<PAGE>

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

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Income, Expenses and Realized and Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio 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 generally accepted

14
<PAGE>

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

NOTE 1 -- concluded

accounting principles. 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company has retained
the services of Federated Services Company ("Federated") as administrator. Under
the Administration Agreement, Federated assisted in the operations of the Fund,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated received a fee from each Fund, which was computed
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 for the Fund's then current fiscal year. Federated, in its
capacity as operations agent for the Portfolio Trust and Administrator of the
Fund, received a minimum fee of $37,500 for the first six months of the Fund's
fiscal year ending August 31, 2000. At a meeting held on January 31, 2000, the
Board of Directors of the Company adopted a resolution to approve an
administration agreement between Investment Company Capital Corp. ("ICCC") and
the Company, replacing Federated Services Company, effective April 7, 2000.

15
<PAGE>

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

Notes to Financial Statements (concluded)

NOTE 2 -- concluded

respectively, to finance any activity that is principally intended to result in
the sale of each such Class of shares. Each Fund will pay to ICC Distributor,
for the provision of certain services to the holders of Class B Shares and Class
C Shares, a Service fee computed at an annual rate of 0.25% of the average daily
net assets of each such Class of shares. Prior to December 20, 1999 Edgewood
Services Inc. ("Edgewood") served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Fund. IBT(Boston) acts as the sub-administrator for the Fund and as the
custodian of the Fund's assets. At a meeting held on January 31, 2000, the Board
of Directors of the Company adopted a resolution to approve a transfer agent
agreement between ICCCapital, Inc., an affiliate of Deutsche Bank AG, and the
Company, replacing Federated Shareholder Services Company, effective April 7,
2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60%, 2.35%, and 2.35% of the average daily net assets of Class A Shares,
Class B Shares and Class C Shares, respectively, through the year ending
December 31, 2000.

For the six months ended February 29, 2000, DFM voluntarily reimbursed
$142,639 to the Fund pursuant to this undertaking.

NOTE 3 -- Concentration of Ownership

16
<PAGE>

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

NOTE 4 -- 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:

<TABLE>
<CAPTION>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
-------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold.............................. 1,229,981 $ 18,541,205 1,093,777 $ 14,427,570
Shares redeemed.......................... (1,179,465) (17,974,672) (903,100) (12,054,080)
---------- ------------ --------- ------------
Net increase............................. 50,516 $ 566,533 190,677 $ 2,373,490
---------- ------------ --------- ------------
Capital Shares -- Class B:
Shares sold.............................. 86,715 $ 1,206,238 379,025 $ 4,442,161
Shares redeemed.......................... (112,133) (1,507,985) (109,012) (1,292,761)
---------- ------------ --------- ------------
Net increase (decrease).................. (25,418) $ (301,747) 270,013 $ 3,149,400
---------- ------------ --------- ------------
<CAPTION>
Period Ended
August 31, 1999/1/
-------------------------
Shares Amount
---------- ------------
<S> <C> <C> <C> <C>
Capital Shares -- Class C:
Shares sold.............................. 9,734 $ 137,336 128,947 $ 1,647,046
Shares redeemed.......................... (11,433) (157,241) (54,282) (703,394)
---------- ------------ --------- ------------
Net increase (decrease).................. (1,699) $ (19,905) 74,665 $ 943,652
---------- ------------ --------- ------------
</TABLE>

- -----------
/1/ Inception date: 9/2/98.

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Flag Investors Top 50 Europe
Portfolio included elsewhere in this report for discussion of off-balance sheet
risk and concentration of credit risk.

17
<PAGE>

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

Proxy Results (Unaudited)

The Flag Investors Top 50 Europe shareholders voted on and approved the
following proposals at the annual meeting of shareholders on March 28, 2000.
The description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 478,149 3,035
Mr. Richard T. Hale 478,149 3,035
Mr. Joseph R. Hardiman 478,149 3,035
Mr. Louis E. Levy 478,149 3,035
Mr. Eugene J. McDonald 478,149 3,035
Ms. Rebecca W. Rimel 478,149 3,035
Mr. Truman T. Semans 478,149 3,035
Mr. Robert H. Wadsworth 478,149 3,035

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
480,943 0 241

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
480,297 567 320

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
480,297 567 320

4.A.(i) To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
472,969 567 7,648

4.A.(ii) To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
472,969 567 7,648

18
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Portfolio of Investments February 29, 2000
(Unaudited)

Shares Security Market Value
- --------------------------------------------------------------------------------
COMMON STOCK -- 87.9%

Austria -- 1.2%
112,200 Bank Austria AG ............................ $ 531,064
-----------
Denmark -- 0.4%
3,740 Coloplast A/S -- B ......................... 150,308
-----------
Finland -- 5.7%
6,700 Nokia Oyj .................................. 1,335,654
13,900 Sonera Oyj ................................. 1,072,250
-----------
2,407,904
-----------
France -- 16.3%
26,931 Aventis SA ................................. 1,374,603
5,500 AXA ........................................ 691,229
4,000 Cap Gemini SA .............................. 1,101,729
3,600 Suez Lyonnaise des Eaux .................... 592,854
10,150 Total Fina SA -- B ......................... 1,344,057
15,700 Vivendi .................................... 1,844,626
-----------
6,949,098
-----------
Germany -- 20.9%
1,650 Allianz AG ................................. 575,548
8,400 Altana AG .................................. 525,825
17,000 BASF AG .................................... 775,207
16,200 Buderus AG/1/ .............................. 249,623
4,900 Daimler-Chrysler AG ........................ 332,214
6,600 Deutsche Pfandbrief-und Hypothekenbank AG .. 527,559
17,000 Dresdner Bank AG ........................... 815,318
2,036 Duerr AG ................................... 40,196
11,500 Fresenius Medical Care AG .................. 808,480
6,300 Kinowelt Medien AG/1/ ...................... 336,730
1,677 Rhoen-Klinikum AG .......................... 71,869
2,274 SAP AG ..................................... 1,423,484
6,800 Schering AG ................................ 817,938
9,000 SGL Carbon AG/1/ ........................... 867,612
11,200 Thyssen Krupp AG/1/ ........................ 270,193
10,000 Veba AG .................................... 446,855
-----------
8,884,651
-----------

See Notes to Financial Statements.

19
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Portfolio of Investments (Continued) February 29, 2000
(Unaudited)

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

Netherlands -- 9.0%
6,400 Aegon NV ................................... $ 441,308
28,500 Elsevier ................................... 301,916
7,200 Equant NV/1/ ............................... 814,047
11,000 ING Groep NV ............................... 556,373
11,200 Koninklijke Ahold NV ....................... 260,162
7,500 Qiagen NV/1/ ............................... 1,292,895
4,000 Unilever NV ................................ 182,016
-----------
3,848,717
-----------
Norway -- 1.1%
24,800 Tomra Systems ASA .......................... 470,156
-----------
Spain -- 4.1%
60,500 Telefonica SA/1/ ........................... 1,739,196
-----------
Sweden -- 9.4%
42,500 Securitas AB -- B Shares ................... 1,137,051
30,000 Telefonaktiebolaget LM Ericsson ............ 2,871,649
-----------
4,008,700
-----------
Switzerland -- 4.0%
2,300 Credit Suisse Group ........................ 365,790
360 Novartis AG ................................ 458,033
37 Roche Holding AG ........................... 398,502
1,980 UBS AG ..................................... 480,945
-----------
1,703,270
-----------
United Kingdom -- 15.8%
24,000 British Telecom Plc ........................ 419,050
48,000 Imperial Chemical Industries Plc ........... 368,658
36,000 Lloyds TSB Group Plc ....................... 331,338
108,900 Rentokil Initial Plc ....................... 355,016
24,000 Reuters Group Plc .......................... 518,698

See Notes to Financial Statements.

20
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

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

United Kingdom -- (Continued)
138,000 Siebe Plc .................................. $ 632,885
730,001 Vodafone Group Plc ......................... 4,094,086
-----------
6,719,731
-----------
Total Common Stock (Cost -- $30,233,703) ... 37,412,795
-----------

PREFERRED STOCK -- 5.9%

Germany -- 5.9%.
4,500 Fresenius AG ............................... 814,740
8,361 Rhoen-Klinikum AG .......................... 386,499
1,600 SAP AG ..................................... 1,336,713
-----------
Total Preferred Stock (Cost -- $1,650,686) ................... 2,537,952
-----------

Total Investments (Cost -- $31,884,389) ...... 93.8% 39,950,747
Other Assets in Excess of Liabilities ........ 6.2% 2,621,428
----- -----------
Net Assets ................................... 100.0% $42,572,175
===== ===========

- -----------
/1/ Non-income producing security.

See Notes to Financial Statements.

21
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Percentage of
Industry Sector (Unaudited) Net Assets
- --------------------------------------------------------------------------------

Telephone Systems.............................................. 17.2%
Computer Software & Processing................................. 11.0%
Communications................................................. 9.9%
Chemicals...................................................... 7.9%
Health Care Providers.......................................... 7.9%
Commercial Services............................................ 7.8%
Banking........................................................ 7.2%
Pharmaceuticals................................................ 5.2%
Financial Services............................................. 4.1%
Oil & Gas...................................................... 3.2%
Industrial - Diversified....................................... 3.1%
Insurance...................................................... 2.4%
Electrical Equipment........................................... 1.5%
Electric Utilities............................................. 1.0%
Entertainment & Leisure........................................ 0.8%
Automotive..................................................... 0.8%
Media - Broadcasting & Publishing.............................. 0.7%
Food Retailers................................................. 0.6%
Building Materials............................................. 0.6%
Beverages, Food & Tobacco...................................... 0.4%
Medical Supplies............................................... 0.4%
Heavy Machinery................................................ 0.1%
Other assets in excess of liabilities.......................... 6.2%
-----
100.0%
=====

22
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29,2000
(Unaudited)

- --------------------------------------------------------------------------------
Assets:
Investments, at value............................................. $39,950,747
Cash.............................................................. 2,591,253
Dividends receivable.............................................. 15,621
Interest receivable............................................... 9,339
Receivable for Investors' Beneficial Interest for contributions... 56,327
Deferred organization costs....................................... 34,090
-----------
Total assets..................................................... 42,657,377
-----------
Liabilities:
Investment management fees payable................................ 27,424
Administration fees payable....................................... 4,705
Organization costs payable........................................ 35,138
Other accrued expenses............................................ 17,935
-----------
Total liabilities................................................ 85,202
-----------
Net assets....................................................... $42,572,175
===========
Net Assets:
Applicable to Investors' Beneficial Interests..................... $42,572,175
===========
Cost of investments............................................... $31,884,389
===========

See Notes to Financial Statements.

23
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statement of Operations
(Unaudited)

For the Six
Months Ended
February 29,
- --------------------------------------------------------------------------------
2000
Investment Income:
Dividend income............................................. $ 140,147
Less: foreign withholding taxes............................. (31,825)
-----------
Net dividend income........................................ 108,322
Interest income............................................. 40,789
Less: interest expense...................................... (86)
-----------
Total income............................................... 149,025
-----------
Expenses:
Investment management fees.................................. 183,699
Custody and portfolio accounting fees....................... 39,934
Operations fees............................................. 29,835
Administration fees......................................... 24,656
Professional fees........................................... 13,206
Amortization of organization costs.......................... 6,574
Trustees' fees and expenses................................. 2,486
Other expenses.............................................. 6,623
-----------
Total expenses............................................. 307,013
-----------
Net investment loss........................................ (157,988)
-----------
Realized and Unrealized Gain (Loss) on Investments, Futures
Contracts and Foreign Currency:
Net realized gain (loss) on:
Investments................................................ 3,750,754
Futures contracts.......................................... 570,942
Foreign currency transactions.............................. (59,459)
Net change in unrealized appreciation on:
Investments................................................ 6,239,424
Foreign currency translations.............................. 35
-----------
Net Realized and Unrealized Gain on Investments, Futures
Contracts and Foreign Currency.............................. 10,501,696
-----------
Net Increase in Net Assets Resulting from Operations......... $10,343,708
===========

See Notes to Financial Statements.

24
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets

For the Six For the
Months Ended Year Ended
February 29, August 31,
- --------------------------------------------------------------------------------
2000 1999
(Unaudited)
Increase (Decrease) In Net Assets:
Operations:
Net investment loss............................... $ (157,988) $ (140,949)
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions...... 4,262,237 (1,887,399)
Net change in unrealized appreciation on
investments and foreign currency translations.... 6,239,459 2,828,599
------------ ------------
Net increase in net assets resulting
from operations.................................. 10,343,708 800,251
------------ ------------
Capital Transactions:
Proceeds from contributions....................... 27,678,449 31,411,385
Withdrawals....................................... (28,000,577) (18,442,917)
------------ ------------
Net increase (decrease) in net assets from
capital transactions............................. (322,128) 12,968,468
------------ ------------
Total increase in net assets..................... 10,021,580 13,768,719
Net Assets:
Beginning of period............................... 32,550,595 18,781,876
------------ ------------
End of period..................................... $ 42,572,175 $ 32,550,595
============ ============

See Notes to Financial Statements.

25
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Financial Highlights

- ------------
/1/ Commencement of operations: 10/2/97
/2/ Annualized
/3/ Amount rounds to less than 0.01%.
/4/ Not Annualized

See Notes to Financial Statements.

26
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Portfolios Trust ("Portfolio Trust") (re-named from Deutsche
Portfolios on January 18, 2000) 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 Europe
Portfolio (US Dollar) (the "Portfolio").

The investment manager (the "Manager") of the Portfolios 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 commenced
operations on October 14, 1997.

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors Top 50 Europe ....... 35.4%
Deutsche Top 50 Europe ............. 64.6%
-----
100.0%
=====

27
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Valuation

Investment Transactions

Investment transactions are recorded on 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 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

The Portfolio Trust 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

28
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- continued

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 Trust 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 U.S. 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 respective 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.

29
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- concluded

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 Portfolios.

NOTE 2 -- 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 each 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
adviser (the "Advisor") to the Portfolio. As compensation for the services
rendered by DFM under the Management Agreement with the Portfolio, DFM receives
a fee from the Portfolio at an annualized rate of 1.00% of the average daily net
assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's advisory fee was $183,699 for
services provided on behalf of the Portfolio.

30
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 2 -- concluded

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation for
its services, DWS receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolios Trust
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at the annual rate of
0.035% of the average daily net assets of the Portfolio for the Portfolio's
then-current fiscal year, subject to a minimum fee of $60,000 annually. At a
meeting held on January 31, 2000, the Board of Trustees of the Portfolios Trust
adopted a resolution to approve an administration agreement between Investment
Company Capital Corp. and the Portfolio Trust, replacing Federated Services
Company, effective April 7, 2000.

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 from, 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.

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $3,765 in brokerage commissions from Flag Investors Top 50 Europe
Portfolio as a result of executing agency transactions in portfolio securities.

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.

31
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government........ $ --
Non-U.S. Government.... 11,267,034
-----------
Total.................. $11,267,034
===========

Sales
U.S. Government........ $ --
Non-U.S. Government.... 13,515,487
-----------
Total.................. $13,515,487
===========

At February 29, 2000, the cost of investments, unrealized appreciation, and
unrealized depreciation of investments for U.S. federal income tax purposes was
$31,884,389, $10,036,671 and $1,970,313 respectively.

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

32
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 5 -- Line of Credit Agreement

The Portfolios 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 33% of the total assets of the Portfolio
Trust. 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 six months ended February 29,
2000, the Portfolio periodically utilized the line of credit and incurred
interest expense as disclosed in the Statements of Operations. The weighted
average interest rate paid by the Portfolio Trust was 5.90% and the maximum and
average amount of the loans outstanding during the borrowing period was
$13,985,293 and $1,484,271, respectively. At February 29, 2000, the Portfolio
had no debt outstanding under the line of credit agreement.

33
<PAGE>

Flag Investors Top 50 Europe Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors Top 50 Europe Portfolio (US Dollar) shareholders voted on
and approved the following proposals at the annual meeting of shareholders on
March 28, 2000. The description of each proposal and number of shares voted are
as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 1,247,619 7,913
Mr. Richard T. Hale 1,247,619 7,913
Mr. Joseph R. Hardiman 1,247,619 7,913
Mr. Louis E. Levy 1,247,619 7,913
Mr. Eugene J. McDonald 1,247,619 7,913
Ms. Rebecca W. Rimel 1,247,619 7,913
Mr. Truman T. Semans 1,247,619 7,913
Mr. Robert H. Wadsworth 1,247,619 7,913

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
1,254,903 0 629

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,253,218 1,479 835

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
1,253,218 1,479 835

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,234,097 1,479 19,956

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
1,234,097 1,479 19,956

34
<PAGE>

This page intentionally left blank.

<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.

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

[FLAG INVESTORS LOGO]

Balanced

Value Builder Fund

Growth

Equity Partners Fund
Emerging Growth Fund

Specialty

Communications Fund
Real Estate Securities Fund

International

International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy

Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income

Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income

Managed Municipal Fund Shares

Money Market

Cash Reserve Prime Shares

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

ICC Distributors, Inc.

TOP50ESA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

Top 50 US

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 17.27% for the six months
ended February 29, 2000, outperforming the S&P 500 Index return of 4.11% for
the same time period.

. Overall, the technology stocks of the S&P 500 were the most ebullient
performers during the Fund's semi-annual period, with a gain of nearly 40%.
All other sectors, with the exception of a small gain in communication
services, had negative returns during this time span.

. The Fund's strong outperformance was primarily due to its concentration in the
technology, health care, consumer cyclical and financial services sectors and
to strong stock selection within those sectors, as we seek only the most
competitive, high quality companies and maintain a focused portfolio of 50
stocks.

. We expect that technology, communications, retail and media companies will be
beneficiaries of the ongoing infrastructure build-out of the Internet and of
increasing bandwidth capabilities.
<PAGE>

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

Flag Investors Top 50 U.S. -- Class A

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 10/2/97 year 10/2/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 U.S. - Class A Shares/1/ 17.27% 24.88% 67.84% 18.01% 21.08%
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index/2/ 4.11% 11.73% 49.18% 11.73% 18.02%
- ----------------------------------------------------------------------------------------------------------------------------
Lipper Large Cap Growth Average/3/ 29.33% 38.72% 93.61% 38.72% 30.65%
- ----------------------------------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.

/2/ The S&P 500 is a broad-based market index of U.S. equity securities. This
index is unmanaged, and investments cannot be made in an index.

/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 respective
categories indicated. These figures do not reflect sales charges.

Flag Investors Top 50 U.S. -- Class B
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 3/18/98 year 3/18/98
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 U.S. - Class B Shares/1/ 16.77% 23.92% 44.24% 17.72% 18.13%
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index/2/ 4.11% 11.73% 27.26% 11.73% 13.44%
- ----------------------------------------------------------------------------------------------------------------------------
Lipper Large Cap Growth Average/3/ 29.33% 38.72% 70.22% 38.72% 31.21%
- ----------------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.

/2/ The S&P 500 is a broad-based market index of U.S. equity securities. This
index is unmanaged, and investments cannot be made in an index.

1
<PAGE>

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

Flag Investors Top 50 U.S. -- Class C
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 9/2/98 year 9/2/98
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 U.S. - Class C Shares/1/ 16.87% 23.25% 57.36% 22.01% 35.48%
S&P 500 Index/2/ 4.11% 11.73% 45.53% 11.73% 28.54%
Lipper Large Cap Growth Average/3/ 29.33% 38.72% 93.70% 38.72% 54.85%
- ----------------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 1.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.

/2/ The S&P 500 is is a broad-based market index of U.S. equity securities.
This index is unmanaged, and investments cannot be made in an index.

2
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
Flag Investors Top 50 U.S. (the "Fund") (formerly Deutsche Top 50 U.S.),
providing a more detailed review of the markets, the portfolio in which the Fund
invests (the "Portfolio"), and our outlook--all in an easier-to-read format. We
continue to include a complete financial summary of the Fund's operations and
listing of the Portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 17.27% for the six
months ended February 29, 2000, as compared to 4.11% for the S&P 500 Index. The
Fund's Class B and C shares produced semi-annual returns of 16.77% and 16.87%,
respectively.

This strong outperformance was primarily due to the Fund's concentration in
the technology, health care, consumer cyclical and financial services sectors
and to strong stock selection within those sectors. We continued to seek U.S.
companies that achieve dominant market share through constant innovation and
aggressive pricing, that rank at the top of their industries, and that have the
strategic vision and commitment to maintain this market share in the future.
Based on careful monitoring of the ever-shifting group of top 50 U.S. companies,
portfolio activity during the semi-annual period was somewhat higher than usual.

For example, we eliminated four names in the technology sector and replaced
them with JDS Uniphase, Nortel Networks, Yahoo!, and Qualcomm, all leaders in
their particular fields. These changes contributed to the Fund's increased
overall exposure to the technology sector, which as of February 29, 2000, stood
at nearly 38% of total net assets.

Other significant changes in the Fund took place in the consumer staples
sector, where exposure was reduced by selling Avon, Coca Cola and Philip Morris
over concerns of slowing sales momentum. We rolled proceeds from these sales
into more domestically-focused firms, including CVS, one of the leading drug
retailers, and Comcast Corp., a major cable TV operator. In the health care
sector, we removed Abbott Labs and Boston Scientific from the portfolio, as both
firms were losing market share in their respective markets, and we bought Amgen,
the leading biotechnology company in the U.S. Amgen is

3
<PAGE>

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

slated to bring several new products to market in the near future and has a full
pipeline over the longer term.

Investment Environment

Overall, the S&P 500's technology constituents were the most ebullient
performers during the semi-annual period, gaining nearly 40%. All other
sectors, with the exception of a small gain in communication services, had
negative returns during this time span. Volatility within the U.S. 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 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 all segments of the
equity market except for technology and utility stocks. 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 by
0.25% each on November 16 and February 2. The Fed maintained its tightening
bias. Large cap stock performance had soared at the end of 1999, but the
Russell 2000 Index, which measures small cap equities, outperformed the S&P 500
Index on an annual basis for the first time in five years, as investors sought
the lower valuations of small cap growth stocks. This preference shift toward
smaller and mid capitalization names continued into the early months of the year
2000.

Looking Ahead

Going forward, we expect operating earnings growth for the year 2000 to remain
in double-digit territory, but to moderate slightly from 1999 levels. Now that
any Y2K concerns are behind us, we believe companies will focus on growth
opportunities, especially in view of the exploding competitive arenas of

4
<PAGE>

- --------------------------------------------------------------------------------
the Internet and e-commerce. We expect, as do many, that both technology and
communications-related companies will be the main beneficiaries of the ongoing
infrastructure build-out and of increasing bandwidth that enables speedier
service. Other industries that will derive new revenue streams from the
Internet, in our view, are retail and media, both content and advertising.

We expect "bulldog" companies to continue to benefit from global deregulation,
as the "best in breed" aggressively defend market share by virtue of their
economies of scale and innovation-based top line growth. The United States
remains the global leader in technology, health care and financial services,
where the Fund has its largest concentrations. Thus, we believe the Fund's
focused investment strategy positions the portfolio well to continue to meet 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/ Owen B. Fitzpatrick /s/ Leo Grohowski
- ----------------------- -----------------
Owen B. Fitzpatrick and Leo Grohowski
Portfolio Managers
February 29, 2000

5
<PAGE>

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

Statement of Assets and Liabilities February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assets:
<S> <C>
Investment in Flag Investors Top 50 US Portfolio, at value........... $8,012,919
Receivable from Manager for expense reimbursement................... 19,935
Receivable from Flag Investors Top 50 US Portfolio for withdrawals.. 600
Deferred organization costs......................................... 6,509
----------
Total assets....................................................... 8,039,963
----------
Liabilities:
Payable for capital shares redeemed................................. 600
Transfer Agent fees payable......................................... 4,801
Distribution fees payable........................................... 5,232
Custody and portfolio accounting fees payable....................... 1,839
Administration fees payable......................................... 5,970
Other accrued expenses.............................................. 27,238
----------
Total liabilities.................................................. 45,680
----------
Net assets......................................................... $7,994,283
==========
Net Assets Consist of:
Capital stock, $0.001 par value(a).................................. $ 408
Paid-in capital..................................................... 5,799,636
Accumulated net investment loss..................................... (39,608)
Undistributed net realized gain on investments...................... 178,831
Net unrealized appreciation of investments.......................... 2,055,016
----------
Net assets......................................................... $7,994,283
==========

Computation of Net Asset Value, Redemption Price and Offering Price Per Share:

Net assets -- Class A............................................... $4,350,466
==========
Shares outstanding -- Class A....................................... 207,379
==========
Net asset value and redemption price per share -- Class A........... $20.98
======
Offering price per share -- Class A................................. $22.20
======

Net assets -- Class B............................................... $3,435,532
==========
Shares outstanding -- Class B....................................... 190,515
==========
Net asset value and offering price per share -- Class B............ $18.03
======
Minimum redemption price per share -- Class B....................... $17.13
======

Net assets -- Class C............................................... $ 208,285
==========
Shares outstanding -- Class C....................................... 10,590
==========
Net asset value and offering price per share -- Class C............. $19.67
======
Minimum redemption price per share -- Class C....................... $19.47
======
</TABLE>
- -------------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements
6

<PAGE>

Flag Investors Top 50 US
- --------------------------------------------------------------------------
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- ----------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses allocated from Flag Investors
Top 50 US Portfolio:
Dividend income........................................................ $ 19,759
Interest income....................................................... 4,823
Expenses.............................................................. (59,944)
----------
Net investment loss allocated from Flag Investors
Top 50 US Portfolio................................................ (35,362)
----------
Expenses:
Administration fees................................................... 37,295
Transfer Agent fees................................................... 26,852
Portfolio accounting fees............................................. 11,339
Professional fees..................................................... 10,421
Registration fees..................................................... 8,701
Reports to Shareholders............................................... 7,458
Trustees' fees and expenses........................................... 2,239
Amortization of organization costs.................................... 1,256
Distribution fees -- Class B.......................................... 11,075
Distribution fees -- Class C.......................................... 609
Service fees -- Class A............................................... 4,856
Service fees -- Class B............................................... 3,692
Service fees -- Class C............................................... 203
Other expenses........................................................ 2,999
----------
Total expenses....................................................... 128,995
Less: Expense reimbursement of Fund and Portfolio allocated expenses.. (124,749)
----------
Net expenses......................................................... 4,246
----------
Net investment loss................................................. (39,608)
----------
Net Realized and Unrealized Gain on Investments allocated from
Flag Investors Top 50 US Portfolio:
Net realized gain on Investments..................................... 367,354
Net change in unrealized appreciation on Investments................. 768,720
----------
Net Realized and Unrealized Gain on Investments allocated from
Flag Investors Top 50 US Portfolio:................................... 1,136,074
----------
Net Increase in Net Assets Resulting From Operations................... $1,096,466
==========
</TABLE>

See Notes to Financial Statements

7
<PAGE>

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

Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31,
- ---------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment loss.................................... $ (39,608) $ (40,481)
Net realized gain (loss) on investments allocated
from Flag Investors Top 50 US Portfolio................ 367,354 (145,703)
Net change in unrealized appreciation
on investments allocated from Flag Investors
Top 50 US Portfolio.................................... 768,720 1,454,911
----------- ------------
Net increase in net assets resulting from operations.... 1,096,466 1,268,727
----------- ------------
Capital Share Transactions:
Net proceeds from shares sold........................... 1,729,441 6,730,640
Net cost of shares redeemed............................. (1,100,273) (4,223,573)
----------- ------------
Net increase in net assets resulting from capital
share transactions..................................... 629,168 2,507,067
----------- ------------
Total increase in net assets.......................... 1,725,634 3,775,794
Net Assets:
Beginning of period..................................... 6,268,649 2,492,855
----------- ------------
End of period........................................... $ 7,994,283 $ 6,268,649
=========== ============

Includes accumulated net investment loss of.............. $ (39,608) $ --
----------- ------------
</TABLE>

See Notes to Financial Statements

8
<PAGE>

Flag Investors Top 50 US
- -------------------------------------------------------------------------------
Financial Highlights -- Class A Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period...... $17.89 $12.62 $12.50
------ ------ ------
Investment operations:
Net investment loss........................ (0.08) (0.08) (0.03)
Net realized and unrealized gain
on investments allocated from Flag
Investors Top 50 US Portfolio............. 3.17 5.35 0.15
------ ------ ------
Increase from investment operations........ 3.09 5.27 0.12
------ ------ ------
Net asset value at end of period............ $20.98 $17.89 $12.62
------ ------ ------
Total Return (based on net
asset value)/2/............................ 17.27%/4/ 41.76% 0.96%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's).......... $4,350 $3,370 $2,056
Ratios to average net assets:
Expenses/3/............................... 1.50%/5/ 1.50% 1.50%/5/
Net investment loss/3/.................... (0.80)%/5/ (0.52)% (0.44)%/5/
Portfolio Turnover of Flag Investors
Top 50 US Portfolio....................... 30%/4/ 58% 24%/4/
</TABLE>
- --------------
/1/ Commencement of operations: 10/2/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 US
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expenses to average net assets 5.05%/5/ 5.71% 11.58%/5/
Net investment income to average net assets (4.35)%/5/ (4.73)% (10.52)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

9
<PAGE>

Flag Investors Top 50 US
- --------------------------------------------------------------------------------
Financial Highlights -- Class B Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period....... $15.44 $10.96 $12.50
------ ------ ------
Investment operations:
Net investment loss......................... (0.12) (0.12) (0.06)
Net realized and unrealized gain (loss)
on investments allocated from Flag
Investors Top 50 US Portfolio.............. 2.71 4.60 (1.48)
------ ------ ------
Increase (decrease) from investment
operations................................. 2.59 4.48 (1.54)
------ ------ ------
Net asset value at end of period............. $18.03 $15.44 $10.96
====== ====== ======
Total Return (based on net asset
value)/2/................................... 16.77%/4/ 40.88% (12.32)%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)........... $3,436 $2,764 $ 436
Ratios to average net assets:
Expenses/3/................................ 2.25%/5/ 2.25% 2.25%/5/
Net investment loss/3/..................... (1.54)%/5/ (1.30)% (1.35)%/5/
Portfolio Turnover of Flag Investors
Top 50 US Portfolio........................ 30%/4/ 58% 24%/4/
</TABLE>
- --------------
/1/ Commencement of operations: 3/18/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 US
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expenses to average net assets 5.80%/5/ 6.83% 12.33%/5/
Net investment income to average net assets (5.09)%/5/ (5.88)% (11.43)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

10
<PAGE>

Flag Investors Top 50 US
- ----------------------------------------------------------------------------
Financial Highlights -- Class C Shares
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended Ended/1/
February 29, August 31,
- ------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Net asset value at beginning of period........... $16.83 $12.50
------ ------
Investment operations:
Net investment loss............................. (0.12) (0.09)
Net realized and unrealized gain on
investments allocated from Flag Investors
Top 50 US Portfolio............................ 2.96 4.42
------ ------
Increase from investment operations............. 2.84 4.33
------ ------
Net asset value at end of period................. $19.67 $16.83
====== ======
Total Return (based on net asset value)/2,4/..... 16.87% 34.64%
Ratios and Supplemental Data:
Net assets, end of period (000's)............... $208 $136
Ratios to average net assets:
Expenses/3,5/.................................. 2.25% 2.25%
Net investment loss/3,5/....................... (1.55)% (1.31)%
Portfolio Turnover of Flag Investors Top 50
US Portfolio/4/................................ 30% 58%
</TABLE>
- --------------
/1/ Commencement of operations: 9/2/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 US
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Expenses to average net assets/5/ 5.78% 7.15%
Net investment income to average net assets/5/ (5.08)% (6.21)%
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements

<PAGE>

Flag Investors Top 50 US
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Funds, Inc. (the "Company") (re-named from Deutsche Funds, Inc.
effective January 18, 2000) 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 seven
separate investment series (the "Funds"). The accompanying financial statements
and notes relate to Flag Investors Top 50 US (the "Fund).

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Flag Investors Top 50 US Portfolio (US Dollar)
(formerly, the Deutsche Top 50 US Portfolio, the "Portfolio"), which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, the Deutsche Portfolios
the "Portfolios Trust"), a New York business trust, registered under the 1940
Act as an open-end investment management company comprised of seven portfolios.
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. All three Classes of shares are 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. The Fund commenced operations during October 1997.

Valuation

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. As of
February 29, 2000, the Fund had a beneficial interest of 29.0% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio of the Portfolio Trust was held by a similar fund of Deutsche Global
Funds Ltd., an offshore company and an affiliate of the Company.

12
<PAGE>

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

NOTE 1 -- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, expenses and
realized and unrealized gains and losses recorded by the Portfolios 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio 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 of the Fund are declared and paid at
least annually. Capital gains of the Fund, if any, are distributed at least
annually. However, to the extent that the net realized gains of the Fund can
be reduced by any capital loss carryforwards of the Fund, such gains will not
be distributed. Dividends and capital gains distributions are distributed in
U.S. dollars. The Fund record all dividends and distributions to shareholders
on ex-dividend date.

13
<PAGE>

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

NOTE 1 -- 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 Funds. The amount paid by
each 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company has retained
the services of Federated Services Company ("Federated") as administrator. Under
the Administration Agreement, Federated assisted in the operations of the Funds,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated received a fee from the Fund, which was computed
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 for the Fund's then current fiscal year. Federated, in its
capacity as operations agent for the Portfolio Trust and Administrator of the
Fund, received a minimum fee of $37,500 for the first six months of the Fund's
fiscal year ending August 31, 2000. At a meeting held on January 31, 2000, the
Board of Directors of the Company adopted a resolution to approve an
administration agreement between Investment Company Capital Corp. ("ICC") and
the Company, replacing Federated Services Company, effective April 7, 2000.

14
<PAGE>

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

NOTE 2 -- concluded

at an annual rate of 0.25%, 0.75% and 0.75%, respectively, of the average daily
net assets of the Fund represented by Class A Shares, Class B Shares and Class C
Shares, respectively, to finance any activity that is principally intended to
result in the sale of each such Class of Shares. Each Fund will pay to ICC
Distributors, for the provision of certain services to the holders of Class B
Shares and Class C Shares, a Service fee computed at an annual rate of 0.25% of
the average daily net assets of each such Class of shares. Prior to December 20,
1999 Edgewood Services Inc. served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company serves as the transfer agent and dividend disbursing agent for
each Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Funds. IBT(Boston) acts as the sub-administrator for the Fund and as the
custodian of the Fund's assets. At a meeting held on January 31, 2000, the Board
of Directors of the Company adopted a resolution to approve a transfer agent
agreement between ICC Capital, Inc., an affiliate of Deutsche Bank AG, and the
Company, replacing Federated Shareholder Services Company, effective April 7,
2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhad 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), at not more
than 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, through the year ending
December 31, 2000.

For the six months ended February 29, 2000, DFM voluntarily reimbursed
$124,749 to the Fund pursuant to this undertaking.

NOTE 3 -- 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.

15
<PAGE>

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

NOTE 4 -- 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 and classes of Fund:
<TABLE>
<CAPTION>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
------------------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold....... 42,971 $ 856,285 245,592 $ 4,215,805
Shares redeemed... (23,951) (490,633) (220,175) (3,728,094)
------- --------- -------- -----------
Net increase...... 19,020 $ 365,652 25,417 $ 487,711
------- --------- -------- -----------

Capital Shares -- Class B:
Shares sold....... 46,662 $ 823,520 157,403 $ 2,177,200
Shares redeemed... (35,168) (609,640) (18,199) (288,524)
------- --------- -------- -----------
Net increase...... 11,494 $ 213,880 139,204 $ 1,888,676
------- --------- -------- -----------
<CAPTION>
Period Ended
August 31, 1999/1/
---------------------
Shares Amount
------ ------
<S> <C> <C> <C> <C>
Capital Shares -- Class C:
Shares sold....... 2,540 $ 49,636 19,925 $ 337,635
Shares redeemed... -- -- (11,875) (206,955)
------- --------- -------- -----------
Net increase...... 2,540 $ 49,636 8,050 $ 130,680
------- --------- -------- -----------
</TABLE>
- --------------
/1/ Inception date: 9/2/98.

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Flag Investors Top 50 US
Portfolio (US Dollar) included elsewhere in this report for discussion of off-
balance sheet risk and concentration of credit risk.

16
<PAGE>

Flag Investors Top 50 US
- --------------------------------------------------------------------------------
Proxy Results (Unaudited)

The Flag Investors Top 50 US shareholders voted on and approved the following
proposals at the annual meeting of shareholders on March 28, 2000. The
description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Withheld
--------- ------------
<S> <C> <C>
Mr. Richard R. Burt 311,400 722
Mr. Richard T. Hale 311,400 722
Mr. Joseph R. Hardiman 311,400 722
Mr. Louis E. Levy 311,400 722
Mr. Eugene J. McDonald 311,400 722
Ms. Rebecca W. Rimel 311,400 722
Mr. Truman T. Semans 311,400 722
Mr. Robert H. Wadsworth 311,400 722
</TABLE>

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
311,145 149 828

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
310,333 961 828

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
310,293 487 1,342

4.A.(i). To approve a new investment sub-advisory agreement between Deutsche
Asset Management, Inc. and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
310,302 992 828

4.A.(ii). To approve a new investment sub-advisory agreement between Deutsche
Asset Management, Inc. and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
310,301 487 1,334

17
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Portfolio of Investments February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
Shares Security Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 96.1%
Advertising -- 1.1%
3,100 Omnicom Group, Inc............................................. $ 291,981
----------
Aerospace & Defense -- 0.8%
4,775 Honeywell International, Inc.................................... 229,797
----------
Banking -- 3.0%
11,100 Bank of New York Co. (The), Inc................................. 369,769
5,600 Chase Manhattan Corp............................................ 445,900
----------
815,669
----------
Building Materials -- 4.4%
21,220 Home Depot, Inc................................................. 1,226,781
----------
Communications -- 5.0%
2,000 Nortel Networks Corp............................................ 223,000
6,100 QUALCOMM, Inc./1/............................................... 868,869
6,000 Tellabs, Inc./1/................................................ 288,000
----------
1,379,869
----------
Computer Software & Processing -- 11.1%
19,200 IMS Health, Inc................................................. 386,400
11,900 Microsoft Corp./1/.............................................. 1,063,563
12,100 Sun Microsystems, Inc./1/....................................... 1,152,525
3,000 Yahoo!, Inc./1/................................................. 479,063
----------
3,081,551
----------
Computers & Information -- 15.3%
9,750 Cisco Systems, Inc./1/.......................................... 1,288,828
12,660 EMC Corp./1/.................................................... 1,506,535
3,100 International Business Machines Corp............................ 316,200
2,400 Solectron Corp./1/.............................................. 157,200
9,820 Symbol Technologies, Inc........................................ 934,128
----------
4,202,891
----------
Cosmetics & Personal Care -- 3.8%
5,000 Colgate-Palmolive Co............................................ 260,938
10,160 Estee Lauder Co. -- Class A..................................... 440,690
4,000 Procter & Gamble (The) Co....................................... 352,000
----------
1,053,628
----------
</TABLE>

See Notes to Financial Statements

18
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- (continued)
Electric Utilities -- 2.1%
7,050 AES Corp./1/.................................................... $ 590,878
----------
Electrical Equipment -- 2.8%
5,920 General Electric Co............................................. 782,550
----------
Electronics -- 9.2%
7,060 Intel Corp...................................................... 797,780
1,500 JDS Uniphase Corp./1/........................................... 395,625
8,100 Texas Instruments, Inc.......................................... 1,348,650
----------
2,542,055
----------
Financial Services -- 5.0%
3,600 American Express Co............................................. 483,075
11,400 Citigroup, Inc.................................................. 589,238
5,940 Federal National Mortgage Association........................... 314,820
----------
1,387,133
----------
Industrial-Diversified -- 1.5%
11,100 Tyco International Ltd.......................................... 421,106
----------
Insurance -- 5.6%
7,593 American International Group, Inc............................... 671,506
4,950 Chubb Corp...................................................... 243,478
8,100 Marsh & McLennan Co., Inc....................................... 626,738
----------
1,541,722
----------
Media-Broadcasting & Publishing -- 1.8%
11,400 Comcast Corp. -- Class A........................................ 484,500
----------
Medical Supplies -- 5.6%
8,100 Guidant Corp./1/................................................ 545,738
4,570 Johnson & Johnson............................................... 327,898
14,120 Medtronic, Inc.................................................. 683,938
----------
1,557,574
----------
Oil & Gas -- 2.0%
8,100 Enron Corp...................................................... 558,900
----------
</TABLE>

See Notes to Financial Statements

19
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
Shares Security Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- (continued)
Pharmaceuticals -- 5.4%
4,575 Amgen, Inc./1/.................................................. $ 311,958
7,980 Merck & Co., Inc................................................ 491,269
12,100 Pfizer, Inc..................................................... 388,713
3,500 Warner-Lambert Co............................................... 299,469
-----------
1,491,409
-----------
Restaurants -- 0.7%
6,000 McDonald's Corp................................................. 189,375
-----------
Retailers -- 5.2%
4,325 CVS Corp........................................................ 151,375
22,270 Staples, Inc./1/................................................ 601,290
14,140 Wal-Mart Stores, Inc............................................ 688,441
-----------
1,441,106
-----------
Telephone Systems -- 3.8%
3,000 Alltel Corp..................................................... 174,000
4,450 AT&T Corp....................................................... 219,997
1,550 Bell Atlantic Corp.............................................. 75,853
12,950 MCI Worldcom, Inc./1/........................................... 577,894
-----------
1,047,744
-----------
Transportation -- 0.9%
8,750 Carnival Corp................................................... 252,109
-----------

Total Investments (Cost -- $16,603,163).......................... 96.1% 26,570,328
Other Assets in Excess of Liabilities............................ 3.9% 1,077,148
----- -----------
Net Assets................................................. 100.0% $27,647,476
===== ===========
</TABLE>
______________
/1/ Non-income producing security.

See Notes to Financial Statements

20
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- ---------------------------------------------------------------------------
Statement of Assets and Liabilities February 29, 2000
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value................................................. $26,570,328
Cash.................................................................. 1,078,145
Dividends receivable.................................................. 7,963
Interest receivable................................................... 2,417
Receivable for Investors' Beneficial Interest for contributions....... 38,147
Deferred organization costs........................................... 34,090
-----------
Total assets......................................................... 27,731,090
-----------
Liabilities:
Investment management fees payable.................................... 18,573
Custody and portfolio accounting fees payable......................... 792
Administration fees payable........................................... 8,881
Organization costs payable............................................ 35,138
Other accrued expenses................................................ 20,230
-----------
Total liabilities.................................................... 83,614
-----------
Net assets........................................................... $27,647,476
-----------
Net Assets:
Applicable to Investors' Beneficial Interests......................... $27,647,476
-----------
Cost of investments................................................... $16,603,163
===========
</TABLE>

See Notes to Financial Statements

<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- --------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Dividend income....................................................... $ 73,523
Interest income....................................................... 17,928
Less: interest expense................................................ (1,279)
----------
Total income......................................................... 90,172
----------
Expenses:
Investment management fees............................................ 110,843
Operations agent fees................................................. 29,835
Custody and portfolio accounting fees................................. 27,355
Administration fees................................................... 24,656
Professional fees..................................................... 13,206
Amortization of organization costs.................................... 6,574
Trustees' fees and expenses........................................... 2,486
Other expenses........................................................ 6,622
----------
Total expenses....................................................... 221,577
----------
Net investment loss.................................................. (131,405)
----------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investments...................................... 1,289,038
Net change in unrealized appreciation on investments.................. 2,958,607
----------
Net Realized and Unrealized Gain on Investments........................ 4,247,645
----------
Net Increase in Net Assets Resulting from Operations................... $4,116,240
==========
</TABLE>

See Notes to Financial Statements

22
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31
- ----------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) In Net Assets:
Operations:
Net investment loss.................................. $ (131,405) $ (247,773)
Net realized gain (loss) on investments.............. 1,289,038 (872,169)
Net change in unrealized appreciation on
investments......................................... 2,958,607 7,983,805
------------ ------------
Net increase in net assets
resulting from operations........................... 4,116,240 6,863,863
------------ ------------
Capital Transactions:
Proceeds from contributions.......................... 11,018,581 22,490,394
Withdrawals.......................................... (11,674,022) (19,487,950)
------------ ------------
Net increase (decrease) in net assets from
capital transactions................................ (655,441) 3,002,444
------------ ------------
Total increase in net assets........................ 3,460,799 9,866,307
Net Assets:
Beginning of period.................................. 24,186,677 14,320,370
------------ ------------
End of period........................................ $ 27,647,476 $ 24,186,677
============ ============
</TABLE>

See Notes to Financial Statements

23
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ----------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's)............. $27,647 $24,187 $14,320
Ratio of expenses to average net assets
before interest expense..................... 1.70%/2/ 1.98% 3.24%/2/
Ratio of interest expense to average
net assets.................................. 0.01%/2/ 0.00%/3/ --
Ratio of expenses to average net assets
after interest expense...................... 1.71%/2/ 1.98% 3.24%/2/
Ratio of net investment loss to
average net assets.......................... (1.01)%/2/ (1.00)% (2.18)%/2/
Portfolio turnover............................ 30%/4/ 58% 24%/4/
</TABLE>
- --------------
/1/ Commencement of operations: 10/2/97.
/2/ Annualized
/3/ Amount rounds to less than 0.01%.
/4/ Not Annualized

See Notes to Financial Statements

24
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors Top 50 US 29.0%
Deutsche Top 50 US 71.0%
-----
100.0%
=====

25
<PAGE>

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

NOTE 1 -- continued

Investment Valuation

Investment Transactions

Investment transactions are recorded on 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 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.

26
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
NOTE 1 -- concluded

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.

Federal Income Taxes

Expenses

Deferred Organization Costs

Organization costs incurred in connection with the organization and initial
registration of the Portfolios 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.

27
<PAGE>

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

NOTE 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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 Deutsche Bank Securities Investment Management ("DBSIM") as
investment adviser (the "Adviser") to the Portfolio. As compensation for the
services rendered by DFM under the Management Agreement with the Portfolio, DFM
receives a fee from the Portfolio at an annualized rate of 0.85% of the average
daily net assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's management fee was $110,843
for services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation for
its services, DBSIM receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

28
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
NOTE 2 -- concluded

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $189 in brokerage commissions from Flag Investors Top 50 US Portfolio
as a result of executing agency transactions in portfolio securities.

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 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government......... $ --
Non-U.S. Government..... 7,644,202
----------
Total................... $7,644,202
----------

Sales
U.S. Government......... $ --
Non-U.S. Government..... 7,339,368
----------
Total................... $7,339,368
==========

At February 29, 2000, the cost of investments, unrealized appreciation, and
unrealized depreciation of investments for U.S. federal income tax purposes was
$16,603,163, $10,632,812 and $665,647, respectively.

29
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

NOTE 5 -- Line of Credit Agreement

The Portfolios 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 33% of the total assets of the Portfolios
Trust. 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 six months ended February 29,
200, the Portfolio periodically utilized the line of credit and incurred
interest expense as disclosed in the Statements of Operations. The weighted
average interest rate paid by the Portfolios Trust was 5.90% and the maximum and
average amount of the loans outstanding during the borrowing period was
$15,985,293 and $1,484,271, respectively. At February, 2000, the Portfolio had
no debt outstanding under the line of credit agreement.

30
<PAGE>

Flag Investors Top 50 US Portfolio (US Dollar)
- --------------------------------------------------------------------------------
Proxy Results (Unaudited)

The Flag Investors Top 50 US Portfolio (US Dollar) shareholders voted on and
approved the following proposals at the annual meeting of shareholders on March
28, 2000. The description of each proposal and number of shares voted are as
follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Withheld
--------- ------------
<S> <C> <C>
Mr. Richard R. Burt 782,715 1,809
Mr. Richard T. Hale 782,715 1,809
Mr. Joseph R. Hardiman 782,715 1,809
Mr. Louis E. Levy 782,715 1,809
Mr. Eugene J. McDonald 782,715 1,809
Ms. Rebecca W. Rimel 782,715 1,809
Mr. Truman T. Semans 782,715 1,809
Mr. Robert H. Wadsworth 782,715 1,809
</TABLE>

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
782,083 385 2,056

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
780,027 2,415 2,081

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
779,908 1,243 3,373

4.A.(i). To approve a new investment sub-advisory agreement between Deutsche
Asset Management, Inc. and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
779,964 2,504 2,056

4.A.(ii). To approve a new investment sub-advisory agreement between Deutsche
Asset Management, Inc. and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
779,963 1,243 3,318

31
<PAGE>

This page intentionally left blank.
<PAGE>

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

[FLAG INVESTORS LOGO]

Balanced
Value Builder Fund

Growth
Equity Partners Fund
Emerging Growth Fund

Specialty
Communications Fund
Real Estate Securities Fund

International
International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy
Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income
Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income
Managed Municipal Fund Shares

Money Market
Cash Reserve Prime Shares

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

ICC Distributors, Inc.

TOP50USSA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

Top 50 World

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 14.06% for the six months
ended February 29, 2000, outperforming the MSCI World Index return of 9.53%
for the same time period.

. Volatility remained high in the world's equity markets due largely to fears of
rising inflation and interest rates in the U.S. The MSCI World Index, as well
as the country indices for the U.S., Japan, the United Kingdom, Germany, and
France, all finished 1999 at twelve-month highs after a dramatic December
rally, only to fall into negative territory in the first two months of the
year 2000. Overall, growth-oriented telecommunication and technology companies
produced the strongest performance.

. We expect world markets to continue to perform well based primarily on
exponential growth of the technology industry and improving global economic
growth.
<PAGE>

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

Flag Investors Top 50 World -- Class A

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------ ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 10/2/97 year 10/2/97
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 World - Class A Shares/1/ 14.06% 28.75% 60.23% 21.67% 18.78%
- --------------------------------------------------------------------------------------------------
MSCI World Index/2/ 9.53% 19.11% 44.40% 19.11% 16.44%
- --------------------------------------------------------------------------------------------------
Lipper Global EquityAverage/3/ 25.04% 40.08% 53.95% 40.08% 18.36%
- --------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.
/2/The MSCI World Index is a broad-based market index of foreign equity
securities. This Index is unmanaged, and investments cannot be made in an
index.
/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 respective
categories indicated. These figures do not reflect sales charges.

Flag Investors Top 50 World -- Class B

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
------------------------------ ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 5/4/98 year 5/4/98
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 World - Class B Shares/1/ 13.60% 27.76% 42.12% 21.37% 18.56%
- ---------------------------------------------------------------------------------------------------------------
MSCI World Index/2/ 9.53% 19.11% 27.98% 19.11% 14.43%
- ---------------------------------------------------------------------------------------------------------------
Lipper Global Equity Average/3/ 25.04% 40.08% 39.79% 40.08% 18.86%
- ---------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/The MSCI World Index is a broad-based market index of foreign equity
securities. This Index is unmanaged, and investments cannot be made in an
index.
/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 respective
categories indicated. These figures do not reflect sales charges.

1
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
Flag Investors Top 50 World (the "Fund") (formerly Deutsche Top 50 World),
providing a more detailed review of the markets, the portfolio in which the Fund
invests (the "Portfolio"), and our outlook--all in an easier-to-read format. We
continue to include a complete financial summary of the Fund's operations and
listing of the portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 14.06% for the six
months ended February 29, 2000, as compared to 9.53% for the MSCI World Index.
The Fund's Class B shares produced a semi-annual return of 13.60%.

This strong outperformance was primarily due to the Fund's overweighting in
the technology and telecommunications sectors and to strong stock selection
across the market sectors. We continued to seek global blue chip companies that
dominate their respective industries, that demonstrate strong market position,
exceptional ability to compete worldwide and excellent growth potential, and
that are 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.

We stayed disciplined to our quality-oriented approach during the semi-annual
period, focusing on strong, growing companies in established industries and
carefully monitoring the ever-shifting group of top 50 companies in the world.
The Fund proved to be well-positioned, and thus there was low portfolio turnover
during the semi-annual period.

Germany's Allianz AG replaced Switzerland's UBS, as the insurer is
increasingly demonstrating better strategic positioning. Yamanouchi replaced
the United States' Merck, as we believe the Japanese pharmaceuticals company
shows more dynamic growth and because we have concerns that major patent
expirations at Merck leave its product pipeline vulnerable. We replaced the
U.S.' Merrill Lynch with Australia's News Corp, on concerns that the broker's
margins will be eroding as fees and brokerage commissions drop due to internet
competition. The United Kingdom's Cable & Wireless replaced that same

2
<PAGE>

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

nation's SmithKline Beecham, as the pharmaceutical company announced merger plan
with Glaxo Wellcome, another Top 50 World portfolio holding. Germany's
Mannesmann replaced the United Kingdom's Vodafone Airtouch, as these two
companies agreed to merge, and Mannesmann traded at a significant valuation
discount to Vodafone.

Amongst the Fund's strongest performers were its technology and
telecommunications holdings in the U.S., Europe, and Asia. These included
Nokia, Ericsson, Cisco Systems, Lucent Technologies, Sony, Microsoft, EMC, SAP,
Enron, and Taiwan Semiconductor. Weaker performers during the semi-annual
period included Unilever, Johnson & Johnson, McDonald's, Coca Cola, and Bristol
Myers Squibb. We continue to hold these stocks in the Fund's portfolio.

Investment Environment

Developments in the world equity markets during the semi-annual period can be
divided into two distinctively different periods--pre- and post-millennium.

The MSCI World Index, as well as the country indices for the U.S., Japan, the
United Kingdom, Germany, and France, all finished 1999 at their twelve-month
highs after a dramatic December rally. The U.S. 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 Index. Growth stocks produced more than double the returns of value
stocks in 1999. The tech-heavy NASDAQ indices soared to all-time records, with
each of the three--the Composite, the Industrials, and the 100--each returning
more than 70% for the year. Still, volatility remained high over the four
months of 1999 in the Fund's semi-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
Index, for example, lost 4.8% for the month, while the S&P 500 Index fell 5.0%.
On the NASDAQ market, the Composite, Industrials, and 100 Indices, fell 3.2%,
1.8%, and 3.7%, respectively. Value stocks outperformed growth stocks.
February was not much better. For the two months year to date, the S&P 500
Index was down 6.82%; the MSCI Japan Index was down 6.79%; the MSCI Pacific ex-
Japan Index was down 7.34%; and the MSCI Europe Index was down 2.24%.

3
<PAGE>

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

Throughout the semi-annual period, growth-oriented telecommunication and
technology companies worldwide produced the strongest performance. Selected
consumer goods stocks, such as Gillette, Coca Cola, and McDonald's, performed
well in November, as the Thanksgiving weekend strongly boosted sales in stores
and over the internet. However, these same stocks fell in December. In
January, the utilities and health care sectors were the lone bright spots,
advancing into positive return territory, although health care then lost
territory in February. At the bottom of the sector list for the six months was
the consumer staples sector.

Looking Ahead

Going forward, several factors lead us to a generally optimistic outlook for
the world markets. Economic growth continues to improve globally, a positive
indicator, in our view, that corporate profits will do likewise. Furthermore,
the recent exponential growth of the technology industry continues to impact
equity investments worldwide. In other sectors, financials are quite oversold
and may see a technical rally in the near term, and pharmaceutical valuations
have come down considerably and may present an opportunity to start building
positions again. On the other hand, while consumer stock valuations have also
come down significantly, they may continue to be out of favor, as growth rates
within this sector are generally in the single-digit figures. Financial stocks
will likely continue in a trading range, given the uncertain interest rate
environment in the U.S. and Europe.

Regionally, we expect operating earnings growth for the year 2000 to remain in
double-digit territory in the U.S. equity markets, but to moderate slightly from
1999 levels. In Europe, we believe the opportunities created by Economic
Monetary Union will continue to ripple through the various participating
nations' economies. Following Japan's best annual stock market performance
since 1986 this past year, global investors, still underweight this market, may
continue to provide positive price pressure in 2000, as Japan continues to seek
to control costs, improve productivity, and increase the viability of its banks.
Outside of Australia and New Zealand, the rest of developed Asia may, in our
view, increasingly look to the U.S. in the months ahead, both as a market for
its exports as well as an economic bellwether, especially given the strong links
between their currencies and the dollar.

4
<PAGE>

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

Given this outlook, we believe the Fund's focused investment strategy and
continued overweighting in the global equity markets' supporting pillar, namely
the technology sector, positions the portfolio well to continue to meet 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
- ---------------------
Klaus Kaldemorgen
Portfolio Manager
February 29, 2000

5
<PAGE>

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

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

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

<TABLE>
<S> <C>
Assets:
Investment in Flag Investors Top 50 World Portfolio, at value... $5,823,789
Receivable from Manager for expense reimbursement............... 18,996
Receivable for capital shares sold.............................. 12,605
Receivable from Flag Investors Top 50 World Portfolio
for withdrawals................................................ 33,017
Foreign tax reclaim receivable.................................. 1,705
Deferred organization costs..................................... 6,509
----------
Total assets............................................... 5,896,621
----------
Liabilities:
Payable for capital shares redeemed............................. 45,622
Administration fees payable..................................... 5,942
Transfer Agent fees payable..................................... 5,609
Distribution fees payable....................................... 3,802
Custody and portfolio accounting fees payable................... 1,645
Other accrued expenses.......................................... 30,843
----------
Total liabilities.......................................... 93,463
----------
Net assets................................................. $5,803,158
==========
Net Assets Consist of:
Capital stock, $0.001 par value(a).............................. $ 312
Paid-in capital................................................. 4,868,212
Accumulated net investment loss................................. (28,339)
Undistributed net realized gain on investments
and foreign currency transactions.............................. 133,598
Net unrealized appreciation of investments and
and foreign currency transactions.............................. 829,375
----------
Net assets................................................. $5,803,158
==========

Computation of Net Asset Value, Redemption Price and Offering Price Per Share:
Net assets -- Class A........................................... $3,350,024
==========
Shares outstanding -- Class A................................... 170,771
==========
Net asset value and redemption price per share -- Class A....... $19.62
======
Offering price per share -- Class A............................. $20.76
======

Net assets -- Class B........................................... $2,453,134
==========
Shares outstanding -- Class B................................... 141,337
==========
Net asset value and offering price per share -- Class B......... $17.36
======
Minimum redemption price per share -- Class B................... $16.49
======
</TABLE>

- -------------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements.

6
<PAGE>

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

Statement of Operations
(Unaudited)

<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- --------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses allocated from
Flag Investors Top 50 World Portfolio:
Dividend income................................................ $ 18,907
Less: Foreign withholding taxes................................ (644)
---------
Net dividend income.......................................... 18,263
Interest income................................................ 6,116
Expenses....................................................... (49,241)
---------
Net investment loss allocated from the
Flag Investors Top 50 World Portfolio........................ (24,862)
---------
Expenses:
Administration fees............................................. 37,295
Transfer Agent fees............................................. 27,349
Professional fees............................................... 10,421
Portfolio accounting fees....................................... 10,145
Registration fees............................................... 8,789
Reports to Shareholders......................................... 7,458
Trustees' fees and expenses..................................... 2,239
Amortization of organization costs.............................. 1,256
Distribution fees -- Class B.................................... 8,282
Service fees -- Class A......................................... 3,854
Service fees -- Class B......................................... 2,761
Other expenses.................................................. 3,100
---------
Total expenses............................................... 122,949
Less: Expense reimbursement of Fund expenses.................... (121,573)
---------
Net expenses................................................. 1,376
---------
Net investment loss...................................... (26,238)
---------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency allocated from Flag Investors Top 50 World Portfolio:
Net realized gain (loss) on:
Investments.................................................... 150,752
Foreign currency transactions.................................. (8,418)
Net change in unrealized appreciation on:
Investments.................................................... 556,493
Foreign currency translations.................................. 137
---------
Net Realized and Unrealized Gain on Investments and Foreign
Currency allocated from Flag Investors
Top 50 World Portfolio......................................... 698,964
---------
Net Increase in Net Assets Resulting From Operations............. $ 672,726
=========
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

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

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31
- -------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment loss.................................. $ (26,238) $ (4,411)
Net realized gain on investments and foreign
currency transactions
Flag Investors Top 50 World Portfolio............... 142,334 72,822
Net change in unrealized appreciation
on investments and foreign currency
translations allocated from
Flag Investors Top 50 World Portfolio............... 556,630 312,328
----------- -----------
Net increase in net assets resulting from operations. 672,726 380,739
----------- -----------
Distributions to Shareholders:
Dividends from net investment income:
Class A............................................. -- (29)
Class B............................................. -- (5)
Distributions from realized gains:
Class A............................................. (27,102) (3,696)
Class B............................................. (22,873) (2,250)
----------- -----------
Total distributions.................................. (49,975) (5,980)
----------- -----------
Capital Share Transactions:
Net proceeds from shares sold........................ 1,853,309 5,644,684
Net proceeds from dividends and distributions
reinvested.......................................... 48,151 5,761
Net cost of shares redeemed.......................... (1,627,864) (1,388,830)
----------- -----------
Net increase in net assets resulting from capital
share transactions.................................. 273,596 4,261,615
----------- -----------
Total increase in net assets...................... 896,347 4,636,374
Net Assets:
Beginning of period.................................. 4,906,811 270,437
----------- -----------
End of period........................................ $ 5,803,158 $ 4,906,811
=========== ===========
Includes accumulated net
investment loss of................................... $ (28,339) $ (2,101)
----------- -----------
</TABLE>

See Notes to Financial Statements.

8
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ----------------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period............. $17.35 $12.35 $12.50
------ ------ ------
Investment operations:
Net investment income (loss)...................... (0.06) 0.01 0.01
Net realized and unrealized gain (loss)
on investments and foreign currency
allocated from Flag Investors
Top 50 World Portfolio........................... 2.49 5.18 (0.16)
------ ------ ------
Increase (decrease) from investment
operations....................................... 2.43 5.19 (0.15)
------ ------ ------
Distributions to Shareholders:
Dividends 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................... $19.62 $17.35 $12.35
====== ====== ======
Total Return (based on net asset
value)/2/......................................... 14.06%/5/ 42.19% (1.20)%/5/
Ratios and Supplemental Data:
Net assets, end of period (000's)................. $3,350 $2,776 $ 181
Ratios to average net assets:
Expenses/3/..................................... 1.60%/6/ 1.60% 1.60%/6/
Net investment income (loss)/3/................. (0.68)%/6/ 0.13% 0.13%/6/
Portfolio Turnover of Flag Investors
Top 50 World Portfolio........................... 51%/5/ 79% 125%/5/
</TABLE>

- ------------
/1/ Commencement of operations: 10/2/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 World
Portfolios' expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
Expenses to average net assets 6.19%/6/ 10.56% 127.49%/6/
Net investment income to average net assets (5.27)%/6/ (8.83)% (125.76)%/6/
/4/ Amount rounds to less than $0.01.
/5/ Not annualized
/6/ Annualized

See Notes to Financial Statements.

9
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ---------------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period................ $15.43 $11.08 $12.50
------ ------ ------
Investment operations:
Net investment loss.................................. (0.11) (0.02) (0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency
allocated from Flag Investors
Top 50 World Portfolio.............................. 2.20 4.56 (1.41)
------ ------ ------
Increase (decrease) from investment
operations.......................................... 2.09 4.54 (1.42)
------ ------ ------
Distributions to Shareholders:
Dividends 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...................... $17.36 $15.43 $11.08
====== ====== ======
Total Return (based on net asset
value)/2/............................................ 13.60%/5/ 41.14% (11.36)%/5/
Ratios and Supplemental Data:
Net assets, end of period (000's).................... $2,453 $2,131 $ 90
Ratios to average net assets:
Expenses/3/......................................... 2.35%/6/ 2.35% 2.35%/6/
Net investment loss/3/.............................. (1.43)%/6/ (0.64)% (0.84)%/6/
Portfolio Turnover of Flag Investors
Top 50 World Portfolio.............................. 51%/5/ 79% 125%/5/
</TABLE>

- ------------
/1/ Commencement of operations: 5/4/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 World
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 6.90%/6/ 12.29% 128.24%/6/
Net investment income to average net assets (5.98)%/6/ (10.58)% (126.73)%/6/
</TABLE>
/4/ Amount rounds to less than $0.01.
/5/ Not annualized
/6/ Annualized

See Notes to Financial Statements.

10
<PAGE>

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

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Funds, Inc. (the "Company") (re-named from Deutsche Funds, Inc.
effective January 18, 2000) were incorporated in Maryland on May 22, 1997. The
Funds are 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 "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 Flag Investors Top 50 World Portfolio (US Dollar)
(formerly the Deutsche Top 50 World Portfolio, the "Portfolio"), which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, Deutsche Portfolios,
the "Portfolio Trust"), a New York business trust, registered under the 1940 Act
as an open-end investment management company comprised of seven portfolios. 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 two classes of shares to investors, Class A and Class B. Both
classes of shares are subject to a Distribution fee and Class B Shares are also
subject to a Service fee. Each Class will bear its respective portion of the
Service and Distribution fees. The Fund commenced operations during October
1997.

Valuation

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. As of
February 29, 2000, the Fund had a beneficial interest of 16.3% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio was held by a similar fund of Deutsche Global Funds Ltd., an
offshore company and an affiliate of the Company.

11
<PAGE>

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

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Income, Expenses and Realized and
Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio are further allocated
to each Class of shares based on their relative net asset value.

Federal Income Taxes

Distributions to Shareholders

12
<PAGE>

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

NOTE 1 -- concluded

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 Company 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company retained the
services of Federated Services Company ("Federated") as administrator. Under the
Administration Agreement, Federated assisted in the operations of the Funds,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated receives a fee from the Fund, which is computed
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 for the Fund's then current fiscal year. Federated, in its
capacity as operations agent for the Portfolio and Administrator of the Fund,
received a minimum fee of $37,500 for the first six months of the Fund's fiscal
year ended August 31, 2000. At a meeting held on January 31, 2000, the Board of
Directors of the Company adopted a resolution to approve an administration
agreement between Investment Company Capital Corp. ("ICCC") and the Company,
replacing Federated Services Company, effective April 7, 2000.

The Company has entered into a distribution agreement with ICC Distributors,
Inc. ("ICC Distributors"). ICC Distributors serves as principal distributor for
shares of the Fund. Class A Shares and Class B Shares pay a distribution fee to
the Distributor in an amount computed at an annual rate of 0.25% and 0.75%,
respectively, of the average daily net assets of the Fund represented by Class A
Shares and Class B Shares to finance any activity that is principally intended
to result in the sale of each such class of shares. The Fund will pay to ICC
Distributors, for the provision of certain services to the holders of Class B

13
<PAGE>

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

Notes to Financial Statements (concluded)

NOTE 2 -- concluded
Shares, a Service fee computed at an annual rate of 0.25% of the average daily
net assets of each such Class of shares. Prior to December 20, 1999 Edgewood
Services Inc. served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Fund. Investors Bank and Trust Company (Boston) acts as the sub-
administrator for the Fund and as the custodian of the Fund's assets. At a
meeting held on January 31, 2000, the Board of Directors of the Company adopted
a resolution to approve a transfer agent agreement between ICCC, an affiliate of
Deutsche Bank AG, and the Company, replacing Federated Shareholder Services
Company, effective April 7, 2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60% and 2.35% of the average daily net assets of Class A Shares and Class
B Shares, respectively, through the year ending December 31, 2000.

For the six months ended February 29, 2000, DFM voluntarily reimbursed
$121,573 to the Fund pursuant to this undertaking.

NOTE 3 -- Concentration of Ownership

14
<PAGE>

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

NOTE 4 -- 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>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
---------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold...................... 76,278 $ 1,367,685 225,999 $ 3,695,241
Reinvestment of dividends
and distributions............... 1,395 26,666 224 3,508
Shares redeemed.................. (66,928) (1,190,086) (80,839) (1,325,130)
------- ----------- ------- -----------
Net increase (decrease).......... 10,745 $ 204,265 145,384 $ 2,373,619
------- ----------- ------- -----------

Capital Shares -- Class B:
Shares sold...................... 29,596 $ 485,624 134,071 $ 1,949,443
Reinvestment of dividends
and distributions............... 1,268 21,485 161 2,253
Shares redeemed.................. (27,673) (437,779) (4,175) (63,700)
------- ----------- ------- -----------
Net increase (decrease).......... 3,191 $ 69,330 130,057 $ 1,887,996
------- ----------- ------- -----------
</TABLE>

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Flag Investors Top 50 World
Portfolio included elsewhere in this report for discussion of off-balance sheet
risk and concentration of credit risk.

15
<PAGE>

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

Proxy Results (Unaudited)

The Flag Investors Top 50 World shareholders voted on and approved the
following proposals at the annual meeting of shareholders on March 28, 2000.
The description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 244,993 2,930
Mr. Richard T. Hale 244,993 2,930
Mr. Joseph R. Hardiman 244,993 2,930
Mr. Louis E. Levy 244,993 2,930
Mr. Eugene J. McDonald 244,993 2,930
Ms. Rebecca W. Rimel 244,993 2,930
Mr. Truman T. Semans 244,993 2,930
Mr. Robert H. Wadsworth 244,993 2,930

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
247,169 0 754

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
244,210 2,959 754

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
243,836 3,021 1,066

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
243,905 2,959 1,059

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
243,855 2,961 1,127

16
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Portfolio of Investments February 29, 2000
(Unaudited)

Shares Security Market Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 94.5%

Australia -- 2.7%
65,000 News Corporation Ltd. (The)........................ $ 947,070
-----------
Finland -- 3.2%
5,750 Nokia Oyj.......................................... 1,146,270
-----------
France -- 5.6%
4,700 AXA................................................ 590,687
945 L'OREAL............................................ 627,957
6,000 Total SA - Series B................................ 794,516
-----------
2,013,160
-----------
Germany -- 6.0%
2,750 Allianz AG......................................... 959,246
8,900 Daimler-Chrysler AG................................ 603,409
4,600 Schering AG........................................ 553,311
-----------
2,115,966
-----------
Hong Kong -- 1.8%
55,600 HSBC Holdings Plc.................................. 637,598
-----------
Japan -- 11.0%
31,000 Fujitsu Ltd. ...................................... 1,029,572
59 Nippon Telegraph & Telephone Corp. ................ 816,015
4,100 Sony Corp. ........................................ 1,212,466
18,000 Yamanouchi Pharmaceutical Co., Ltd. ............... 859,873
-----------
3,917,926
-----------
Netherlands -- 0.9%
7,100 Unilever NV........................................ 323,079
-----------
Sweden -- 3.4%
12,800 Telefonaktiebolaget LM Ericsson.................... 1,225,232
-----------
</TABLE>

See Notes to Financial Statements.

17
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Portfolio of Investments (continued) February 29, 2000
(Unaudited)

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

Switzerland -- 3.7%
265 Nestle SA ......................................... $ 446,535
160 Novartis AG ....................................... 203,570
63 Roche Holding AG .................................. 678,531
-----------
1,328,636
-----------
Taiwan -- 2.8%
16,800 Taiwan Semiconductor Manufacturing
Co. Ltd. - ADR/1/ ................................ 1,004,850
-----------
United Kingdom -- 8.2%
55,000 BP Amoco Plc ...................................... 423,289
31,500 Cable & Wireless Plc .............................. 653,937
32,500 Glaxo Wellcome Plc ................................ 778,852
66,000 Shell Transport & Trading Co. ..................... 453,766
112,295 Vodafone Group Plc ................................ 629,786
-----------
2,939,630
-----------
United States -- 45.2%
20,300 Abbott Laboratories ............................... 664,825
12,750 America Online, Inc./1/ ........................... 752,250
5,300 American Express Co. .............................. 711,194
13,700 Bristol-Myers Squibb Co. .......................... 778,331
6,200 Chevron Corp. ..................................... 463,063
5,850 Cisco Systems, Inc./1/ ............................ 773,297
13,700 Citigroup, Inc. ................................... 708,119
7,800 Coca-Cola (The) Co. ............................... 377,813
11,250 Colgate-Palmolive Co. ............................. 587,109
7,600 EMC Corp./1/ ...................................... 904,400
9,800 Enron Corp. ....................................... 676,200
6,900 Exxon Mobil Corp. ................................. 519,656
13,800 Gillette Co. ...................................... 486,450
15,300 Halliburton Co. ................................... 584,269
5,600 International Business Machines Corp. ............. 571,200
6,300 Johnson & Johnson ................................. 452,025
13,800 Lucent Technologies, Inc. ......................... 821,100
13,500 McDonald's Corp. .................................. 426,094
</TABLE>

See Notes to Financial Statements.

<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- -------------------------------------------------------------------------------

United States -- (Continued)
17,900 MCI Worldcom, Inc./1/ ................................. $ 798,788
15,000 Medtronic, Inc. ....................................... 726,563
6,050 Microsoft Corp./1/ .................................... 540,719
29,500 Pfizer, Inc. .......................................... 947,688
6,750 Procter & Gamble (The) Co. ............................ 594,000
8,400 Schlumberger Ltd. ..................................... 620,550
19,500 Walt Disney (The) Co. ................................. 653,250
-----------
16,138,953
-----------
Total Common Stock (Cost - $28,129,505) ............... 33,738,370
-----------
PREFERRED STOCK -- 2.8%

Germany -- 2.8%
1,210 SAP AG ................................................ 1,010,890
-----------
Total Common Stock (Cost -- $535,510) ................ 1,010,890
-----------

Total Investments (Cost -- $28,665,015) ..................................... 97.3% 34,749,260
Other Assets in Excess of Liabilities ....................................... 2.7% 977,695
----- -----------
Net Assets .................................................................. 100.0% $35,726,955
===== ===========
</TABLE>

- ----------
/1/ Non-income producing security.
ADR -- American Depositary Receipt

See Notes to Financial Statements.

19
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Percentage of
Industry Sector (Unaudited) Net Assets
- -----------------------------------------------------

Pharmaceuticals......................... 15.3%
Oil & Gas............................... 11.1%
Computer Software & Processing.......... 9.3%
Communications.......................... 9.0%
Telephone Systems....................... 8.1%
Cosmetics & Personal Care............... 6.4%
Computers & Information................. 6.3%
Electronics............................. 6.2%
Financial Services...................... 5.6%
Medical Supplies........................ 3.3%
Beverages, Food & Tobacco............... 3.2%
Insurance............................... 2.7%
Media - Broadcasting & Publishing....... 2.7%
Entertainment & Leisure................. 1.8%
Banking................................. 1.8%
Automotive.............................. 1.7%
Commercial Services..................... 1.6%
Restaurants............................. 1.2%
Other assets in excess of liabilities... 2.7%
-----
100.0%
=====

20
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

<TABLE>
- ----------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value............................................. $34,749,260
Cash.............................................................. 1,831,683
Dividends receivable.............................................. 32,930
Interest receivable............................................... 2,745
Receivable for investments sold................................... 65,612
Receivable for Investors' Beneficial Interest for contributions... 42,268
Deferred organization costs....................................... 34,090
-----------
Total assets..................................................... 36,758,588
-----------
Liabilities:
Payable for investments purchased................................. 863,075
Due to Custodian.................................................. 38,013
Payable to Investors' Beneficial Interest for withdrawals......... 45,622
Investment management fees payable................................ 20,725
Custody and portfolio accounting fees payable..................... 141
Administration fees payable....................................... 9,129
Organization costs payable........................................ 35,138
Other accrued expenses............................................ 19,790
-----------
Total liabilities................................................ 1,031,633
-----------
Net assets....................................................... $35,726,955
===========
Net Assets:
Applicable to Investors' Beneficial Interests..................... $35,726,955
===========
Cost of investments............................................... $28,665,015
===========
</TABLE>

See Notes to Financial Statements.

21
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Statement of Operations
(Unaudited)

For the Six
Months Ended
February 29,
- -------------------------------------------------------------------------------
2000
Investment Income:
Dividend income........................................... $ 103,992
Less: foreign withholding taxes........................... (3,554)
----------
Net dividend income...................................... 100,438
Interest income........................................... 32,539
Less: interest expense.................................... (1,084)
----------
Total income............................................. 131,893
----------
Expenses:
Investment management fees................................ 143,901
Custody and portfolio accounting fees..................... 37,821
Operations agent fees..................................... 29,835
Administration fees....................................... 24,656
Professional fees......................................... 13,206
Amortization of organization costs........................ 6,574
Trustees' fees and expenses............................... 2,486
Other expenses............................................ 6,582
----------
Total expenses........................................... 265,061
----------
Net investment loss...................................... (133,168)
----------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency:
Net realized gain (loss) on:
Investments.............................................. 892,261
Foreign currency transactions............................ (47,939)
Net change in unrealized appreciation on:
Investments.............................................. 2,772,748
Foreign currency translations............................ 1,971
----------
Net Realized and Unrealized Gain on Investments and
Foreign Currency.......................................... 3,619,041
----------
Net Increase in Net Assets Resulting from Operations....... $3,485,873
==========

See Notes to Financial Statements.

22
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- ------------------------------------------------------------------------------

Statements of Changes in Net Assets

23
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- ------------------------------------------------------------------------------

Financial Highlights

- ------------
/1/ Commencement of operations: 10/2/97.
/2/ Annualized
/3/ Amount rounds to less than 0.01%.
/4/ Not Annualized

See Notes to Financial Statements.

24
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

The Portfolio operates under a "Hub and Spoke/(R)/" structure where the
beneficial interest holders of the Portfolio invest substantially all of their
investable assets in the Portfolio ("Hub and Spoke/(R)/" is a registered service
mark of Signature Financial Group, Inc.). 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.

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors Top 50 World ........... 16.3%
Deutsche Top 50 World.................. 83.7%
-----
100.0%
=====

25
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Valuation

Investment Transactions

Investment transactions are recorded on 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 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

26
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- continued

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 future 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 U.S. 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 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.

27
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- concluded

Federal Income Taxes

Expenses

Deferred Organization Costs

NOTE 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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
adviser (the "Adviser") to the Portfolio. As compensation for the services
rendered by DFM under the Management Agreement with the Portfolio, DFM receives
a fee from the Portfolio at an annualized rate of 1.00% of the average daily net
assets, which is computed daily and paid monthly.

28
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 2 -- concluded

For the six months ended February 29, 2000 DFM's advisory fee was $143,901 for
services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation
for its services, DWS receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolio Trust
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at the annual rate of
0.035% of the average daily net assets of the Portfolio for the Portfolio's
then-current fiscal year, subject to a minimum fee of $60,000 annually. At a
meeting held on January 31, 2000 the Board of Trustees of the Portfolio Trust
adopted a resolution to approve an administration agreement between Investment
Company Capital Corp. and the Portfolio Trust, replacing Federated Services
Company, effective April 7, 2000.

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.

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $3,214 in brokerage commissions from Flag Investors Top 50 World
Portfolio as a result of executing agency transactions in portfolio securities.

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.

During the six months ended February 29, 2000, certain portfolios of the
Portfolio Trust purchased/sold securities to/from other portfolios within the
Portfolios Trust and other entities of the Manager at prevailing market values
and in accordance with procedures approved by the Board of Trustees of the
Portfolios Trust.

29
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government........ $ --
Non-U.S. Government.... 23,802,842
-----------
Total.................. $23,802,842
===========

Sales
U.S. Government........ $ --
Non-U.S. Government.... 14,068,042
-----------
Total.................. $14,068,042
===========

At February 29, 2000, the cost of investments, unrealized appreciation, and
unrealized depreciation of investments for U.S. federal income tax purposes was
$28,665,015, $7,233,697 and $1,149,452, respectively.

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

30
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 5 -- Line of Credit Agreement

31
<PAGE>

Flag Investors Top 50 World Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors Top 50 World Portfolio (US Dollar) shareholders voted on
and approved the following proposals at the annual meeting of shareholders on
March 28, 2000. The description of each proposal and number of shares voted are
as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 975,356 11,651
Mr. Richard T. Hale 975,356 11,651
Mr. Joseph R. Hardiman 975,356 11,651
Mr. Louis E. Levy 975,356 11,651
Mr. Eugene J. McDonald 975,356 11,651
Ms. Rebecca W. Rimel 975,356 11,651
Mr. Truman T. Semans 975,356 11,651
Mr. Robert H. Wadsworth 975,356 11,651

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
984,036 0 2,971

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
972,208 11,828 2,971

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
970,724 12,038 4,244

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
971,016 11,754 4,237

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
970,724 11,756 4,527

32
<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.

[FLAG INVESTORS LOGO]

Balanced

Value Builder Fund

Growth

Equity Partners Fund
Emerging Growth Fund

Specialty

Communications Fund
Real Estate Securities Fund

International

International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy

Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income

Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income

Managed Municipal Fund Shares

Money Market

Cash Reserve Prime Shares

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

ICC Distributors, Inc.

TOP50WSA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

Top 50 Asia

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 42.37% for the six months
ended February 29, 2000, outperforming the MSCI Pacific Ex-Japan Index return
of 8.52% for the same time period.

. The Asian and Pacific Rim markets continued their 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. Overall, telecommunications and technology
companies produced the strongest performance.

. The Fund's strong outperformance was primarily due to its overweightings in
the technology and telecommunications sectors 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 50 stocks.

. We expect Asian markets to continue to perform well based on exponential
growth of the technology industry and improving global and regional economic
growth. Still, the year 2000 may be a year of stabilization for the Asian
equity markets, wherein we see some profit-taking and consolidation following
a strong rally. The primary risk to the Asian region is that of the Japanese
economy falling back into a recession.
<PAGE>

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

Flag Investors Top 50 Asia -- Class A

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------------- -------------------------------
Past 6 Past 1 Since inception Past 1 Since inception
Periods ended February 29, 2000 months year 10/14/97 year 10/14/97
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 Asia -
Class A Shares/1/ 42.37% 141.66% 114.29% 128.37% 34.54%
- --------------------------------------------------------------------------------------------------------------------
MSCI Pacific
Ex-Japan Index/2/ 8.52% 33.07% 20.90% 33.07% 8.49%
- --------------------------------------------------------------------------------------------------------------------
Lipper Pacific Region
Funds Average/3/ 29.76% 90.11% 53.84% 90.11% 19.71%
- --------------------------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.
/2/ The MSCI Pacific Ex-Japan Index is a broad-based market index of Asia-
Pacific (except Japan) equity securities. This Index is unmanaged, and
investments cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

Flag Investors Top 50 Asia -- Class B

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
--------------------------------------- -------------------------------
Past 6 Past 1 Since inception Past 1 Since inception
Periods ended February 29, 2000 months year 5/5/98 year 5/5/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Top 50 Asia -
Class B Shares/1/ 41.90% 140.20% 140.87% 128.37% 58.42%
- --------------------------------------------------------------------------------------------------------------------
MSCI Pacific
Ex-Japan Index/2/ 8.52% 33.07% 24.90% 33.07% 12.92%
- --------------------------------------------------------------------------------------------------------------------
Lipper Pacific Region
Funds Average/3/ 29.76% 90.11% 78.37% 90.11% 36.15%
- --------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MSCI Pacific Ex-Japan Index is a broad-based market index of Asia-
Pacific (except Japan) equity securities. This Index is unmanaged, and
investments cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

1
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
Flag Investors Top 50 Asia (the "Fund") (formerly Deutsche Top 50 Asia),
providing a more detailed review of the markets, the portfolio in which the Fund
invests (the "Portfolio"), and our outlook -- all in an easier-to-read format.
We continue to include a complete financial summary of the Fund's operations and
listing of the Portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 42.37% for the six
months ended February 29, 2000, as compared to 8.52% for the MSCI Pacific Ex-
Japan Index. The Fund's Class B shares produced a semi-annual return of 41.90%.

This strong outperformance was primarily due to the Fund's overweighting in
the technology and telecommunications sectors 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 top 50 Asian companies, portfolio activity during the semi-
annual period was somewhat higher than usual.

For example, we sold Hong Kong's Cheung Kong Infrastructure and replaced it with
Infosys Technologies, Ltd., India's fifth largest software exporter. We expect
that Infosys is capitalizing on the strong growth of the software industry and
the internet in particular, and thus has strong upward potential. We sold
Japan's Bridgestone and Minebea, as a strong yen was damaging the former's
international competitiveness and the latter was negatively affected by pricing
pressure on PC component producers. We replaced those holdings with Murata
Manufacturing and Rohm, both Japanese equities. Murata is a leading producer of
capacitors and ceramic filters for the strong growing mobile communications
industry, and Rohm is a leading producer for mainline customized ICs, well known
for development prowess and strong cost competitiveness. Both of these
companies benefited from the strong demand for telecommunications equipment
products.

2
<PAGE>

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

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
that should benefit from stronger commodity prices if economic growth in Europe,
Japan and Asia picks up as expected; Australia's National Mutual, a subsidiary
of France's insurance company AXA; and Japan's Yamanouchi Pharmaceuticals, which
holds important patents and an outstanding production pipeline.

In addition to Infosys Technologies and some of the other new additions to the
Fund, performance winners for the portfolio were largely found amongst the
Fund's telecommunications and technology holdings. These included NTT Mobile
Communications, Softbank, China Telecom, and Asustek Computer. The announcement
of Sony's digitalization and networking strategy stimulated its stock's
performance as did hopes of a successful sales start for its new Playstation 2
product. Another top performer for the Fund was Toyota Motor Corp, which
published its restructuring plans. Toyota also continued to play an important
role in the consolidation process of the Japanese telecommunications industry,
because it has a major holding in one of the merger candidates.

Weaker performers in the portfolio included India's Dr. Reddys Laboratories
and ITC, both of which saw profit-taking after reaching all-time highs. Others
were Korea's LG Electronics and Korea Electric Power, Singapore's GP Batteries,
and Hong Kong's Cathay Pacific Airways. We continue to hold these stocks in the
Fund's portfolio.

Investment Environment

As a whole, Asia ex-Japan rose 8.52% in U.S. dollar terms and Japan rose
14.24% in U.S. dollar terms during the semi-annual period. The Asian and
Pacific Rim markets continued their 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. The bullishness
arose after several companies, including Sony, announced restructuring plans,
with the goal of increasing profitability. The announcement of a mega-merger
among three major Japanese banks was a much-needed step in the restructuring
of the

3
<PAGE>

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

Japanese banking system. By December, Japanese technology stocks rallied on
continued strength in the U.S. economy. Ongoing strong demand for Japanese
products was forecast.

Encouraged by investor confidence of economic recovery in the region, other
Asian equity markets also performed well for the semi-annual period. Hong
Kong's equity market rose, as investors became more optimistic about corporate
earnings. Singapore, Australia, and New Zealand were also among the stronger
performing markets in the region. Conversely, Taiwan's equity market was
volatile during the period due to Chinese threats to use military force in case
Taiwan declares independence.

Overall, telecommunications and technology companies produced the strongest
performance. A revaluation of cellular phone operators worldwide, strong demand
for telecommunications equipment and internet-related products, a very positive
growth outlook, and high liquidity inflows into these sectors combined to push
many of these companies' stocks to new all-time highs. Semiconductor stocks in
particular benefited from high demand for chips.

Looking Ahead

Going forward, several factors lead us to a generally optimistic outlook for
the Asian markets. The recent exponential growth of the technology industry
continues to impact equity investments worldwide. Furthermore, economic growth
continues to improve globally, a positive indicator, in our view, that corporate
profits will do likewise. Within Asia itself, GDP growth remains above world
average, inflation minimal, and interest rates relatively stable. The year 2000
may be a year of stabilization for the Asian equity markets, wherein we see some
profit-taking and consolidation following a strong rally.

In Japan, the forces of modernization will likely continue their battle
against the inertial forces of "Japan, Inc." Following Japan's best annual
stock market performance since 1986 in the calendar year 1999, global investors,
still underweight this market, may continue to provide positive price pressure
in coming months, as Japan continues to seek to control costs, improve
productivity, and increase the viability of its banks. Outside of Australia and
New Zealand, the rest of developed Asia may, in our view, increasingly look to
the U.S. this year, both as a market for its exports as well as an economic
bellwether, especially given the strong links between their currencies and the
dollar.

4
<PAGE>

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

China/Taiwan tensions continue to impact the region's equity markets, but in
our view, once the upcoming elections are over, this negative factor will
dissipate. Rather, the more significant risk to the Asian region is that of the
Japanese economy falling back into a recession.

Given this outlook, we intend to maintain the Fund's overweighting in the
technology, telecommunications, and media sectors. We have seen a significant
shift in the Asian equity markets from property stocks, which have gone from
approximately 50% of the region's indices three years ago to approximately 20%
currently, to technology and telecommunications stocks, which have become an
increasingly crucial part of these countries' economies. This trend is
especially true in Hong Kong and Singapore, and it is a trend we expect to
continue. In our view, Taiwan, Korea, and Japan will also particularly benefit
from an outsourcing trend in the electronics industry. The upturn cycle in the
semiconductor industry also appears to remain strong.

We believe the Fund's focused investment strategy positions the portfolio well
to continue to meet 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
- ---------------------
Klaus Kaldemorgen
Portfolio Manager
February 29, 2000

5
<PAGE>

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

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Flag Investors Top 50 Asia Portfolio, at value........... $44,518,544
Receivable from Manager for expense reimbursement...................... 15,923
Receivable for capital shares sold..................................... 117,598
Deferred organization costs............................................ 6,592
-----------
Total assets.......................................................... 44,658,657
-----------
Liabilities:
Payable for capital shares redeemed.................................... 6,788
Payable to Flag Investors Top 50 Asia Portfolio for contributions...... 110,810
Transfer Agent fees payable............................................ 5,758
Distribution fees payable.............................................. 18,477
Custody and portfolio accounting fees payable.......................... 1,645
Administration fees payable............................................ 5,946
Other accrued expenses................................................. 26,835
-----------
Total liabilities..................................................... 176,259
-----------
Net assets............................................................ $44,482,398
===========
Net Assets Consist of:
Capital stock, $0.001 par value(a)..................................... $ 1,706
Paid-in capital........................................................ 25,699,115
Accumulated net investment loss........................................ (662,885)
Accumulated net realized gain on investments
and foreign currency transactions..................................... 1,978,867
Net unrealized appreciation of investments
and foreign currency transactions..................................... 17,465,595
-----------
Net assets............................................................ $44,482,398
===========
Computation of Net Asset Value, Redemption Price
and Offering Price Per Share:
Net assets -- Class A.................................................. $36,358,150
===========
Shares outstanding -- Class A.......................................... 1,425,153
===========
Net asset value and redemption price per share -- Class A.............. $25.51
======
Offering price per share -- Class A.................................... $26.99
======

Net assets -- Class B.................................................. $ 8,124,248
===========
Shares outstanding -- Class B.......................................... 280,963
===========
Net asset value and offering price per share -- Class B................ $28.92
======
Minimum redemption price per share -- Class B.......................... $27.47
======
</TABLE>

- ------------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements.

6
<PAGE>

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

Statement of Operations
(Unaudited)

<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- -----------------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses allocated from
Flag Investors Top 50 Asia Portfolio:
Dividend income....................................................... $ 82,695
Less: Foreign withholding taxes....................................... (11,229)
-----------
Net dividend income................................................ 71,466
Interest income....................................................... 11,186
Expenses.............................................................. (238,341)
-----------
Net investment loss allocated from the
Flag Investors Top 50 Asia Portfolio............................... (155,689)
-----------
Expenses:
Administration fees................................................... 37,295
Transfer Agent fees................................................... 26,852
Professional fees..................................................... 10,421
Portfolio accounting fees............................................. 10,145
Registration fees..................................................... 8,789
Reports to Shareholders............................................... 7,458
Trustees' fees and expenses........................................... 2,239
Amortization of organization costs.................................... 1,256
Distribution fees -- Class B.......................................... 22,021
Service fees -- Class A............................................... 36,614
Service fees -- Class B............................................... 7,340
Other expenses........................................................ 4,464
-----------
Total expenses..................................................... 174,894
Less: Expense reimbursement of Fund and Portfolio
allocated expenses................................................... (109,829)
-----------
Net expenses....................................................... 65,065
-----------
Net investment loss.............................................. (220,754)
-----------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency allocated from Flag Investors Top 50 Asia Portfolio:
Net realized gain (loss) on:
Investments.......................................................... 2,815,003
Foreign currency transactions........................................ (164)
Net change in unrealized appreciation/(depreciation) on:
Investments.......................................................... 9,718,787
Foreign currency translations........................................ (719)
-----------
Net Realized and Unrealized Gain on Investments and Foreign
Currency allocated from Flag Investors Top 50 Asia Portfolio.......... 12,532,907
-----------
Net Increase in Net Assets Resulting From Operations................... $12,312,153
===========
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

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

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31,
- ----------------------------------------------------------------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment loss.................................. $ (220,754) $ (46,031)
Net realized gain on investments and foreign
currency transactions allocated from
Flag Investors Top 50 Asia Portfolio................ 2,814,839 357,038
Net change in unrealized appreciation on
investments and foreign currency translations
allocated from Flag Investors Top 50
Asia Portfolio...................................... 9,718,068 7,762,530
------------ -----------
Net increase in net assets resulting from
operations.......................................... 12,312,153 8,073,537
------------ -----------
Distributions to Shareholders:
Dividends from net investment income:
Class A............................................. (348,693) (217)
Class B............................................. (51,370) (102)
Distributions from realized gains:
Class A............................................. (1,052,806) --
Class B............................................. (197,139) --
------------ -----------
Total distributions.................................. (1,650,008) (319)
------------ -----------
Capital Share Transactions:
Net proceeds from shares sold........................ 20,278,262 21,563,670
Net proceeds from dividends and distributions
reinvested.......................................... 1,554,095 319
Net cost of shares redeemed.......................... (15,633,427) (2,106,011)
------------ -----------
Net increase in net assets resulting from capital
share transactions.................................. 6,198,930 19,457,978
------------ -----------
Total increase in net assets...................... 16,861,075 27,531,196
Net Assets:
Beginning of period.................................. 27,621,323 90,127
------------ -----------
End of period........................................ $ 44,482,398 $27,621,323
============ ===========
Includes accumulated
net investment loss of............................... $ (662,885) $ (42,068)
------------ -----------
</TABLE>

See Notes to Financial Statements.

8
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period...... $18.79 $ 8.18 $ 12.50
--------- ------- --------
Investment operations:
Net investment income (loss)............... (0.09) (0.10) 0.01
Net realized and unrealized gain
(loss) on investments and
foreign currency allocated
from Flag Investors
Top 50 Asia Portfolio..................... 7.90 10.72 (4.33)
--------- ------- --------
Increase (decrease) from investment
operations................................ 7.81 10.62 (4.32)
--------- ------- --------
Distributions to Shareholders:
Dividends 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............ $ 25.51 $ 18.79 $ 8.18
========= ======= ========
Total Return (based on net asset
value)/2/.................................. 42.37%/4/ 130.00% (34.56)%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's).......... $ 36,358 $23,954 $ 41
Ratios to average net assets:
Expenses/3/.............................. 1.60%/5/ 1.60% 1.60%/5/
Net investment income (loss)/3/.......... (1.13)%/5/ (0.34)% 0.15%/5/
Portfolio Turnover of Flag Investors
Top 50 Asia Portfolio..................... 28%/4/ 51% 54%/4/
</TABLE>

- ---------
/1/ Commencement of operations: 10/14/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 Asia
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 2.22%/5/ 3.50% 247.05%/5/
Net investment income to average net assets (1.75)%/5/ (2.24)% (245.30)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

9
<PAGE>

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

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- -------------------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning of period.............. $21.21 $ 9.28 $ 12.50
------ ------- -------
Investment operations:
Net investment loss................................. (0.15) (0.12) (0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency
allocated from Flag Investors
Top 50 Asia Portfolio............................. 8.89 12.06 (3.20)
------ ------- -------
Increase (decrease) from investment
operations........................................ 8.74 11.94 (3.22)
------ ------- -------
Distributions to Shareholders
Dividends from net investment
income............................................ (0.20) -- --
Distributions from net realized gains.............. (0.83) (0.01) --
------ ------- -------
Total distributions................................ (1.03) (0.01) --
------ ------- -------
Net asset value at end of period.................... $28.92 $ 21.21 $ 9.28
====== ======= =======
Total Return (based on net asset
value)/2/.......................................... 41.90%/4/ 128.65% (25.76)%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's).................. $8,124 $ 3,667 $ 50
Ratios to average net assets:
Expenses/3/...................................... 2.35%/5/ 2.35% 2.35%/5/
Net investment loss/3/........................... (1.90)%/5/ (1.32)% (0.51)%/5/
Portfolio Turnover of Flag Investors
Top 50 Asia Portfolio............................. 28%/4/ 51% 54%/4/
</TABLE>

- -----------
/1/ Commencement of operations: 5/5/98
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Top 50 Asia
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 2.96%/5/ 3.75% 247.80%/5/
Net investment income to average net assets (2.51)%/5/ (2.72)% (245.96)%/5/
</TABLE>
/4/ Not annualized
/5/ Annualized

See Notes to Financial Statements.

10
<PAGE>

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

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Flag Investors Top 50 Asia Portfolio (USDollar)
(formerly the Deutsche Top 50 Asia Portfolio, the "Portfolio"), which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, Deutsche Portfolios the
"Portfolios Trust"), a New York business trust, registered under the 1940 Act as
an open-end investment management company comprised of seven portfolios. 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 two classes of shares to investors, Class A and Class B. Both
Classes of shares are subject to a Distribution fee, and Class B Shares are also
subject to a Service fee. Each Class will bear its respective portion of the
Service and Distribution fees. The Fund commenced operations during October
1997.

Valuation

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. As of
February 29, 2000, the Fund had a beneficial interest of 45.4% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio was held by a similar fund of Deutsche Global Funds, Ltd., an
offshore company, and an affiliate of the Company.

11
<PAGE>

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

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Income, Expenses and Realized and Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio are further allocated
to each Class of shares based on their relative net asset value.

Federal Income Taxes

Distributions to Shareholders

12
<PAGE>

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

NOTE 1 -- concluded

manent 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company has retained
the services of Federated Services Company ("Federated") as administrator. Under
the Administration Agreement, Federated assisted in the operations of the Funds,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated received a fee from the Fund, which was computed
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 for the Fund's then current fiscal year. Federated, in its capacity
as operations agent for the Portfolio and Administrator of the Fund, received a
minimum fee of $37,500 for the first six months of the Fund's fiscal year ending
August 31, 2000. At a meeting held on January 31, 2000, the Board of Directors
of the Company adopted a resolution to approve an administration agreement
between Investment Company Capital Corp. ("ICCC") and the Company, replacing
Federated Services Company, effective April 7, 2000.

13
<PAGE>

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

Notes to Financial Statements (concluded)

NOTE 2 -- concluded

pay to ICC Distributors, for the provision of certain services to the holders
of Class B Shares, a Service fee computed at an annual rate of 0.25% of the
average daily net assets of each such Class of shares. Prior to December 20,
1999 Edgewood Services Inc. served as distributor for the Fund.

For the period covered by these financial statements, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Funds. Investors Bank and Trust Company (Boston) acts as the sub-
administrator for the Fund and as the custodian of the Fund's assets. At a
meeting held on January 31, 2000, the Board of Directors of the Company adopted
a resolution to approve a transfer agent agreement between ICCCan affiliate of
Deutsche Bank AG, and the Company, replacing Federated Shareholder Services
Company, effective April 7, 2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60% and 2.35% of the average daily net assets of Class A Shares and
Class B Shares, respectively, through the year ending December 31, 2000.

For the period ended February 29, 2000, DFM voluntarily reimbursed $109,829 to
the Fund pursuant to this undertaking.

NOTE 3 -- Concentration of Ownership

14
<PAGE>

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

NOTE 4 -- 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>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
------------------------- -------------------------
Shares Amount Shares Amount
--------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold............................... 792,791 $ 16,384,711 1,376,077 $18,173,485
Reinvestment of dividends
and distributions....................... 59,436 1,342,743 19 216
Shares redeemed........................... (701,633) (14,087,399) (106,497) (1,681,431)
-------- ------------ --------- -----------
Net increase............................. 150,594 $ 3,640,055 1,269,599 $16,492,270
-------- ------------ --------- -----------
Capital Shares -- Class B:
Shares sold............................... 161,980 $ 3,893,551 191,167 $ 3,390,185
Reinvestment of dividends
and distributions....................... 8,295 211,352 8 103
Shares redeemed........................... (62,191) (1,546,028) (23,633) (424,580)
-------- ------------ --------- -----------
Net increase.............................. 108,084 $ 2,558,875 167,542 $ 2,965,708
-------- ------------ --------- -----------
</TABLE>

NOTE 5 -- Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Flag Investors Top 50 Asia
Portfolio included elsewhere in this report for discussion of off-balance sheet
risk and concentration of credit risk.

15
<PAGE>

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

Proxy Results (Unaudited)

The Flag Investors Top 50 Asia shareholders voted on and approved the
following proposals at the annual meeting of shareholders on March 28, 2000.
The description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 1,168,099 7,517
Mr. Richard T. Hale 1,168,099 7,517
Mr. Joseph R. Hardiman 1,168,099 7,517
Mr. Louis E. Levy 1,168,099 7,517
Mr. Eugene J. McDonald 1,167,926 7,690
Ms. Rebecca W. Rimel 1,167,197 8,419
Mr. Truman T. Semans 1,167,926 7,690
Mr. Robert H. Wadsworth 1,167,926 7,690

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
1,170,889 2,941 1,787

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,166,551 5,784 3,282

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
1,169,345 4,035 2,237

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
1,168,622 4,775 2,220

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
1,168,562 3,853 3,202

16
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Portfolio of Investments February 29, 2000
(Unaudited)

Australia -- 5.2%
71,662 Australia & New Zealand Banking Group Ltd. ................ $ 440,373
103,337 Broken Hill Proprietary Co., Ltd. ......................... 1,020,854
500,000 National Mutual Holdings Ltd. ............................. 705,985
170,000 News Corporation Ltd. (The) ............................... 2,476,951
20,000 Rio Tinto Ltd. ............................................ 286,077
30,000 Woodside Petroleum Ltd. ................................... 171,278
-----------
5,101,518
-----------
Hong Kong -- 15.6%
1,100,000 Cathay Pacific Airways .................................... 1,526,443
100,000 Cheung Kong Holdings Ltd. ................................. 1,329,856
1,000,000 China Telecom (Hong Kong) Ltd./1/ ......................... 9,186,925
222,400 HSBC Holdings Plc ......................................... 2,550,393
80,000 Sun Hung Kai Properties Ltd. .............................. 722,105
-----------
15,315,722
-----------
India -- 7.3%
50,000 Dr. Reddy's Laboratories Ltd. -- GDR ...................... 1,777,000
15,000 Infosys Technologies Ltd. -- ADR .......................... 4,053,750
57,000 ITC Ltd. -- GDR ........................................... 1,279,650
-----------
7,110,400
-----------
Indonesia -- 0.1%
108,000 PT Telekomunikasi Indonesia ............................... 53,091
-----------
Japan -- 32.9%
37,000 Canon, Inc. ............................................... 1,538,581
50,000 Fujitsu Ltd. .............................................. 1,660,601
10,000 Murata Manufacturing Co., Ltd. ............................ 1,903,549
210 Nippon Telegraph & Telephone Corp. ........................ 2,904,459
130,000 Nomura Securities Co., Ltd. ............................... 3,666,970
87 NTT Mobile Communications Network, Inc. ................... 3,506,915
6,000 Rohm Co., Ltd. ............................................ 1,946,315
5,000 Softbank Corp. ............................................ 7,279,345
</TABLE>

See Notes to Financial Statements.

17
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Portfolio of Investments (continued) February 29, 2000
(Unaudited)

Shares Security Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- continued

Japan -- continued
17,000 Sony Corp. ...................................... $ 5,027,298
16,000 Takeda Chemical Industries ...................... 902,639
25,000 Toyota Motor Co. ................................ 998,635
20,000 Yamanouchi Pharmaceutical Co., Ltd. ............. 955,414
-----------
32,290,721
-----------
Korea -- 10.3%
45,000 Korea Electric Power Corp./1/ ................... 1,125,890
30,408 LG Electronics/1/ ............................... 625,040
55,000 Pohang Iron & Steel Co., Ltd. -- ADR ............ 1,381,875
9,000 Pohang Iron & Steel Co., Ltd./1/ ................ 887,186
26,955 Samsung Electronics ............................. 6,100,654
-----------
10,120,645
-----------
Malaysia -- 1.6%
149,000 Malaysian Oxygen Bhd ............................ 466,599
620,000 Nylex (Malaysia) Bhd ............................ 481,309
188,200 O.Y.L. Industries Bhd ........................... 638,881
-----------
1,586,789
-----------
Philippines -- 0.7%
1,128,000 Ayala Corp. ..................................... 242,225
58,000 Benpres Holdings Corp. -- GDR/1/................. 209,468
176,000 San Miguel Corp. -- Class B...................... 206,149
-----------
657,842
-----------
Singapore -- 9.1%
180,000 City Developments ............................... 730,986
202,600 DBS Group Holdings Ltd. ......................... 2,503,556
500,000 DBS Land Ltd. ................................... 661,368
200,000 GP Batteries International Ltd. ................. 184,487
510,350 Overseas Union Bank Ltd. ........................ 2,264,998
60,000 Singapore Airlines Ltd. ......................... 556,941
200,000 Star Cruises Plc/1/.............................. 1,980,000
-----------
8,882,336
-----------
</TABLE>
See Notes to Financial Statements.

18
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Shares Security Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- concluded

Taiwan -- 15.3%
46,000 Acer, Inc. -- GDR/1/ ............................. $ 625,600
83,000 Advanced Semiconducter Engineering,
Inc. -- GDR/1/ .................................. 1,815,625
235,198 Asustek Computer, Inc. -- GDR-Reg. S ............. 4,221,804
109 Asustek Computer, Inc. -- GDR .................... 1,957
138,270 Taiwan Semiconductor Manufacturing Co.,
Ltd. -- ADR/1/ .................................. 8,270,274
3,960 Uni-President Enterprises Co. -- GDR-144A ........ 36,375
-----------
14,971,635
-----------
United Kingdom -- 0.7%
51,059 Standard Chartered Plc ........................... 720,625
-----------

Total Investments (Cost - $49,607,677) ........................................ 98.8% 96,811,324
Other Assets in Excess of Liabilities ......................................... 1.2% 1,172,526
----- -----------
Net Assets .................................................................... 100.0% $97,983,850
====== ===========
</TABLE>

- ------------
/1/ Non-income producing security.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
144A -- Securities restricted from resale to Qualified Institutional Buyers

See Notes to Financial Statements.

19
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Percentage of
Industry Sector (Unaudited) Net Assets
- -------------------------------------------------------------------------------
Electronics.................................. 22.3%
Computers & Information...................... 17.9%
Telephone Systems............................ 12.4%
Banking...................................... 8.6%
Communications............................... 3.8%
Financial Services........................... 3.7%
Real Estate.................................. 3.5%
Industrial - Diversified..................... 3.3%
Pharmaceuticals.............................. 2.8%
Metals....................................... 2.6%
Media - Broadcasting & Publishing............ 2.5%
Computer Software & Processing............... 2.3%
Airlines..................................... 2.1%
Transportation............................... 2.0%
Electrical Equipment......................... 1.9%
Office Equipment............................. 1.6%
Electric Utilities........................... 1.2%
Automotive................................... 1.0%
Medical Supplies............................. 0.9%
Insurance.................................... 0.7%
Building Materials........................... 0.7%
Chemicals.................................... 0.5%
Beverages, Food & Tobacco.................... 0.3%
Oil & Gas.................................... 0.2%
Other assets in excess of liabilities........ 1.2%
-----
100.0%
=====

20
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Statement of Assets and Liabilities February 29, 2000
(Unaudited)
- ---------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value............................................. $96,811,324
Cash.............................................................. 968,347
Dividends receivable.............................................. 28,072
Interest receivable............................................... 2,328
Receivable for Investors' Beneficial Interest for contributions... 261,489
Deferred organization costs....................................... 34,524
-----------
Total assets..................................................... 98,106,084
-----------
Liabilities:
Payable to Investors' Beneficial Interest for withdrawals......... 6,788
Investment management fees payable................................ 58,142
Custody and portfolio accounting fees payable..................... 3,765
Administration fees payable....................................... 4,424
Organization costs payable........................................ 35,571
Other accrued expenses............................................ 13,544
-----------
Total liabilities................................................ 122,234
-----------
Net assets....................................................... $97,983,850
===========
Net Assets:
Applicable to Investors' Beneficial Interests..................... $97,983,850
-----------
Cost of investments............................................... $49,607,677
===========
</TABLE>
See Notes to Financial Statements.

21
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Statement of Operations
(Unaudited)
For the Six
Months Ended
February 29,
- -------------------------------------------------------------------------------
2000
Investment Income:
Dividend income........................................... $ 181,636
Less: foreign withholding taxes........................... (24,999)
-----------
Net dividend income...................................... 156,637
Interest income........................................... 24,377
Less: interest expense.................................... (8,281)
-----------
Total income............................................. 172,733
-----------
Expenses:
Investment management fees................................ 389,924
Custody and portfolio accounting fees..................... 46,084
Operations agent fees..................................... 29,835
Administration fees....................................... 24,656
Professional fees......................................... 13,206
Amortization of organization costs........................ 6,574
Trustees' fees and expenses............................... 2,486
Other expenses............................................ 6,622
-----------
Total expenses........................................... 519,387
-----------
Net investment loss...................................... (346,654)
-----------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency:
Net realized gain on:
Investments.............................................. 6,210,096
Foreign currency transactions............................ 735
Net change in unrealized appreciation/(depreciation) on:
Investments.............................................. 22,019,610
Foreign currency translations............................ (1,864)
-----------
Net Realized and Unrealized Gain on Investments
and Foreign Currency...................................... 28,228,577
-----------
Net Increase in Net Assets Resulting from Operations....... $27,881,923
===========

See Notes to Financial Statements.

22
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets
(Unaudited)

See Notes to Financial Statements.

23
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Financial Highlights

/1/ Commencement of operations: 10/14/97
/2/ Annualized
/3/ Not Annualized

See Notes to Financial Statements.

24
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

Flag Investors Portfolios Trust ("Portfolio Trust") (re-named from Deutsche
Portfolios on January 18, 2000) was organized on June 20, 1997, as a business
trust under the laws of the State of New York. The Portfolios 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 Asia Portfolio (US Dollar).

The investment manager (the "Manager") 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 commenced
operations on October 14, 1997.

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors Top 50 Asia ........... 45.4%
Deutsche Top 50 Asia ................. 54.6%
-----
100.0%
=====

25
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Valuation

Investment Transactions

Investment transactions are recorded on 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 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.

26
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- -------------------------------------------------------------------------------

NOTE 1 -- continued

Forward Foreign Currency Contracts

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.

27
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Foreign Currency Translation

The books and records of the Portfolio are maintained in U.S. 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 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

28
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- concluded

Deferred Organization Costs

Organization costs incurred in connection with the organization and initial
registration of the Portfolios 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 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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
adviser (the "Adviser") to the Portfolio. As compensation for the services
rendered by DFM under the Management Agreement with the Portfolio, DFM receives
a fee from the Portfolio at an annualized rate of 1.00% of the average daily net
assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's advisory fee was $389,924 for
services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation for
its services, DWS receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolios Trust had
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at the annual rate of
0.035% of the average daily net assets of the Portfolio for the Portfolio's
then-current fiscal year, subject to a minimum fee of $60,000 annually. At a
meeting held on January 31, 2000, the Board of Trustees of the Portfolios Trust
adopted a resolution to approve an administration agreement between Investment
Company Capital Corp. and the Portfolios Trust, replacing Federated Services
Company, effective April 7, 2000.

29
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 2 -- concluded

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $0 in brokerage commissions from Flag Investors Top 50 Asia Portfolio
as a result of executing agency transactions in portfolio securities.

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 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government........ $ --
Non-U.S. Government.... 22,159,339
-----------
Total.................. $22,159,339
===========

Sales
U.S. Government........ $ --
Non-U.S. Government.... 23,424,088
-----------
Total.................. $23,424,088
===========

30
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 3 -- concluded

At February 29, 2000, the cost of investments, unrealized appreciation and
unrealized depreciation of investments for U.S. federal income tax purposes was
$49,607,677, $48,225,008 and $1,021,361, respectively.

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

NOTE 5 -- Line of Credit Agreement

The Portfolios 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 Portfolios Trust. 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 six months ended February 29, 2000, the Portfolio
periodically utilized the line of credit and incurred interest expense as
disclosed in the Statements of Operations. The weighted average interest rate
paid by the Portfolios Trust was 5.90% and the maximum and average amount of the
loans outstanding during the borrowing period was $13,985,293 and $1,484,271,
respectively. At February 29, 2000, the Portfolio had no debt outstanding under
the line of credit agreement.

31
<PAGE>

Flag Investors Top 50 Asia Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors Top 50 Asia Portfolio (US Dollar) shareholders voted on and
approved the following proposals at the annual meeting of shareholders on March
28, 2000. The description of each proposal and number of shares voted are as
follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 2,252,132 14,499
Mr. Richard T. Hale 2,252,132 14,499
Mr. Joseph R. Hardiman 2,252,132 14,499
Mr. Louis E. Levy 2,252,132 14,499
Mr. Eugene J. McDonald 2,251,849 14,782
Ms. Rebecca W. Rimel 2,250,357 16,274
Mr. Truman T. Semans 2,251,849 14,782
Mr. Robert H. Wadsworth 2,251,849 14,782

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
2,257,516 5,668 3,445

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
2,249,165 11,130 6,337

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
2,254,578 7,744 4,310

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
2,253,091 9,248 4,293

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
2,252,842 7,453 6,337

32
<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.

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

[FLAG INVESTORS LOGO]

Balanced

Value Builder Fund

Growth

Equity Partners Fund
Emerging Growth Fund

Specialty

Communications Fund
Real Estate Securities Fund

International

International Equity Fund
European Mid-Cap Fund
Japanese Equity Fund

Top 50 Strategy

Top 50 World
Top 50 Europe
Top 50 Asia
Top 50 US

Fixed Income

Total Return U.S. Treasury Fund Shares
Short-Intermediate Income Fund

Tax-Free Income

Managed Municipal Fund Shares

Money Market

Cash Reserve Prime Shares

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

ICC Distributors, Inc.

TOP50ASA(4/00)
<PAGE>

[FLAG INVESTORS LOGO]

Japanese Equity
Fund

Semi-Annual Report

February 29, 2000
<PAGE>

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

. The Fund's Class A shares produced a total return of 48.85% for the six months
ended February 29, 2000, outperforming the MSCI Japan Index return of 14.24%
for the same time period.

. The Japanese equity market continued its rally back from 1998's global
economic woes primarily due to low domestic interest rates, a more stable
currency, substantial fiscal packages, increased industrial production, better
than expected GDP growth, and ongoing gains in business sentiment. Overall,
telecommunications and technology companies produced the strongest
performance.

. We expect the Japanese market to continue to perform well based on improving
global and regional economic growth and on ongoing corporate restructuring
efforts within Japanese companies toward enhanced profitability. The biggest
contribution to growth will continue to be, we believe, information technology
spending and investment. The primary risk to the market is a slowdown of
Japanese companies' restructuring efforts.
<PAGE>

Fund Performance
- --------------------------------------------------------------------------------
Flag Investors Japanese Equity Fund -- Class A

<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
---------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 10/20/97 year 10/20/97
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Equity Fund -
Class A Shares/1/ 48.85% 159.29% 139.58% 145.03% 41.34%
- -----------------------------------------------------------------------------------------------------
MSCI Japan Index/2/ 14.24% 53.01% 40.47% 53.01% 15.72%
- -----------------------------------------------------------------------------------------------------
Lipper Japanese Funds Average/3/ 27.41% 106.16% 113.81% 106.16% 35.33%
- -----------------------------------------------------------------------------------------------------
</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 dividends 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 charge and expense structure.
/2/ The MSCI Japan Index is a broad-based market index of equity securities
listed on the Tokyo Stock Exchange. This Index is unmanaged, and investments
cannot be made in an index.
/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 respective
categories indicated. These figures do not reflect sales charges.

Flag Investors Japanese Equity Fund -- Class B

Cumulative Total Returns Average Annual Total Returns
----------------------------------------- ----------------------------
Since Since
Past 6 Past 1 inception Past 1 inception
Periods ended February 29, 2000 months year 8/10/98 year 8/10/98
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Equity Fund -
Class B Shares/1/ 48.23% 157.12% 191.47% 144.27% 93.80%
- ----------------------------------------------------------------------------------------------------------------------------
MSCI Japan Index/2/ 14.24% 53.01% 86.15% 53.01% 51.55%
- ----------------------------------------------------------------------------------------------------------------------------
Lipper Japanese Funds Average/3/ 27.41% 106.16% 136.19% 106.16% 75.44%
- ----------------------------------------------------------------------------------------------------------------------------
</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 dividends and capital gain distributions and include the
Fund's maximum 5.00% contingent deferred sales charge. Performance figures
for the classes differ because each class maintains a distinct charge and
expense structure.
/2/ The MSCI Japan Index is a broad-based market index of equity securities
listed on the Tokyo Stock Exchange. This Index is unmanaged, and investments
cannot be made in an index.
/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
respective categories indicated. These figures do not reflect sales charges.

1
<PAGE>

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

Dear Shareholder:

We are pleased to present you with this newly-designed semi-annual report for
the Flag Investors Japanese Equity Fund (the "Fund") (formerly Deutsche Japanese
Equity), providing a more detailed review of the markets, the portfolio, in
which the Fund invests (the "Portfolio") and our outlook--all in an easier-to-
read format. We continue to include a complete financial summary of the Fund's
operations and listing of the portfolio's holdings.

Fund Performance

For the first half of the fiscal year, the Fund significantly outperformed its
benchmark. The Fund's Class A shares produced a return of 48.85% for the six
months ended February 29, 2000, as compared to 14.24% for the MSCI Japan Index.
The Fund's Class B shares produced a semi-annual return of 48.23%.

This strong outperformance was primarily due to the Fund's overweighting in
the telecommunications and services sectors, to its concentration on information
technology- and software-related stocks within the services sector and to strong
stock selection across the market sectors. The Fund was also overweight in the
electrical equipment, electronics and finance sectors, which benefited
performance. Equally important, we were underweight in what are known as "Old
Japan" sectors, such as steel, shipbuilding, and construction. These sectors
significantly underperformed due primarily to overcapacities and unwinding of
cross-shareholdings.

We continued to seek Japan's highest quality, market-leading companies that
are internationally known and internationally competitive, that are best
positioned to benefit from the trends of deregulation and trade liberalization,
and that are focused on enhancing shareholder value through restructuring and
other corporate strategies.

For example, one of the key drivers of Fund performance during the semi-annual
period was Sony. The announcement of Sony's digitalization and networking
strategy stimulated its stock's performance as did hopes of a successful sales
start for its new Playstation 2 product. Other strong performers for the Fund
included NTT Mobile Communications, which benefited from the overall success of
the mobile phone market and especially i-mode service; Murata Manufacturing,
which saw strong order growth in cellular phone-related parts,

2
<PAGE>

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

e.g. multilayer ceramic capacitors; and Nintendo, which continued to expand its
product content market worldwide. Based on a strong Initial Public Offering
(IPO) pipeline in Japan, Hikari Tsushin, a mobile phone company, and Softbank, a
computers and information company, both benefited from the high profitability of
their investments in venture capital companies. In the finance sector, the
Fund's strongest performer was Nomura Securities, which launched several new
equity funds and which also saw increased activity and volume in the stock
market during the period.

Investment Environment

Japan, along with the Asian and Pacific Rim markets as a whole, continued its
rally back from 1998's global economic woes. Several inter-related factors
contributed to Japan's economic recovery track. These included:

. low domestic interest rates
. a more stable currency
. substantial fiscal packages
. increased industrial production, and
. better than expected GDP growth.

Based on its economic recovery track, Japan's equity market rose 14.24% in
U.S. dollar terms during the semi-annual period on strong foreign buying and
ongoing gains in business sentiment.

After trading virtually sideways from July through September 1999, the market
broke out to the upside toward the end of October. The bullishness arose after
several companies, including Sony, announced restructuring plans, with the goal
of increasing profitability. The announcement of a mega-merger among three
major Japanese banks -- Dai Ichi Kangyo, Industrial Bank of Japan and Fuji Bank
- -- was a much-needed step in the restructuring of the Japanese banking system.
In October, the majority of Japanese companies released half-year results that
were either in line with or better than expectations.

Though volatile, the market continued its advance, fueled by a favorable
international environment, by an ongoing enthusiasm for the technology sector,
especially cell phone related, and by an unbroken internet fever. In December,
Japanese technology stocks rallied mid-month on continued strength in the U.S.
economy and on forecasts of ongoing strong demand for Japanese products.
However, in January 2000, there was a strong correction in the high-flying
technology stocks of 1999,

3
<PAGE>

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

primarily due to technical factors. The correction was short-lived. In February,
selected technology stocks recovered. The equity market demonstrated significant
segmentation between "Old Japan" and "New Japan" stocks.

Looking Ahead

Going forward, several factors lead us to a generally optimistic outlook for
the Japanese equity market. The recent exponential growth of the technology
industry continues to impact equity investments worldwide. Furthermore,
economic growth continues to improve globally and restructuring efforts within
Japanese companies remain on an upward trend, both positive indicators, in our
view, that corporate profits will do likewise. On the other hand, corporate
restructuring tends to lead to higher unemployment and thus domestic consumption
may remain weak. Still, the major risk to the market, in our view, is if
company restructuring efforts slow and profitability does not rise, then the
Japanese economy may fall back into a recession. We do not anticipate any
change in monetary policy from the Bank of Japan before autumn 2000 at the
earliest.

The forces of modernization in Japan will likely continue their battle against
the inertial forces of "Japan, Inc." Following Japan's best annual stock market
performance since 1986 in the calendar year 1999, global investors, still
underweight this market, may continue to provide positive price pressure in
coming months, as Japan continues to seek to control costs, improve
productivity, and increase the viability of its banks. The biggest contribution
to growth will continue to be, we believe, information technology spending and
investment. However, not all companies will benefit equally.

Given this outlook, individual stock picking based on fundamental analysis,
extensive research and local insight becomes increasingly important. We intend
to maintain the Fund's overweighting in the technology and telecommunications
sectors. Due to stretched valuations, however, we will likely decrease that
over-

4
<PAGE>

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

weight a bit, choosing individual high quality stocks in these sectors that are
comparatively undervalued. We also intend to maintain the Fund's underweighting
in consumption, construction, and most of the "Old Japan" sectors.

We believe the Fund's high quality investment strategy positions the portfolio
well to continue to meet 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/ Lilian Haag
- ---------------
Lilian Haag
Portfolio Manager
February 29, 2000

5
<PAGE>

Flag Investors Japanese Equity Fund
- ------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in Flag Investors Japanese Equity Portfolio, at value... $14,379,061
Receivable from Manager for expense reimbursement.................. 22,047
Receivable for capital shares sold................................. 200
Receivable from Flag Investors Japanese Equity Portfolio
for withdrawals................................................... 23,713
Other receivables.................................................. 23,354
Deferred organization costs........................................ 6,619
-----------
Total assets.................................................. 14,454,994
-----------
Liabilities:
Payable for capital shares redeemed................................ 47,267
Transfer Agent fees payable........................................ 5,271
Distribution fees payable.......................................... 12,148
Custody and portfolio accounting fees payable...................... 1,645
Administration fees payable........................................ 5,942
Other accrued expenses............................................. 31,983
-----------
Total liabilities............................................. 104,256
-----------
Net assets.................................................... $14,350,738
===========
Net Assets Consist of:
Capital stock, $0.001 par value(a)................................. $ 516
Paid-in capital.................................................... 7,147,894
Accumulated net investment loss.................................... (114,579)
Accumulated net realized loss on investments and
foreign currency transactions..................................... (280,328)
Net unrealized appreciation of investments
and foreign currency transactions................................. 7,597,235
-----------
Net assets.................................................... $14,350,738
===========
Computation of Net Asset Value, Redemption Price
and Offering Price Per Share:
Net assets -- Class A.............................................. $ 4,155,580
===========
Shares outstanding -- Class A...................................... 176,643
===========
Net asset value and redemption price per share -- Class A.......... $23.53
======
Offering price per share -- Class A................................ $24.90
======

Net assets -- Class B.............................................. $10,195,158
===========
Shares outstanding -- Class B...................................... 339,477
===========
Net asset value and offering price per share -- Class B............ $30.03
======
Minimum redemption price per share -- Class B...................... $28.53
======
</TABLE>

- -----------
(a) 250,000,000 shares authorized.

See Notes to Financial Statements.

6
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Statement of Operations
(Unaudited)

<TABLE>
<CAPTION>
For the Six
Months Ended
February 29,
- ---------------------------------------------------------------------------------
2000
<S> <C>
Investment Income:
Investment Income and Expenses allocated from
Flag Investors Japanese Equity Portfolio:
Dividend income................................................... $ 13,083
Less: Foreign withholding taxes................................... (1,962)
----------
Net dividend income............................................ 11,121
Interest income................................................... 13,832
Expenses.......................................................... (132,719)
----------
Net investment loss allocated from the
Flag Investors Japanese Equity Portfolio....................... (107,766)
----------
Expenses:
Administration fees............................................... 37,295
Transfer Agent fees............................................... 26,355
Professional fees................................................. 10,421
Portfolio accounting fees......................................... 10,145
Registration fees................................................. 8,680
Reports to Shareholders........................................... 7,458
Trustees' fees and expenses....................................... 2,239
Amortization of organization costs................................ 1,256
Distribution fees - Class B....................................... 30,728
Service fees -- Class A........................................... 6,490
Service fees -- Class B........................................... 10,242
Other expenses.................................................... 3,828
----------
Total expenses................................................. 155,137
Less: Expense reimbursement of Fund expenses...................... (150,082)
----------
Net expenses.................................................... 5,055
----------
Net investment loss............................................ (112,821)
----------
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency allocated from
Flag Investors Japanese Equity Portfolio:
Net realized gain on:
Investments.................................................... 2,314,788
Foreign currency transactions.................................. 20,442
Net change in unrealized appreciation/(depreciation) on:
Investments.................................................... 3,840,662
Foreign currency translations.................................. (6,731)
----------
Net Realized and Unrealized Gain on Investments and
Foreign Currency allocated from
Flag Investors Japanese Equity Portfolio......................... 6,169,161
----------
Net Increase in Net Assets Resulting From Operations............... $6,056,340
==========
</TABLE>

See Notes to Financial Statements.

7
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets

Net change in unrealized appreciation
on investments and foreign currency
translations allocated from
Flag Investors Japanese Equity Portfolio......... 3,833,931 3,771,153
------------ -----------
Net increase in net assets resulting
from operations.................................. 6,056,340 4,154,275
------------ -----------
Distributions to Shareholders:
Distributions from realized gains:
Class A......................................... (1,301,081) --
Class B......................................... (1,663,439) --
------------ -----------
Total distributions............................... (2,964,520) --
------------ -----------
Capital Share Transactions:
Net proceeds from shares sold..................... 23,229,048 16,293,920
Net proceeds from dividends
and distributions reinvested..................... 2,454,865 --
Net cost of shares redeemed....................... (30,039,548) (5,130,586)
------------ -----------
Net increase (decrease) in net assets
resulting from capital share transactions........ (4,355,635) 11,163,334
------------ -----------
Total increase (decrease) in net assets......... (1,263,815) 15,317,609
Net Assets:
Beginning of period............................. 15,614,553 296,944
------------ -----------
End of period................................... $ 14,350,738 $15,614,553
============ ===========
Includes accumulated net investment loss of........ $ (114,578) $ (1,757)
------------ -----------
</TABLE>

See Notes to Financial Statements.

8
<PAGE>

Flag Investors Japanese Equity Fund
- -------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- --------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning
of period......................................... $20.12 $ 9.85 $ 12.50
------ ------- -------
Investment operations:
Net investment income loss........................ (0.18) 0.00/4/ (0.07)
Net realized and unrealized gain
(loss) on investments and
foreign currency allocated
from Flag Investors
Japanese Equity Portfolio........................ 9.40 10.27 (2.58)
------ ------- -------
Increase (decrease) from
investment operations............................ 9.22 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................... $23.53 $ 20.12 $ 9.85
====== ======= =======
Total Return
(based on net asset value)/2/..................... 48.85%/5/ 104.26% (21.20)%/5/
Ratios and Supplemental Data:
Net assets, end of period (000's)................. $4,156 $11,010 $ 14
Ratios to average net assets:
Expenses/3/...................................... 1.60%/6/ 1.60% 1.60%/6/
Net investment loss/3/........................... (1.29)%/6/ (1.29)% (1.00)%/6/
Portfolio Turnover of Flag Investors
Japanese Equity Portfolio........................ 78%/5/ 133% 95%/5/
</TABLE>

- --------------
/1/ Commencement of operations: 10/20/97.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the Flag Investors Japanese Equity
Portfolios' expenses net of expense reimbursments. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 3.72%/6/ 5.88% 454.24%/6/
Net investment income to average net assets (3.41)%/6/ (5.57)% (453.64)%/6/
</TABLE>
/4/ Amount rounds to less than $0.01.
/5/ Not annualized.
/6/ Annualized.

See Notes to Financial Statements.

9
<PAGE>

Flag Investors Japanese Equity Fund
- -------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
For the Six For the For the Period
Months Ended Year Ended Ended/1/
February 29, August 31, August 31,
- ---------------------------------------------------------------------------------------------------
2000 1999 1998
(Unaudited)
<S> <C> <C> <C>
Net asset value at beginning
of period........................................... $ 24.58 $ 12.11 $12.50
------- ------- ------
Investment operations:
Net investment loss................................. (0.22) (0.12) (0.01)
Net realized and unrealized gain
(loss) on investments and
foreign currency allocated
from Flag Investors
Japanese Equity Portfolio.......................... 11.48 12.59 (0.38)
------- ------- ------
Increase (decrease) from
investment operations.............................. 11.26 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..................... $ 30.03 $ 24.58 $12.11
======= ======= ======
Total Return
(based on net asset value)/2/....................... 48.23%/4/ 102.97% (3.12)%/4/
Ratios and Supplemental Data:
Net assets, end of period (000's)................... $10,195 $ 4,604 $ 283
Ratios to average net assets:
Expenses/3/........................................ 2.35%/5/ 2.35% 2.35%/5/
Net investment loss/3/............................. (1.93)%/5/ (1.74)% (1.25)%/5/
Portfolio Turnover of Flag Investors
Japanese Equity Portfolio.......................... 78%/4/ 133% 95%/4/
</TABLE>

- ----------------
/1/ Commencement of operations: 8/10/98.
/2/ Total Return based on net asset value, excluding transaction charges,
assumes a purchase of common stock at net asset value at the beginning of
each period, reinvestment of distributions at net asset value and a
redemption on the last day of the period, also at net asset value. During
the period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
/3/ Includes the Fund's allocated portion of the corresponding Flag Investors
Japanese Equity Portfolios' expenses net of expense reimbursments. Had the
Manager not undertaken to reimburse such expenses, the ratios of expenses
and net investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C>
Expenses to average net assets 4.65%/5/ 14.99% 454.99%/5/
Net investment income to average net assets (4.23)%/5/ (14.38)% (453.89)%/5/
</TABLE>
/4/ Not annualized.
/5/ Annualized.

See Notes to Financial Statements.

10
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Flag Investors Japanese Equity Portfolio (US Dollar)
(formerly, the Deutsche Japanese Equity Portfolio, the "Portfolio") which has
substantially the same investment objective as the Fund. The Portfolio is a
series of the Flag Investors Portfolios Trust (formerly, the Deutsche Portfolios
the "Portfolios Trust"), a New York business trust, registered under the 1940
Act, as an open-end investment management company and comprised of seven
portfolios. 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 two classes of shares to investors, Class A shares and Class B
shares. Each class of shares is subject to a Distribution fee and Class B shares
are also subject to a Service fee. Each Class will bear its respective portion
of the Service and Distribution fees. The Funds commenced operations during
October 1997.

Valuation

The value of a Fund 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. As of
February 29, 2000, the Fund had a beneficial interest of 47.9% in the net
assets of the Portfolio. At February 29, 2000, the remaining interest in the
Portfolio was held by a similar fund of Deutsche Global Funds Ltd., an
offshore company and an affiliate of the Company.

11
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Income, Expenses and Realized and Unrealized Gains and Losses

The Fund records its proportionate share of the investment income,
including accretion of discount and amortization of premium, 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 attributable to more than one Fund of the
Company are allocated among the respective Funds. The investment income and
expenses of each Fund (other than Class specific expenses), and realized and
unrealized gains and losses allocated from the Portfolio are further allocated
to each Class of shares based on their relative net asset value.

Distributions to Shareholders

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

12
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

NOTE 1 -- concluded

nization 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 2 -- Significant Agreements and Transactions with Affiliates

For the period covered by these financial statements, the Company retained the
services of Federated Services Company ("Federated") as administrator. Under the
Administration Agreement, Federated assisted in the operations of the Fund,
subject to the direction and control of the Board of Directors of the Company.
For its services, Federated received a fee from each Fund, which was computed
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 for the Fund's then current fiscal year. Federated, in its
capacity as operations agent for the Portfolio Trust and Administrator of the
Fund, received a minimum fee of $37,500 for the first six months of the Fund's
fiscal year ending August 31, 2000. At a meeting held on January 31, 2000, the
Board of Directors of the Company adopted a resolution to approve an
administration agreement between Investment Company Capital Corp. ("ICCC") and
the Company, replacing Federated, effective April 7, 2000.

The Company has entered into a distribution agreement with ICC Distributors,
Inc. ("ICC Distributors"). ICC Distributors serves as principal distributor for
shares of the Fund. Class A Shares and Class B Shares pay a distribution fee to
the Distributor in an amount computed at an annual rate of 0.25% and 0.75%,
respectively, of the average daily net assets of the Fund represented by Class A
Shares and Class B Shares to finance any activity that is principally intended
to result in the sale of each such class of funds. The Fund will pay to
ICCDistributors, for the provision of certain services to the holders of Class B
Shares, a Service fee computed at an annual rate of 0.25% of the average daily
net assets of each such Class of shares. Prior to December 20, 1999 Edgewood
Services Inc. served as distributor for the Fund.

13
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 2 -- concluded

For the period covered by these financial statements, Federated Shareholder
Services Company served as the transfer agent and dividend disbursing agent for
the Fund. IBT Fund Services (Canada) Inc. provides fund accounting services to
the Fund. Investors Bank and Trust Company (Boston) acts as the sub-
administrator for the Fund and as the custodian of the Fund's assets. At a
meeting held on January 31, 2000, the Board of Directors of the Company adopted
a resolution to approve a transfer agent agreement between ICCC, an affiliate of
Deutsche Bank AG, and the Company, replacing Federated Shareholder Services
Company, effective April 7, 2000.

Expense Reimbursements

By an Expense Limitation agreement dated October 14, 1999, between the Company
and DFM, DFMhas 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), at not more
than 1.60% and 2.35% of the average daily net assets of Class A Shares and Class
B Shares, respectively, through the year ending December 31, 2000.

For the period ended February 29, 2000, DFM voluntarily reimbursed $150,082 to
the Fund pursuant to this undertaking.

NOTE 3 -- Concentration of Ownership

14
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

NOTE 4 -- 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>
Period Ended
February 29, 2000 Year Ended
(Unaudited) August 31, 1999
------------------------------------- -------------------------
Shares Amount Shares Amount
------------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C>
Capital Shares -- Class A:
Shares sold................................ 797,817 $ 18,196,174 775,493 $12,552,723
Reinvestment of dividends
and distributions......................... 46,077 980,977 -- --
Shares redeemed............................ (1,214,589) (27,681,111) (229,605) (4,506,823)
---------- ------------ --------- -----------
Net increase (decrease)................... (370,695) $ (8,503,960) 545,888 $ 8,045,900
---------- ------------ --------- -----------
Capital Shares -- Class B:
Shares sold................................ 177,643 $ 5,032,874 191,425 $ 3,741,197
Reinvestment of dividends
and distributions......................... 54,127 1,473,888 -- --
Shares redeemed............................ (79,645) (2,358,437) (27,405) (623,763)
---------- ------------ --------- -----------
Net increase............................... 152,125 $ 4,148,325 164,020 $ 3,117,434
---------- ------------ --------- -----------
</TABLE>

NOTE 5 - Off-Balance Sheet Risk and Concentration of Credit Risk

See Notes to the Financial Statements of the Flag Investors Japanese Equity
Portfolio (US Dollar) included elsewhere in this report for discussion of off-
balance sheet risk and concentration of credit risk.

15
<PAGE>

Flag Investors Japanese Equity Fund
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors Japanese Equity Fund shareholders voted on and approved the
following proposals at the annual meeting of shareholders on March 28, 2000.
The description of each proposal and number of shares voted are as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 320,136 1,509
Mr. Richard T. Hale 320,136 1,509
Mr. Joseph R. Hardiman 320,136 1,509
Mr. Louis E. Levy 320,136 1,509
Mr. Eugene J. McDonald 320,136 1,509
Ms. Rebecca W. Rimel 320,136 1,509
Mr. Truman T. Semans 320,136 1,509
Mr. Robert H. Wadsworth 320,136 1,509

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
319,545 0 2,100

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
318,229 1,136 2,280

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
319,365 0 2,280

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
318,229 1,136 2,280

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
318,229 1,136 2,280

16
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Portfolio of Investments February 29, 2000
(Unaudited)

Shares Security Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 102.9%

Advertising -- 1.0%
13,000 Aoi Advertising Promotion, Inc. ................. $ 307,552
-----------
Automotive -- 5.1%
70,000 Mitsubishi Motors Corp./1/ ...................... 222,293
9,000 Toyoda Gosei Co., Ltd. .......................... 624,022
17,000 Toyota Motor Co. ................................ 679,072
-----------
1,525,387
-----------
Banking -- 2.3%
43,000 Asahi Bank Ltd. ................................. 181,938
45,000 Sakura Bank Ltd. ................................ 256,733
26,000 Sanwa Bank ...................................... 239,181
-----------
677,852
-----------
Beverages, Food & Tobacco -- 0.7%
30 Japan Tobacco, Inc. ............................. 214,286
-----------
Chemicals -- 1.8%
10,000 Shin-Etsu Chemical Co., Ltd. .................... 541,401
-----------
Commercial Services -- 2.9%
300 Bellsystem 24, Inc. ............................. 263,421
2,000 Benesse Corp. ................................... 400,364
30,000 Mitsubishi Corp. ................................ 221,383
-----------
885,168
-----------
Communications -- 9.5%
500 Hikari Tsushin, Inc. ............................ 950,864
2,000 Matsushita Communication Industrial Co., Ltd. ... 338,490
30 NTT Mobile Communications Network, Inc. ......... 1,209,281
20,000 Toyo Communication Equipment Co., Ltd./1/ ....... 341,219
-----------
2,839,854
-----------
</TABLE>

See Notes to Financial Statements.

17
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Portfolio of Investments (continued) February 29, 2000
(Unaudited)

Shares Security Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- continued

Computer Software & Processing -- 6.8%
11,000 Fujitsu Ltd. .................................... $ 365,332
3,000 Konami Co., Ltd. ................................ 528,207
7,000 Nihon Unisys Ltd. ............................... 191,083
640 Obic Co., Ltd. .................................. 558,471
5,000 Toyo Information Systems Co., Ltd. .............. 396,269
-----------
2,039,362
-----------
Computers & Information -- 13.4%
1,000 Fujitsu Support and Service, Inc. ............... 641,492
2,000 InterQ, Inc./1/ ................................. 1,565,061
2,000 Rohm Co., Ltd. .................................. 648,772
800 Softbank Corp. .................................. 1,164,695
-----------
4,020,020
-----------
Cosmetics & Personal Care -- 2.0%
1,500 Fancl Corp. ..................................... 353,367
9,000 Kao Corp. ....................................... 238,717
-----------
592,084
-----------
Electrical Equipment -- 18.6%
5,500 Fanuc Ltd. ...................................... 535,487
60,000 Furukawa Electric (The) Co. ..................... 916,652
28,000 Hitachi Ltd. .................................... 381,911
12,000 Hosiden Corp. ................................... 636,579
2,500 Mabuchi Motor Co., Ltd. ......................... 308,462
60,000 Mitsubishi Electric Corp. ....................... 531,210
4,000 Murata Manufacturing Co., Ltd. .................. 761,419
13,000 Nikon Corp. ..................................... 438,854
70,000 Sanyo Electric Co., Ltd. ........................ 285,350
15,000 Sharp Corp. ..................................... 313,922
2,500 SMC Corp. ....................................... 464,058
-----------
5,573,904
-----------
</TABLE>

See Notes to Financial Statements.

18
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

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

Electronics -- 7.9%
15,000 Olympus Optical Co., Ltd. ....................... $ 199,955
3,000 Sony Corp. ...................................... 887,170
40,000 Star Micronics Co., Ltd. ........................ 672,975
4,000 Tokyo Electron Ltd. ............................. 609,645
-----------
2,369,745
-----------
Entertainment & Leisure -- 4.8%
7,000 Fuji Photo Film ................................. 307,643
3,000 Nintendo Co., Ltd ............................... 654,868
5,500 People Co., Ltd. ................................ 490,446
-----------
1,452,957
-----------
Financial Services -- 8.0%
2,000 Acom Co., Ltd. .................................. 212,193
1,900 Aiful Corp. ..................................... 399,536
20,000 Nikko Securities Co., Ltd. ...................... 257,871
30,000 Nomura Securities Co., Ltd. ..................... 846,224
2,500 Orix Corp. ...................................... 432,211
2,000 Takefuji Corp. .................................. 261,146
-----------
2,409,181
-----------
Heavy Machinery -- 2.8%
6,500 Fuji Machine Manufacturing Co., Ltd. ............ 429,982
9,000 THK Co., Ltd. ................................... 397,179
-----------
827,161
-----------
Media -- Broadcasting & Publishing -- 1.1%
15 Fuji Television Network, Inc. ................... 333,030
-----------
Medical Supplies -- 1.1%
6,000 Takeda Chemical Industries ...................... 338,490
-----------
</TABLE>

See Notes to Financial Statements.

19
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Portfolio of Investments (concluded) February 29, 2000
(Unaudited)

Shares Security Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- concluded

Office Equipment -- 2.0%
8,000 Canon, Inc. ..................................... $ 332,666
15,000 Ricoh Co., Ltd. ................................. 269,017
-----------
601,683
-----------
Pharmaceuticals -- 2.4%
12,000 Fujisawa Pharmaceutical Co., Ltd. ............... 394,177
7,000 Yamanouchi Pharmaceutical Co., Ltd. ............. 334,395
-----------
728,572
-----------
Real Estate -- 0.4%
15,000 Mitsubishi Estate Co., Ltd. ..................... 131,301
-----------
Restaurants -- 1.4%
6,600 Saizeriya Co., Ltd. ............................. 431,192
-----------
Retailers -- 3.7%
1,700 Fast Retailing Co., Ltd. ........................ 483,394
4,000 Ito-Yokado Co., Ltd. ............................ 232,939
2,400 Paris Miki, Inc. ................................ 187,807
2,000 Seven-Eleven Japan Co., Ltd. .................... 201,274
-----------
1,105,414
-----------
Telephone Systems -- 2.3%
50 Nippon Telegraph & Telephone Corp. .............. 691,538
-----------
Transportation -- 0.9%
10,000 Yamato Transport Co., Ltd. ...................... 265,696
-----------
Total Investments (Cost -- $19,687,307) ................................. 102.9% 30,902,830
Liabilities in Excess of Other Assets ................................... (2.9)% (881,503)
----- -----------
Net Assets .............................................................. 100.0% $30,021,327
====== ===========
</TABLE>

- ------------
/1/ Non-income producing security.

See Notes to Financial Statements.

20
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities February 29, 2000
(Unaudited)

- --------------------------------------------------------------------------------
Assets:
Investments, at value...................................... $30,902,830
Dividends receivable....................................... 3,975
Interest receivable........................................ 505
Receivable for Investors' Beneficial Interest for
contributions............................................. 78,568
Deferred organization costs................................ 34,668
-----------
Total assets.......................................... 31,020,546
-----------
Liabilities:
Payable for Loans.......................................... 850,603
Payable to Investors' Beneficial Interest for
withdrawals............................................... 47,268
Organization costs payable................................. 35,716
Investment management fees payable......................... 34,051
Administration fees payable................................ 4,755
Custody and portfolio accounting fees payable.............. 41
Other accrued expenses..................................... 26,785
-----------
Total liabilities..................................... 999,219
-----------
Net assets............................................ $30,021,327
===========
Net Assets:
Applicable to Investors' Beneficial Interests.............. $30,021,327
===========
Cost of investments........................................ $19,687,307
===========

See Notes to Financial Statements.

21
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Statement of Operations
(Unaudited)
For the Six
Months Ended
February 29,
- -------------------------------------------------------------------------------
2000
Investment Income:
Dividend income.............................................. $ 25,459
Less: foreign withholding taxes.............................. (3,819)
-----------
Net dividend income......................................... 21,640
Interest income.............................................. 24,607
Less: interest expense....................................... (11,494)
-----------
Total income............................................... 34,753
-----------
Expenses:
Investment management fees................................... 103,636
Custody and portfolio accounting fees........................ 35,144
Operations agent fees........................................ 29,835
Administration fees.......................................... 24,656
Professional fees............................................ 20,417
Amortization of
organization costs.......................................... 6,574
Trustees' fees and expenses.................................. 2,486
Other expenses............................................... 6,622
-----------
Total expenses.............................................. 229,370
-----------
Net investment loss......................................... (194,617)
-----------
Realized and Unrealized Gain on Investments
and Foreign Currency:
Net realized gain on:
Investments................................................. 4,098,615
Foreign currency transactions............................... 27,555
Net change in unrealized appreciation on:
Investments................................................. 5,878,998
Foreign currency translations............................... 517
-----------
Net Realized and Unrealized Gain on Investments
and Foreign Currency.......................................... 10,005,685
-----------
Net Increase in Net Assets Resulting from Operations........... $ 9,811,068
===========

See Notes to Financial Statements.

22
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets
(Unaudited)

See Notes to Financial Statements.

23
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- -------------------------------------------------------------------------------

Financial Highlights

- ---------
/1/ Commencement of operations: 10/20/97
/2/ Annualized.
/3/ Not annualized.

See Notes to Financial Statements.

24
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (Unaudited)

NOTE 1 -- Significant Accounting Policies

The beneficial interest holders of the Portfolio at February 29, 2000 were as
follows:

Flag Investors Japanese Equity Fund..... 47.9%
Deutsche Japanese Equity Fund........... 52.1%
-----
100.0%
=====

25
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Investment Valuation

Investment Transactions

Investment transactions are recorded on 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 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.

26
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- continued

Forward Foreign Currency Contracts

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.

27
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (continued)

NOTE 1 -- continued

Foreign Currency Translation

Federal Income Taxes

Expenses

28
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 1 -- concluded

Deferred Organization Costs

Organization costs incurred in connection with the organization and initial
registration of the Portfolios 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 2 -- Significant Agreements and Transactions with Affiliates

The Portfolios 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
adviser (the "Advisor") to the Portfolio. As compensation for the services
rendered by DFM under the Management Agreement with the Portfolio, DFM receives
a fee from the Portfolio at an annualized rate of 0.85% of the average daily
net assets, which is computed daily and paid monthly.

For the six months ended February 29, 2000 DFM's advisory fee was $103,636 for
services provided on behalf of the Portfolio.

The adviser is an indirect subsidiary of Deutsche Bank AG. As compensation for
its services, DWS receives a fee, paid by DFM which is based on the average
daily net assets of the Portfolio.

For the period covered by these financial statements, the Portfolios Trust
retained Federated Services Company ("Federated") as operations agent to the
Portfolio. As operations agent of the Portfolio, Federated received a fee from
the Portfolio, which was computed daily and paid monthly, at the annual rate of
0.035% of the average daily net assets of the Portfolio for the Portfolio's
then-current fiscal year, subject to a minimum fee of $60,000 annually. At a
meeting held on January 31, 2000, the Board of Trustees of the Portfolios Trust
adopted a resolution to approve a administration agreement between Investment
Company Capital Corp. and the Portfolios Trust, replacing Federated Services
Company, effective April 7, 2000.

The Portfolios Trust has entered into an agreement with IBT Trust Company
(Cayman) Ltd. ("IBT (Cayman)"). Pursuant to that agreement, IBT

29
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Notes to Financial Statements (concluded)

NOTE 2 -- concluded

(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.

For the six months ended February 29, 2000, affiliates of Deutsche Bank AG
received $0 in brokerage commissions from Flag Investors Japanese Equity
Portfolio as a result of executing agency transactions in portfolio securities.

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 3 -- Investment Portfolio Transactions

Cost of purchases and proceeds from sales of investments, excluding short-term
securities, for the six months ended February 29, 2000 were as follows:

Purchases
U.S. Government........ $ --
Non-U.S. Government.... 19,575,622
-----------
Total.................. $19,575,622
===========

Sales
U.S. Government........ $ --
Non-U.S. Government.... 19,037,716
-----------
Total.................. $19,037,716
===========

30
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

NOTE 3 -- concluded

At February 29, 2000, the cost of investments, the unrealized appreciation,
and unrealized depreciation of investments for U.S. federal income tax purposes
was $19,687,307, 12,268,232 and $1,052,709, respectively.

NOTE 4 -- Off-Balance Sheet Risk and Concentration of Credit Risk

NOTE 5 -- Line of Credit Agreement

31
<PAGE>

Flag Investors Japanese Equity Portfolio (US Dollar)
- --------------------------------------------------------------------------------

Proxy Results (Unaudited)

The Flag Investors Japanese Equity Portfolio (US Dollar) shareholders voted on
and approved the following proposals at the annual meeting of shareholders on
March 28, 2000. The description of each proposal and number of shares voted are
as follows:

1. To elect the Flag Investors Portfolios Trust Board of Trustees

Shares Shares Voted
Voted For Withheld
--------- ------------
Mr. Richard R. Burt 601,060 2,836
Mr. Richard T. Hale 601,060 2,836
Mr. Joseph R. Hardiman 601,060 2,836
Mr. Louis E. Levy 601,060 2,836
Mr. Eugene J. McDonald 601,060 2,836
Ms. Rebecca W. Rimel 601,060 2,836
Mr. Truman T. Semans 601,060 2,836
Mr. Robert H. Wadsworth 601,060 2,836

2. To ratify the selection of PriceWaterhouseCoopers LLP as independent
accountants for the Fund and the Portfolio

For Against Abstain
--- ------- -------
599,961 0 3,935

3A. To approve a new investment advisory agreement between the Portfolio
and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
597,488 2,124 4,284

3B. To approve a new investment advisory agreement between the Portfolio
and Investment Company Capital Corp.

For Against Abstain
--- ------- -------
599,612 0 4,284

4.A.(i). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Deutsche Fund Management, Inc.

For Against Abstain
--- ------- -------
597,488 2,124 4,284

4.A.(ii). To approve a new investment sub-advisory agreement between DWS
International Portfolio Management and Investment Company Capital
Corp.

For Against Abstain
--- ------- -------
597,488 2,124 4,284

32
<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.

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

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