FLAG INVESTORS INTERNATIONAL FUND INC, N-30D, 2000-07-05

FLAG INVESTORS INTERNATIONAL FUND INC
N-30D, 2000-07-05

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[Flag Investors logo omitted]

INTERNATIONAL
EQUITY FUND

Semi-Annual Report
April 30, 2000

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

TABLE OF CONTENTS

REPORT HIGHLIGHTS .................................. 1
PERFORMANCE ........................................ 2
LETTER TO SHAREHOLDERS ............................. 4

FLAG INVESTORS INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities ............. 13
Statement of Operations ......................... 14
Statements of Changes in Net Assets ............. 15
Financial Highlights ............................ 16
Notes to Financial Statements ................... 20

INTERNATIONAL EQUITY PORTFOLIO

Statement of Net Assets .......................... 24
Statement of Assets and Liabilities .............. 33
Statement of Operations .......................... 34
Statements of Changes in Net Assets .............. 35
Financial Highlights ............................. 36
Notes to Financial Statements .................... 38

<PAGE>

REPORT HIGHLIGHTS
--------------------------------------------------------------------------------

o The Fund's Class A Shares produced a total return of -13.49% (excluding sales
charges) for the six months ended April 30, 2000, underperforming the MSCI
EAFE Index return of 6.72% for the same time period.

o EAFE markets closely tracked the performance of U.S. stocks during the
semi-annual period, although, as in the U.S., market volatility persisted.
Fears that Year 2000 disruptions would adversely affect global equity markets
were dispelled in the closing months of 1999, as an impressive rally took many
world markets to all-time highs. In the closing weeks of the period,
volatility not seen since the emerging market crises of 1998 struck most
equity markets based on the concern that valuations for technology, media and
telecommunications (TMT) stocks had become unreasonable.

o The Fund experienced two major changes during the six month period. First, the
portfolio management team headed by Michael Levy and Robert Reiner assumed
responsibility for this Fund on February 29, 2000, and began changing the
structure of the portfolio at that time. Second, just as the team completed
the process of restructuring the portfolio, the EAFE markets were hit by
extreme volatility. For the month of April 2000, the MSCI EAFE Index was down
5.26%.

o We expect low inflation and global economic growth to spur the world's equity
markets higher from current levels, especially in Europe.

<PAGE>

PERFORMANCE
--------------------------------------------------------------------------------

Change in Value of a $10,000 Investment(1)
November 18, 1986 - April 30, 2000

[line graph omitted]
plot points as follows:

Flag Investor MSCI
Nov-86 10000 10000
Oct-87 10215 12621
Oct-88 11871 15800
Oct-89 13919 17086
Oct-90 12996 14896
Oct-91 12586 15931
Oct-92 10850 13826
Oct-93 15541 19004
Oct-94 17740 20923
Oct-95 16091 20845
Oct-96 18044 23028
Oct-97 21198 24094
Oct-98 22311 26418
Oct-99 27554 32502
Apr-00 23836 34685

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

(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 5.50% maximum sales charge. During the period the Fund waived certain
fees and expenses. The Morgan Stanley Capital International Europe,
Australia, Far East(R) (MSCI EAFE) Index is an unmanaged index that is
widely recognized as an indicator of general international equity
performance.

2
<PAGE>

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

<TABLE>
<CAPTION>
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS

Periods ended Past 6 Past 1 Past 3 Past 5 Past 10 Since Past 1 Past 3 Past 5 Past 10 Since
April 30, 2000 months year years years years inception year years years years inception
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Flag Investors
International Equity
Class A Shares(1)
(inception 11/18/86) -13.49% -6.83% 23.79% 53.08% 69.08% 152.23% -6.83% 7.37% 8.89% 5.39% 7.12%
---------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(2)
(inception 11/30/86) 6.72% 13.89% 48.30% 63.74% 134.20% 246.85% 13.89% 14.04% 10.36% 8.88% 9.71%
---------------------------------------------------------------------------------------------------------------------------
Lipper International
Equity Average(3)
(inception 11/30/86) 14.14% 24.76% 55.50% 89.14% 171.23% 311.54% 24.76% 15.38% 13.16% 10.21% 10.81%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

CUMULATIVE TOTAL RETURNS
Periods ended April 30, 2000 Since inception
--------------------------------------------------------------------------------
Flag Investors International Equity Class B and Class C Shares(1)
(inception 2/29/00) -12.51%
--------------------------------------------------------------------------------
MSCI EAFE Index(2) (inception 2/29/00) -1.59%
--------------------------------------------------------------------------------
Lipper International Equity Average(3) (inception 2/29/00) -5.56%
-------------
(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 do not include
the Fund's 5.5% maximum sales charge. Returns would have been lower during
the period if certain fees and expenses had not been waived by the Fund.
(2) The MSCI EAFE Index of major markets in Europe, Australia and the Far East
is an unmanaged index used to portray international stock performance.
(3) Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.

3
<PAGE>

LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------

Dear Shareholder:

We are pleased to present you with this newly-designed, semi-annual report
for the Flag Investors International Equity Fund (formerly the Flag Investors
International Fund), providing a more detailed review of the markets, the
Portfolio, and our outlook -- all in an easier-to-read format. Of course, we
continue to include a complete financial summary of the Fund's operations and a
listing of the Portfolio's holdings.

FUND PERFORMANCE
For the first half of the fiscal year, the Fund underperformed its
benchmark. The Fund's Class A shares produced a return of -13.49% (excluding
sales charges) for the six months ended April 30, 2000, as compared to 6.72% for
the MSCI EAFE Index. The Fund's Class B and Class C shares have an inception
date of February 29, 2000 and thus have not been in operation for a full six
months.

The Fund experienced two major changes during the six month period. First,
as indicated in the last report to shareholders, the Deutsche Asset Management
portfolio management team assumed responsibility for this Fund on February 29,
2000, and began changing the structure of the portfolio at that time. Second,
just as the team completed the process of restructuring the portfolio, the EAFE
markets were hit by extreme volatility. For the month of April 2000, the MSCI
EAFE Index was down 5.26%. Still, based on management activity during the
semi-annual period, we believe the Fund's portfolio is currently well-positioned
to benefit from a positive outlook for the world's equity markets.

SINCE WE BEGAN MANAGING THE FUND, WE MAINTAINED A PREFERENCE FOR
CONTINENTAL EUROPEAN EQUITIES, BUT WE LIMITED EXPOSURE THERE TO GAIN ACCESS TO
EXCITING OPPORTUNITIES IN OTHER REGIONS AROUND THE WORLD.

o Although underweight in Japan relative to the benchmark, the Fund's
exposure to this market remained relatively stable during the semi-annual
period.
o We added to positions in emerging markets, as domestic recovery progressed
and export demand improved.

o Canada provided excellent investment opportunities in the technology,
media, and telecommunications sectors.

4
<PAGE>

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

WHILE THE FUND IS OVERWEIGHT IN THE TECHNOLOGY AND TELECOMMUNICATIONS
SECTORS, WE DID TAKE THE OPPORTUNITY TO TAKE PROFITS IN SEVERAL HOLDINGS, AS
VALUATIONS SURGED DURING THE FIRST QUARTER OF 2000.
o In the information technology sub-sector, we purchased European software
companies Business Objects and Logica, Indian software firms NIIT and
Satyam Computer, Finnish information system developer Tietoenator, and
Canadian contract manufacturer Celestica. We also added Japanese electronic
components firm Kyocera and electric products company Toshiba to the
portfolio.
o We trimmed positions in certain communications equipment providers,
semiconductor firms, diversified electronics manufacturers, and
Internet-related and software companies.
o In Asia ex-Japan, we continued to favor the top semiconductor firms. We
added Portfolio exposure to Samsung Electronics and United Microelectronics
and established positions in flash memory firm Macronix and semiconductor
test and assembly company Malaysian Pacific Industries.
o On the back of Internet and mobile telecommunications spin-off
announcements, many of the European telecommunications stocks became much
more expensive than their U.S. peers. However, we added or topped up
attractively valued telecommunications operators like Cable & Wireless, KPN
and NTT.

THE CONVERGENCE OF MEDIA WITH TECHNOLOGY AND COMMUNICATIONS HAS CREATED NEW
MARKETS AND NEW OPPORTUNITIES. WE FOCUSED THE FUND'S MEDIA EXPOSURE ON VALUABLE
CONTENT AND DISTRIBUTION PROVIDERS.
o Media stocks globally were boosted by the AOL-Time Warner merger deal,
which highlighted the importance of content as well as distribution
capability.
o We found new opportunities in French television channel TF1, international
media group News Corp., newspaper monopoly Singapore Press Holdings, and
cable holding company United Globalcom.

DESPITE THE HIGHER INTEREST RATE ENVIRONMENT, WE ADDED TO THE PORTFOLIO'S
EUROPEAN BANKS, SINCE WE FEEL THAT EUROPEAN RATES DO NOT HAVE TO RISE AS MUCH AS
U.S. RATES AND THAT BANKS WILL LIKELY BE BENEFICIARIES OF EUROPE'S ECONOMIC
ACCELERATION.
o We favored retail-oriented banks like Spain's BSCH, Royal Bank of Scotland,
and Hungary's OTP Bank.
o We added to positions in France's BNP Paribas, Bank of Ireland, and the
UK's Barclays when the market severely de-rated anything not in the TMT
sectors.
o Germany's proposals to eliminate the capital gains tax on cross-held shares
is very positive for financials with large investment portfolios. We bought
insurance company Munich Re on the back of the proposed tax reform because
of the potential for shareholder value to be unlocked.

5
<PAGE>

LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------

WE TURNED SIGNIFICANTLY MORE CAUTIOUS ON THE PROSPECTS FOR MATERIAL
COMPANIES, LEADING US TO AN UNDERWEIGHTED POSITION IN THE SECTOR.
o Such a position is based on recent data showing a peaking in Organization
for Economic Cooperation and Development (OECD) leading indicators that
suggest global economic growth may be nearing a top.
o On the other hand, we increased the portfolio's overweighting in the oil
sector, given favorable supply-demand dynamics. We added to holdings in BP
Amoco, Shell, and ENI.

EMERGING MARKET STOCKS WERE ACTIVELY PURCHASED DURING THE PERIOD.
o In India, we purchased long distance operator VSNL.
o We increased our weighting in Latin America with undervalued
telecommunications firms Embratel and Telenorte Leste and with Televisa,
the world's largest Spanish language broadcaster.
o We added cellular firms Mobinil and Partner in Egypt and Israel,
respectively.
o In Turkey, we purchased Yapi Kredi Bank and Dogan Holdings.

INVESTMENT ENVIRONMENT

EAFE MARKETS CLOSELY TRACKED THE PERFORMANCE OF U.S. STOCKS DURING THE
SEMI-ANNUAL PERIOD, AS THE BENEFITS OF SYNCHRONIZED GLOBAL ECONOMIC EXPANSION
CONTINUED TO SPREAD. STILL, AS IN THE U.S., MARKET VOLATILITY PERSISTED.
o Fears that Year 2000 disruptions would adversely affect global equity
markets were dispelled in the closing months of 1999, as an impressive
rally took many world markets to all-time highs. Inflation and interest
rate concerns persisted but were offset to a large degree by strong
earnings growth.
o In the closing weeks of the semi-annual period, volatility not seen since
the emerging market crises of 1998 struck most equity markets based on the
concern that valuations for technology, media and telecommunications (TMT)
stocks had become unreasonable.
o Recommendations by U.S. market strategists to lower equity exposure amid
rising domestic interest rates led to a short-term spillover effect for
international markets.
o Central banks moved to raise interest rates in order to quell rising
inflation in the U.S. and the U.K. and to support a weakening currency in
the Eurozone.

6
<PAGE>

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

EUROPE

EUROPE OVERALL OUTPERFORMED ALL DEVELOPED MARKET REGIONS, POSTING AN 8.5%
RETURN IN U.S. DOLLAR TERMS FOR THE PERIOD.
o As clearer signs of accelerating growth became evident, investors sought to
purchase attractively valued cyclical stocks and fast growing TMT
securities.
o The two markets with the highest degree of telecommunications equipment and
infrastructure exposure relative to market capitalization -- Finland and
Sweden -- soared 81.4% and 53.1%, respectively, as web-enabled mobile
telephony captured investor interest.
o Despite a series of interest rate hikes by the European Central Bank, the
Euro touched an all-time low, as foreign investors sought dollar exposure
after exceptionally strong U.S. economic reports.

GERMANY LED THE LARGER EUROPEAN MARKETS WITH A 15.5% IMPROVEMENT IN U.S.
DOLLAR TERMS, REFLECTING POSITIVE MARKET RESPONSES TO PROPOSED CAPITAL GAINS TAX
CUTS AND IMPROVING ECONOMIC FUNDAMENTALS.
o France followed closely behind Germany, rising 14.6%, as corporate earnings
estimates continued to be revised upwards.
o The United Kingdom fell 3.1% for the period amid fears that higher interest
rates would constrain earnings growth. o Performance in Europe's smaller
markets was mixed.
-- In many cases, domestic investment managers continued to seek
diversification through the purchase of other Eurozone equities, funding
such purchases through the sale of domestic securities.
-- Southern European markets, spurred on by attractive valuations, fared
well, with Italy gaining 9.6%, Spain, 8.1% and Portugal, 4.0%. Other
small markets generally fared poorly, with Switzerland and Austria down
7.8% and 13.3%, respectively, and Ireland and Belgium declining 8.0% and
21.0%, respectively.

ASIA

JAPAN MANAGED A POSITIVE, THOUGH SUBDUED, 3.4% PERFORMANCE IN U.S. DOLLAR
TERMS FOR THE SEMI-ANNUAL PERIOD, AS NEWS THAT ITS ECONOMY HAD FALLEN BACK INTO
RECESSION WEIGHED ON INVESTOR SENTIMENT.
o Volatility buffeted the market, as speculation grew that maturing postal
savings accounts would find their way into the equity markets. Also,
evidence of an organized "price keeping operation" to prop up the market
and to strengthen the yen upon the close of the March 31 fiscal year
created doubt for foreign investors regarding domestic investor support for
the market.

7
<PAGE>

LETTER TO SHAREHOLDERS (CONTINUED)
--------------------------------------------------------------------------------

o Much of the excitement generated by restructuring announcements and
positive economic indicators since the autumn of 1998 was replaced with
skepticism. Indeed, last year's rebound in the Japanese equity market may
have resulted in complacency by institutions who found that they could be
rewarded for announcing restructuring plans rather than actually following
through on those plans.
o After a strong run fueled by merger announcements, bank stocks declined by
more than 27% during the semi-annual period, as investors doubted that
these previously announced mergers would create value.
o Telecommunications and technology stocks tracked the performance of their
global counterparts, rising during the first half of the semi-annual period
and declining in the second. Despite very strong growth numbers, investors
questioned whether valuations had become noticeably stretched.

ASIA EX-JAPAN MARKETS GAINED 7.2% IN U.S. DOLLAR TERMS DURING THE FUND'S
SEMI-ANNUAL PERIOD.
o Within the six months, Asia ex-Japan markets surged with a NASDAQ-inspired,
liquidity-driven rally at the close of 1999, only to succumb to market
weakness toward the end of the period based on interest rate nervousness
and in spite of strong macroeconomic and corporate profit data.
o Several markets recorded double-digit gains for the semi-annual period,
including Malaysia, India, Taiwan and Hong Kong.
-- These better performing markets were those with technical support from
anticipated higher MSCI Index weightings, including Malaysia and Taiwan
-- and/or those with greater Index exposure to high growth sectors,
including Hong Kong and Taiwan.
-- Despite China's threats of war, Taiwan elected the pro-independence
party candidate as its President, ending the KMT party's rule of more
than 50 years. Its market reacted positively.
o The smaller markets, like Indonesia, the Philippines and Thailand, posted
losses.
o South Korea's Kospi Index was a disappointment, falling 17.2% during the
semi-annual period, despite high earnings growth and inexpensive
valuations. Selling pressure had emanated from local investment trusts
facing redemptions and domestic retail investors fretting about the economy
being too strong and about the financial viability of several investment
trust companies.
o Deflationary pressure appeared to be ending in China, and private
consumption in major cities rebounded faster than expected.

OTHER MARKETS

Emerging markets, benefiting from higher global economic growth, rose 13.9%
in U.S. dollar terms. The emerging markets overall outperformed the EAFE markets
for the semi-annual period, as the risk premium for many emerging market regions

8
<PAGE>

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

has been declining due to improved economic and political outlooks.

LATIN AMERICAN MARKETS PERFORMED STRONGLY, GAINING 22.9% IN U.S. DOLLAR
TERMS. LED BY BRAZIL'S SHARP RISE, ALL OF THE REGION'S MARKETS, WITH THE
EXCEPTION OF VENEZUELA, DELIVERED POSITIVE GAINS.
o Although much feared, Y2K turned out to be a non-event for Latin American
economies and companies.
o Brazil advanced 34.4% on the back of a series of good news on the
inflation, interest rate, fiscal surplus, and growth fronts. Additionally,
the long awaited Fiscal Responsibility Law was passed, and a minority
shareholders' rights bill is under discussion.
o Mexico gained 21.0%, reflecting the booming domestic economy, firmer oil
prices, robust exports to the U.S., and Mexico's newly awarded investment
grade status.

EMERGING EUROPE CHALKED UP AN IMPRESSIVE 24.5% JUMP, DESPITE PROFIT TAKING
IN GREECE.
o Turkey and Russia each surged over 120%. Investors cheered Turkey's
International Monetary Fund agreement and its credible fiscal/inflation
program. Russia benefited from high oil prices and reduced political risk
following favorable parliamentary elections, Yeltsin's surprise
resignation, and Vladimir Putin winning the Presidential election.
o Elsewhere, improvement in the peace process and a series of interest rate
cuts propelled Israel's equity market higher by 49.7%.

LOOKING AHEAD

WE MAINTAIN OUR BELIEF THAT LOW INFLATION AND GLOBAL ECONOMIC GROWTH WILL
SPUR THE WORLD'S EQUITY MARKETS HIGHER FROM CURRENT LEVELS. Europe is benefiting
from accelerating earnings growth, buoyed by the weak Euro, and from valuations
that remain attractive relative to other regions.

WE ARE DOUBTFUL THAT THE JAPANESE ECONOMY HAS REACHED A STAGE OF
SUSTAINABLE RECOVERY DESPITE ONGOING FISCAL STIMULUS SPENDING, AND WE QUESTION
THE EXTENT AND PACE OF CORPORATE RESTRUCTURING, WHICH APPEARS TO HAVE SLOWED IN
RECENT MONTHS.
o Questions also remain as to whether market transparency is being hindered
by government intercession. Insurers and corporations, who have been net
sellers for most of the past five years for liquidity reasons, bought
domestic shares in record volume during the last week of the nation's
fiscal year in March, presumably to prop up the market.
o Foreigners, who have been the predominant buyers of Japanese equities for
most of the past year or so, became net sellers. Unless Japanese domestic
investors can be convinced that equities are attractive, it is difficult to
see what will take the market higher.
o We do believe that there are good stocks to be found in Japan, but they
remain within only a few key sectors that are not dependent on the weak
domestic economy.

<PAGE>

LETTER TO SHAREHOLDERS (CONCLUDED)
--------------------------------------------------------------------------------

ASIA EX-JAPAN AND EMERGING MARKETS OVERALL WILL LIKELY REMAIN CAPTIVE TO
U.S. STOCK MARKET VOLATILITY.
o If the NASDAQ Composite stabilizes, the positive macroeconomic and
corporate fundamentals of Asia and the emerging markets could reassert
themselves. These positives include corporate streamlining and
deleveraging, which have continued at a rapid pace.
o We are neutral in our view of the developed Asian equity markets, namely
Australia and Hong Kong, as these markets are more directly affected by the
global tightening of interest rates, while the emerging Asian markets show
relatively stronger earnings prospects.
o Emerging Europe should, in our view, be the most resilient emerging market
region, given its gearing to strong continental European economies and its
lower exposure to the TMT sectors.
o Latin America is, in our view, the most sensitive region in terms of U.S.
interest rate tightening and a U.S. hard-landing economic scenario. Still,
economic data within the region continues to be encouraging.

AT A TIME OF HIGH MARKET VOLATILITY, IT IS WORTHWHILE TO REITERATE THE
PRECEPT THAT EQUITY INVESTING AT HOME AND ABROAD IS A LONG-TERM ENDEAVOR THAT
SHOULD NOT BE MEASURED IN SHORT-TERM TIME FRAMES.
o Double-digit corrections have historically helped to consolidate and
prepare markets for higher long-term moves.
o The current low inflation global economic environment is supportive for
heightened corporate earnings growth.

We will, of course, continue to monitor economic conditions and political
initiatives and their effect on financial markets as we seek long-term capital
appreciation. We appreciate your ongoing support of Flag Investors International
Equity Fund, and we look forward to continuing to serve your investment needs
for many years ahead.

/S/SIGNATURES Michael Levy, Robert Reiner, Julie Wang

Michael Levy, Robert Reiner and Julie Wang

Portfolio Managers of the INTERNATIONAL EQUITY PORTFOLIO
April 30, 2000

10
<PAGE>

TEN LARGEST HOLDINGS
--------------------------------------------------------------------------------
Percentages are
based on the
market value of
Total Investments
Company in the Portfolio
--------------------------------------------------------------------------------
1. VODAFONE AIRTOUCH PLC 2.77%
The largest cellular telecommunications company in the world.
2. TOTAL FINA SA 2.45%
The company is a leading oil and gas supplier.
3. NOKIA OYJ 2.27%
Supplies telecommunications systems and equipment. Including
mobile phones and accessories, computer monitors and network
terminals.
4. CANAL PLUS 1.91%
The company owns and operates pay television channels and
produces content for television and film.
5. ERICSSON LM 1.89%
The company is the world-leading supplier of equipment for
telecommunications systems and related terminals.
6. PHILIPS ELECTRONICS NV 1.80%
Maker of consumer electronic and electrical household durables.
7. RECKITT & COLEMAN PLC 1.72%
The company creates and distributes household products, food and
pharmaceutical products.
8. SHELL TRANSPORT & TRADING CO. PLC 1.71%
Shell predominantly provides oil and gas as well as exploration
for oil and gas.
9. TAKEDA CHEMICAL INDUSTRIES LTD. 1.65%
Takeda manufactures prescription pharmaceuticals.
10. STMICROELECTRONICS NV 1.64%
The company designs, develops and markets semiconductor
integrated circuits and devices for telecommunications, consumer
and automotive products.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

ADDITIONAL PERFORMANCE INFORMATION
The shareholder letter included in this report contains statistics designed
to help you evaluate the performance of your Fund's management. To further
assist in this evaluation, the Securities and Exchange Commission (SEC) requires
that we include the Fund's total return, according to a standardized formula,
for various time periods through the end of the most recent calendar quarter.

The SEC standardized total return figures include the impact of the maximum
5.50% initial sales charge for Class A Shares and the contingent deferred sales
charge applicable to the specified time period for Class B and Class C
Shares.The contingent deferred sales charge for Class B declines over time from
a maximum of 5% to 0% after six years. A 1% contingent deferred sales charge
applies to redemptions of Class C Shares within one year after purchase. Returns
would be higher for investors who qualified for a lower initial sales charge.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------------------------------------------------------
Periods Ended 4/30/00 1 Year 5 Years 10 Years Since Inception
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares (inception 11/18/86) (11.96)% 7.66% 4.80% 6.67%
--------------------------------------------------------------------------------------------
Class B Shares (inception 2/29/00) --% --% --% (16.88)%
--------------------------------------------------------------------------------------------
Class C Shares (inception 2/29/00) --% --% --% (12.51)%
--------------------------------------------------------------------------------------------
</TABLE>

Past performance is not indicative of future results. Since investment
return and principal value will fluctuate, an investor's shares may be worth
more or less than their original cost when redeemed.

The SEC total return figures may differ from total return figures in the
shareholder letter because the SEC figures include the impact of sales charges
while the total return figures in the shareholder letter do not. Any performance
figures shown are for the full period indicated.

These figures assume reinvestment of dividends and capital gains
distributions. Returns would have been lower during the specified period if
certain fees and expenses had not been waived.

12
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000
Assets
Investments in International Equity Portfolio, at Value .... $14,905,539
Receivable for Shares of Beneficial Interest Subscribed .... 50,000
Due from Bankers Trust ..................................... 8,605
Prepaid Expenses and Other ................................. 35,563
-----------
Total Assets .................................................. 14,999,707
-----------
Liabilities
Payable for Shares of Beneficial Interest Redeemed ......... 114,515
Accrued Expenses and Other ................................. 46,202
-----------
Total Liabilities ............................................. 160,717
-----------
Net Assets .................................................... $14,838,990
===========
Composition of Net Assets
Paid in Capital ............................................ $16,818,540
Distributions in Excess of Net Investment Income ........... (757,548)
Accumulated Net Realized Gain from Investment .............. 1,008,485
Net Unrealized Depreciation on Investment .................. (2,230,487)
-----------
Net Assets .................................................... $14,838,990
===========
Net Asset Value Per Share
(net assets divided by shares outstanding)
Class A(1) ................................................. $14.84
======
Class B(2) ................................................. $14.87
======
Class C(3) ................................................. $14.83
======

-----------
(1) Net Asset Value per share (based on net assets of $13,723,031 and 924,719
shares of beneficial interest outstanding and .001 par value, unlimited
number of shares of beneficial interest authorized).
(2) Net Asset Value per share (based on net assets of $440,733 and 29,649 shares
of beneficial interest outstanding and .001 par value, unlimited number of
shares of beneficial interest authorized).
(3) Net Asset Value per share (based on net assets of $675,226 and 45,529 shares
of beneficial interest outstanding and .001 par value, unlimited number of
shares of beneficial interest authorized).

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(UNAUDITED)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000
Investment Income
Income Allocated from International Equity Portfolio, net ..... $ 21,206
Dividends ..................................................... 63,698
Interest ...................................................... 16,234
Less: Foreign Dividend Taxes Withheld ....................... (7,717)
-----------
Total Income ............................................. 93,421
-----------
Expenses
Professional Fees ............................................. 69,598
Investment Advisory Fee ....................................... 32,687
Printing and Postage .......................................... 22,315
Distribution Fees
Class A ..................................................... 16,949
Class B ..................................................... 490
Class C ..................................................... 833
Accounting Fee ................................................ 16,006
Registration Fees ............................................. 8,726
Administration and Services Fees .............................. 7,617
Custodian Fee ................................................. 4,511
Transfer Agent Fee ............................................ 861
Directors' Fee ................................................ 460
Miscellaneous ................................................. 3,518
-----------
Total Expenses ................................................... 184,571
Less: Fee Waivers or Expenses Reimbursed ......................... (76,323)
-----------
Net Expenses ..................................................... 108,248
-----------
Expenses in Excess of Net Investment Income ...................... (14,827)
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net Realized Gain from Investment Transactions ................ 2,985,449
Net Realized Gain from Foreign Currency Related Transactions .. 82,254
Change in Unrealized Appreciation/Depreciation of Investments . (5,459,100)
Change in Unrealized Appreciation/Depreciation on Translation of
Assets and Liabilities Denominated in Foreign Currencies .... 373
-----------
Net Realized and Unrealized Loss on Investments .................. (2,391,024)
-----------
Net Decrease in Net Assets from Operations ....................... $(2,405,851)
===========

SEE NOTES TO FINANCIAL STATEMENTS.

14
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
--------------------------------------------------------------------------------
2000(1) 1999
Increase/(decrease) in Net Assets:
Operations:
Net (Expenses in Excess of) investment income ... $ (14,827) $ 94,771
Net realized gain from security transactions
and foreign exchange transactions ............ 3,067,703 1,474,566
Change in unrealized appreciation/(depreciation)
of investments ............................... (5,459,100) 1,077,700
Change in unrealized appreciation/(depreciation)
on translation of assets and liabilities
denominated in foreign currencies ............ 373 (3,657)
----------- ------------
Net increase/(decrease) in net assets resulting
from operations .............................. (2,405,851) 2,643,380
----------- ------------
Dividends to Shareholders from:
Net investment income and short-term gains ...... (2,356,503) (48,602)
----------- ------------
Total distributions ............................. (2,356,503) (48,602)
----------- ------------
Capital Share Transactions:
Proceeds from sale of 444,634 and 482,274
shares, respectively ......................... 8,247,140 9,655,136
Value of 118,387 and 2,257 shares issued in
reinvestment of dividends, respectively ...... 2,098,197 40,630
Cost of 224,156 and 542,832 shares
repurchased, respectively .................... (4,514,737) (10,706,756)
----------- ------------
Total increase/(decrease) in net assets derived
from capital share transactions .............. 5,830,600 (1,010,990)
----------- ------------
Total increase in net assets .................... 1,068,246 1,583,788
Net Assets:
Beginning of period ............................. 13,770,744 12,186,956
----------- ------------
End of period (including undistributed net
investment income of $94,599 for the year
ended October 31, 1999) ...................... $14,838,990 $ 13,770,744
=========== =============

-----------
(1) Unaudited.

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CLASS A
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000(1)
Per Share Operating Performance:
Net Asset Value, Beginning of Period ........................... $ 20.83
-------
Income from Investment Operations:
Net Investment Income .......................................... 0.79
Net Realized and Unrealized Gain (Loss) on Investments(2) ...... (3.09
-------
Total from Investment Operations ............................... (2.30)
-------
Distributions to Shareholders
Net Investment Income and Short TermGains ...................... (0.94)
Net Realized Gains ............................................. (2.75)
-------
Total Distributions ............................................ (3.69)
-------
Net Asset Value, End of Period ................................. $ 14.84
=======
Total Investment Return(3) ........................................ (13.49)%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ....................... $13,723
Ratios to Average Daily Net Assets:
Expenses(4) .................................................... 1.50%(7)
Net Investment (Expenses in Excess of) Income(5) ............... 0.17%(7)
Portfolio turnover rate(6) ..................................... --%

------------
(1) Unaudited.
(2) The years ended October 31, 1999, 1998, 1997, 1996 and 1995 include net
realized currency gain/(loss).
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees and reimbursement of expenses (Note
2),the ratio of expenses to average daily net assets would have been 1.91%
(annualized), 3.10%, 2.78%, 2.24%, 2.30% and 2.17% for the six months ended
April 30, 2000 and the years ended October 31, 1999, 1998, 1997, 1996 and
1995, respectively.
(5) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of net investment income to average daily net assets would have
been (0.24)% (annualized), (0.84)%, (0.67)%, 0.44%, 1.10% and 0.02% for the
six months ended April 30, 2000 and the years ended October 31, 1999, 1998,
1997, 1996, and 1995, respectively.
(6) Beginning on February 29, 2000 the Flag Investors International Equity Fund
became a feeder of the Deutsche International Equity Portfolio. Effective
February, 2000 portfolio turnover rate is not applicable to the Flag
Investors International Equity Class A Shares.
(7) Annualized.

16
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Years Ended October 31,
------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995

<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period ..................... $ 16.94 $ 16.36 $ 14.20 $ 12.69 $ 13.97
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income .................................... 0.48 0.08 0.11 0.26 0.09
Net Realized and Unrealized Gain (Loss) on Investments(2) 3.48 0.76 2.34 1.28 (1.37)
------- ------- ------- ------- -------
Total from Investment Operations ......................... 3.96 0.84 2.45 1.54 (1.28)
------- ------- ------- ------- -------
Distributions to Shareholders
Net Investment Income and Short Term Gains ............... (0.07) (0.10) (0.18) (0.03) --
Net Realized Gains ....................................... -- (0.16) (0.11) -- --
------- ------- ------- ------- -------
Total Distributions ...................................... (0.07) (0.26) (0.29) (0.03) --
------- ------- ------- ------- -------
Net Asset Value, End of Period ........................... $ 20.83 $ 16.94 $ 16.36 $ 14.20 $ 12.69
======= ======= ======= ======= =======
Total Investment Return(3) .................................. 23.5% 5.25% 17.48% 12.13% (9.16)%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ................. $13,771 $12,187 $13,982 $12,930 $12,483
Ratios to Average Daily Net Assets:
Expenses(4) .............................................. 1.50% 1.50% 1.50% 1.50% 1.50%
Net Investment (Expenses in Excess of) Income(5) ......... 0.75% 0.62% 1.18% 1.91% 0.68%
Portfolio turnover rate(6) ............................... 18% 27% 21% 13% 35%

------------
<FN>
(1) Unaudited.
(2) The years ended October 31, 1999, 1998, 1997, 1996 and 1995 include net
realized currency gain/(loss).
(3) Total return excludes the effect of sales charge.
(4) Without the waiver of advisory fees and reimbursement of expenses (Note
2),the ratio of expenses to average daily net assets would have been 1.91%
(annualized), 3.10%, 2.78%, 2.24%, 2.30% and 2.17% for the six months ended
April 30, 2000 and the years ended October 31, 1999, 1998, 1997, 1996 and
1995, respectively.
(5) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of net investment income to average daily net assets would have
been (0.24)% (annualized), (0.84)%, (0.67)%, 0.44%, 1.10% and 0.02% for the
six months ended April 30, 2000 and the years ended October 31, 1999, 1998,
1997, 1996, and 1995, respectively.
(6) Beginning on February 29, 2000 the Flag Investors International Equity Fund
became a feeder of the Deutsche International Equity Portfolio. Effective
February, 2000 portfolio turnover rate is not applicable to the Flag
Investors International Equity Class A Shares.
(7) Annualized.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CLASS B
For the Period
February 29, 2000
to April 30,
--------------------------------------------------------------------------------
2000(1)
Per Share Operating Performance:
Net Asset Value, Beginning of Period ......................... $16.95
Income from Investment Operations
Expenses in Excess of Income ................................. (0.02)
Net Realized and Unrealized Loss on Investments .............. (2.06)
------
Total from Investment Operations ................................ (2.08)
------
Distributions to Shareholders
Net Investment Income and Short Term Gains ................... --
Net Realized Gains ........................................... --
------
Total Distributions ............................................. --
------
Net Asset Value, End of Period .................................. $14.87
======
Total Investment Return(2) ...................................... (12.51)%(3)
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ..................... $ 441
Ratios to Average Net Assets:
Expenses ................................................... 2.25%(4,5)
Expenses in Excess of Income ............................... (0.11)%(4,6)

------------
(1) Unaudited.
(2) Total return excludes the effect of sales charge. (3) Total return since
inception on February 29, 2000.
(4) Annualized.
(5) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of expenses to average daily net assets would have been 2.74%
(annualized) for the six months ended April 30, 2000.
(6) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of net investment income to average daily net assets would have
been (0.60)% (annualized) for the six months ended April 30, 2000.

SEE NOTES TO FINANCIAL STATEMENTS.

18
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS CLASS C
For the Period
February 29, 2000
to April 30,
--------------------------------------------------------------------------------
2000(1)
Per Share Operating Performance:
Net Asset Value, Beginning of Period $16.95
Income from Investment Operations
Expenses in Excess of Income (0.02)
Net Realized and Unrealized Loss on Investments (2.10)
------
Total from Investment Operations (2.12)
------
Distributions to Shareholders
Net Investment Income and Short Term Gains --
Net Realized Gains --
------
Total Distributions --
------
Net Asset Value, End of Period $14.83
======
Total Investment Return(2) (12.51)%(3)
Supplemental Data and Ratios:

Net Assets, End of Period (000s omitted) $ 675
Ratios to Average Net Assets:
Expenses 2.25%(4,5)
Expenses in Excess of Income (0.08)%(4,6)

------------
(1) Unaudited.
(2) Total return excludes the effect of sales charge.
(3) Total return since inception on February 29, 2000.
(4) Annualized.
(5) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of expenses to average daily net assets would have been 2.79%
(annualized) for the six months ended April 30, 2000.
(6) Without the waiver of advisory fees and reimbursement of expenses (Note 2),
the ratio of net investment income to average daily net assets would have
been (0.62)% (annualized) for the six months ended April 30, 2000.

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 -- Significant Accounting Policies

Flag Investors Series Funds, Inc. (the "Company"), which began operations
on November 18, 1986, is a Maryland Corporation. The Company is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. Flag Investors International Equity Fund ("Fund") is
currently the only fund offered to investors by the Company. The Fund's
objective is to seek long-term capital appreciation, primarily through
investments in stocks and other equity securities of companies in developed
countries outside of the United States. On February 29, 2000 the Flag Investors
International Equity Fund became a feeder of the Deutsche International Equity
Portfolio. The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the International Equity Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Investment Company Act of 1940. The value of the investment
in the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio. At April 30, 2000, the Fund's investment was less than 1% of the
Portfolio.

The financial statements of the Portfolio, including a list of assets held,
are contained elsewhere in this report and should be read in conjunction with
the Fund's financial statements.

Prior to February 29, 2000, The Glenmede Trust Company served as the
investment advisor to the Company.

The Fund consists of three share classes: Class A Shares, which began
operations November 18, 1986; Class B Shares, which began operations February
29, 2000; and Class C Shares, which began operations February 29, 2000.

The Class A, Class B, and Class C Shares are subject to different sales
charges. The Class A Shares have front-end sales charge and the Class B and C
Shares have a contingent deferred sales charge. In addition, the Class A Shares
have a different distribution fee than the Class B and Class C Shares.

When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with accounting principals generally accepted in the
United States. These estimates affect: 1) the assets and liabilities that we
report at the date of the financial statements; 2) the contingent assets and
liabilities that we disclose at the date of the financial statements; and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results.

20
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

NOTE 2 -- Administrative Fees, Transactions with Affiliates and other Fees

Investment Company Capital Corp. (ICCC) is the Fund's Administrator. As
compensation for its administrative services, the Fund pays ICCC an annual fee
based on the average net assets of the Fund that is calculated daily and paid
monthly at the annual rate of 0.20%.

Bankers Trust Company, the Advisor to the Portfolio, and ICCC have
contractually agreed to limit their fees and reimburse expenses to the extent
necessary so that the Fund's Total Annual Fund Operating Expenses do not exceed
1.50% for Class A Shares and 2.25% for each of the Class B and C Shares. This
agreement will continue until at least February 28, 2001, and may be extended.
For the six months ended April 30, 2000, ICCC waived fees of $32,687 and
reimbursed expenses of $43,636.

Certain officers and directors of the Fund are also officers or directors
of the Fund's administrator and of the Portfolio.

ICCC also provides accounting services to the Fund for which the Fund pays
ICCC an annual fee that is calculated daily and paid monthly from the Fund's
average daily net assets. For the six months ended April 30, 2000, ICCC's fee
was $16,006, of which $4,418 was payable at April 30, 2000.

ICCC also provides transfer agent services to the Fund for which the Fund
pays ICCC a per-account fee that is calculated and paid monthly. For the six
months ended April 30, 2000, ICCC's fee was $861, of which $1,765 was payable at
April 30, 2000.

Bankers Trust Company, an affiliate of the administrator, is the Fund's
custodian. For the six months ended April 30, 2000, Bankers Trust's fee was
$4,511 of which $943 was payable at April 30, 2000.

ICC Distributors, Inc., ("ICC Distributors"), provides distribution
services to the Fund for which ICC Distributors is paid an annual fee that is
calculated daily and paid monthly, as a percentage of the Fund's average daily
net assets, at an annual rate equal to 0.25% for Class A Shares, and 0.75% for
Class B and Class C Shares. For the six months ended April 30, 2000, ICC
Distributors' fees for Classes A, B, and C were $16,949, $490, and $833,
respectively, of which $3,369, $266, and $443, respectively, was payable at
April 30, 2000.

<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- Capital Share Transactions

The Fund is authorized to issue up to 28 million shares of $.001 par value
capital stock (10 million Flag Investors Class A, 2 million Flag Investors Class
B, 15 million Flag Investors Class C and 1 million undesignated).

Class A Shares
-----------------------------------------
For the For the
Six Months Ended Year Ended
April 30, 2000(2) Oct. 31, 1999
----------------- --------------
Shares sold ............................... 353,225 482,274
Shares issued to shareholders on
reinvestment of dividends .............. 118,387 2,257
Shares redeemed ........................... (207,926) (542,832)
----------- ------------
Net increase/(decrease) in shares
outstanding 263,686 (58,351)
=========== ============
Proceeds from sale of shares .............. $ 6,750,758 $ 9,655,136
Value of reinvested dividends ............. 2,098,197 40,630
Cost of shares redeemed ................... (4,253,589) (10,706,756)
----------- ------------
Net increase/(decrease) from capital share
transactions ........................... $ 4,595,366 $ (1,010,990)
=========== ============

Class B Shares
--------------------
For the Period
February 29, 2000(1)
to April 30, 2000(2)
--------------------
Shares sold .................................................. 45,880
Shares issued to shareholders on reinvestment of dividends ... --
Shares redeemed .............................................. (16,230)
---------
Net increase in shares outstanding ........................... 29,650
=========
Proceeds from sale of shares ................................. $ 752,858
Value of reinvested dividends ................................ --
Cost of shares redeemed ...................................... (261,148)
---------
Net increase from capital share transactions ................. $ 491,710
=========
------------
(1) Commencement of Operations.
(2) Unaudited.

22
<PAGE>

FLAG INVESTORS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------

NOTE 3 -- concluded

Class C Shares
--------------------
For the Period
February 29, 2000(1)
to April 30, 2000(2)
--------------------
Shares sold ................................................... 45,529
Shares issued to shareholders on reinvestment of dividends .... --
Shares redeemed ............................................... --
--------
Net increase in shares outstanding ............................ 45,529
========
Proceeds from sale of shares .................................. $743,524
Value of reinvested dividends ................................. --
Cost of shares redeemed ....................................... --
--------
Net increase from capital share transactions .................. $743,524
========

------------
(1) Commencement of Operations.
(2) Unaudited.

NOTE 4 -- Federal Income Tax Information

The Fund may periodically make reclassifications among certain of its
capital accounts as a result of differences in the characterization and
allocation of certain income and capital gain distributions determined annually
in accordance with federal tax regulations which may differ from generally
accepted accounting principles.

NOTE 5 -- Change in Independent Accountants

On December 15, 1999, the Audit and Compliance Committee and the Board of
Directors of the Fund participated in and approved the decision to change the
Fund's independent accountants from Deloitte & Touche LLP to
PricewaterhouseCoopers LLP for the Fund's fiscal year ended October 31, 2000.

The reports of Deloitte &Touche LLP on the financial statements of the Fund
for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle. In connection with the Fund's audits for the two most
recent fiscal years and through December 13, 1999, there were no disagreements
with Deloitte & Touche LLPon any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Deloitte &Touche LLP would
have caused them to make reference thereto in their report on the financial
statements for such years.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS APRIL 30, 2000
(UNAUDITED)

Shares Description Value
--------------------------------------------------------------------------------
COMMON STOCK -- 95.7%
--------------------------------------------------------------------------------
ARGENTINA -- 0.1%
333,735 Impsat Fiber Networks, Inc.(1) (Technology --
Other Telecommunications) ................... $ 5,277,185
-------------
AUSTRALIA -- 1.5%
562,900 Brambles Industries Ltd.
(Diversified Commercial Services) ........... 15,831,665
660,020 News Corp., Ltd. ADR (Media Conglomerates) ..... 29,040,880
2,486,100 Telstra Corp. (Telecommunications) ............. 6,353,909
1,261,400 Telstra Corp. Ltd. (Telecommuncations) ......... 5,402,530
-------------
56,628,984
-------------
BOTSWANA -- 0.1%
5,341,900 Sechaba Breweries Ltd. (Alcoholic Beverages) ... 4,736,941
-------------
BRAZIL -- 1.0%
425,900 Embratel Participacoes SA ADR
(Telecommunications) ........................ 9,582,750
187,490 Telebras ADR(1) (Telecommuncations) ............ 22,158,974
428,404 Tele Norte Leste Participacoes SA ADR
(Telecommunications) ........................ 7,630,947
-------------
39,372,671
-------------
CANADA -- 2.7%
471,708 Celestica Inc.(1) (Electronic Production
Equipment) .................................. 25,437,344
416,950 Nortel Networks Corp.
(Telecommunications Equipment) .............. 47,107,621
1,209,960 Rogers Communications, Inc.(1)
(Cable Television) .......................... 31,480,899
-------------
104,025,864
-------------
EGYPT -- 0.3%
319,545 Egyptian Mobile Phone Service(1)
(Telecommunications) ........................ 12,182,325
-------------

24
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

Shares Description Value
--------------------------------------------------------------------------------
COMMON STOCK -- continued
--------------------------------------------------------------------------------
FINLAND -- 4.5%
2,196,300 Jot Automation Group OYJ (Industrial
Machinery/Components) ....................... $ 15,910,976
1,508,160 Nokia Oyj ADR (Telecommunications
Equipment) .................................. 85,776,600
322,630 Tietonator OYJ (EDP Services) .................. 15,581,836
989,520 Sonera Group OYJ(2) (Telecommunication) ........ 54,552,916
-------------
171,822,328
-------------
FRANCE -- 13.6%
266,400 AXA2 (Multi-Line Insurance) .................... 39,593,710
427,830 Banque Nationale de Paris (Non-U.S. Banks) ..... 34,658,600
166,242 Business Objects SA ADR1 (Computer Software) ... 16,270,936
372,137 Canal Plus (Cable Television) .................. 71,891,365
80,434 Christian Dior (Alcoholic Beverages) ........... 19,166,790
819,670 Sanofi-Synthelabo SA1 (Major Pharmaceuticals) .. 30,661,276
142,846 Societe Generale(1,2) (Non-U.S. Banks) ......... 29,652,398
325,770 STMicroelectronics NV(2) (Semi-Conductors) ..... 61,794,497
272,800 Suez Lyonnaise des Eaux
(Engineering & Construction) ................ 42,881,650
43,632 Television Francaise (Broadcasting) ............ 29,939,057
608,684 Total Fina SA -- Class B1 (Oil
Refining/Marketing) ......................... 92,573,406
546,150 Vivendi(2) (Multi-Sector Companies) ............ 54,147,555
-------------
523,231,240
-------------
GERMANY -- 9.0%
1,113,172 Bayer AG(2) (Major Chemicals) .................. 46,204,968
459,200 Bayerische Vereinsbank(2) (Non-U.S. Banks) ..... 28,496,204
413,874 Epcos AG(1,2) (Electronic Components) .......... 58,645,751
145,240 Infineon Technologies AG(1) (Semi Conductors) .. 10,025,520
102,077 Intershop Communications AG(1,2)
(Internet Services) ......................... 45,439,180
1,014,220 Lufthansa AG(2) (Airlines) ..................... 21,210,596
111,863 Muenchener Rueckversicherungs-
Gesellschaft AG (Multi-Line Insurance) ...... 32,721,222
56,410 SAP AG(2) (Computer Software) .................. 33,258,174
281,190 Siemens AG (Diversified Electronic Products) ... 41,586,887
1,319,130 Thyssenkrupp AG(1,2) (Multi-Sector Companies) .. 27,767,552
-------------
345,356,054
-------------

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) APRIL 30, 2000
(UNAUDITED)

26
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

Shares Description Value
--------------------------------------------------------------------------------
COMMON STOCK -- continued
--------------------------------------------------------------------------------
ITALY -- 4.8%
6,961,710 ENI SPA (Integrated Oil Companies) .............. $ 34,700,943
2,551,728 San Paolo-- IMI SPA(1) (Non-U.S. Banks) ......... 35,809,076
8,035,667 Seat-Pagine Gialle Spa(2) (Printing/Forms) ...... 35,367,721
3,032,320 Telecom Italia SPA (Telecommunications) ......... 42,498,087
8,493,810 Unicredito Italiano SPA(2) (Non-U.S. Banks) ..... 34,520,368
-------------
182,896,195
-------------
JAPAN -- 12.0%
1,551,000 Fujitsu Ltd.(2) (Electronic Data Processing) .... 43,915,896
191,400 Kyocera Corp.(2) (Diversified
Electronic Products) ......................... 32,002,846
215,000 Murata Manufacturing Co. Ltd.
(Electronic Components) ...................... 41,777,868
703,100 Nichiei Co., Ltd. (Finance Companies) ........... 13,922,569
3,221 Nippon Telegraph & Telephone Corp.
(Telecommunications) ......................... 39,937,791
1,455 NTT Mobile Communications(2)
(Cellular Telephone) ......................... 48,602,512
111,744 Rohm Company (Semi Conductors) .................. 37,430,127
93,130 Shohkoh Fund & Co., Ltd.(2)
(Finance Companies) .......................... 16,631,654
73,800 Softbank Corporation1
(Electronics Distributors) ................... 18,164,628
147,400 Sony Corp.(1,2) (Consumer Electronics/
Appliances) .................................. 16,926,134
117,400 Sony Corp. New(1) (Consumer
Electronics/Appliances) ...................... 13,578,964
943,900 Takeda Chemical Industries Ltd.(1)
(Major Pharmaceuticals) ...................... 62,098,928
2,002,000 The Furukawa Electric Co. Ltd.
(Electrical Products) ........................ 27,768,615
5,072,000 Toshiba Corp. (Diversified Electronic Products) . 49,184,589
-------------
461,943,121
-------------

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) APRIL 30, 2000
(UNAUDITED)

Shares Description Value
--------------------------------------------------------------------------------
Common Stock -- continued
--------------------------------------------------------------------------------
MALAYSIA -- 0.5%
2,484,800 AMMB Holdings Berhad (Investment Bankers/
Brokers/Services) ............................ $ 9,416,305
795,000 Malaysian Pacific Industries
(Containers/Packaging) ....................... 8,891,656
-------------
18,307,961
-------------
MEXICO -- 1.0%
314,700 Grupo Televisa SA GDR(1,2) (Broadcasting) ....... 19,963,781
303,400 Telefonos de Mexico SA ADR
(Telecommunications) ......................... 17,843,713
-------------
37,807,494
-------------
NETHERLANDS -- 8.0%
1,477,050 ASM Lithography Holding1 (Electronic
Production Equipment) ........................ 57,876,421
1,887,370 Buhrmann NV (Wholesale Distributors) ............ 48,758,252
884,494 ING Groep NV (Diversified Financial Services) ... 48,375,882
480,020 Koninklijke KPN (Telecommunications) ............ 48,487,863
418,240 Kpnqwest NV(1,2) (Telecommunications) ........... 17,417,258
1,519,920 Philips Electronics NV
(Diversified Electronic Products) ............ 67,963,354
355,225 Unitedglobalcom Inc.(1) (Cable Television) ...... 18,871,328
-------------
307,750,358
-------------
POLAND -- 0.3%
1,399,293 Telekomunikacja Polska SA GDR Rule 144A(1,3)
(Telecommunications) ......................... 10,739,574
-------------
SINGAPORE -- 1.1%
913,000 DBS Group Holdings Ltd.(2) (Non-U.S. Banks) ..... 12,565,895
2,803,200 Natsteel Electronics Ltd.(2)
(Diversified Electronic Products) ............ 16,089,219
716,400 Singapore Press Holdings Ltd.(2) (Newspapers) ... 14,013,830
-------------
42,668,944
-------------

28
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED) APRIL 30, 2000
(UNAUDITED)

Shares Description Value
--------------------------------------------------------------------------------
COMMON STOCK -- continued
--------------------------------------------------------------------------------
TAIWAN -- 1.2%
519,000 Asustek Computer, Inc.
(Electronic Data Processing) ................. $ 5,746,031
4,112,000 Macronix International (Semi Conductors) ........ 12,422,122
1,835,400 Systex Corp. (EDP Services) ..................... 8,002,265
6,453,000 United Microelectronics Corp.
(Semi Conductors) ............................ 21,812,375
--------------
47,982,793
--------------
TURKEY -- 0.4%
9,127,360 Vestel Elektronik Sanayi1
(Consumer Electronics/Appliances) ............ 3,435,538
382,621,000 Yapi Ve Kredi Bankasi (Non-U.S. Banks) .......... 12,212,308
--------------
15,647,846
--------------
UNITED KINGDOM -- 14.7%
1,567,613 Barclays PLC (Non-U.S. Banks) ................... 40,449,984
134,590 Bookham Technology ADR(1)
(Electronic Components) ...................... 6,998,680
1,025,890 BP Amoco PLC ADR
(Integrated Oil Companies) ................... 52,320,390
2,394,910 Cable & Wireless PLC (Telecommunications) ....... 39,911,463
1,803,495 Celltech Group PLC1 (Biotechnology) ............. 29,886,134
999,760 COLT Telecom Group PLC(1)
(Telecommunications) ......................... 43,788,240
804,480 Logica PLC (EDP Services) ....................... 24,472,050
409,868 NTL, Inc(.)1 (Telecommunications) ............... 31,354,902
6,301,700 Old Mutual PLC (Diversified Financial Services) . 14,298,305
6,274,725 Reckitt & Colman PLC (Package
Goods/Cosmetics) ............................. 64,852,445
3,175,640 Royal Bank of Scotland Group PLC
(Non-U.S. Banks) ............................. 49,717,262
7,848,000 Shell Transport & Trading Co. PLC
(Integrated Oil Companies) ................... 64,472,890
22,791,741 Vodafone AirTouch PLC (Cellular Telephone) ...... 104,675,356
--------------
567,198,101
--------------
TOTAL COMMON STOCK (Cost $2,944,712,600) ........................ 3,679,238,806
--------------

30
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

Shares Description Value
--------------------------------------------------------------------------------
OPTION -- INDEX -- 0.1%
--------------------------------------------------------------------------------
10,740 Nikkei 225 Index (Options on Nikkei Exchange
with Strike Price of 20,922.68 and Expiration
6/30/00) .................................... $ 637,225
4,912 Nikkei 225 Index (Options on Nikkei Exchange
with Strike Price of 20,434.27 and Expiration
6/9/00) ..................................... 298,972
3,936 Nikkei 225 Index (Options on Nikkei Exchange
with Strike Price of 19,727.47 and Expiration
6/9/00) ..................................... 243,644
4,893 Nikkei 225 Index (Options on Nikkei Exchange
with Strike Price of 20,239.31 and Expiration
6/30/00) .................................... 609,036
148,400,000 Eur/Jpy Option (Strike Price of 99.00 and
Expiration 5/24/00) ......................... 1,964,816
--------------
TOTAL OPTION -- INDEX (Cost $19,563,044) ....................... 3,753,693
--------------
--------------------------------------------------------------------------------
Short-Term Instrument -- 2.4%
--------------------------------------------------------------------------------
MUTUAL FUNDS -- 2.4%
91,492,387 Institutional Cash Management Fund,
(Cost $91,492,387) .......................... 91,492,387
--------------
TOTAL INVESTMENTS (Cost $3,036,204,986) ............. 98.2% $3,774,484,886
OTHER ASSETS IN EXCESS OF LIABILITIES ............... 1.8 67,937,534
----- --------------
NET ASSETS .......................................... 100.0% $3,842,422,420
===== ==============

------------
(1) Non-income producing security.
(2) Securities on loan.
(3) This security may be resold in transactions exempt from registrations,
normally to qualified institutional buyers.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION APRIL 30, 2000
(UNAUDITED)

AS A PERCENT OF
TOTAL INVESTMENTS
IN THE PORTFOLIO
-----------------
Telecommunications.................... 12.53%
Non-U.S. Banks........................ 10.70
Diversified Electronic Products....... 6.31
Cellular Telecommunications........... 5.93
Telecommunications Equipment.......... 5.53
Integrated Oil Companies.............. 4.02
Semi Conductors....................... 3.81
Cable Television...................... 3.24
Multi-Sector Companies................ 3.14
Electronic Components................. 2.85
Major Pharmaceuticals................. 2.46
Oil Refining/Marketing................ 2.46
Electronic Production Equipment ...... 2.21
Other Pharmaceuticals................. 2.00
Multi-Line Insurance.................. 1.92
Package Goods/Cosmetics............... 1.72
Electrical Products................... 1.69
Diversified Financial Services........ 1.66
Diversified Commercial Services....... 1.63
Wholesale Distributors................ 1.56
Industrial Machinery/Components....... 1.47
Broadcasting.......................... 1.32
Electronic Data Processing............ 1.32
Computer Software..................... 1.31
EDP Services.......................... 1.27
Major Chemicals....................... 1.23
Internet Services..................... 1.21
Engineering &Construction............. 1.14
Building Materials.................... 1.08
Non-U.S. Utilities.................... 1.03
Other Industries1..................... 7.82
------
97.57%
Cash & Cash Equivalent................ 2.43
------
100.00%
======

------------
(1) No one industry represents more than 1% of Portfolio holdings.

SEE NOTES TO FINANCIAL STATEMENTS.

32
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000
Assets
Investments, at Value:
Common Stock and Purchased Options (Cost $2,964,275,644) .. $3,682,992,499
Short-Term Instrument (Cost $91,492,387) .................. 91,492,387
--------------
Total Investments, at Value .................................... 3,774,484,886
Cash(1) ..................................................... 23,253,218
Receivable for Securities Sold .............................. 52,703,354
Receivable for Collateral Under Security Loan Agreements .... 496,895,089
Unrealized Appreciation on Forward Foreign Currency
Contracts ................................................. 39,729,639
Dividends and Interest Receivable ........................... 8,105,652
Receivable for Foreign Taxes Withheld ....................... 3,410,112
Receivable for Shares of Beneficial Interest Subscribed ..... 27,133,824
Securities Lending Income Receivable ........................ 111,230
Prepaid Expenses and Other .................................. 107,377
--------------
Total Assets ................................................... 4,425,934,381
--------------
Liabilities
Payable for Options Sold (Cost $2,095,119) .................. 2,206,704
Payable for Securities Purchased ............................ 53,295,558
Payable for Collateral Under Security Loan Agreements ....... 496,895,089
Unrealized Depreciation on Forward Foreign Currency Contracts 28,916,155
Due to Bankers Trust ........................................ 2,179,078
Accrued Expenses and Other .................................. 19,377
--------------
Total Liabilities .............................................. 583,511,961
--------------
Net Assets ..................................................... $3,842,422,420
==============
Composition of Net Assets
Paid-in Capital ............................................. $3,147,449,623
Net Unrealized Appreciation on Investments, Options, Foreign
Futures, Foreign Currencies and Forward Foreign Currency
Contracts ................................................. 694,972,797
--------------
Net Assets ..................................................... $3,842,422,420
==============

-----------
(1) Includes foreign cash of $19,232,798 with a cost of $20,003,622.

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(UNAUDITED)
For the Six
Months Ended
April 30,
--------------------------------------------------------------------------------
2000
Investment Income
Dividends (net of foreign withholding tax of $1,476,044) .... $ 15,244,118
Interest .................................................... 2,587,829
Securities Lending Income ................................... 682,592
------------
Total Investment Income ................................... 18,514,539
------------
Expenses
Advisory Fees ............................................... 12,365,322
Administration and Services Fees ............................ 2,871,036
Professional Fees ........................................... 38,252
Trustees Fees ............................................... 2,622
Printing and Shareholder Reports ............................ 1,000
Miscellaneous ............................................... 47,725
------------
Total Expenses ............................................ 15,325,957
Less: Fee Waivers .............................................. (2,006,292)
------------
Net Expenses .............................................. 13,319,665
------------
Net Investment Income .......................................... 5,194,874
------------
Realized and Unrealized Gain (Loss) on Investments, Options,
Foreign Futures, Foreign Currencies, and Forward Foreign
Currency Contracts
Net Realized Gain (Loss) from:
Investment Transactions ................................... 277,208,809
Option Transactions ....................................... (839,447)
Foreign Futures Transactions .............................. (28,337,693)
Foreign Currency Transactions ............................. 31,757,616
Forward Foreign Currency Transactions ..................... (6,924,471)
Net Change in Unrealized Appreciation/Depreciation on
Investments, Options, Foreign Futures, Foreign Currencies and
Forward Foreign Currency Contracts ........................ 204,838,595
------------
Net Realized and Unrealized Gain on Investments, Options,
Foreign Futures, Foreign Currencies, and Forward Foreign
Currency Contracts .......................................... 477,703,409
------------
Net Increase in Net Assets from Operations ..................... $482,898,283
============

SEE NOTES TO FINANCIAL STATEMENTS.

34
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period For the
Months Ended October 1, 1999 to Year Ended
April 30, October 31, September 30,
----------------------------------------------------------------------------------------------
2000(2) 1999(1) 1999
<S> <C> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment (Expenses in Excess
of ) Income ........................ $ 5,194,874 $ (323,887) $ 26,238,345
Net Realized Gain (Loss) from
Investment, Option, Foreign Futures,
Foreign Currency, and Forward
Foreign Currency Transactions ...... 272,864,814 (9,960,988) 4,300,697
Net Change in Unrealized
Appreciation/Depreciation on
Investments, Options, Foreign
Futures, Foreign Currencies and
Forward Foreign Currency
Contracts .......................... 204,838,595 146,111,035 345,753,008
--------------- -------------- ---------------
Net Increase in Net Assets from
Operations ........................... 482,898,283 135,826,160 376,292,050
--------------- -------------- ---------------
Capital Transactions
Proceeds from Capital Invested ....... 2,898,384,435 340,860,574 3,135,914,534
Value of Capital Withdrawn ........... (2,556,221,132) (357,182,232) (2,446,602,079)
--------------- -------------- ---------------
Net Increase (Decrease) in Net Assets
from Capital Transactions ............ 342,163,303 (16,321,658) 689,312,455
--------------- -------------- ---------------
Total Increase in Net Assets ............ 825,061,586 119,504,502 1,065,604,505
Net Assets
Beginning of Period .................. 3,017,360,834 2,897,856,332 1,832,251,827
--------------- -------------- ---------------
End of Period ........................ $ 3,842,422,420 $3,017,360,834 $ 2,897,856,332
=============== ============== ===============

-----------
<FN>
(1) On September 8, 1999, the Board of Trustees approved the change of the
fiscal year end from September 30 to October 31.
(2) Unaudited.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the International Equity Portfolio.

For the For the
Six Months Period
Ended Oct. 1, 1999
April 30, to Oct. 31,
--------------------------------------------------------------------------------
2000(4) 1999(3)
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted) ....................... $3,842,422 $3,017,361
Ratios to Average Net Assets:
Net Investment (Expenses in
Excess of) Income .................. 0.14%(1) (0.13)%(1)
Expenses After Waivers .................. 0.70%(1) 0.70%(1)
Expenses Before Waivers ................. 0.81%(1) 0.83%(1)
Portfolio Turnover Rate ................... 114% 5%

-----------
(1) Annualized.
(2) On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
(3) On September 8, 1999, the Board of Trustees approved the change of the
fiscal year end from September 30 to October 31.
(4) Unaudited.

36
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the For the
Period Year
Jan. 1, 1995 to Ended
For the Years Ended September 30, September 30, Dec. 31,
---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995(2) 1994

<S> <C> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted) $2,897,856 $1,832,252 $572,405 $164,813 $83,313 $56,042
Ratios to Average Net Assets:
Net Investment (Expenses in
Excess of) Income 1.00% 1.52% 1.35% 1.76% 2.39%(1) 1.69%
Expenses After Waivers 0.70% 0.66% 0.65% 0.65% 0.65%(1) 0.65%
Expenses Before Waivers 0.80% 0.81% 0.82% 0.85% 0.87%(1) 0.89%
Portfolio Turnover Rate 106% 65% 63% 68% 21% 15%

-----------
<FN>
(1) Annualized.
(2) On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
(3) On September 8, 1999, the Board of Trustees approved the change of the
fiscal year end from September 30 to October 31.
(4) Unaudited.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Note 1 -- Organization and Significant Accounting Policies

A. ORGANIZATION -- The International Equity Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as
amended, as an open-end management investment company. The Portfolio
was organized as an unincorporated trust under the laws of New York and
began operations on August 4, 1992. The Declaration of Trust permits
the Board of Trustees (the "Trustees") to issue beneficial interests in
the Portfolio.

B. SECURITY VALUATION -- The Portfolio's investments listed or traded on
National Stock Exchanges or other domestic or foreign exchanges are
valued based on the closing price of the security traded on that
exchange prior to the time when the Portfolio assets are valued.
Short-term debt securities are valued at market value until such time
as they reach a remaining maturity of 60 days, whereupon they are
valued at amortized cost using their value on the 61st day. All other
securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Trustees.

C. SECURITY TRANSACTIONS AND INTEREST INCOME -- Security transactions are
accounted for on a trade date basis. Dividend income, less foreign
taxes withheld, if any, is recorded on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign
securities. Interest income is recorded on the accrual basis and
includes amortization of premium and accretion of discount on
investments. Expenses are recorded as incurred. Realized gains and
losses from securities transactions are recorded on the identified cost
basis.

All of the net investment income and realized and unrealized gains
and losses from the security and foreign currency transactions of the
Portfolio are allocated pro rata among the investors in the Portfolio
at the time of such determination.

D. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Portfolio
are maintained in U.S. dollars. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at
prevailing exchange rates. Purchases and sales of investment
securities, dividend and interest income and certain expenses are
translated at the rates of exchange prevailing on the respective dates
of such transactions.

38
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

NOTE 1 -- continued

E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Portfolio may enter into
forward foreign currency contracts for the purpose of settling specific
purchases or sales of securities denominated in a foreign currency or
with respect to the Portfolio's investments. The net U.S. dollar value
of foreign currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation are
determined using prevailing exchange rates. With respect to forward
foreign currency contracts, losses in excess of amounts recognized in
the Statement of Assets and Liabilities may arise due to changes in the
value of the foreign currency or if the counterparty does not perform
under the contract.

F. OPTION CONTRACTS -- Upon the purchase of a put option or a call option
by the Portfolio, the premium paid is recorded as an investment and
marked-to-market daily to reflect the current market value. When a
purchased option expires, the Portfolio will realize a loss in the
amount of the cost of the option. When the Portfolio enters into a
closing sale transaction, the Portfolio will realize a gain or loss
depending on whether the sale proceeds from the closing sale
transaction are greater or less than the cost of the option. When the
Portfolio exercises a put option, it realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Portfolio exercises
a call option, the cost of the security which the Portfolio purchases
upon exercise will be increased by the premium originally paid.

G. FUTURES CONTRACTS -- The Portfolio may enter into financial futures
contracts, which are contracts to buy a standard quantity of securities
at a specified price on a future date. The Portfolio is required to
deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Variation margin payments are made
or received by the Portfolio each day, depending on the daily
fluctuations in the value of the underlying security, and are recorded
for financial statement purposes as unrealized gains or losses by the
Portfolio.

Futures contracts are valued at the settlement price established
each day by the board of trade or exchange on which they are traded.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- concluded

H. FEDERAL INCOME TAXES -- The Portfolio is considered a Partnership under
the Internal Revenue Code. Therefore, no federal income tax provision
is necessary.

I. SECURITY LOANS -- The Portfolio receives compensation in the form of
fees or it retains a portion of interest on the investment of any cash
received as collateral. The Portfolio also continues to receive
interest or dividends on the securities loaned. The loans are secured
by collateral at least equal, at all times, to the fair value of the
securities loaned plus accrued interest. Gain or loss in the fair value
of the securities loaned that may occur during the term of the loan
will be for the account of the Portfolio.

J. OTHER -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts in the
financial statements. Actual results could differ from those estimates.

Note 2 -- Fees and Transactions with Affiliates

The Portfolio has entered into an Administration and Services Agreement
with Bankers Trust Company ("Bankers Trust"), an indirect wholly owned
subsidiary of Deutsche Bank A.G. Under this agreement, Bankers Trust provides
administrative, custody, transfer agency and shareholder services to the
Portfolio in return for a fee computed daily and paid monthly at an annual rate
of 0.15% of the Portfolio's average daily net assets.

The Portfolio has entered into an Advisory Agreement with Bankers Trust.
Under this agreement, the Portfolio pays Bankers Trust a fee computed daily and
paid monthly at an annual rate of .65% of the Portfolio's average daily net
assets.

Bankers Trust has contractually agreed to waive its fees and reimburse
expenses of the Portfolio, through February 28, 2001, to the extent necessary,
to limit all expenses to 0.70% of the average daily net assets of the Portfolio.

The Portfolio may invest in the Institutional Cash Management Fund (the
"Cash Management Fund"), an open-end management investment company managed by
Bankers Trust. The Cash Management Fund is offered as a cash management option
to the Portfolio and other accounts managed by Bankers Trust. Distributions from

40
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

NOTE 2 -- concluded

the Cash Management Fund to the Portfolio for the six months ended April 30,
2000, amounted to $2,216,254 and are included in dividend income.

At April 30, 2000, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $200,000,000 that
expires April 27, 2001. A commitment fee on the average daily amount of the
available commitment is payable on a quarterly basis and apportioned among all
participants. For the six months ended April 30, 2000, $19,900,000 was drawn
down under the credit facility at an interest rate range of 6.125% to 8.50%.
Total interest charges as a result of these borrowings amounted to $11,360,
which were paid prior to April 30, 2000. No amounts were outstanding or drawn
down under the credit facility as of April 30, 2000.

The Portfolio may use cash collateral from its securities lending
transactions, described in Note 1.I. to purchase shares of an affiliated fund
and may pay fees generated from those transactions to Bankers Trust.

Note 3 -- Purchases and Sales of Investment Securities

The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, for the six months ended April 30, 2000, were
$2,371,371,652 and $2,053,569,888, respectively.

For Federal income tax purposes, the tax basis of investments held at April
30, 2000, was $3,055,768,031. The aggregate gross unrealized appreciation for
all investments at April 30, 2000, was $901,838,236, and the aggregate gross
unrealized depreciation for all investments was $182,676,271.

<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

Note 4 -- Open Forward Foreign Currency Contracts

On April 28, 2000, the International Equity Portfolio had the following
open forward foreign currency contracts outstanding:

<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
CONTRACT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE VALUE (U.S.$) (U.S.$)
----------------------------------------------------------------------------------------------------------------------
SALES
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australian Dollar 17,633,294 U.S. Dollar 10,550,000 5/8/00 10,289,204 $ 260,796
Australian Dollar 34,668,595 U.S. Dollar 21,100,000 5/8/00 20,242,299 857,701
Swiss Franc 117,691,730 U.S. Dollar 71,000,000 5/25/00 68,461,247 2,538,753
Euro 8,000,000 U.S. Dollar 7,291,200 5/3/00 7,290,008 1,192
Euro 113,594,802 U.S. Dollar 105,600,000 5/25/00 103,513,377 2,086,623
Euro 113,353,371 U.S. Dollar 105,600,000 5/25/00 103,293,372 2,306,628
Euro 74,400,000 U.S. Dollar 70,944,832 5/17/00 67,717,392 3,227,440
Euro 74,200,000 U.S. Dollar 70,991,827 5/17/00 67,535,356 3,456,471
Euro 74,400,000 U.S. Dollar 71,771,409 5/17/00 67,717,392 4,054,017
Euro 74,200,000 U.S. Dollar 69,901,439 5/25/00 67,574,682 2,326,757
Euro 74,200,000 U.S. Dollar 69,894,322 5/25/00 67,574,682 2,319,640
Euro 7,840,000 U.S. Dollar 7,236,320 5/31/00 7,143,024 93,296
Euro 2,182,000 U.S. Dollar 1,992,275 5/31/00 1,988,020 4,255
British Pound 6,670,123 U.S. Dollar 10,550,000 5/8/00 10,437,408 112,592
British Pound 44,552,887 U.S. Dollar 70,300,000 5/25/00 69,716,357 583,643
British Pound 13,364,157 U.S. Dollar 21,100,000 5/8/00 20,754,537 345,463
Japanese Yen 6,733,699,375 U.S. Dollar 63,770,320 5/8/00 62,307,775 1,462,545
Japanese Yen 7,481,270,000 U.S. Dollar 71,000,000 5/10/00 69,225,141 1,774,859
Japanese Yen 7,463,165,000 U.S. Dollar 70,868,531 5/10/00 69,057,613 1,810,918
Japanese Yen 7,363,533,800 U.S. Dollar 70,691,824 5/17/00 68,135,713 2,556,111
Japanese Yen 115,455,200 U.S. Dollar 1,111,857 5/17/00 1,068,322 43,535
Japanese Yen 50,964,000 U.S. Dollar 492,325 5/17/00 471,576 20,749
Japanese Yen 14,903,808,000 U.S. Dollar 143,453,616 5/17/00 138,151,724 5,301,892
Norwegian Krone 89,594,820 U.S. Dollar 10,550,000 5/8/00 10,014,213 535,787
Norwegian Krone 176,476,180 U.S. Dollar 21,100,000 5/8/00 19,744,261 1,355,739
New Zealand Dollar 21,229,500 U.S. Dollar 10,549,999 5/8/00 10,321,868 228,132
New Zealand Dollar 43,314,926 U.S. Dollar 21,100,000 5/8/00 21,035,894 64,105
----------------------------------------------------------------------------------------------------------------------
Total Sales 39,729,639
----------------------------------------------------------------------------------------------------------------------
PURCHASES
----------------------------------------------------------------------------------------------------------------------
Canadian Dollar 104,731,390 U.S. Dollar 71,000,000 5/25/00 70,730,999 (269,001)
Canadian Dollar 104,824,400 U.S. Dollar 71,000,000 5/25/00 70,793,814 (206,186)
Swiss Franc 34,526,700 U.S. Dollar 21,125,000 5/8/00 20,068,121 (1,056,879)
Swiss Franc 69,750,525 U.S. Dollar 42,250,000 5/8/00 40,472,627 (1,777,373)
Euro 10,970,727 U.S. Dollar 10,550,000 5/8/00 9,997,086 (552,914)
Euro 74,200,000 U.S. Dollar 70,691,824 5/17/00 67,614,824 (3,077,000)
Euro 21,716,756 U.S. Dollar 21,100,000 5/8/00 19,753,344 (1,346,656)
Euro 148,800,000 U.S. Dollar 143,453,616 5/17/00 135,434,784 (8,018,832)
Euro 5,059,000 U.S. Dollar 4,610,773 5/3/00 4,610,019 (754)
British Pound 5,160,000 U.S. Dollar 8,154,348 5/2/00 8,074,368 (79,980)
British Pound 44,931,874 U.S. Dollar 71,000,000 5/25/00 69,788,187 (1,211,813)
Japanese Yen 2,239,989,375 U.S. Dollar 21,125,000 5/8/00 20,726,906 (398,094)
Japanese Yen 4,493,710,000 U.S. Dollar 42,250,000 5/8/00 41,589,172 (660,828)
Japanese Yen 7,478,989,000 U.S. Dollar 70,991,827 5/17/00 69,326,928 (1,664,899)
Japanese Yen 7,474,038,000 U.S. Dollar 70,944,832 5/17/00 69,281,034 (1,663,797)
Japanese Yen 7,480,734,000 U.S. Dollar 71,771,409 5/17/00 69,343,103 (2,428,306)
Japanese Yen 7,287,924,000 U.S. Dollar 69,901,439 5/25/00 67,649,903 (2,251,536)
Japanese Yen 7,287,182,000 U.S. Dollar 69,894,322 5/25/00 67,643,015 (2,251,307)
----------------------------------------------------------------------------------------------------------------------
Total Purchases (28,916,155)
----------------------------------------------------------------------------------------------------------------------
Net Unrealized Appreciation $ 10,813,484
----------------------------------------------------------------------------------------------------------------------
</TABLE>

42
<PAGE>

INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------

Note 5 -- Call and Put Options

Call and Put Options written and related premiums received during the
period were as follows:

<TABLE>
<CAPTION>
CALLS -- ACTUAL PUTS -- ACTUAL
---------------------------------------------------------------------------------------------------------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding, October 31, 1999
Options written 397,284 2,517,509 500,950 3,632,888
Options closed (397,284) (2,517,509) (246,950) (1,537,769)
Options expired -- -- -- --
Options exercised -- -- -- --
---------------------------------------------------------------------------------------------------------------------
Options outstanding, April 30, 2000 -- -- 254,000 2,095,119
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 6 -- Lending of Portfolio Securities

The Portfolio has the ability to lend its securities to brokers, dealers
and other financial organizations. Loans of portfolio securities are
collateralized by cash and/or government securities that are maintained at all
times in an amount equal to 102% and 105% of the current market value of the
loaned securities for both domestic and international securities, respectively.

At April 30, 2000

Market Value Market Value % of Portfolio
of Loaned Securities of Collateral on Loan
-------------------- ------------- --------------
$473,695,902 $496,895,089 12.87

Note 7 -- Risks of Investing in Foreign Securities

The Portfolio invests in foreign securities. Investing in foreign companies
and foreign governments involves special risks and considerations not typically
associated with investing in securities of U.S. companies and the U.S.
government. These risks include devaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies and
the U.S. government. This is particularly true with respect to emerging markets
in developing countries.

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

DIRECTORS AND OFFICERS

TRUMAN T. SEMANS
CHAIRMAN

CARL W. VOGT, ESQ. REBECCA W. RIMEL
PRESIDENT DIRECTOR

RICHARD R. BURT ROBERT H. WADSWORTH
DIRECTOR DIRECTOR

RICHARD T. HALE CHARLES A. RIZZO
DIRECTOR TREASURER

JOSEPH R. HARDIMAN AMY M. OLMERT
DIRECTOR SECRETARY

LOUIS E. LEVY DANIEL O. HIRSCH
DIRECTOR ASSISTANT SECRETARY

EUGENE J. MCDONALD
DIRECTOR

INVESTMENT OBJECTIVE

A mutual fund seeking long-term growth of capital primarily through investment
in stocks and other equity securities of companies in developed countries
located outside of the United States.

--------------------------------------------------------------
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 omitted]

DOMESTIC EQUITY
Communications Fund
Emerging Growth Fund
Equity Partners Fund
Real Estate Securities Fund
Top 50 U.S.
Value Builder Fund

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

FIXED INCOME
Managed Municipal Fund Shares
Short-Intermediate Income Fund
Total Return U.S. Treasury Fund Shares

MONEY MARKET
Cash Reserve Prime Shares

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

Distributed by:
ICC DISTRIBUTORS, INC.

INTLSA(6/00)