DEUTSCHE FAMILY OF FUNDS INC, N-1A EL/A, 1997-08-01

DEUTSCHE FAMILY OF FUNDS INC
N-1A EL/A, 1997-08-01

Previous: OHIO STATE FINANCIAL SERVICES INC, S-1/A, 1997-08-01

Next: UNITED DIGITAL NETWORK INC, RW, 1997-08-01

As filed with the Securities and Exchange Commission on August 1, 1997
Registration No. 333 - 7008
811 - 8227
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________

FORM N-1A

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2

and

REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2

DEUTSCHE FAMILY OF FUNDS, INC.
(Exact name of Registrant as specified in charter)

2nd Federated Square, Pittsburgh, PA 15222
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (800) 245-5000

BRIAN LEE Copy to: JOHN T. BOSTELMAN, ESQ.
Deutsche Fund Management, Inc. Sullivan & Cromwell
31 West 52nd Street 125 Broad Street
New York, New York 10019 New York, New York 10004
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this registration statement. It is proposed that this filing
will become effective (check appropriate box):

[ ] immediately upon filing pursuant to pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

The Registrant elects, pursuant to Rule 24f-2 of the Investment Company
Act General Rules and Regulations, to register an indefinite number of shares of
its capital stock.
===============================================================================

The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two prospectuses. The first
prospectus relates to five funds (the Deutsche European Mid-Cap Fund, the
Deutsche German Equity Fund, the Deutsche Japanese Equity Fund, the Deutsche
Global Bond Fund and the Deutsche European Bond Fund (formerly the Deutsche
German Bond Fund)). The second prospectus relates to four additional funds (the
Deutsche Top 50 World, the Deutsche Top 50 Europe, the Deutsche Top 50 Asia and
the Deutsche Top 50 US). The enclosed statement of additional information
relates to all nine such Funds. This Registration Statement is filed to update
information contained in the prospectuses and the statement of additional
information in response to comments received from the Securities and Exchange
Commission after its review of the Registrant's initial Registration Statement
as filed on May 23, 1997.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404(c))

N-1A Item No. Location

Part A
Item 1. Cover Page . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . Expense Summary
Item 3. Condensed Financial Information. . . . . . Not Applicable
Item 4. General Description of Registrant. . . . . Investment Objectives
Policies and
Restrictions;
Investing in the Funds
Item 5. Management of the Fund . . . . . . . . . . Management of the
Corporation and the
Portfolio Trust;
Expense Summary
Item 5A. Management's Description of Fund
Performance . . . . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other Securities . . . . Investing in the Funds
Item 7. Purchase of Securities Being Offered . . . Purchase of Shares;
Special Purchase
Features
Item 8. Redemption or Repurchase . . . . . . . . . Redemption of Shares;
Exchange Privileges;
Special Redemption
Features; Contingent
Deferred Sales Charge
Item 9. Pending Legal Proceedings. ... . . . . . . Not Applicable

Part B
Item 10. Cover Page . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents. . . . . . . . . . . . . Table of Contents
Item 12. General Information and History. . . . . . Not Applicable
Item 13. Investment Objectives and Policies . . . . Investment Objectives
and Policies;
Investment
Restrictions
Item 14. Management of the Fund . . . . . . . . . . Directors, Trustees and
Officers; Manager;
Administrator; Off-
Shore Agent, Service
Agent; Distributor
Item 15. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . Directors, Trustees and
Officers
Item 16. Investment Advisory and Other Services . . Adviser; Administrator;
Off-Shore Agent;
Distributor;
Servicing Agent
Item 17. Brokerage Allocation and Other Practices . Portfolio Transactions
Item 18. Capital Stock and Other Securities . . . . Description of Shares
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered. . . . . . . . Purchase of Shares;
Redemption of Shares;
Net Asset Value;
Redemption in Kind
Item 20. Tax Status . . . . . . . . . . . . . . . . Federal Taxes
Item 21. Underwriters . . . . . . . . . . . . . . . Administrator;
Distributor; Purchase
of Shares
Item 22. Calculation of Performance Data . . . . . Computation of
Performance
Item 23. Financial Statements . . . . . . . . . . . Financial Statements

Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>

PROSPECTUS

DEUTSCHE EUROPEAN MID-CAP FUND
DEUTSCHE GERMAN EQUITY FUND
DEUTSCHE JAPANESE EQUITY FUND
DEUTSCHE GLOBAL BOND FUND
DEUTSCHE EUROPEAN BOND FUND
CLASS A AND CLASS B SHARES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FOR INFORMATION CALL (800) [#]

This prospectus relates to the Deutsche European Mid-Cap Fund ("European
Mid-Cap Fund"), Deutsche German Equity Fund ("German Equity Fund") and Deutsche
Japanese Equity Fund ("Japanese Equity Fund")(collectively, the "Equity Funds")
and Deutsche Global Bond Fund ("Global Bond Fund") and Deutsche European Bond
Fund ("European Bond Fund")(collectively, the "Bond Funds"). The Equity Funds
and the Bond Funds are referred to herein individually, as a "Fund" and
collectively, as the "Funds." Each Fund is a non-diversified series of the
Deutsche Family of Funds, Inc., an open-end management investment company
organized as a Maryland corporation (the "Corporation"). The investment
objective of European Mid-Cap Fund and the German Equity Fund is primarily to
achieve high capital appreciation, and as a secondary objective, reasonable
dividend income. The investment objective of Japanese Equity Fund is to achieve
high capital appreciation. The investment objective of the Bond Funds is to
achieve steady, high income.

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A CORRESPONDING NON-DIVERSIFIED
OPEN-END MANAGEMENT INVESTMENT COMPANY (EACH, A "PORTFOLIO" AND COLLECTIVELY,
THE "PORTFOLIOS").

EACH PORTFOLIO IS A SERIES OF THE DEUTSCHE PORTFOLIOS (THE "PORTFOLIO
TRUST") AND HAS THE SAME INVESTMENT OBJECTIVE AS ITS CORRESPONDING FUND. EACH
FUND INVESTS IN ITS CORRESPONDING PORTFOLIO THROUGH THE HUB AND SPOKE(R)
MASTER-FEEDER INVESTMENT FUND STRUCTURE. "HUB AND SPOKE" IS A REGISTERED SERVICE
MARK OF SIGNATURE FINANCIAL GROUP, INC.

Each Portfolio is managed by Deutsche Fund Management, Inc. ("DFM" or
the "Manager"), a registered investment adviser and an indirect subsidiary of
Deutsche Bank AG, a major global financial institution.

This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Funds has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated [DATE], 1997 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Funds' Distributor, Edgewood Services, Inc. ("Edgewood" or the
"Distributor"), Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779,
Attention: Deutsche Family of Funds, Inc., or by calling (800)[#].
<PAGE>

INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, DEUTSCHE BANK AG OR ANY OTHER BANK. SHARES OF THE FUNDS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN CLASS A SHARES
OR CLASS B SHARES IS SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT
TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS [DATE], 1997.

DEUT016N
-2-

<PAGE>

TABLE OF CONTENTS

PAGE

Expense Summary.........................................................
The Funds...............................................................
Investment Objectives, Policies and Restrictions........................
Risk Factors............................................................
Management of the Corporation and the Portfolio Trust...................
Investing in the Funds..................................................
Purchase of Shares......................................................
Special Purchase Features...............................................
Exchange Privileges.....................................................
Redemption of Shares....................................................
Special Redemption Features.............................................
Contingent Deferred Sales Charge........................................
Dividends and Distributions.............................................
Account and Share Information...........................................
Net Asset Value.........................................................
Organization............................................................
Taxes...................................................................
Additional Information..................................................
Appendix A..............................................................

<PAGE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses of Class A and Class B shares of each Fund and the allocable
operating expenses of its corresponding Portfolio. The Directors of the
Corporation believe that the aggregate per share expenses of each Fund and the
allocable operating expenses of its corresponding Portfolio will be
approximately equal to and may be less than the expenses that the Fund would
incur if it retained the services of an investment adviser and invested its
assets directly in portfolio securities. Actual expenses may vary. A
hypothetical example based on the summary is also shown. For more information
concerning the expenses of each Fund and its corresponding Portfolio, see
"Management of the Corporation and the Portfolio Trust."
<TABLE>

EQUITY FUNDS BOND FUNDS
SHAREHOLDER
TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
Maximum Sales Charge Imposed
on Purchases
(as a percentage of offering price) 5.50% None 4.50% None
Maximum Sales Charge Imposed
on Reinvested Dividends
(as a percentage of offering price) None None None None
Contingent Deferred Sales Charge
(as a percentage of
original purchase price
or redemption proceeds,
as applicable) 0.00%1 5.00% in 0.00%1 5.00% in
the first year the first year
declining to declining to
1.00% in the 1.00% in the
sixth year and sixth year and
0% thereafter 0% thereafter
Redemption Fees (as a percentage
of amount redeemed,
if applicable) None None None None
Exchange Fees None None None None
</TABLE>

1 Class A Shares purchased without an initial sales charge (i) based on an
initial investment of $1,000,000 or more or (ii) with proceeds of a redemption
of shares of an unaffiliated investment company purchased or redeemed with a
sales charge and not distributed by Edgewood may be charged a contingent
deferred sales charge of 1.00% for redemptions made within one full year of
purchase. See "Contingent Deferred Sales Charge" and "Special Redemption
Features -Contingent Deferred Sales Charge."

EXPENSE TABLE

ANNUAL OPERATING EXPENSES (AFTER EXPENSE REIMBURSEMENT)
(As a percentage of projected average net assets)

EQUITY FUNDS BOND FUNDS
CLASS A CLASS B CLASS A CLASS B
Advisory Fees 0.85% 0.85% 0.75% 0.75%
12b-1 Fees

Service 0.25% 0.25% 0.25% 0.25%
Distribution 0.00% 0.75% 0.00%

0.75%
Other Expenses (after
expense

reimbursement) 0.50% 0.50% 0.30% 0.30%
---- ---- ---- ----
Total Operating Expenses
(after expense
reimbursement) 1.60% 2.35% 1.30% 2.05%
==== ==== ==== ====

DEUT016N
-3-

<PAGE>

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

EQUITY FUNDS BOND FUNDS
CLASS A CLASS B CLASS A CLASS B

1 Year $ 70 $ 73 $ 58 $ 70
3 Years $103 $103 $ 84 $ 94

You would pay the following expenses on the same investment assuming no
redemption:

1 Year $ 70 $ 25 $ 58 $ 24
3 Years $103 $ 73 $ 84 $ 73

The above expense table is designed to assist investors in understanding
the various estimated direct and indirect costs and expenses that investors in
the Funds would bear. Wire transferred redemptions of less than $5,000 may be
subject to additional fees. The fees and expenses included in "Other Expenses"
are estimated for each Fund's first fiscal year and include (i) the fees paid to
the Administrator, Administrative Agent, Operations Agent, Transfer Agent, Fund
Accounting Agent, and Custodian, (ii) amortization of organizational expenses,
and (iii) other usual and customary expenses of each Fund and each Portfolio.
DFM has agreed that it will reimburse each Fund through at least August 31,
1998, or until the average net assets of the Fund exceed $25 million, whichever
occurs first, to the extent necessary to maintain each Fund's ratio of total
operating expenses to average annual net assets at the level indicated above.
Assuming no reimbursement of expenses and average net assets of $20 million for
each Fund's fiscal year, estimated "Other Expenses" for the European Mid-Cap
Fund, German Equity Fund, Japanese Equity Fund, Global Bond Fund and European
Bond Fund would be 0.98%, 0.96%, 0.99%, 1.01% and 0.95%, respectively, and
"Total Operating Expenses" would be 2.08%, 2.06%, 2.09%, 2.01% and 1.95%,
respectively, of the Fund's average daily net assets attributed to Class A
shares, and 2.83%, 2.81%, 2.84%, 2.76% and 2.70%, respectively, of the Fund's
average daily net assets attributed to Class B Shares. For a more detailed
description of contractual fee arrangements, including expense reimbursements,
see "Management of the Corporation and the Portfolio Trust." In connection with
the above example, please note that $1,000 is less than the minimum investment
requirement for each Class of each Fund. See "Purchase of Shares." THE EXAMPLE
IS HYPOTHETICAL; IT IS

DEUT016N
-4-

<PAGE>

INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.

THE FUNDS

Each Fund is a non-diversified, open-end management investment company and
is a series of shares of common stock of the Deutsche Family of Funds, Inc., a
Maryland corporation incorporated on May 22, 1997 (see "Organization").

Each Fund seeks to achieve its investment objective by investing all of
its investable assets in a corresponding Portfolio that has the same investment
objective as the Fund. The European Mid-Cap Fund invests all of its investable
assets in the Provesta Portfolio (US Dollar); the German Equity Fund invests all
of its investable assets in the Investa Portfolio (US Dollar); the Japanese
Equity Fund invests all of its investable assets in the Japanese Equity
Portfolio (US Dollar); the Global Bond Fund invests all of its investable assets
in the Global Bond Portfolio (US Dollar); and the European Bond Fund invests all
of its investable assets in the European Bond Portfolio (US Dollar).
The Provesta Portfolio (US Dollar), Investa Portfolio (US Dollar) and Japanese
Equity Portfolio (US Dollar) are referred to herein individually, as an "Equity
Portfolio" and collectively, as the "Equity Portfolios." The Global Bond
Portfolio (US Dollar) and the European Bond Portfolio (US Dollar) are referred
to herein individually, as a "Bond Portfolio" and collectively, as the "Bond
Portfolios." The Equity Portfolios and the Bond Portfolios are referred to
herein individually, as a "Portfolio" and collectively, as the "Portfolios."
Each Portfolio is an open-end management investment company and a series of
shares of beneficial interest in the Deutsche Portfolios, a trust organized
under the laws of the State of New York (see "Organization)".

Shares of the Funds are sold continuously by the Distributor. The Funds
require a minimum initial investment of $5,000. The minimum subsequent
investment is $500 (see "Purchase of Shares"). If a shareholder reduces his or
her investment in a Fund to less than the applicable minimum investment, the
investment is subject to mandatory redemption. See "Account and Share
Information - Accounts with Low Balances."

DEUT016N
-5-

<PAGE>

Company ("IBT") is the custodian of the Funds and the Portfolios ("Custodian").
The Board of Directors of the Corporation and the Board of Trustees of the
Portfolio Trust provide broad supervision over the affairs of the Funds and of
the Portfolios, respectively. The Directors who are not "interested persons" of
the Corporation as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")(the "Independent Directors"), are the same as the Trustees who
are not "interested persons" of the Portfolio Trust as defined in the 1940 Act
(the "Independent Trustees"). A majority of the Corporation's Directors and the
Portfolio Trust's Trustees are not affiliated with the Manager, the Adviser or
the Distributor. For further information about the Directors of the Corporation
and the Trustees of the Portfolio Trust, see "Management of the Corporation and
the Portfolio Trust" herein and in the Statement of Additional Information.

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

Each Fund seeks to achieve its investment objective by investing all its
investable assets in a corresponding Portfolio, an open end management company
that has the same investment objective and investment policies as the Fund.
Since the investment characteristics and experience of each Fund will correspond
directly with those of its corresponding Portfolio, the discussion in this
Prospectus focuses on the investments and investment policies of the Portfolios.
No Fund represents a complete investment program, nor is each Fund suitable for
all investors.
EQUITY FUNDS

The investment objective of European Mid-Cap Fund and the German Equity
Fund is primarily to achieve high capital appreciation and, as a secondary
objective, reasonable dividend income. The investment objective of Japanese
Equity Fund is to achieve high capital appreciation.

The PROVESTA PORTFOLIO (US DOLLAR)("PROVESTA PORTFOLIO") pursues its (and
the European Mid-Cap Fund's) investment objective by investing primarily in the
equity securities of issuers located in European countries, including those
which are member states of the European Union, those which are party to the
Convention on the European Economic Area ("CEEA"), Switzerland, Slovakia, Czech
Republic, and Hungary.

The Provesta Portfolio seeks investment in companies which the Adviser
believes may grow at a higher rate than the average of other European companies.
These anticipated higher growth rates may cause the performance of the Fund to
be more volatile than that of other equity funds, and therefore, investors
should consider an investment in the European Mid-Cap Fund to be subject to more
risk and greater volatility. See "Risk Factors".

Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in European equity securities issued by companies with market
capitalizations of between

DEUT016N
-6-

<PAGE>

$115 million and $19 billion.

The INVESTA PORTFOLIO (US DOLLAR)("INVESTA PORTFOLIO") pursues its (and
the German Equity Fund's) investment objective by investing primarily in the
equity securities of German companies.

Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in equity securities issued by German issuers. In pursuing the
Portfolio's objective, the Adviser will emphasize German companies that have
some or all of the following attributes: high market capitalization, large
number of publicly held shares, high trading volume, high liquidity, financial
stability, or a widely known name or product/service.

The JAPANESE EQUITY PORTFOLIO (US DOLLAR)("JAPANESE EQUITY PORTFOLIO")
pursues its (and the Japanese Equity Fund's) investment objective by investing
primarily in the equity securities of Japanese issuers. Under normal
circumstances, at least 65% of the Portfolio's total assets are invested in
equity securities issued by Japanese companies, including securities that grant
the right to acquire Japanese securities.

-------

FIXED INCOME SECURITIES. Each Equity Portfolio is permitted to invest in
fixed income securities, although it intends to remain invested in equity
securities to the extent practical in light of its objective. The Provesta
Portfolio's and Investa Portfolio's investment in fixed income securities
(excluding bank deposits and money market instruments) will not exceed 20% of
such Portfolio's net assets. The Japanese Equity Portfolio's investment in fixed
income securities (excluding bank deposits and money market instruments) will
not exceed 30% of the Portfolio's net assets. For purposes of each Portfolio's
investments, convertible bonds and bonds with warrants would be considered
equities, not fixed income securities. For the quality criteria of the fixed
income securities in which the Equity Portfolios may invest, see "Quality of
Fixed Income Securities" below.

BOND FUNDS

The investment objective of the Bond Funds is to achieve steady, high
income.

The GLOBAL BOND PORTFOLIO (US DOLLAR)("GLOBAL BOND PORTFOLIO") pursues its
(and the Global Bond Fund's) investment objective by investing primarily in the
fixed income securities (including convertible bonds and bonds with warrants) of
issuers worldwide.

DEUT016N
-7-

<PAGE>

Under normal circumstances, at least 65% of the Global Bond Portfolio's total
assets are invested in fixed income securities and the Portfolio will include
securities of issuers organized in at least three different countries.

The EUROPEAN BOND PORTFOLIO (US DOLLAR)("EUROPEAN BOND PORTFOLIO") pursues
its (and the European Bond Fund's) investment objective by investing primarily
in the fixed income securities of European issuers.

Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in fixed income securities and the Portfolio will include
securities issued by European issuers.

Each Bond Portfolio's investment in equity securities will not exceed 25%
of each Portfolio's net assets.

ALL FUNDS

LISTED SECURITIES. Each Portfolio will invest primarily in listed securities
("Listed Securities"). For purposes of this prospectus Listed Securities are
defined as securities meeting at least one of the following requirements: (a)
they are listed on a stock exchange in a member state of the European Union
("Member State") or in another state which is a party to the CEEA, or are
included on another regulated market in a Member State or in another state party
to the CEEA which market is recognized, open to the public and operates
regularly; (b) they are admitted to the official listing on one of the stock
exchanges listed in Appendix A or included on one of the regulated markets
listed in Appendix A; or (c) application is to be made for admission to official
listing on one of the aforementioned stock exchanges or inclusion in one of the
aforementioned regulated markets and such admission or inclusion is to take
place within 12 months of their issue.

UNLISTED SECURITIES AND NOTES. Up to a total of 10% of the net
assets of each Portfolio may be invested in:

(a) securities that are consistent with the Portfolio's investment objective
and policies, which are not admitted to official listing on one of the
stock exchanges or included on one of the regulated markets, described
above;

(b) interests in loans which are portions of an overall loan granted by a
third party and for which a note has been issued ("Notes"), provided these
Notes can be assigned at least twice after purchase by the Portfolio, and
the Note was issued by:

o the Federal Republic of Germany, a special purpose fund of the Federal
Republic of Germany, a state of the Federal Republic of Germany, the
European Union or a member state of the Organisation for Economic
Cooperation and Development (an "OECD Member"),

DEUT016N
-8-

<PAGE>

o another German domestic authority, or a regional government or local
authority of another Member State or another state party to the CEEA
for which a zero weighting was notified according to Article 7 of the
Council Directive 89/647/EEC of 18 December 1989 on a solvency ratio
for credit institutions (Official Journal EC No. L386, p. 14),

o other corporate bodies or institutions organized under public law and
registered domestically in Germany or in another Member State or
another state party to the CEEA,

o other debtors, if guaranteed as to the payment of interest
and repayment of principal by one of the aforementioned
bodies, or

o companies which have issued securities which are admitted to official
listing on a German or other foreign stock exchange.

Investments in Notes are subject to the Provesta Portfolio's and Investa
Portfolio's overall 20% limitation on fixed income securities and the Japanese
Equity Portfolio's overall 30% limitation on fixed income securities. See
"Equity Funds" above.

The current Member States and the states party to the CEEA and OECD
Members are listed in Appendix A.

QUALITY OF FIXED INCOME SECURITIES. The fixed income securities in which each
Portfolio may invest will be rated on the date of investment, within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's"), currently Aaa,
Aa, A and Baa, or of Standard & Poor's Rating Services ("S&P"), currently AAA,
AA, A and BBB or, if unrated, will be, in the opinion of the Adviser, of
comparable quality to such rated securities discussed above. See Appendix B to
the Statement of Additional Information for a description of these ratings.

BANK DEPOSITS AND MONEY MARKET INSTRUMENTS. Each Portfolio may temporarily
invest in bank deposits and money market instruments maturing in less than 12
months. These instruments include credit balances and bank certificates of
deposit, discounted treasury notes and bills issued by the Federal Republic of
Germany ("FRG"), the states of the FRG, the European Union, OECD Members or
quasi-governmental entities of any of the foregoing.

Under normal circumstances each Portfolio will purchase bank deposits and
money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions. However, each Portfolio may temporarily invest in
bank deposits and money market instruments, up to 49% of its net assets, as a
measure taken in the Adviser's judgment during, or in anticipation of, adverse
market conditions. Certificates of deposit from the same credit institution may
not account for more than 10% of a Portfolio's total assets. See "Investment
Objectives and Policies" in the Statement of Additional Information.

DEUT016N
-9-

<PAGE>

OPTIONS TRANSACTIONS ON SECURITIES. Options transactions may be carried out for
each Portfolio if the securities options are admitted to official listing on a
recognized futures or securities exchange and the securities underlying the
options are within the applicable investment objective and policies of the
Portfolio. Each of these instruments is a derivative instrument as its value
derives from the underlying asset. Each Portfolio may use options for hedging
and risk management purposes and may purchase call options and sell put options
for speculation. See "Risk Factors".

By purchasing a put option, a Portfolio obtains the right (but not the
obligation) to sell the instrument underlying the option at a fixed strike
price. In return for this right, the Portfolio pays the current market price for
the option (known as the option premium). The purchaser of a call option obtains
the right to purchase, rather than sell, the instrument underlying the option at
the option's strike price.

Put options on securities may be purchased only if the securities
underlying the option transaction are held by a Portfolio at the time of the
purchase of the put option.

When a Portfolio writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the Portfolio assumes the obligation to pay the strike price for the instrument
underlying the option if the other party to the option chooses to exercise it.

Writing a call option obligates a Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option.

Call options on securities may be sold only if the securities underlying
the option transaction are held by a Portfolio at the time of the sale. These
securities may not be sold during the maturity of the call option and may not be
the subject of a securities loan.

There is no limitation on the value of the options that may be purchased
or written by a Portfolio. However, the strike prices of the securities options,
together with the strike prices of the securities that underlie other securities
options already purchased or granted for the account of each Portfolio, may not
exceed 20% of net assets of the Portfolio. See "Risk Factors." With respect to
the Provesta Portfolio and the Investa Portfolio, the strike prices of options
on fixed income securities held by each Portfolio may not exceed 4% of the net
assets of the Portfolio (i.e., 20% of the 20% investment limitation on fixed
income securities). See "Equity Funds - Fixed Income Securities" above. Options
on securities may only be purchased or granted to a third party to the extent
that the strike prices of such options, together with the strike prices of
options on securities of the same issuer already purchased by or granted for the
account of a Portfolio, do not exceed 10% of the net assets of the Portfolio.
Options on securities may only

DEUT016N
-10-

<PAGE>

be written (sold) to the extent that the strike prices of such options ,
together with the strike prices of options on securities of the same issuer
already written for the account of a Portfolio, do not exceed 2% of the net
assets of the Portfolio. When an option transaction is offset by a back-to-back
transaction (e.g., where a Portfolio writes a put option on a security and
purchases a put option on the same security having the same expiration date),
these two transactions will not be counted for purposes of the limits set forth
in this paragraph.

FUTURES CONTRACTS, OPTIONS ON FUTURES AND SECURITIES INDICES AND WARRANTS. Each
Portfolio may purchase and sell stock index futures contracts and interest rate
futures contracts and may purchase options on interest rate futures contracts,
options on securities indices and warrants on futures contracts and stock
indices. A Portfolio will engage in transactions in such instruments only if
they are admitted to official listing on a recognized futures or securities
exchange and meet certain other requirements stated below. A Portfolio may use
these techniques for hedging or risk management purposes or, subject to certain
limitations, for the purposes of obtaining desired exposure to certain
securities or markets.

For the purpose of hedging a Portfolio's assets, the Portfolio may sell
(but not purchase) stock index or interest rate futures contracts and may
purchase put or call options on futures contracts, options on securities indices
and any of the warrants described above. Any such transaction will be considered
a hedging transaction, and not subject to the limitations on non-hedging
transactions stated below, to the extent that (1) in the case of stock index
futures, options on securities indices and warrants thereon, the contract value
does not exceed the market value of the shares held by the Portfolio for which
the hedge is intended and such shares are admitted to official listing on a
stock exchange in the country in which the relevant futures or securities
exchange is based or (2) in the case of interest rate futures and options on
securities indices and warrants thereon, the contract value does not exceed the
interest rate exposure associated with the assets held in the applicable
currency by the Portfolio. In carrying out a particular hedging strategy, a
Portfolio may sell futures contracts and purchase options or warrants based on
securities, financial instruments or indices that have issuers, maturities or
other characteristics that do not precisely match those of the Portfolio's
assets for which such hedge is intended, thereby creating a risk that the
futures, options or warrants position will not mirror the performance of such
assets. A Portfolio may also enter into transactions in futures contracts,
options on futures, options on indices and warrants for non-hedging purposes, as
described below.

Each Portfolio may purchase or sell stock index or interest rate futures
contracts, put or call options on futures, options on securities indices and
warrants other than for hedging purposes . Transactions for non-hedging purposes
may be entered into

DEUT016N
-11-

<PAGE>

only to the extent that (1) the underlying contract values, together with the
contract values of any instrument then held by the Portfolio for non-hedging
purposes, do not exceed in the aggregate 20% of the net assets of the Portfolio
and (2) such instruments relate to categories of assets which the Portfolio is
permitted to hold. In addition, with respect to the Provesta Portfolio and the
Investa Portfolio, the contract values of all interest rate futures contracts
and options and warrants on interest rate futures contracts held for non-hedging
purposes may not exceed 4% of the net assets of the Portfolio (i.e., 20% of the
20% limitation on fixed income securities). See "Equity Funds - Fixed Income
Securities" above.

CURRENCY FORWARD CONTRACTS, OPTION RIGHTS AND WARRANTS ON CURRENCIES AND
CURRENCY FUTURES CONTRACTS. Each Portfolio may enter into foreign currency
transactions to hedge currency risks associated with the assets of each
Portfolio denominated in foreign currencies. A Portfolio may purchase or sell
foreign currency contracts for forward delivery, purchase option rights for the
purchase or sale of currencies or currency futures contracts or warrants which
entitle the holder to the right to purchase or sell currencies or currency
futures contracts or to receive payment of a difference, which is measured by
the performance of currencies or currency futures contracts, provided that these
option rights and warrants are admitted to official listing on an exchange.

The Japanese Equity Portfolio may enter into foreign exchange
transactions in order to hedge the U.S. dollar value of all or any part of the
assets denominated in foreign currencies then held or expected to be acquired by
the Portfolio. The Global Bond Portfolio and European Bond Portfolio may enter
into foreign currency transactions to hedge against currencies other than the
U.S. dollar. Each other Portfolio may also enter into forward contracts to hedge
against changes in foreign currency exchange rates that would affect the value
of existing investments denominated or principally traded in a foreign currency.
In the case of the Provesta Portfolio and the Investa Portfolio, however, such
hedging activity will be limited to those circumstances in which the Adviser
believes that one or more currencies in which such Portfolio's assets are
denominated may suffer a substantial decline against the U.S. dollar.

SECURITIES LOANS. Subject to applicable investment restrictions, each Portfolio
is permitted to lend its securities. These loans may not exceed 33 1/3% of a
Portfolio's total assets. The Portfolios may pay reasonable administrative and
custodial fees in connection with the loan of securities. The following
conditions will be met whenever portfolio securities of a Portfolio are loaned:
(1) the Portfolio must receive at least

DEUT016N
-12-

<PAGE>

100% collateral from the borrower; (2) the borrower must increase such
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (3) the Portfolio must be able to terminate the loan at
any time; (4) the Portfolio must receive reasonable interest on the loan, as
well as payments in respect of any dividends, interest or other distributions on
the loaned securities, and any increase in market value; (5) the Portfolio may
pay only reasonable custodian and finder's fees in connection with the loan; and
(6) while voting rights on the loaned securities may pass to the borrower, the
Portfolio must terminate the loan and regain the right to vote the securities if
a material event conferring voting rights and adversely affecting the investment
occurs. In addition, a Portfolio will consider all facts and circumstances,
including the creditworthiness of the borrowing financial institution. No
Portfolio will lend its securities to any officer, Trustee, Director, employee
or other affiliate of the Corporation or the Portfolio Trust, the Manager, the
Adviser or the Distributor, unless otherwise permitted by applicable law.

Each Portfolio may lend its securities on a demand basis provided the
market value of the assets transferred in securities loans together with the
market value of the securities already transferred as a securities loan for the
Portfolio's account to the same borrower does not exceed 10% of the net assets
of the Portfolio.

BORROWING. Each Portfolio may borrow money from banks for temporary or
short-term purposes and then only in amounts not to exceed 10% of the
Portfolio's net assets, taken at cost, at the time of such borrowing.

WARRANTS. Each Portfolio may purchase warrants in value of up to 10% of the
Portfolio's net assets. The warrants in which the Portfolios invest are a type
of security that entitles the holder to buy a fixed amount of securities of such
issuer at a specified price at a fixed date or for a fixed period of time (which
may be in perpetuity) or to demand settlement in cash based on the price
performance of the underlying security. If the market price of the underlying
security is below the exercise price set forth in the warrant on the expiration
date, the warrant will expire worthless.

Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.

CONVERTIBLE SECURITIES. The convertible securities in which the Portfolios may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.

DEUT016N
-13-

<PAGE>

SHORT-TERM TRADING. Each Portfolio intends to manage its portfolio actively in
pursuit of its investment objective. A Portfolio may take advantage of
short-term trading opportunities that are consistent with its objective. To the
extent a Portfolio engages in short-term trading, it may realize short-term
capital gains or losses and incur increased transaction costs. See "Taxes"
below.

INVESTMENT RESTRICTIONS. The investment objective of the Funds and the
Portfolios, together with the fundamental investment restrictions described
below and in the Statement of Additional Information, except as noted, are
deemed fundamental policies, i.e., they may be changed only with the approval of
the holders of a majority of the outstanding voting securities of a Fund and its
corresponding Portfolio. Each Fund has the same investment restrictions as its
corresponding Portfolio, except that each Fund may invest all of its investable
assets in the corresponding Portfolio. References below to the Portfolios'
investment restrictions also include the Funds' investment restrictions. Any
other investment policies of the Portfolios and the Funds described herein or in
the Statement of Additional Information are not fundamental and may be changed
without shareholder approval.

FUNDAMENTAL INVESTMENT RESTRICTIONS.

Each Portfolio is classified as "non-diversified" under the 1940 Act,
which means that each corresponding Fund is not limited by the 1940 Act with
respect to the portion of its assets which may be invested in securities of a
single company (although certain diversification requirements are imposed by the
Internal Revenue Code of 1986, as amended (the "Code")). The possible assumption
of large positions in the securities of a small number of companies may cause
the performance of a Fund to fluctuate to a greater extent than that of a
diversified investment company as a result of changes in the financial condition
or in the market's assessment of the companies.

At least 65% of the Provesta Portfolio's total assets are invested in
European equity securities issued by companies with market capitalizations of
between $115 million and $19 billion. At least 65% of the Investa Portfolio's
total assets are invested in equity securities issued by German companies. At
least 65% of the Japanese Equity Portfolio's total assets are invested in equity
securities issued by Japanese companies, including securities that grant the
right to acquire Japanese securities. At least 65% of the Global Bond
Portfolio's total assets are invested in fixed income securities and such
Portfolio will include securities of issuers organized in at least three
different countries. At least 65% of the European Bond Portfolio's total assets
are invested in fixed income securities issued by European issuers.

No Portfolio may purchase securities or other obligations of issuers
conducting their principal business activity in the same

DEUT016N
-14-

<PAGE>

industry if its investments in such industry would equal or exceed 25% of the
value of the Portfolio's total assets, provided that each of the Global Bond
Portfolio and European Bond Portfolio may invest at least 25% of the value of
its total assets in securities issued by foreign governments and their agencies
and instrumentalities and provided, further, that the foregoing limitation shall
not apply to investments in securities issued by the U.S. Government or its
agencies or instrumentalities.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS

Each Portfolio generally will not borrow money. Each Portfolio may not
issue senior securities except as permitted by the 1940 Act or any rule, order
or interpretation thereunder. Each Portfolio may not invest more than 10% of its
net assets in the securities of any one issuer or invest more than 40% of its
net assets in the aggregate in the securities of those issuers in which the
Portfolio has invested in excess of 5% but not more than 10% of its net assets.

For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see "Investment
Restrictions" in the Statement of Additional Information.

RISK FACTORS

EQUITY INVESTMENTS. Because the assets of each Equity Portfolio are invested
primarily in equity securities, the Equity Portfolios are subject to market risk
and the risks associated with the individual companies in which the Portfolios
invest, meaning that stock prices in general may decline over short or extended
periods of time. As with any equity-based investment company, the investor
should be aware that unfavorable economic conditions can adversely affect
corporate earnings and cause declines in stock prices.

With respect to the Provesta Portfolio, investing in equity securities of
mid-sized companies involves risks not typically associated with investing in
comparable securities of large companies. Assets of the Portfolio are invested
in companies which may have narrow product lines and limited financial and
managerial resources. Since the market for the equity securities of mid-sized
companies is often characterized by less information and liquidity than that for
the equity securities of large companies, the Portfolio's investments can
experience unexpected sharp declines in their market prices. Therefore,
investments in the Portfolio may be subject to greater declines in value than
shares of equity funds investing in the equity securities of large companies.

FIXED INCOME SECURITIES. The value of fixed income securities generally goes
down when interest rates go up, and vice versa. Furthermore, the value of fixed
income securities may vary based on anticipated or potential changes in interest
rates. Changes in interest rates will generally cause bigger changes in the
prices of longer-term securities than in the prices of shorter-term securities.

DEUT016N
-15-

<PAGE>

Prices of fixed income securities fluctuate based on changes in the actual
and perceived creditworthiness of issuers. The prices of lower rated securities
often fluctuate more than those of higher rated securities. It is possible that
some issuers will be unable to make required payments on fixed income
securities.

FOREIGN INVESTMENTS. Each Portfolio invests in foreign securities.
Investment in securities of foreign issuers involves somewhat different
investment risks from those affecting securities of U.S. domestic issuers. There
may be limited publicly available information with respect to foreign issuers,
and foreign issuers are not generally subject to uniform accounting, auditing
and financial standards and requirements comparable to those applicable to U.S.
domestic companies. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes (such as capital gain taxes)
which may decrease the net return on foreign investments as compared to
dividends and interest paid to a Portfolio by U.S.

domestic companies.

Investors should realize that the value of a Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) currency exchange control or tax regulations in those foreign
countries. In addition, changes in government administrations or economic or
monetary policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect a
Portfolio's operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolios must be made in
compliance with foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic securities exchanges. Accordingly, the Portfolios'
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less government supervision
and regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.

DEUT016N
-16-

<PAGE>

Since each Portfolio's investments in foreign securities involve foreign
currencies, the value of the Portfolio's assets as measured in U.S. dollars may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, including currency blockage. See "Foreign Currency
Exchange Transactions" in the Statement of Additional Information.

EMERGING MARKETS (PROVESTA PORTFOLIO AND GLOBAL BOND PORTFOLIO ONLY).
Investments in securities of issuers in emerging markets countries may involve a
high degree of risk and many may be considered speculative. Investments in
developing and emerging markets may be subject to potentially greater risks than
those of other foreign issuers. These risks include: (i) the small current size
of the markets for such securities and the low volume of trading, which result
in less liquidity and in greater price volatility; (ii) certain national
policies which may restrict the Portfolio's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to national
interests; (iii) foreign taxation; (iv) the absence, until recently, of a
capital market structure or market oriented economy as well as issuers without a
long period of successful operations; (v) the possibility that recent favorable
economic developments may be slowed or reversed by unanticipated political or
social events in such countries or their neighboring countries; and (vi) greater
risks of expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability.

FUTURES, OPTIONS AND WARRANTS. Each Portfolio's successful use of futures,
options and warrants depends on the ability of the Adviser to predict the
direction of the market or, in the case of hedging transactions, the correlation
between market movements and movements in the value of the Portfolio's assets,
and is subject to various additional risks. The investment techniques and skills
required to use futures, options and warrants successfully are different from
those required to select equity securities for investment. The correlation
between movements in the price of the futures contract, option or warrant and
the price of the securities or financial instruments being hedged is imperfect
and the risk from imperfect correlation increases, with respect to stock index
futures, options and warrants, as the composition of a Portfolio's portfolio
diverges from the composition of the index underlying such stock index futures,
options or warrants. If a Portfolio has hedged portfolio securities by
purchasing put options or selling futures contracts, the Portfolio could suffer
a loss which is only partially offset or not offset at all by an increase in the
value of the Portfolio's securities. As noted, a Portfolio may also enter into
transactions in future contracts, options and warrants for other than hedging
purposes (subject to applicable law), including speculative transactions, which
involve greater risk. In particular, in entering into such transactions, a
Portfolio may experience losses which are not offset by gains on other portfolio
positions, thereby reducing its gross income. In addition, the markets for such
instruments may be volatile from time to time, which could increase the risk
incurred by a Portfolio in entering into such transactions. The ability of a

DEUT016N
-17-

<PAGE>

Portfolio to close out a futures, options or warrants position depends on a
liquid secondary market.

The use of futures contracts potentially exposes the Portfolios to the
effects of "leveraging," which occurs when futures are used so a Portfolio's
exposure to the market is greater than it would have been if the Portfolio had
invested directly in the underlying instruments. Leveraging increases a
Portfolio's potential for both gain and loss. As noted above, the Portfolios
intend to adhere to certain policies relating to the use of futures contracts,
which should have the effect of limiting the amount of leverage by the
Portfolios. See "Futures and Option Contracts" in the Statement of Additional
Information.

LOCAL SECURITIES MARKETS

[TO BE SUPPLIED BY AMENDMENT]

MANAGEMENT OF THE CORPORATION AND THE PORTFOLIO TRUST

The Board of Directors of the Corporation and the Board of Trustees of the
Portfolio Trust provide broad supervision over the affairs of each Fund and each
Portfolio, respectively. Each Fund has retained the services of Federated
Services Company as Administrator, Federated Shareholder Services Company as
Transfer Agent, IBT (Canada) as Fund Accounting Agent and IBT as Custodian but
has not retained the services of an investment manager or adviser since each
Fund seeks to achieve its investment objective by investing all of its
investable assets in its corresponding Portfolio. Each Portfolio has retained
the services of DFM as Manager, Federated Services Company as Operations Agent,
IBT (Canada) as Fund Accounting Agent, IBT (Cayman) as Administrative Agent and
IBT as Custodian. DFM has retained the services of DWS International Portfolio
Management GmbH as Adviser for each Portfolio.

MANAGER. The Portfolio Trust has retained the services of DFM as investment
manager to each Portfolio. DFM, with principal offices at 31 West 52nd Street,
New York, New York 10019, is a Delaware corporation and registered investment
adviser under the Advisers Act of 1940.

DFM is a wholly-owned subsidiary of Deutsche Fonds Holding GmbH ("DFH"), a
company with limited liability organized under the laws of Germany and a
consolidated subsidiary of Deutsche Bank AG, a major global banking institution.
With total assets the equivalent of $570 billion and 75,000 employees as of
year-end 1996, Deutsche Bank AG is Europe's largest universal bank. It is
engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. Deutsche Bank AG's creditworthiness
ranks it among the most highly rated financial institutions in the world. For
example, Deutsche Bank AG has been rated AAA by Standard & Poor's Corporation,
New York. Deutsche Bank AG and its affiliates may have commercial lending
relationships with companies whose

DEUT016N
-18-

<PAGE>

securities may be held by a Portfolio.

DFH subsidiaries include German-based DWS Deutsche Gesellschaft fuer
Wertpapiersparen mbH ("DWS") and others based in Luxembourg, Austria,
Switzerland, Singapore, France and Italy. Together, DFH subsidiaries serve as
manager and/or investment adviser to more than 150 mutual funds outside the
United States, having aggregate assets under management of more than the
equivalent of $65 billion as of March 1997. DFH and its subsidiaries employ
approximately 500 professionals and is the largest mutual fund operator in
Europe based on assets under management.

The primary subsidiary of DFH is DWS. Founded in 1956, it is the largest
mutual fund company in Germany, holding a 25% share of the German mutual fund
market based on assets under management as of March 1997. DFH and its
subsidiaries are known in the financial market as "DWS Group, Investmentgroup of
Deutsche Bank."

DFH subsidiaries have received widespread industry recognition in Europe.
For example, Micropal, Europe's leading fund rating organization, has accorded
DWS the following awards: 1994: best fund manager for 1, 3 and 5 year periods;
1995: best fund manager for 1, 3 and 5 year periods; 1996: best fund manager for
3 and 5 year periods. These awards were given to fund managers having 10 or more
funds registered for sale in Germany, based on the manager with the highest
number of funds ranked first within various categories of investment objective
defined by Micropal. Fund rankings are based on above-average performance in
Deutsche Mark ("DM") terms and below-average volatility.

Subject to the overall supervision of the Portfolio Trust's Trustees, DFM
is responsible for the day-to-day investment decisions, the execution of
portfolio transactions and the general management of each Portfolio's
investments and provides certain supervisory services. Under its investment
management agreement with the Portfolio Trust (the "Management Agreement"), DFM
is permitted, subject to the approval of the Board of Trustees of the Portfolio
Trust, to delegate to a third party responsibility for management of the
investment operations of each Portfolio. DFM has delegated this responsibility
to the Adviser. DFM retains overall responsibility, however, for supervision of
the investment management program for each Portfolio. See "Manager" in the
Statement of Additional Information.

As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Portfolio Trust with respect to each
Equity Portfolio, DFM receives a fee from each Equity Portfolio, which is
computed daily and paid monthly, equal to 0.85% of the average daily net assets
of each Equity Portfolio on an annualized basis for the Portfolio's then-current
fiscal year. As compensation for the services rendered and related expenses
borne by DFM under the Management Agreement with the Portfolio Trust with
respect to each Bond Portfolio, DFM receives a fee from each Bond Portfolio,
which is

DEUT016N
-19-

<PAGE>

computed daily and paid monthly, equal to 0.75% of the average daily net assets
of each Bond Portfolio on an annualized basis for the Portfolio's then-current
fiscal year. See also "Expenses."

ADVISER. Pursuant to an investment advisory agreement ("Advisory Agreement")
between DFM and DWS International Portfolio Management GmbH, the Adviser
provides investment advice and portfolio management services to each Portfolio.
Subject to the overall supervision of DFM, the Adviser conducts the day-to-day
investment decisions of each Portfolio , arranges for the execution of portfolio
transactions and furnishes a continuous investment program for each Portfolio.

The Adviser is an SEC-registered investment adviser and an indirect
subsidiary of Deutsche Bank AG. The offices of the Adviser are located at
Grueneburgweg 113-115, 60323 Frankfurt am Main, Germany.

For these services, the Adviser receives from DFM a fee, which is computed
daily and may be paid monthly, equal to 0.60% of the average daily net assets of
each Equity Portfolio and 0.50% of the average daily net assets of each Bond
Portfolio on an annualized basis for the Portfolio's then-current fiscal year.

PERFORMANCE INFORMATION

Each of the European Mid-Cap Fund and German Equity Fund, through its
investment in its corresponding Portfolio, is designed to produce investment
results as similar to Provesta and Investa (each, a "DWS Fund" and collectively,
the "DWS Funds"), respectively, as possible under the existing circumstances.
The DWS Funds are German-registered mutual funds.
Each Equity Fund's investment objective, policies and restrictions are the same
as its corresponding DWS Fund except as noted. The Adviser is an affiliate of
DWS Deutsche Gesellschaft fuer Wertpapiersparen mbH, the investment manager of
the DWS Funds ("DWS"). The Adviser will manage the investment operations of each
Equity Portfolio with a portfolio manager and staff of investment professionals
that is composed of the same persons as those that manage and have full
discretionary authority over the selection of investments for the corresponding
DWS Fund.

HISTORICAL PERFORMANCE OF CORRESPONDING DWS FUNDS

The Equity Funds and the Equity Portfolios commenced operations in 1997
and have no operating or performance history. As indicated above, each Equity
Portfolio is modeled after and will be managed by the same staff of investment
professionals as its corresponding DWS Fund.

DEUT016N
-20-

<PAGE>

Below you will find information about the performance of two corresponding
DWS Funds--Provesta (corresponding to European Mid-Cap Equity Fund) and Investa
(corresponding to German Equity Fund). Although each Equity Fund and its
corresponding Equity Portfolio have the same investment objectives, policies and
restrictions as their corresponding DWS Fund, and each Equity Portfolio has the
same staff of investment professionals and the same portfolio manager as its
corresponding DWS Fund, the DWS Funds are separate funds and you should not
assume that a Fund offered by this Prospectus will have the same future
performance as its corresponding DWS Fund. For example, a Fund's future
performance may be better or worse than the performance of its corresponding DWS
Fund due to, among other things, differences in expenses and cash flows of the
two funds. In addition, the past performance of the DWS Funds is not predictive
of the future performance of the Equity Funds or their corresponding Equity
Portfolios.

The following tables show the average annualized total return for the DWS
Funds for the one-, three-, five- and ten-year periods ended March 31, 1997 and
of securities indexes believed by the Adviser to be composed of securities
comparable in their respective markets to the investments of the Equity
Portfolios and the DWS Funds. These figures are based on the actual gross
investment performance of the DWS Funds with the adjustments indicated below:

Periods Ended 6/30/97

PROVESTA1

(CORRESPONDING TO EUROPEAN MID-CAP FUND)
Average Annual Return for the Periods Ending June 30, 1997

Historical Performance

Adjusted to Reflect Max.

U.S. Expense Ratio (Class A)

IN U.S.$ CDAX INDEX
(IN US $,
WITHOUT SALES LOAD2 WITH SALES LOAD3 ANNUALIZED)4

One Year 26.44% 19.49% 28.97%
Three Years 16.51% 14.33% 19.58%
Five Years 13.87% 12.59% 13.59%
Ten Years 12.27% 11.64% 11.10%

1 Net Assets as of 6/30/97 were DM 1,730 million ($992 million). Provesta
commenced investment operations in November, 1985.

2 The sales load may be reduced or eliminated on the purchase of Class A Shares
in certain circumstances. See "Purchase of Shares - Reducing or Eliminating
Sales Charge."

3 Adjusted to reflect deduction for the maximum sales charge applicable to Class
A Shares and the Fund's estimated expense ratio

4 The DAX Composite Index ("CDAX") is a total rate of return index of all
domestic stocks traded on the Frankfurt Stock Exchange. It is a broad-based
index consisting of 16 industry groups.

DEUT016N
-21-

<PAGE>

INVESTA1

(CORRESPONDING TO GERMAN EQUITY FUND)
Average Annual Returns for the Periods Ending June 30, 1997

Historical Performance

Adjusted to Reflect Max.

U.S. Expense Ratio (Class A)2

in U.S.$ DAX INDEX
(IN US $,
WITHOUT SALES LOAD3 WITH SALES LOAD ANNUALIZED)4

One Year 28.95% 21.86% 23.91%
Three Years 18.82% 16.60% 15.93%
Five Years 13.34% 12.07% 11.30%
Ten Years 10.90% 10.27% 10.51%

1 Assets as of 3/31/97 were DM 3,451 million ($1,980 million). Investa commenced
investment operations in December, 1956.

2 Adjusted to reflect deduction for the maximum sales charge applicable to Class
A Shares and the Fund's estimated expense ratio

3 The sales load may be reduced or eliminated on the purchase of Class A Shares
in certain circumstances. See "Purchase of Shares - Reducing or Eliminating
Sales Charge."

4 DAX is a total rate of return index consisting of 30 selected German stocks
traded on the Frankfurt Stock Exchange.

---------

The above results are shown in U.S. dollars on the basis of conversion
at the rate of DM values to U.S. dollars at the end of

DEUT016N
-22-

<PAGE>

each month. The results assume all dividends and capital gain distributions have
been reinvested with no sales charge.

The historical performance of the DWS Funds shown above was calculated
according to a methodology generally acknowledged in Germany and developed by
the BVI Bundesverband Deutscher Investment - Gesellschaften (Association of
German Fund Companies) ("BVI"), with certain adjustments described below. The
BVI method measures total return by comparing the net asset value per share of a
fund in DM at the beginning and at the end of the relevant measurement period,
assuming the reinvestment of distributions made by the fund during such period.
For this purpose, the reinvestment of distributions includes the corporate
income tax credit that is available to shareholders of German fund companies in
connection with such distributions. The BVI method does not take account of any
sales load charged to an investor on the initial investment. For purposes of
calculating the equivalent U.S. dollar returns (before application of the U.S.
maximum expense ratio) from the DM returns yielded by the BVI method, DWS made
the following adjustments: (1) in the case of Investa, the performance impact of
the shares of Deutsche Bank AG which were held by Investa and which may not be
held by the German Equity Portfolio under U.S. regulations was eliminated (only
Investa had any significant holdings of Deutsche Bank AG); (2) the effect of the
German corporate tax credit referred to above was subtracted from the
distributions reinvested (but the effect of corporate income taxes incurred by
the corresponding DWS Funds was not eliminated); (3) the effect of the German
combined fund management and expense fee charged against the assets of each DWS
Fund (0.5% per annum of net assets) was eliminated; and (4) the DM returns
(including capital gains and income) were converted to U.S. dollars at
prevailing exchange rates as of the end of each month. These adjusted BVI
returns were then further adjusted to apply the relevant U.S. maximum expense
ratio and, where appropriate, the effect of the maximum U.S. sales load.

Results do not reflect the elimination of German income taxes paid by
the DWS Funds, although the Equity Portfolios will not be subject to such taxes.
However, the Equity Funds will be subject to any applicable foreign withholding
or other taxes in the countries in which the companies in which the Equity
Portfolios invest are organized or doing business. Such taxes would apply
generally only to dividend and, in some cases, interest income and capital gains
and the Equity Funds may be entitled to a refund of all or a portion of such
taxes under an applicable income tax treaty. Accordingly, it is anticipated that
the net effect of these various tax differences will not materially affect the
performance results of the Equity Funds compared to those of the DWS Funds.

The investment characteristics of each Equity Portfolio, such as industry
diversification, country diversification, portfolio beta, portfolio quality,
average maturity of fixed-income assets and equity/non-equity mix will be
substantially the same as the investment characteristics of its corresponding
DWS Fund. However, each Equity Portfolio may differ from its corresponding DWS
Fund in certain respects, none of which the Adviser believes would cause a
significant change in investment

DEUT016N
-23-

<PAGE>

results. Differences which investors may note are indicated below:

1. The DWS Funds may invest in securities issued by Deutsche Bank AG and
its affiliated persons, but the Equity Portfolios may not invest in
securities issued by Deutsche Bank AG or its affiliated persons that are
in securities-related businesses.

2. The DWS Funds may trade as principal with Deutsche Bank AG and its
affiliated persons, but the Equity Portfolios may not.

3. The DWS Funds are not subject to the U.S. Internal Revenue Code
requirements for qualification as a regulated investment company, but
the Equity Funds, and, in effect the Equity Portfolios, are subject to
such requirements. Among other things, these requirements (i) prohibit
each Equity Fund from deriving 30% or more of its gross income from
dispositions of securities and certain other investments held for less
than three months, and (ii) require each Equity Fund to diversify so
that, as to 50% of its holdings at the end of each fiscal quarter, no
securities position in any single issuer represents over 5% of its total
assets or 10% of the voting securities of such issuer, and as to such
Fund's entire holdings at the end of each fiscal quarter no securities
position in any single issuer represents over 25% of the Equity Fund's
total assets (subject in all cases to exceptions for U.S. Government
securities and certain other investments).

4. Because of their smaller size as newly established investment companies,
the Equity Portfolios may have fewer individual holdings than the

corresponding DWS Funds.

5. The DWS Funds have no express investment policies limiting concentration
in any one industry to 25% of net assets, but the Equity Portfolios do.

6. The DWS Funds have a policy of not engaging in currency hedging
transactions with respect to

DEUT016N
-24-

<PAGE>

DM-denominated assets. The Equity Portfolios listed above do not
currently intend to hedge currency exposure, but reserve the right
to do so.

If investment restrictions imposed by the 1940 Act and the Code on each
Equity Portfolio had applied to the DWS Funds whose performance is reported
above, it is possible that such performance would have been adversely affected.

PORTFOLIO MANAGEMENT

Elisabeth Weisenhorn is the senior portfolio manager for the Investa
Portfolio and the Provesta Portfolio. Ms. Weisenhorn also serves as portfolio
manager for Investa and Provesta, the Portfolios' corresponding DWS Funds. She
has held this position since 1991. Ms. Weisenhorn has 12 years of experience as
an investment manager and joined the DWS Group in 1985. She is Senior Investment
Officer, head of the German equity team, supervising funds holding assets under
management of DM 8 billion ($4.7 billion) as of March 31, 1997. Ms. Weisenhorn
is based at DWS Group's office in Frankfurt, Germany.

Hannah Cunliffe is the portfolio manager for the DWS-Japan Portfolio.
Ms. Cunliffe also serves as portfolio manager of the DWS-Japan Fonds, the
Portfolio's corresponding DWS Fund. She has held this position since February,
1994. Prior to this, she was the Asian equity market analyst for Deutsche Bank
Research. Ms. Cunliffe joined the Deutsche Bank Group in 1989.

Heinz-Wilhelm Fesser is senior portfolio manager for the Global Bond
Portfolio [and European Bond Portfolio]. Mr. Fesser joined the DWS Group in
1987, where he has been engaged in the management of global fixed income funds.
He is Senior Investment Officer, head of the global fixed-income team,
supervising funds holding assets under management of DM 19.5 billion ($11.5
billion) as of March 31, 1997. ADMINISTRATOR. Under a master agreement for
administration services with the Corporation , Federated Services Company serves
as Administrator to the Funds . In connection with its responsibilities as
Administrator of the Funds , Federated Services Company, among other things (i)
prepares, files and maintains the Funds' governing documents , registration
statements and regulatory filings; (ii) prepares and coordinates the printing of
publicly disseminated documents

DEUT016N
-25-

<PAGE>

; (iii) monitors declaration and payment of dividends and distributions; (iv)
projects and reviews the Funds' expenses; (v) performs internal audit
examinations; (vi) prepares and distributes materials to the Directors of the
Corporation, (vii) coordinates the activities of all service providers; (viii)
monitors and supervises collection of tax reclaims; and (ix) prepares
shareholder meeting materials.

As Administrator, Federated Services Company receives a fee from each
Fund, which is computed daily and may be paid monthly, at the annual rate of
0.065% of the average daily net assets of each Fund up to $200 million and
0.0525% of the average daily net assets of each Fund greater than $200 million
for the Fund's then-current fiscal year. The Administrator will receive a
minimum fee of $75,000 per Fund annually.

OPERATIONS AGENT. Under an operations agency agreement with the
Portfolio Trust, Federated Services Company serves as Operations Agent to the
Portfolio. In connection with its responsibilities

DEUT016N
-26-

<PAGE>

as Operations Agent of the Portfolios, Federated Services Company, among other
things, (i) prepares governing documents, registration statements and regulatory
filings; (ii) prepares internal audit examinations (iii) prepare expense
projections; (iv) prepares materials to the Trustees of the Portfolio Trust, (v)
coordinates the activities of all service providers; (vi) conducts compliance
training for the Adviser; (vii) prepares investor meeting materials and (viii)
monitors and supervises collection of tax reclaims.

As Operations Agent of the Portfolios, Federated Services Company receives
a fee from each Portfolio, which is computed daily and paid monthly, at the
annual rate of 0.035% of the average daily net assets of each Portfolio for the
Portfolio's then-current fiscal year. The Operations Agent of the Portfolios
will receive a minimum fee of $60,000 per Portfolio annually and a minimum
aggregate fee for each Portfolio, corresponding Fund and any other fund
investing in the Portfolio, taken together, of $75,000 for the first year of the
Portfolio's operation and $125,000 for the second year, in each case payable to
the Operations Agent.

ADMINISTRATIVE AGENT. Under an administration agreement with the Portfolio
Trust, IBT (Cayman) provides certain services to the Portfolios, including (i)
filing and maintaining the governing documents, registration statements and
other regulatory filings; (ii) maintaining a telephone line; (iii) approving
annual expense budget; (iv) authorizing expenses; (v) distributing materials to
the Trustees of the Portfolio Trust; (vi) authorizing dividend distributions;
(vii) maintaining books and records; (viii) filing tax returns; and (ix)
maintaining an investor register.

As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee
from each Portfolio, which is computed daily and may be paid monthly, at the
annual rate of 0.025% of the average daily net assets of each Portfolio up to
$200 million, 0.02% of the average daily net assets of each Portfolio greater
than $200 million and less than $800 million, and 0.01% of the average daily net
assets of each Portfolio greater than $1 Billion for the Portfolio's
then-current fiscal year. The Administrative Agent will receive a minimum fee of
$40,000 per Portfolio for the first full year of operation, $45,000 for the
second year of operation, and $50,000 for the third year of operation.

DISTRIBUTOR. Edgewood serves as principal distributor for Shares of each Fund.
Edgewood is located at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. It is a New York corporation organized on October 26, 1993, and is
the principal distributor for a number of investment companies. Edgewood is a
subsidiary of Federated Investors and an affiliate of Federated Services
Company.

DEUT016N
-27-

<PAGE>

assets, and will not be made from the assets of a Fund. Dealers may voluntarily
waive receipt of all or any portion of these advance payments. The Distributor
may pay all or a portion of the distribution fee discussed below to Financial
Intermediaries (as defined below) that waive all or any portion of the advance
payments.

Under a distribution and services plan adopted in accordance with Rule
12b-1 of the 1940 Act, Class B Shares are subject to a distribution plan (the
"Distribution Plan") and Class A Shares and Class B Shares are subject to a
service plan (the "Service Plan").

Under the Distribution Plan, Class B Shares of each Fund will pay a fee to
the Distributor in an amount computed at an annual rate of 0.75% of the average
daily net assets of the Fund represented by Class B Shares to finance any
activity which is principally intended to result in the sale of Class B Shares
of the Fund subject to the Distribution Plan. Because distribution fees to be
paid by a Fund to the Distributor may not exceed an annual rate of 0.75% of
Class B Shares' average daily net assets, it will take the Distributor a number
of years to recoup the expenses, including payments to other dealers, it has
incurred for its sales services and distribution-related support services
pursuant to the Distribution Plan.

The Distribution Plan is a compensation-type plan. As such, a Fund makes
no payments to the Distributor except as described above. Therefore, a Fund does
not pay for unreimbursed expenses of the Distributor, including amounts expended
by the Distributor in excess of amounts received by it from a Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the Distributor's overhead expenses. However, the Distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Distribution Plan.

Under the Service Plan, each Fund pays to DFM for the provision of certain
services to the holders of Class A Shares and Class B Shares a fee computed at
an annual rate of 0.25% of the average daily net assets of each such Class of
Shares. The service provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund, providing reports and other information to shareholders and financial
intermediaries ("Financial Intermediaries"), and services related to the
maintenance of shareholder accounts, and other services. DFM determines the
amounts to be paid to Financial Intermediaries, the schedules of such fees and
the basis upon which such fees will be paid.

DEUT016N
-28-

<PAGE>

DFM may pay Financial Intermediaries a shareholder services fee of up
to 0.25% of the amount invested in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have a
minimum of 250 employees eligible for participation in such plans or programs,
or (ii) such plan's or program's aggregate investment in the series of the
Corporation (the "Deutsche Funds") or certain other products made available by
the Distributor to such plans or programs is $1,000,000 or more ("Eligible
Benefit Plans"). Shares in the Deutsche Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. DFM reserves the right to
cease paying these fees at any time. DFM may pay such fees from its own funds in
addition to amounts received from the Funds under the Service Plan, including
past profits or any other source available to it.

Such payments are subject to a reclaim from the Financial Intermediary should
the assets leave the plan or program within 12 months after purchase.

Furthermore, with respect to Class A Shares and Class B Shares, the
Distributor may offer to pay a fee from its own assets to Financial
Intermediaries as financial assistance for providing substantial sales services,
distribution related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of a Fund. Such assistance may be predicated upon the
amount of Shares the Financial Intermediary sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the Financial
Intermediary.

TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT. Federated Shareholder Services
Company, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, serves
as the transfer agent and dividend disbursing agent for each Fund. IBT, 200
Clarendon Street, Boston, MA 02116 acts as the custodian of each Fund's and each
Portfolio's assets. Securities held for a Portfolio may be held by a
sub-custodian bank approved by the Trustees or the Custodian of the Portfolio
Trust. IBT (Canada) provides fund accounting services to the Funds and the
Portfolios, including (i) calculation of the daily net asset value for the Funds
and the Portfolios; (ii) monitoring compliance with investment portfolio
restrictions, including all applicable federal and state securities and other
regulatory requirements; and (iii) monitoring each Fund's and Portfolio's
compliance with the requirements applicable to a regulated investment company
under the Code.

DEUT016N
-29-

<PAGE>

applicable securities laws, fund accounting fees, custodian fees and
extraordinary expenses. For each Fund, such expenses also include transfer,
registrar and dividend disbursing costs, and the expenses of printing and
mailing reports and notices and proxy statements to Fund shareholders. For each
Portfolio, such expenses also include brokerage expenses.

DFM has agreed that it will reimburse each Fund through at least August
31, 1998, or until the average net assets of the Fund exceed $25 million,
whichever occurs first, to the extent necessary to maintain each Fund's total
operating expenses (which includes expenses of the Fund and its corresponding
Portfolio but does not cover extraordinary expenses during the period) at not
more than 1.60%, 2.35%, 1.30% and 2.05% of the average annual net assets of
Class A Shares of the Equity Funds, the Class B Shares of the Equity Funds, the
Class A Shares of the Bond Funds and the Class B shares of the Bond Funds,
respectively. There is no assurance that DFM will continue this reimbursement
beyond the specified period.

EXPENSES OF CLASS A SHARES AND CLASS B SHARES. Holders of Class A Shares and
Class B Shares bear their allocable portion of a Fund's expenses along with
their allocable share of the corresponding portfolio's operating expenses. At
present, the only expenses which are allocated specifically to Class A Shares
and Class B Shares as classes are expenses under the Distribution Plan and
expenses under the Service Plan. However, the Directors reserve the right to
allocate certain other expenses to holders of Class A Shares and Class B Shares
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; shareholder services fees; transfer agent fees as identified
by the Transfer Agent as attributable to holders of Class A Shares and Class B
Shares; printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders as attributable to holders of Class A Shares and Class B Shares;
registration fees paid to the Securities and Exchange Commission and to state
securities commissions as attributable to holders of Class A Shares and Class B
Shares; expenses related to administrative personnel and services as required to
support holders of Class A Shares and Class B Shares; legal fees relating solely
to Class A Shares or Class B Shares; and Directors' fees incurred as a result of
issues related solely to Class A Shares or Class B Shares.

PORTFOLIO BROKERAGE. The estimated annual portfolio turnover rate for the
Provesta Portfolio, Investa Portfolio, Japanese Equity Portfolio, Global Bond
Portfolio and European Bond Portfolio is generally not expected to exceed 180%,
80%, 150%, 350% and 350%, respectively. A 100% annual turnover rate would occur,
for example, if all portfolio securities (excluding short-term obligations) were
replaced once in a period of one year, or if 10% of the portfolio securities
were replaced ten times in one year. The amount of brokerage commissions and
taxes on realized capital gains to be borne by the shareholders of a Fund tend
to increase as the level of portfolio activity increases.

DEUT016N
-30-

<PAGE>

In effecting securities transactions, the Adviser seeks to obtain the best
price and execution of orders. In selecting a broker, the Adviser considers a
number of factors including: the broker's ability to execute orders without
disturbing the market price; the broker's reliability for prompt, accurate
confirmations and on-time delivery of securities; the broker's financial
condition and responsibility; the research and other investment information
provided to the Adviser by the broker; and the commissions charged. Accordingly,
the commissions charged by any such broker may be greater than the amount
another firm might charge if the Adviser determines in good faith that the
amount of such commissions is reasonable in relation to the value of the
brokerage services and research information provided by such broker.

The Adviser may direct a portion of a Portfolio's securities transactions
to certain unaffiliated brokers which in turn use a portion of the commissions
they receive from a Portfolio to pay other unaffiliated service providers on
behalf of that Portfolio for services provided for which the Portfolio would
otherwise be obligated to pay. Such commissions paid by a Portfolio are at the
same rate paid to other brokers for effecting similar transactions in listed
equity securities.

Deutsche Bank AG or one of its subsidiaries or affiliates may act as one
of the agents of the Portfolios in the purchase and sale of portfolio securities
when, in the judgment of the Adviser, that firm will be able to obtain a price
and execution at least as favorable as other qualified brokers. As one of the
principal brokers for the Portfolios, Deutsche Bank AG receives brokerage
commissions from each Portfolio.

On those occasions when the Adviser deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other customers,
the Adviser, to the extent permitted by applicable laws and regulations, may,
but is not obligated to, aggregate the securities to be sold or purchased for a
Portfolio with those to be sold or purchased for other customers in order to
obtain best execution, including lower brokerage commissions, if appropriate.
In such event, allocation of the securities so purchased or sold as well as any
expenses incurred in the transaction are made by the Adviser in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
its customers, including the Portfolio. In some instances, this procedure might
adversely affect a Portfolio.

INVESTING IN THE FUNDS

Each Fund offers investors two classes of Shares that carry sales charges
and contingent deferred sales charges in different forms and amounts and which
bear different levels of expenses.

CLASS A SHARES. An investor who purchases Class A Shares of a Fund pays a
maximum sales charge of 5.50% for the Equity Funds and 4.50% for the Bond Funds
at the time of purchase. Certain purchases of Class A Shares are not subject to
a sales charge. See "Purchase of Shares - Investing in Class A Shares." As a

DEUT016N
-31-

<PAGE>

result, Class A Shares are not subject to any charges when they are redeemed
(except for special programs offered under "Purchase of Shares - Purchases with
Proceeds From Redemptions of Unaffiliated Investment Companies.") Certain
purchases of Class A Shares qualify for reduced sales charges. See "Purchase of
Shares - Reducing or Eliminating the Sales Charge." Class A Shares have no
conversion feature.

CLASS B SHARES. Class B Shares of each Fund are sold without an initial sales
charge, but are subject to a contingent deferred sales charge in accordance with
the following schedule:
Contingent
Year of Redemption Deferred
AFTER PURCHASE SALES CHARGE
-------------- ------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

Class B Shares also bear a fee pursuant to a Distribution Plan, adopted in
accordance with Rule 12b-1 of the 1940 Act, while Class A Shares do not bear
such a fee. Both Class A Shares and Class B Shares will bear shareholder
services fees. Class B Shares will automatically convert into Class A Shares,
based on relative net asset value, on or about the fifteenth of the month eight
full years after the purchase date. Class B Shares provide an investor the
benefit of putting all of the investor's dollars to work from the time the
investment is made, but (until conversion) will have a higher expense ratio and
pay lower dividends than Class A Shares due to the higher 12b-1 fees.

PURCHASE OF SHARES

Shares of each Fund are sold on days on which the New York Stock Exchange
is open. Shares of a Fund may be purchased as described below, either through a
Financial Intermediary (such as a bank or broker/dealer which has a sales
agreement with the Distributor) or by sending a wire or a check directly to the
Fund, with a minimum initial investment of $5,000 for Class A Shares and Class B
Shares. Additional investments can be made for as little as $500. The minimum
initial investment for retirement plan participants is $1,000. The minimum
subsequent investment for retirement plan participants is $100. (Financial
Intermediaries may impose different minimum investment requirements on their
customers.)

In connection with any sale, the Distributor may from time to time offer
certain items of nominal value to any shareholder or investor. The Funds reserve
the right to reject any purchase request. An account must be established through
a Financial Intermediary or by completing, signing, and returning the new
account form available from the Funds before Shares can be purchased.

DEUT016N
-32-

<PAGE>

INVESTING IN CLASS A SHARES

Class A Shares of each Fund are sold at their net asset value next
determined after an order is received, plus a sales charge as follows:

EQUITY FUNDS

Sales Charge Dealer
Sales Charge as as a Percentage Concession
a Percentage of Net As a Percentage
Amount of Offering Amount of Public
TRANSACTION PRICE INVESTED OFFERING PRICE

Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less
than $100,000 4.50% 4.71% 3.75%
$100,000 but less
than $250,000 3.50% 3.63% 2.75%
$250,000 but less
than $500,000 2.50% 2.56% 2.00%
$500,000 but less
than $1 million 2.00% 2.04% 1.75%
$1 million or
greater None None Up to 1.00%*

BOND FUNDS

Sales Charge Dealer
Sales Charge as as a Percentage Concession
a Percentage of Net As a Percentage
Amount of Offering Amount of Public
TRANSACTION PRICE INVESTED OFFERING PRICE

Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less
than $100,000 4.00% 4.17% 3.50%
$100,000 but less
than $250,000 3.50% 3.63% 3.00%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.75%
$1 million or
greater None None Up to 1.00%*

DEUT016N
-33-

<PAGE>

* See "Dealer Concession" below.

DEALER CONCESSION. The dealer concession may be changed from time to time but
will remain the same for all dealers. Dealer concession will be paid to dealers
who initiate and are responsible for purchases of $1 million or more. Any
portion of the sales charge which is not paid to a dealer will be retained by
the Distributor. The Distributor, at its expense, may provide additional
promotional incentives to dealers. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant numbers of
shares of the Fund or other Deutsche Funds.

The sales charge for Shares sold other than through registered
broker/dealers will be retained by the Distributor. The Distributor may pay fees
to banks out of the sales charge in exchange for sales and/or administrative
services performed on behalf of the bank's customers in connection with the
initiation of customer accounts and purchases of Shares.

REDUCING OR ELIMINATING THE SALES CHARGE. The sales charge can be
reduced or eliminated on the purchase of Class A Shares through:

o sales charge waiver;
o quantity discounts and accumulated purchases;
o concurrent purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o purchases with proceeds from redemptions of
unaffiliated investment company shares.

SALES CHARGE WAIVER. Sales charges may be waived on Class A Shares of the Fund
(subject to appropriate documentation furnished to the Distributor as it may
request from time to time in order to verify eligibility for this privilege) if
purchased by:

1. Full-time employees of National Association of Securities Dealers, Inc.
("NASD") member firms and full-time employees of other Financial Institutions
which have entered into a supplemental agreement with the Distributor pertaining
to the sale of Fund shares, either for themselves directly or pursuant to an
employee benefit plan or other program, or for their spouses or minor children.
This privilege also applies to full-time employees of Financial Institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A Shares at net asset value;

DEUT016N
-34-

<PAGE>

2. Current full-time, part-time or retired employees of Deutsche Bank AG and its
affiliates or subsidiaries, current or former directors or trustees of Deutsche
Bank AG and its affiliates or subsidiaries, current or former Board members of a
fund advised by Deutsche Bank AG or any of its affiliates or subsidiaries,
including the Directors of the Corporation, or the spouse or minor child of the
foregoing, including an employee of Deutsche Bank AG or any of its affiliates or
subsidiaries who act as custodian for a minor child;

3. Registered representatives, bank trust officers, certified financial planners
and other employees (and their immediate families) of investment professionals
who have entered into a supplemental agreement with the Distributor;

4. IRA Rollover accounts sponsored by Deutsche Bank Trust Company or any of its
affiliates as administrator, trustee or custodian, provided that the
distribution proceeds are made from a qualified retirement plan or from a
403(b)(7) plan that is sponsored, administered or custodied by Deutsche Bank
Trust Company or any of its affiliates, and provided that, at the time of such
distribution, such qualified retirement plan or 403(b)(7) plan met the
requirements of an Eligible Benefit Plan and all or a portion of such plan's
assets were invested in the Deutsche Funds or certain other products made
available by the Distributor to such plans;

5. As part of an Eligible Benefit Plan having a minimum of 250 eligible
employees or a minimum of $1,000,000, or such lesser amount as may be
determined by the Distributor, invested in Deutsche Funds;

6. Investor accounts through certain broker-dealers and other Financial
Intermediaries that have entered into supplemental agreements with the
Distributor, which include a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or similar program under
which such clients pay a fee to the broker-dealer or other Financial
Intermediary, or such other accounts to which the broker-dealer or other
Financial Intermediary charges an asset management fee;

7. Qualified separate accounts maintained by an insurance company pursuant to
the laws of any State or territory of the United States;

8. Trust companies and bank trust departments, including Deutsche Bank Trust
Company and its affiliates, initially investing at least $100,000 of assets held
in a fiduciary, agency, advisory, custodial or similar capacity on behalf of any
one of their investor clients;

9. Accounts investing $100,000 or more of (1) a State or territory of the United
States, county, city or instrumentality thereof, (2) charitable organizations as
defined under Section 501(c)(3) of the Code, and (3) charitable remainder trusts
or life income pools as defined under Section 501(c)(3) of the Code;

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. Larger purchases

DEUT016N
-35-

<PAGE>

reduce the sales charge paid. A Fund will combine purchases of Class A Shares
made on the same day by the investor, the investor's spouse, and the investor's
children under age 21 when it calculates the sales charge. In addition, the
sales charge, if applicable, is reduced for purchases made at one time by a
trustee or fiduciary for a single trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made in a Fund, the Fund will
consider the previous purchases still invested in the Fund. For example, if a
shareholder already owns Class A Shares of an Equity Fund having a current value
at the public offering price of $30,000 and he purchases $20,000 more at the
current public offering price, the sales charge on the additional purchase
according to the schedule now in effect would be 4.50%, not 5.50%.

To receive the sales charge reduction, the Distributor must be notified by the
shareholder in writing or by his Financial Intermediary at the time the purchase
is made that Class A Shares are already owned or that purchases are being
combined. A Fund will reduce the sales charge after it confirms the purchases.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares of two or more of the Deutsche Funds, the purchase price of which
includes a sales charge. For example, if a shareholder concurrently invested
$30,000 in Class A Shares of one of the Deutsche Funds with a sales charge, and
$20,000 in another Fund, the sales charge would be reduced to reflect a $50,000
purchase.

To receive this sales charge reduction, the Distributor must be notified by the
shareholder in writing or by his Financial Intermediary at the time the
concurrent purchases are made. A Fund will reduce the sales charge after the
purchases are confirmed.

LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of Class
A Shares of the Deutsche Funds (excluding the Deutsche U.S. Money Market Fund)
over the next 13 months, the sales charge may be reduced by signing a letter of
intent to that effect. This letter of intent includes a provision for a sales
charge adjustment depending on the amount actually purchased within the 13-month
period and a provision for the Custodian to hold up to the maximum sales charge
of the total amount intended to be purchased in escrow (in Shares) until such
purchase is completed.

The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at

DEUT016N
-39-

<PAGE>

the sales charge applicable to the total amount intended to be purchased. At the
time a letter of intent is established, current balances in accounts in any
Shares of any Deutsche Fund, excluding the Deutsche U.S. Money Market Fund, will
be aggregated to provide a purchase credit towards fulfillment of the letter of
intent. Prior trade prices will not be adjusted.

REINVESTMENT PRIVILEGE. If Class A Shares in a Fund have been redeemed, the
shareholder has the privilege, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Distributor must be notified by the shareholder in writing or by his Financial
Intermediary of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems his Class A Shares in a Fund, there may be tax consequences.
See "Tax Treatment of Reinvestments" below.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or sold with a sales charge or commission
and were not distributed by the Distributor. The purchase must be made within 60
days of the redemption, and the Distributor must be notified by the investor in
writing, or by his Financial Intermediary, at the time the purchase is made.
From time to time, the Distributor may offer dealers compensation for Shares
purchased under this program. If Shares are purchased in this manner,
redemptions of these Shares will be subject to a contingent deferred sales
charge for one year from the date of purchase. Shareholders will be notified
prior to the implementation of any special offering as described above.

TAX TREATMENT OF REINVESTMENTS. Generally, a reinvestment of the proceeds of a
redemption of shares in a Fund or an unaffiliated investment company will not
alter the federal income tax status of any capital gain realized on the
redemption of the shares. However, any loss on the disposition of the shares in
a Fund will be disallowed to the extent shares of the same Fund are purchased
within a 61-day period beginning 30 days before and ending 30 days after the
disposition of shares. Further, if the proceeds are reinvested within 90 days
after the redeemed shares were acquired, the sales charge imposed on the
original acquisition, to the extent of the reduction in the sales charge on the
reinvestment, will not be taken into account in determining gain or loss on the
disposition of the original shares, but will be treated instead as incurred in
connection with the acquisition of the replacement shares.

INVESTING IN CLASS B SHARES. Class B Shares are sold at their net asset value
next determined after an order is received. While Class B Shares are sold
without an initial sales charge, under certain circumstances described under
"Contingent Deferred Sales Charge-Class B Shares," a contingent deferred sales
charge may be applied by the Distributor at the time Class B Shares are
redeemed.

CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares on or about the fifteenth of the

DEUT016N
-37-

<PAGE>

month eight full years after the purchase date, except as noted below. Such
conversion will be on the basis of the relative net asset values per share,
without the imposition of any sales charge, fee, or other charge. Class B Shares
acquired by exchange from Class B Shares of another Deutsche Fund will convert
into Class A Shares based on the time of the initial purchase. For purposes of
conversion to Class A Shares, Shares purchased through the reinvestment of
dividends and distributions paid on Class B Shares will be considered to be held
in a separate sub-account. Each time any Class B Shares in the shareholder's
account (other than those in the sub-account) convert to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also
convert to Class A Shares. The conversion of Class B Shares to Class A Shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service or an opinion of counsel that such conversions will not constitute
taxable events for federal tax purposes. There can be no assurance that such
ruling or opinion will be available, and the conversion of Class B Shares to
Class A Shares will not occur if such ruling or opinion is not available. In
such event, Class B Shares would continue to be subject to higher expenses than
Class A Shares for an indefinite period.

PURCHASING SHARES THROUGH A FINANCIAL INTERMEDIARY. An investor may call his
Financial Intermediary (such as a bank or an investment dealer) to place an
order to purchase Shares. Orders placed through a Financial Intermediary are
considered received when the Fund is notified of the purchase order . Shares
will not be issued in respect of such orders until payment is converted into
federal funds. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 p.m. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. Purchase orders through other Financial
Intermediaries must be received by the Financial Intermediary and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. It is the Financial Intermediary's responsibility to transmit
orders promptly. Financial Intermediaries may charge additional fees for their
services.

The Financial Intermediary which maintains investor accounts in Class B Shares
with a Fund must do so on a fully disclosed basis unless it accounts for share
ownership periods used in calculating the contingent deferred sales charge (see
"Contingent Deferred Sales Charge"). In addition, advance payments made to
Financial Intermediaries may be subject to reclaim by the Distributor for
accounts transferred to Financial Intermediaries which do not maintain investor
accounts on a fully disclosed basis and do not account for share ownership
periods.

DEUT016N
-41-

<PAGE>

contacting the Fund); Account Number; Trade Date and Order Number; Group Number
or Dealer Number; Nominee or Institution Name; and ABA Number [#]. Shares cannot
be purchased by wire on holidays when wire transfers are restricted.

PURCHASING SHARES BY CHECK. Once an account has been established, Shares may be
purchased by sending a check made payable to the name of the specific Fund
(designate class of Shares and account number) to: Deutsche Family of Funds,
Inc., Federated Investors Tower, Pittsburgh, PA 15222-3779. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received).

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been opened with the
minimum initial investment, shareholders may add to their investment on a
regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in a Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales charge, if applicable. Shareholders should contact their Financial
Intermediary or the Funds directly to participate in this program.

RETIREMENT PLANS. Fund Shares can be purchased as an investment for retirement
plans or IRA accounts. For further details, contact the Funds and consult a tax
adviser.

EXCHANGE PRIVILEGE

CLASS A SHARES. Class A shareholders may exchange all or some of their Shares
for Class A Shares of other Deutsche Funds at relative net asset value. None of
the Deutsche Funds imposes any additional fees on exchanges. Shareholders in
certain other Deutsche Funds may exchange all or some of their shares for Class
A Shares.

CLASS B SHARES. Class B shareholders may exchange all or some of their Shares
for Class B Shares of the Deutsche Funds. Not all Deutsche Funds offer Class B
Shares. Contact your Financial Intermediary regarding the availability of other
Class B Shares in the Deutsche Funds. Exchanges are made at net asset value
without being assessed a contingent deferred sales charge on the exchanged
Shares. To the extent that a shareholder exchanges Shares for Class B Shares of
other Deutsche Funds, the time for which exchanged-from Shares were held will be
credited against the time for which the exchanged-for Shares are required to be
held for purposes of satisfying the applicable holding period in respect of the
contingent deferred sales charge. For more information, see "Contingent Deferred
Sales Charge."

Please contact your Financial Intermediary directly or the Distributor for
information on and prospectuses for the Deutsche Funds into which your Shares
may be exchanged free of charge.

DEUT016N
-39-

<PAGE>

REQUIREMENTS FOR EXCHANGE. Shareholders using this privilege must exchange
Shares having a net asset value equal to the minimum investment requirements of
the Deutsche Fund into which the exchange is being made. The shareholder must
receive a Prospectus of the Deutsche Fund for which the exchange is being made.

This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of Shares of the other Fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified in advance of the modification or termination of the exchange
privilege.

TAX CONSEQUENCES. An exchange will be treated as a taxable sale for federal
income tax purposes and any gain or loss realizes will be subject to the rules
applicable to reinvestments (described above under "Tax Treatment of
Reinvestments"). See "Taxes" below for additional information.

MAKING AN EXCHANGE. Instructions for exchanging may be given in writing or by
telephone. Written instructions may require a signature guarantee. Shareholders
of a Fund may have difficulty in making exchanges by telephone through brokers
and other Financial Intermediaries during times of drastic economic or market
changes. If a shareholder cannot contact his broker or Financial Intermediary by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to: Deutsche Family of Funds, Inc., Federated Shareholder
Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779.

TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with a Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. If
reasonable procedures are not followed, the responsible party may be liable for
losses due to unauthorized or fraudulent telephone instructions. Shares may be
exchanged between two Funds by telephone only if the two Deutsche Funds have
identical shareholder registrations.

Any Shares held in certificated form cannot be exchanged by telephone but must
be forwarded to Federated Shareholder Services Company and deposited to the
shareholder's account before being exchanged. Telephone exchange instructions
are recorded and will be binding upon the shareholder. Such instructions will be
processed as of 4:00 p.m. (Eastern time) and must be received by the Fund before
that time for Shares to be exchanged the same day. Shareholders exchanging into
a Fund will begin receiving dividends the following business day. This privilege
may be modified or terminated at any time.

REDEMPTION OF SHARES

DEUT016N
-40-

<PAGE>

Shares are redeemed at their net asset value, next determined after a Fund
receives the redemption request, less any applicable contingent deferred sales
charge. Redemptions will be made on days on which the Funds compute their net
asset value. Investors who redeem Shares through a Financial Intermediary may be
charged a service fee by that Financial Intermediary. Redemption requests must
be received in proper form and can be made as described below.

REDEEMING SHARES THROUGH A FINANCIAL INTERMEDIARY. Shares of a Fund may be
redeemed by calling your Financial Intermediary to request the redemption.
Shares will be redeemed at the net asset value next determined after a Fund
receives the redemption request from the Financial Intermediary, less any
applicable contingent deferred sales charge. Redemption requests made through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to a Fund before 5:00 p.m.
(Eastern time) in order for Shares to be redeemed at that day's net asset value.
Redemption requests through other Financial Intermediaries (such as banks) must
be received by the Financial Intermediary and transmitted to a Fund before 4:00
p.m. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. The Financial Intermediary is responsible for promptly submitting
redemption requests and providing proper written redemption instructions.
Customary fees and commissions may be charged by the Financial Intermediary for
this service.

REDEEMING SHARES BY TELEPHONE. Shares may be redeemed in any amount by calling a
Fund provided that Fund has received a properly completed authorization form.
These forms can be obtained from the Distributor. Proceeds will be mailed in the
form of a check, to the shareholder's address of record or by wire transfer to
the shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. The minimum amount for a wire transfer is $1,000.
Proceeds from redeemed Shares purchased by check or through ACH will not be
wired until the payment has cleared. Proceeds from redemption requests received
on holidays when wire transfers are restricted will be wired the following
business day.

Telephone instructions will be recorded. If reasonable procedures are not
followed by a Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, redemption by mail (see "Redeeming Shares By Mail") should be
considered. If at any time a Fund shall determine it necessary to terminate or
modify the telephone redemption privilege, shareholders would be promptly
notified.

REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Deutsche Family of Funds, Inc., Federated Shareholder
Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.

DEUT016N
-41-

<PAGE>

The written request should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the Shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days after receipt of a proper written redemption request. Dividends are
paid up to and including the day that a redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record, must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined by the Securities and Exchange Act of 1934,
as amended. The Funds do not accept signatures guaranteed by a notary public.

Each Fund and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. A Fund may elect in the future to limit
eligible signature guarantors to institutions that are members of a signature
guarantee program. Each Fund and the Transfer Agent reserve the right to amend
these standards at any time without notice.

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program permits the
shareholder to request withdrawal of a specified dollar amount (minimum $100) on
either a monthly or quarterly basis from accounts with a $10,000 minimum at the
time the shareholder elects to participate in the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder.

Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in a Fund. In
addition, shareholder accounts are subject to minimum balances. See "Account and
Share Information." For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in a Fund. To be
eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through his Financial Intermediary.

Due to the fact that Class A Shares are sold with a sales charge, it is not
advisable for shareholders to continue to purchase Class A Shares while
participating in this program. A contingent deferred sales charge may be imposed
on Class B Shares.

DEUT016N
-42-

<PAGE>

CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

CLASS A SHARES. No initial sales charge applies on investments of $1 million or
more, but a contingent deferred sales charge of 1% is imposed on certain
redemptions within one year of purchase. Any applicable contingent deferred
sales charge will be imposed on the lesser of the net asset value of the
redeemed Shares at the time of purchase or the net asset value of the redeemed
Shares at the time of redemption.

CLASS B SHARES. Shareholders redeeming Class B Shares from their Fund accounts
within six full years of the purchase date of those Shares will be charged a
contingent deferred sales charge by the Distributor. Any applicable contingent
deferred sales charge will be imposed on the lesser of (i) the net asset value
of the redeemed Shares at the time of purchase (or, if such redeemed Shares were
acquired in an exchange of Class B Shares of another Fund, at the time of
purchase of the Class B Shares of the exchanged-from Fund) or (ii) the net asset
value of the redeemed Shares at the time of redemption.

CLASS A SHARES AND CLASS B SHARES. The contingent deferred sales charge will be
deducted from the redemption proceeds otherwise payable to the shareholder and
will be retained by the Distributor. The contingent deferred sales charge will
not be imposed with respect to: (1) Shares acquired through the reinvestment of
dividends or distributions of long-term capital gains; and (2) Shares held for
more than six full years from the date of purchase with respect to Class B
Shares and one full year from the date of purchase with respect to applicable
Class A Shares. Redemptions will be processed in a manner intended to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge. In computing the amount of the applicable contingent deferred
sales charge, redemptions are deemed to have occurred in the following order:
(1) Shares acquired through the reinvestment of dividends and long-term capital
gains; (2) Shares held for more than six full years from the date of purchase
with respect to Class B Shares and one full year from the date of purchase with
respect to applicable Class A Shares; (3) Shares held for fewer than six years
with respect to Class B Shares and one full year from the date of purchase with
respect to applicable Class A Shares on a first-in, first-out basis. A
contingent deferred sales charge is not assessed in connection with an exchange
of Fund Shares for shares of other funds in the Deutsche Funds in the same class
(see "Exchange Privilege"). Any contingent deferred sales charge imposed at the
time the exchanged-for shares are redeemed is calculated as if the shareholder
had held the shares from the date on which he became a shareholder of the
exchanged-from Shares. Moreover, the contingent deferred sales charge will be
eliminated with respect to certain redemptions (see "Contingent Deferred Sales
Charge - Elimination of Contingent Deferred Sales Charge").

DEUT016N
-43-

<PAGE>

ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE. The contingent deferred sales
charge will be eliminated with respect to the following redemptions: (1)
redemptions following the death or disability, as defined in Section 72(m)(7) of
the Code of a shareholder; (2) redemptions representing minimum required
distributions from an Individual Retirement Account or other retirement plan to
a shareholder who has attained the age of 70 1/2; and (3) involuntary
redemptions by a Fund of Shares in shareholder accounts that do not comply with
the minimum balance requirements. No contingent deferred sales charge will be
imposed on redemptions of Shares held by Trustees, employees and sales
representatives of the Funds, the distributor, or affiliates of the Funds or
distributor; employees of any Financial Intermediary that sells Shares of the
Funds pursuant to a sales agreement with the Distributor; and spouses and
children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940, or retirement plans where
the third party administrator has entered into certain arrangements with the
Distributor or its affiliates, or any other Financial Intermediary, to the
extent that no payments were advanced for purchases made through such entities.
The Trustees reserve the right to discontinue elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Shares purchased prior to the termination of such waiver would have the
contingent deferred sales charge eliminated as provided in the Fund's Prospectus
at the time of the purchase of the Shares. If a shareholder making a redemption
qualifies for an elimination of the contingent deferred sales charge, the
shareholder must notify the Distributor or the transfer agent in writing that he
is entitled to such elimination.

ACCOUNT AND SHARE INFORMATION

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Funds, Federated
Shareholder Services Company maintains a Share account for each shareholder.
Share certificates are not issued unless requested in writing to Federated
Shareholder Services Company. No certificates will be issued for fractional
shares.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual statements are sent to report dividends paid during the year
for the Equity Funds and monthly confirmations are sent to report dividends paid
during that month for the Bond Funds.

ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, a Fund may redeem Shares in any account, except retirement plans,
and pay the proceeds to the shareholder if the account balance falls below the
required minimum value of $5,000. This requirement does not apply, however, if
the balance falls below the required minimum value because of changes in the net
asset value of the respective Share Class. Before Shares are redeemed to close
an account, the shareholder is notified in writing and allowed 30 days to
purchase additional Shares to meet the minimum requirement.

DEUT016N
-44-

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Dividends consisting of substantially all of a Fund's net investment income, if
any, are declared and paid annually with respect to the Equity Funds and monthly
with respect to the Bond Funds. A Fund may also declare an additional dividend
of net investment income in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.

Substantially all the realized net capital gains, if any, of each Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. All shareholders on the record
date are entitled to dividends and capital gains distributions.

Dividends and distributions paid by a Fund are automatically reinvested in
additional shares of that Fund at net asset value with no sales charge unless
the shareholder has elected to have them paid in cash. Dividends and
distributions to be paid in cash are mailed by check in accordance with the
customer's instructions. Each Fund reserves the right to discontinue, alter or
limit the automatic reinvestment privilege at any time.

U.S. federal Regulations require that a shareholder provide a certified
taxpayer identification number ("TIN") upon opening an account. A TIN is either
the Social Security number or employer identification number of the record owner
of the account. Failure to furnish a certified TIN to a Fund could subject a
shareholder to a $50 penalty which will be imposed by the Internal Revenue
Service ("IRS") on the Fund and passed on by the Fund to the shareholder. With
respect to individual investors and certain non-qualified retirement plans, U.S.
federal Regulations generally require a Fund to withhold ("backup withholding")
and remit to the U.S. Treasury 31% of any dividends and distributions (including
the proceeds of any redemption) payable to a shareholder if such shareholder
fails to certify either that the TIN furnished in connection with opening an
account is correct, or that such shareholder has not received notice from the
IRS of being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a federal income tax return.
Furthermore, the IRS may notify the Fund to institute backup withholding if the
IRS determines a shareholder's TIN is incorrect.

NET ASSET VALUE

DEUT016N
-45-

<PAGE>

net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled. Values of
assets in each Portfolio are determined on the basis of their market value or
where market quotations are not determinable, at fair value as determined by the
Trustees of the Portfolio Trust. See "Net Asset Value" in the Statement of
Additional Information for information on valuation of portfolio securities.

Each Fund computes its net asset value once daily at 4:00 p.m. (Eastern time)
on Monday through Friday, except on the holidays listed under "Net Asset Value"
in the Statement of Additional Information.

ORGANIZATION

The Corporation is an open-end management investment company organized on May
22, 1997, as a corporation under the laws of the State of Maryland. Its offices
are located at Federated Investors Tower, Pittsburgh, PA 15222-3779; its
telephone number is [#].

The Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par value $0.001 per share, of which
10,000,000 shares have been classified as shares of each Fund. The Board of
Directors of the Corporation may increase the number of shares the Corporation
is authorized to issue without the approval of shareholders. The Board of
Directors of the Corporation also has the power to designate one or more
additional series of shares of common stock and to classify and reclassify any
unissued shares with respect to such series. Currently there are 10 such series
and two classes of shares for each Fund (except for the Deutsche U.S. Money
Market Fund) known as Class A Shares and Class B Shares.

Each share of a Fund or Class shall have equal rights with each other share of
that Fund or Class with respect to the assets of the Corporation pertaining to
that Fund or Class. Upon liquidation of a Fund, shareholders of each Class are
entitled to share pro rata in the net assets of the Fund available for
distribution to their Class.

Shareholders of a Fund are entitled to one vote for each full share held and to
a fractional vote for fractional shares. The voting rights of shareholders are
not cumulative. Shares have no preemptive or conversion rights (other than the
automatic conversion of Class B Shares into Class A Shares as described under
"Purchase of Shares - Conversion of Class B Shares"). The rights of redemption
are described elsewhere herein. Shares are fully paid and nonassessable by the
Corporation. It is the intention of the Corporation not to hold meetings of
shareholders annually. The Directors of the Corporation may call meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or as may be permitted by the Articles of Incorporation or By-laws.

The Corporation's Articles of Incorporation provide that the presence in person
or by proxy of the holders of record of one

DEUT016N
-46-

<PAGE>

third of the shares outstanding and entitled to vote thereat shall constitute a
quorum at all meetings of shareholders of a Fund, except as otherwise required
by applicable law. The Articles of Incorporation further provide that all
questions shall be decided by a majority of the votes cast at any such meeting
at which a quorum is present, except as otherwise required by applicable law.

The Corporation's Articles of Incorporation provide that, at any meeting of
shareholders of a Fund or Class, a Financial Intermediary may vote any shares as
to which that Financial Intermediary is the agent of record and which are
otherwise not represented in person or by proxy at the meeting, proportionately
in accordance with the votes cast by holders of all shares otherwise represented
at the meeting in person or by proxy as to which that Financial Intermediary is
the agent of record. Any shares so voted by an Financial Intermediary are deemed
represented at the meeting for purposes of quorum requirements.

Each Portfolio is a series of the Deutsche Portfolios, a trust organized under
the law of the State of New York. The Deutsche Portfolios' Declaration of Trust
provides that a Fund and other entities investing in a Portfolio (E.G., other
investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of the Portfolio.
However, the risk of a Fund incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance existed
and the Portfolio itself was unable to meet its obligations. Accordingly, the
Directors of the Corporation believe that neither a Fund nor its shareholders
will be adversely affected by reason of the investment of all of the assets of a
Fund in its corresponding Portfolio.

Each investor in a Portfolio, including its corresponding Fund, may add to or
reduce its investment in the Portfolio on each day the New York Stock Exchange
is open for regular trading.

At 4:00 p.m. (Eastern time) on each such business day, the value of each
investor's beneficial interest in a Portfolio is determined by multiplying the
net asset value of the Portfolio by the percentage, effective for that day that
represents that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or withdrawals, which are to be effected on that day,
are then effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio is then recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of 4:00 p.m. (Eastern time) on such day plus or minus, as
the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m. (Eastern time) on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined is
then applied to determine the value of the investor's interest in the Portfolio
as of 4:00 p.m. (Eastern time) on the following business day of the Portfolio.

DEUT016N
-47-

<PAGE>

Whenever the Corporation is requested to vote on a matter pertaining to a
Portfolio, the Corporation will vote its shares without a meeting of
shareholders of its corresponding Fund if the proposal is one that, if made with
respect to the Fund, would not require the vote of shareholders of the Fund, as
long as such action is permissible under applicable statutory and regulatory
requirements. For all other matters requiring a vote, the Corporation will hold
a meeting of shareholders of the Fund and, at the meeting of investors in its
corresponding Portfolio, the Corporation will cast all of its votes in the same
proportion as the votes of the Fund's shareholders even if all Fund shareholders
did not vote. Even if the Corporation votes all its shares at the Portfolio
Trust meeting, other investors with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio.

TAXES

The Corporation intends that each Fund will qualify as a separate "regulated
investment company" under Subchapter M of the Code. As a regulated investment
company, a Fund will not be subject to U.S. federal income tax on its income and
gains that it distributes to stockholders, provided that it distributes annually
at least 90% of its net investment income (which includes income, other than
capital gains, net of operating expenses, and the Fund's net short-term capital
gains in excess of its net long-term capital losses) and capital loss carry
forward, if any. Each Fund intends to distribute at least annually to its
shareholders substantially all of its net investment income and realized net
capital gains. Each Portfolio intends to elect to be treated as a partnership
for U.S. federal income tax purposes. As such, each Portfolio generally should
not be subject to U.S. taxes.

While each Fund intends to distribute all of its net capital gains annually,
each Fund reserves the right to elect to retain some or all of its net capital
gains and treat such undistributed gains as having been paid to shareholders. If
a Fund makes this election, a shareholder would include the amount of
undistributed gains in income as long-term capital gain and would be treated as
having paid the tax on such undistributed gains (which tax will instead be paid
by the Fund) and the shareholder's basis in the shares of the Fund will be
increased by 65% of the amount of undistributed gains included in income.

If the net asset value of shares in any Fund is reduced below a shareholder's
cost as a result of a distribution by the Fund,

DEUT016N
-48-

<PAGE>

such distribution will be taxable even though it represents a return of invested
capital. Investors should consider the tax implications of buying shares just
prior to a distribution when the price of the shares may reflect the amount of
the forthcoming distribution. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders at the end of each
taxable year.

Any gain or loss realized on the redemption or exchange of a Fund's shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in a Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, no loss will be allowed on the sale or
other disposition of shares of a Fund if, within a period beginning 30 days
before the date of such sale or disposition and ending 30 days after such date,
the holder acquires (such as through dividend reinvestment) securities that are
substantially identical to the shares of such Fund. For additional information
regarding the tax consequences of the reinvestment of the proceeds of a
redemption see "Tax Treatment of Reinvestments" above.

It is anticipated that certain income of the Funds will be subject to foreign
withholding or other taxes and that each Fund will be eligible to elect to "pass
through" to its shareholders the amount of foreign income taxes (including
withholding taxes) paid by such Fund. If a Fund makes this election, a
shareholder would include in gross income his pro rata share of the foreign
income taxes passed through and would be entitled either to deduct such taxes in
computing his taxable income (if the shareholder itemizes deductions) or to
claim a credit (which would be subject to certain limitations) for such taxes
against his U.S. federal income tax liability. A Fund will make such an election
only if it deems it to be in the best interests of its shareholders and will
notify each shareholder in writing each year that it makes the election of the
amount of foreign taxes, if any, to be treated as paid by the shareholder.

A Fund may be required to backup withhold for U.S. federal income tax purposes
31% of any dividends and distributions (including the proceeds of any
redemption) payable to a shareholder who fails to provide the Fund with his
correct TIN or to make required certifications, or who has been notified by the
IRS that he is subject to backup withholding. Backup withholding is not an
additional tax; amounts withheld may be credited against the shareholder's U.S.
federal income tax liability.

For further information on taxes, see "Taxes" in the Statement of Additional
Information.

ADDITIONAL INFORMATION

Each Fund sends to its shareholders annual and semiannual reports. The financial
statements appearing in annual reports

DEUT016N
-49-

<PAGE>

are audited by independent accountants. Shareholders also will be sent
confirmations of each purchase and redemption and monthly statements, reflecting
all other account activity, including dividends and any distributions reinvested
in additional shares or credited as cash.

In addition to selling beneficial interests to its corresponding Fund, a
Portfolio may sell beneficial interests to other mutual funds or institutional
investors. Such investors will invest in a Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio may sell shares of their
own fund using a different pricing structure than the corresponding Fund. Such
different pricing structures may result in differences in returns experienced by
investors in other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Administrator at (800)[#].

A Fund may withdraw its investment from its corresponding Portfolio at any time
if the Board of Directors of the Corporation determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Directors
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with its investment
objective and policies.

Certain changes in a Portfolio's investment objective, policies or
restrictions, or a failure by a Fund's shareholders to approve a change in its
corresponding Portfolio's investment objective or restrictions, may require
withdrawal of the Fund's interest in the Portfolio. Any such withdrawal could
result in a distribution in kind of portfolio securities (as opposed to a cash
distribution) from the Portfolio which may or may not be readily marketable. The
distribution in kind may result in the Fund having a less diversified portfolio
of investments or adversely affect the Fund's liquidity, and the Fund could
incur brokerage, tax or other charges in converting the securities to cash.

DEUT016N
-50-

<PAGE>

APPENDIX A
MEMBER STATES OF THE EUROPEAN UNION

Austria Belgium Denmark
Finland France Germany
Greece Italy Ireland
Luxembourg Netherlands Norway
Portugal Sweden Spain
United Kingdom

ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT MEMBERS

Australia Austria Belgium
Canada Czech Republic Denmark
Finland France Greece
Germany Hungary Iceland
Ireland Italy Japan
Liechtenstein Luxembourg Mexico
Netherlands New Zealand Norway
Poland Portugal South Korea
Spain Sweden Switzerland
Turkey United Kingdom United States

STATES PARTY TO THE CONVENTION ON THE EUROPEAN ECONOMIC AREA
Austria Belgium Denmark
Finland France Greece
Germany Iceland Ireland
Italy Liechtenstein Luxembourg
Netherlands Norway Portugal
Spain Sweden Switzerland
United Kingdom

EXCHANGES IN EUROPEAN COUNTRIES WHICH ARE NOT MEMBER STATES OF
THE EUROPEAN UNION AND NOT STATES PARTY TO THE CONVENTION ON THE
EUROPEAN ECONOMIC AREA.
SWITZERLAND SLOVAKIA* CZECH REPUBLIC* HUNGARY*
Zurich Bratislavia Prague Budapest
Geneva
Basel

EXCHANGES IN NON-EUROPEAN COUNTRIES**
ARGENTINA* CANADA* SINGAPORE*
Buenos Aires Toronto Singapore Stock Exchange
Vancouver
AUSTRALIA* Montreal SOUTH AFRICA*
ASX (Sydney, Johannesburg
Hobart, Melbourne,
Perth) THAILAND*
Bangkok
BRAZIL* SOUTH KOREA*
Sao Paulo Seoul USA
Rio de Janiero American Stock Exchange (AMEX)
Boston*
CHILE* MALAYSIA* Chicago*
Santiago Kuala Lumpur Cincinnati*
Los Angeles Pacific Stock Exchange*
HONG KONG* MEXICO* New York
Hongkong Stock Mexico City New York Stock Exchange (NYSE)
Exchange Philadelphia*
San Francisco Pacific Stock Exchange*

DEUT016N

<PAGE>

INDONESIA* NEW ZEALAND*
Jakarta Stock Exchange Wellington
Christchurch/Invercargill
JAPAN Auckland
Tokyo
Osaka PERU*
Nagoya Lima
Kyoto
Fukuoto PHILIPPINES*
Niigata Manilla
Sapporo
Hiroshima

REGULATED MARKETS IN COUNTRIES WHICH ARE NOT MEMBERS ON THE EUROPEAN UNION AND
NOT CONTRACTING STATES OF THE TREATY ON THE EUROPEAN ECONOMIC AREA

JAPAN* **
Over-the-Counter Market

CANADA* **
Over-the-Counter Market

SOUTH KOREA* **
Over-the Counter Market

SWITZERLAND
Free Trading Zurich
Free Trading Geneva
Exchange Bern
Over the Counter Market of the members of the International
Securities Market Association (ISMA), Zurich

UNITED STATES**
NASDAQ-System
Over-the-Counter Market (organized markets by the National
Association of Securities Dealers, Inc.)

* NOT APPLICABLE TO THE DEUTSCHE EUROPEAN BOND FUND
** NOT APPLICABLE TO THE DEUTSCHE EUROPEAN MID-CAP FUND

DEUT016N

<PAGE>

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE CORPORATION OR BY THE DISTRIBUTOR TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE CORPORATION OR THE
DISTRIBUTOR TO MAKE SUCH OFFER IN SUCH JURISDICTION.

DEUT016N

<PAGE>

PROSPECTUS

DEUTSCHE TOP 50 WORLD
DEUTSCHE TOP 50 EUROPE
DEUTSCHE TOP 50 ASIA
DEUTSCHE TOP 50 US
CLASS A AND CLASS B SHARES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FOR INFORMATION CALL (800) [#]

This prospectus relates to the Deutsche Top 50 World ("Top 50 World"),
Deutsche Top 50 Europe ("Top 50 Europe"), Deutsche Top 50 Asia ("Top 50 Asia")
and Deutsche Top 50 US ("Top 50 US")(each, a "Fund" and collectively, the
"Funds"). Each Fund is a non-diversified series of the Deutsche Family of Funds,
Inc., an open-end management investment company organized as a Maryland
corporation (the "Corporation"). The investment objective of each Fund is
primarily to achieve high capital appreciation, and as a secondary objective,
reasonable dividend income.

EACH PORTFOLIO IS A SERIES OF THE DEUTSCHE PORTFOLIOS (THE "PORTFOLIO TRUST")
AND HAS THE SAME INVESTMENT OBJECTIVE AS ITS CORRESPONDING FUND. EACH FUND
INVESTS IN ITS CORRESPONDING PORTFOLIO THROUGH THE HUB AND SPOKE(R)
MASTER-FEEDER INVESTMENT FUND STRUCTURE. "HUB AND SPOKE" IS A REGISTERED SERVICE
MARK OF SIGNATURE FINANCIAL GROUP, INC.

THE DATE OF THIS PROSPECTUS IS [DATE], 1997.

DEUT012K

<PAGE>

TABLE OF CONTENTS

PAGE

Expense Summary.........................................................
The Funds...............................................................
Investment Objectives, Policies and Restrictions.......................
Risk Factors............................................................
Management of the Corporation and the Portfolio Trust...................
Investing in the Funds..................................................
Purchase of Shares......................................................
Special Purchase Features...............................................
Exchange Privileges.....................................................
Redemption of Shares....................................................
Special Redemption Features.............................................
Contingent Deferred Sales Charge........................................
Dividends and Distributions.............................................
Account and Share Information...........................................
Net Asset Value.........................................................
Organization............................................................
Taxes...................................................................
Additional Information..................................................
Appendix A..............................................................

DEUT012K

<PAGE>

EXPENSE SUMMARY

SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.50% None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable) 0.00%1 5.00% in
the first year
declining to
1.00% in the
sixth year and
0% thereafter
Redemption Fees (as a percentage of amount redeemed,
if applicable) None None
Exchange Fees None None
</TABLE>

EXPENSE TABLE

ANNUAL OPERATING EXPENSES (AFTER EXPENSE REIMBURSEMENT)
(As a percentage of projected average net assets)

TOP 50 WORLD
TOP 50 EUROPE
TOP 50 ASIA TOP 50 US
CLASS A CLASS B CLASS A CLASS B

Advisory Fees 1.00% 1.00% 0.85% 0.85%
12b-1 Fees Service 0.25% 0.25% 0.25% 0.25%
Distribution 0.00% 0.75% 0.00% 0.75%
Other Expenses
(after expense
reimbursement) 0.35% 0.35% 0.40% 0.40%
---- ---- ---- ----
Total Operating Expenses
(after expense
reimbursement) 1.60% 2.35% 1.50% 2.25%
==== ==== ==== ====

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

TOP 50 WORLD
TOP 50 EUROPE
TOP 50 ASIA TOP 50 US
CLASS A CLASS B CLASS A CLASS B

1 Year $ 70 $ 73 $ 69 $ 72
3 Years $103 $103 $100 $100

You would pay the following expenses on the same investment assuming no
redemption:

1 Year $ 74 $ 24 $ 69 $ 23
3 Years $103 $ 73 $100 $ 70

The above expense table is designed to assist investors in understanding
the various estimated direct and indirect costs and expenses that investors in
the Funds would bear. Wire transferred redemptions of less than $5,000 may be
subject to additional fees. The fees and expenses included in "Other Expenses"
are estimated for each Fund's first fiscal year and include (i) the fees paid to
the Administrator , Administrative Agent, Operations Agent, Transfer Agent, Fund
Accounting Agent, and Custodian, (ii) amortization of organizational expenses,
and (iii) other usual and customary expenses of each Fund and each Portfolio.
DFM has agreed that it will reimburse each Fund through at least August 31,
1998, or until the average net assets of the Fund exceed $25 million, whichever
occurs first, to the extent necessary to maintain each Fund's ratio of total
operating expenses to average annual net assets at the level indicated above.
Assuming no reimbursement of expenses and average net assets of $20 million for
each Fund's fiscal year, estimated "Other Expenses" for the Top 50 World, Top 50
Europe, Top 50 Asia and Top 50 US would be 0.96%, 0.96%, 0.96% and 0.95%,
respectively, and "Total Operating Expenses" would be 2.21%, 2.21%, 2.21% and
2.20%, respectively, of the Fund's average daily net assets attributed to Class
A Shares and 2.96%, 2.96%, 2.96% and 2.95%, respectively, of the Fund's average
daily net assets attributed to Class B Shares. For a more detailed description
of contractual fee arrangements, including expense reimbursements, see
"Management of the Corporation and the Portfolio Trust." In connection with the
above example, please note that $1,000 is less than the minimum investment
requirement for each Class of each Fund. See "Purchase of Shares." THE EXAMPLE
IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN.

THE FUNDS

DEUT012K

-1-

<PAGE>

Fund is primarily to achieve high capital appreciation and as a secondary
objective reasonable dividend income.

Proceeds from the sale of shares of each Fund are invested in its
corresponding Portfolio, which then invests its assets in accordance with its
investment objective and policies. DWS International Portfolio Management GmbH
is the investment adviser of the Portfolios other than Top 50 US Portfolio (the
"DWS Adviser"). Deutsche Asset Management North America Inc. is the investment
adviser of the Top 50 US Portfolio (the "DAMNA Adviser"); and together with the
DWS Adviser or severally as the context may require, the "Adviser". The Advisers
are indirect subsidiaries of Deutsche Bank AG. Federated Services Company is the
administrator of the Funds (the "Administrator") and operations agent of the
Portfolios ("Operations Agent"). IBT Fund Services (Canada) Inc. ("IBT
(Canada)") is the fund accounting agent of the Funds and the Portfolios ("Fund
Accounting Agent"). Federated Shareholder Services Company is the transfer agent
and dividend disbursing agent of the Funds ("Transfer Agent"). IBT Trust Company
(Cayman) Ltd. ("IBT (Cayman)") is the administrative agent of the Portfolios
("Administrative Agent"). Investors Bank & Trust Company ("IBT") is the
custodian of the Funds and the Portfolios ("Custodian"). The Board of Directors
of the Corporation and the Board of Trustees of the Portfolio Trust provide
broad supervision over the affairs of the Funds and of the Portfolios,
respectively. The Directors who are not "interested persons" of the Corporation
as defined in the Investment Company Act of 1940, as amended (the "1940
Act")(the "Independent Directors"), are the same as the Trustees who are not
"interested persons" of the Portfolio Trust as defined in the 1940 Act (the
"Independent Trustees"). A majority of the Corporation's Directors and the
Portfolio Trust's Trustees are not affiliated with the Manager, the Adviser or
the Distributor. For further information about the Directors of the

DEUT012K

-2-

<PAGE>

Corporation and the Trustees of the Portfolio Trust, see "Management of the
Corporation and the Portfolio Trust" herein and in the Statement of Additional
Information.

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

The investment objective of each Fund is primarily to achieve high capital
appreciation, and as a secondary objective, reasonable dividend income. No Fund
represents a complete investment program, nor is each Fund suitable for all
investors.

The number of issuers of equity securities held in each Portfolio is
generally fifty. Each of the Portfolios generally invests only in those
companies that the portfolio managers consider to be of outstanding quality in
their particular field. In selecting the fifty issuers, the Adviser will
emphasize some or all of the following attributes:

o strong market position within its respective market
o profitability, predictability and duration of earnings growth,
reflected in sound balance sheet ratios and financial statements
o high quality of management with an orientation toward strong,
long-term earnings
o long-range strategic plans in place
o generally publicly-held with broad distribution of financial
information related to the company's operations

Companies selected for each Portfolio will be monitored on a consistent
basis to detect risk in the form of possible changes in their earnings outlook
and/or financial condition. The Adviser will monitor the annual and interim
financial statements of a broad universe of companies, conduct sector and
industry analysis and maintain company contact, including company visits and
attendance at company meetings and analyst presentations. In addition, the
Adviser will assess macroeconomic and stock market conditions in the various
countries in which the companies held in each Portfolio are domiciled or have
their primary stock market listings.

The Adviser will consider the geographic market focus of each Portfolio in
considering companies proposed for investment, which may cause modest
differences in style or investment approach among the respective Portfolios.

DEUT012K

-3-

<PAGE>

Because each Portfolio is classified as "non-diversified" under the
1940 Act, the performance of each Portfolio may be subject to greater
fluctuation than that of a diversified investment company. See " - Fundamental
Investment Restrictions" below.

The TOP 50 WORLD PORTFOLIO (US DOLLAR) pursues its (and the Top 50
World's) investment objective by investing at least 65% of its total assets in
equity securities. In selecting securities for the Portfolio, emphasis will be
placed on international diversification. While there are no specific percentage
limitations on investments in any single country, the Portfolio generally
expects to maintain a significant investment in at least three regions around
the world - e.g., Europe, North America, Asia, etc.

The Portfolio invests in companies with a strong market position, which
are globally competitive, have outstanding growth potential and offer
above-average opportunities to take advantage of one or more of the following
global future trends ("megatrends"):

1. Strong population growth in emerging markets
2. Aging population in industrialized nations, leading to
growing demands for the products and services of healthcare
and related industries
3. Transition to an information and communications society
4. Growing demand for brand names
5. Growing oil/energy consumption worldwide

The TOP 50 EUROPE PORTFOLIO (US DOLLAR) pursues its (and the Top 50
Europe's) investment objective by investing at least 65% of its total assets in
the equity securities of issuers located in European countries, including those
which are member states of the European Union, those which are party to the
Convention on the European Economic Area ("CEEA"), Switzerland, Slovakia, Czech
Republic, and Hungary.

The Portfolio invests primarily in European companies with above-average
potential for capital gain. The Adviser places strong emphasis on companies that
have clear strategic goals, that concentrate on their core businesses, and whose
management gives appropriate consideration to return on investment.

The TOP 50 ASIA PORTFOLIO (US DOLLAR) pursues its (and the Top 50 Asia's)
investment objective by investing at least 65% of its total assets in the equity
securities of issuers with a domicile or business focus in Asian countries,
including China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia,
Philippines, Singapore, Taiwan, Thailand. A company has its business focus in
Asia when the majority of its profits or sales are made there.

In selecting securities for the Portfolio, the Adviser will seek companies
with some or all of the following attributes: strong prospects for medium-term
growth, solid market position, with favorable financial performance and
indicators, and high quality management whose aim is toward longer-term
earnings, with a strategic view of their companies and markets.

DEUT012K

-4-

<PAGE>

The TOP 50 US PORTFOLIO (US DOLLAR) pursues its (and the Top 50 US's)
investment objective by investing at least 65% of its total assets in the equity
securities of issuers domiciled or headquartered in the United States. These
companies may also conduct a substantial part of their business outside the
United States.

The Portfolio will invest primarily in companies that dominate their
markets and maintain a leadership position through the combination of management
talent, product or service differentiation, economies of scale and financial
strength. These companies, in the opinion of the Adviser, are aggressive and
tenacious companies, generally referred to as "Bulldogs," that are leading-edge
U.S. corporations and have a "no holds barred" attitude geared toward market
share dominance.

The investment style of the Portfolio will also place great emphasis on
the market valuation of a company's earnings (i.e. P/E ratio), as well as the
predictability and durability of its earnings growth. The analysis of industry
trends will also play an important part in the portfolio management process.

Although the assets of the Fund are invested primarily in common stocks,
other securities with equity characteristics may be purchased, including
securities convertible into common stock, and warrants. The Portfolio may
participate in initial public offerings from time to time and may only invest in
publicly traded securities.

ALL FUNDS

LISTED SECURITIES. Each Portfolio will invest primarily in listed securities
("Listed Securities"). For purposes of this prospectus, Listed Securities are
defined as securities meeting the following requirements: (a) they are listed on
a stock exchange in a member state of the European Union ("Member State") or in
another state which is a party to the CEEA, or are included on another regulated
market in a Member State or in another state party to the CEEA which market is
recognized, open to the public and operates regularly; (b) they are admitted to
the official listing on one of the stock exchanges listed in Appendix A or
included on one of the regulated markets listed in Appendix A; or (c)
application is to be made for admission to official listing on one of the
aforementioned stock exchanges or inclusion in one of the aforementioned
regulated markets and such admission or inclusion is to take place within 12
months of their issue.

UNLISTED SECURITIES AND NOTES. Up to a total of 10% of the net
assets of each Portfolio may be invested in:

DEUT012K

-5-

<PAGE>

o other corporate bodies or institutions organized under public law and
registered domestically in Germany or in another Member State or
another state party to the CEEA,

o other debtors, if guaranteed as to the payment of interest and
repayment of principal by one of the aforementioned bodies, or

o companies which have issued securities which are admitted to official
listing on a German or other foreign stock exchange.

Investments in Notes are subject to each Portfolio's overall 20%
limitation on fixed income securities. See "Fixed Income Securities" below.

The current Member States and the states party to the CEEA and OECD
Members are listed in Appendix A.

FIXED INCOME SECURITIES. Each Portfolio is permitted to invest in fixed income
securities, although it intends to remain invested in equity securities to the
extent practical in light of its objective. Each Portfolio's investment in fixed
income securities (excluding bank deposits and money market instruments) will
not exceed 20% of the Portfolio's net assets. For purposes of each Portfolio's
investments, convertible bonds and bonds with warrants would be considered
equities, not fixed income securities.

The fixed income securities in which each Portfolio may invest will be
rated on the date of investment, within the four highest ratings of Moody's
Investors Service, Inc. ("Moody's"), currently Aaa, Aa, A and Baa, or of
Standard & Poor's Rating Services ("S&P"), currently AAA, AA, A and BBB or, if
unrated, will be, in

DEUT012K

-6-

<PAGE>

the opinion of the Adviser, of comparable quality to such rated securities
discussed above. See Appendix B to the Statement of Additional Information for a
description of these ratings.

Under normal circumstances each Portfolio will purchase bank deposits and
money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions. However, each Portfolio may temporarily invest in
bank deposits and money market instruments, up to 49% of its net assets, as a
measure taken in the Adviser's judgment during, or in anticipation of, adverse
market conditions. For each Portfolio, except the Top 50 US Portfolio,
certificates of deposit from the same credit institution may not account for
more than 10% of a Portfolio's total assets. See "Investment Objectives and
Policies" in the Statement of Additional Information.

Put options on securities may be purchased only if the securities
underlying the option transaction are held by a Portfolio at the time of the
purchase of the put option.

Writing a call option obligates a Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option.

DEUT012K

-7-

<PAGE>

There is no limitation on the value of the options that may be purchased
or written by a Portfolio. However, the strike prices of the securities options,
together with the strike prices of the securities that underlie other securities
options already purchased or granted for the account of each Portfolio, may not
exceed 20% of net assets of the Portfolio. See "Risk Factors." Options on
securities may only be purchased or granted to a third party to the extent that
the strike prices of such options , together with the strike prices of options
on securities of the same issuer already purchased by or granted for the account
of a Portfolio, do not exceed 10% of the net assets of the Portfolio. Options on
securities may only be written (sold) to the extent that the strike prices of
such options , together with the strike prices of options on securities of the
same issuer already written for the account of a Portfolio, do not exceed 2% of
the net assets of the Portfolio. When an option transaction is offset by a
back-to-back transaction (e.g., where a Portfolio writes a put option on a
security and purchases a put option on the same security having the same
expiration date), these two transactions will not be counted for purposes of the
limits set forth in this paragraph.

DEUT012K

-8-

<PAGE>

currency by the Portfolio. In carrying out a particular hedging strategy, a
Portfolio may sell futures contracts and purchase options or warrants based on
securities, financial instruments or indices that have issuers, maturities or
other characteristics that do not precisely match those of the Portfolio's
assets for which such hedge is intended, thereby creating a risk that the
futures, options or warrants position will not mirror the performance of such
assets. A Portfolio may also enter into transactions in futures contracts,
options on futures, options on indices and warrants for non-hedging purposes, as
described below.

Each Portfolio, except the Top 50 US Portfolio, may purchase or sell stock
index or interest rate futures contracts, put or call options on futures,
options on securities indices and warrants other than for hedging purposes.
Transactions for non-hedging purposes may be entered into only to the extent
that (1) the underlying contract values, together with the contract values of
any instrument then held by the Portfolio for non-hedging purposes, do not
exceed in the aggregate 20% of the net assets of the Portfolio and (2) such
instruments relate to categories of assets which the Portfolio is permitted to
hold. The Top 50 US Portfolio does not limit its purchase or sale of stock index
or interest rate futures contracts, put or call options on futures, options on
securities indices and warrants for other than for hedging purposes.

CURRENCY FORWARD CONTRACTS, OPTION RIGHTS AND WARRANTS ON CURRENCIES AND
CURRENCY FUTURES CONTRACTS (EACH PORTFOLIO EXCEPT TOP 50 US PORTFOLIO). Each
Portfolio, except Top 50 US Portfolio may enter into foreign currency
transactions to hedge currency risks associated with the assets of each
Portfolio, except the Top 50 US Portfolio, denominated in foreign currencies. A
Portfolio may purchase or sell foreign currency for forward delivery, purchase
option rights for the purchase or sale of currencies or currency futures
contracts or warrants which entitle the holder to the right to purchase or sell
currencies or currency futures contracts or to receive payment of a difference,
which is measured by the performance of currencies or currency futures
contracts, provided that these option rights and warrants are admitted to
official listing on an exchange.

Each Portfolio does not currently intend to engage in foreign exchange
transactions as an investment strategy. However, each Portfolio may enter into
forward contracts to hedge against changes in foreign currency exchange rates
that would affect the value of existing investments denominated or principally
traded in a foreign currency.

SECURITIES LOANS. Subject to applicable investment restrictions, each Portfolio
is permitted to lend its securities. These loans

DEUT012K

-9-

<PAGE>

may not exceed 33 1/3% of each Portfolio's total assets. The Portfolios may pay
reasonable administrative and custodial fees in connection with the loan of
securities. The following conditions will be met whenever portfolio securities
of a Portfolio are loaned: (1) the Portfolio must receive at least 100%
collateral from the borrower; (2) the borrower must increase such collateral
whenever the market value of the securities loaned rises above the level of the
collateral; (3) the Portfolio must be able to terminate the loan at any time;
(4) the Portfolio must receive reasonable interest on the loan, as well as
payments in respect of any dividends, interest or other distributions on the
loaned securities, and any increase in market value; (5) the Portfolio may pay
only reasonable custodian and finder's fees in connection with the loan; and (6)
while voting rights on the loaned securities may pass to the borrower, the
Portfolio must terminate the loan and regain the right to vote the securities if
a material event conferring voting rights and adversely affecting the investment
occurs. In addition, a Portfolio will consider all facts and circumstances,
including the creditworthiness of the borrowing financial institution. No
Portfolio will lend its securities to any officer, Trustee, Director, employee
or other affiliate of the Corporation or the Portfolio Trust, the Manager, the
Adviser or the Distributor, unless otherwise permitted by applicable law.

BORROWING. Each Portfolio may borrow money from banks for temporary or
short-term purposes and then only in amounts not to exceed 10% of each
Portfolio's, except the Top 50 US Portfolio's, net assets, taken at cost, at the
time of such borrowing. The Top 50 US Portfolio may take up short-term loans up
to a limit of 1/3 of the Portfolio's net assets.

DEUT012K

-10-

<PAGE>

FUNDAMENTAL INVESTMENT RESTRICTIONS.

Top 50 World Portfolio will invest at least 65% of its total assets in
equity securities. Top 50 Europe Portfolio will invest at least 65% of its total
assets in the equity securities of issuers located in European countries. Top 50
Asia Portfolio will invest at least 65% of its total assets in the equity
securities of issuers with a domicile or business focus in Asian countries. Top
50 US Portfolio will invest at least 65% of its total assets in the equity
securities of issuers located in the United States.

No Portfolio may purchase securities or other obligations of

DEUT012K

-11-

<PAGE>

issuers conducting their principal business activity in the same industry if its
investments in such industry would equal or exceed 25% of the value of the
Portfolio's total assets, except this limitation shall not apply to investments
in securities issued by the U.S. Government or its agencies or
instrumentalities.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS

Each Portfolio generally will not borrow money. Each Portfolio may not
issue senior securities except as permitted by the 1940 Act or any rule, order
or interpretation thereunder. Each Portfolio, except the Top 50 US Portfolio,
may not invest more than 10% of its net assets in the securities of any one
issuer or invest more than 40% of its net assets in the aggregate in the
securities of those issuers in which the Portfolio has invested in excess of 5%
but not more than 10% of its net assets.

RISK FACTORS

EQUITY INVESTMENTS. Because the assets of each Portfolio are invested primarily
in equity securities, the Portfolios are subject to market risk and the risks
associated with the individual companies in which the Portfolios invest, meaning
that stock prices in general may decline over short or extended periods of time.
As with any equity-based investment company, the investor should be aware that
unfavorable economic conditions can adversely affect corporate earnings and
cause declines in stock prices.

FOREIGN INVESTMENTS (EACH PORTFOLIO EXCEPT TOP 50 US PORTFOLIO). Each Portfolio,
except the Top 50 US Portfolio, invests primarily in foreign securities.
Investment in securities of foreign issuers involves somewhat different
investment risks from those affecting securities of U.S. domestic issuers. There
may be limited publicly available information with respect to foreign issuers,
and foreign issuers are not generally subject to uniform accounting, auditing
and financial standards and requirements comparable to those applicable to U.S.
domestic companies. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes (such as capital gain taxes)
which may decrease the net return on foreign investments as compared to
dividends and interest paid to a Portfolio by U.S. domestic companies.

DEUT012K

-12-

<PAGE>

could result in appreciation or depreciation of portfolio securities and could
favorably or unfavorably affect a Portfolio's operations. Furthermore, the
economies of individual foreign nations may differ from the U.S. economy,
whether favorably or unfavorably, in areas such as growth of gross domestic
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position; it may also be more difficult to obtain and
enforce a judgment against a foreign issuer. Any foreign investments made by the
Portfolios must be made in compliance with foreign currency restrictions and tax
laws restricting the amounts and types of foreign investments.

EMERGING MARKETS (EACH PORTFOLIO EXCEPT TOP 50 US PORTFOLIO). Investments in
securities of issuers in emerging markets countries may involve a high degree of
risk and many may be considered speculative. Investments in developing and
emerging markets may be subject to potentially greater risks than those of other
foreign issuers. These risks include: (i) the small current size of the markets
for such securities and the low volume of trading, which result in less
liquidity and in greater price volatility; (ii) certain national policies which
may restrict the Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests;
(iii) foreign taxation; (iv) the absence, until recently, of a capital market
structure or market oriented economy as well as issuers without a long period of
successful operations; (v) the possibility that recent favorable economic
developments may be slowed or reversed by unanticipated political or social
events in such countries or their neighboring countries; and (vi) greater risks
of expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability.

DEUT012K

-13-

<PAGE>

LOCAL SECURITIES MARKETS

[TO BE SUPPLIED BY AMENDMENT]

MANAGEMENT OF THE CORPORATION AND THE PORTFOLIO TRUST

DEUT012K

-14-

<PAGE>

its investment objective by investing all of its investable assets in its
corresponding Portfolio. Each Portfolio has retained the services of DFM as
Manager, Federated Services Company as Operations Agent, IBT (Canada) as Fund
Accounting Agent, IBT (Cayman) as Administrative Agent and IBT as Custodian. DFM
has retained the services of DWS International Portfolio Management GmbH as
investment adviser of each Portfolio except the Top 50 US Portfolio. DFM has
retained the services of DAMNA as investment adviser of the Top 50 US Portfolio.

DFM is a wholly-owned subsidiary of Deutsche Fonds Holding GmbH ("DFH"), a
company with limited liability organized under the laws of Germany and a
consolidated subsidiary of Deutsche Bank AG, a major global banking institution.
With total assets the equivalent of $570 billion and 75,000 employees as of
year-end 1996, Deutsche Bank AG is Europe's largest universal bank. It is
engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. Deutsche Bank AG's creditworthiness
ranks it among the most highly rated financial institutions in the world. For
example, Deutsche Bank AG has been rated AAA by Standard & Poor's Corporation,
New York. Deutsche Bank and its affiliates may have commercial lending
relationships with companies whose securities may be held by a Portfolio.

DEUT012K

-15-

<PAGE>

various categories of investment objective defined by Micropal. Fund rankings
are based on above-average performance in Deutsche Mark ("DM") terms and
below-average volatility.

As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Portfolio Trust with respect to each
Portfolio, DFM receives a fee from each Portfolio, which is computed daily and
paid monthly, equal to 1.00% of the average daily net assets of each Portfolio
except Top 50 US Portfolio and equal to 0.85% of the average daily net assets of
Top 50 US Portfolio on an annualized basis for the Portfolio's then-current
fiscal year. See also "Expenses."

ADVISER. Pursuant to an investment advisory agreement ("Advisory Agreement")
between DFM and the relevant Adviser, the Adviser provides investment advice and
portfolio management services to each Portfolio. Subject to the overall
supervision of DFM, the Adviser conducts the day-to-day investment decisions of
each Portfolio , arranges for the execution of portfolio transactions and
furnishes a continuous investment program for each Portfolio.

Each Adviser is an SEC-registered investment adviser and an indirect
subsidiary of Deutsche Bank AG. The offices of the DWS Adviser are located at
Grueneburgweg 113-115, 60323 Frankfurt am Main, Germany. The offices of the
DAMNA Adviser are located at 31 West 52nd Street, New York, New York 10019.

For these services, the Adviser receives from DFM a fee, which is computed
daily and may be paid monthly, equal to 0.75% of the average daily net assets of
each Portfolio

DEUT012K

-16-

<PAGE>

except Top 50 US Portfolio and equal to 0.60% of the average daily net assets of
Top 50 US Portfolio on an annualized basis for the Portfolio's then-current
fiscal year.

PORTFOLIO MANAGEMENT

Klaus Kaldemorgen is the senior portfolio manager for the Top 50 Asia
Portfolio and Deutsche Top 50 World Portfolio. Mr. Kaldemorgen also serves as
senior portfolio manager for the Top 50 Asien and Top 50 Welt, German registered
mutual funds with the same investment objective, policies and restrictions as
the respective Portfolio. He has held this position since the inception of these
funds in April, 1996, and January 1997, respectively. Mr. Kaldemorgen has 15
years experience as an investment manager, joining the DWS Group in 1982. Mr.
Kaldemorgen is Senior Investment Officer, head of the global equity team, DWS
Group, Investmentgroup of Deutsche Bank, supervising funds holding assets under
management of DM 10.8 billion ($6.3 billion) as of March 31, 1997.

Klaus Martini is the senior portfolio manager for the Top 50 Europe
Portfolio. He joined the DWS Group in 1984, where he has managed European stock
funds since 1988. Mr. Martini also serves as senior portfolio manager for
Europa. He has held this position since the fund's inception in November, 1995.
He is Senior Investment Officer, head of the European equity team, supervising
funds holding assets under management of DM 4.8 billion ($2.8 billion) as of
March 31, 1997. Mr. Martini is based at DWS Group's office in Frankfurt,
Germany.

James E. Moltz, the chief investment officer of Deutsche Morgan
Grenfell Inc., is the senior portfolio manager of the Top 50 US Portfolio. Mr.
Moltz is also the chief investment strategist of Deutsche Morgan Grenfell Inc.,
and previously served as chief investment strategist for 20 years with an
acquired firm, C.J. Lawrence Inc. He was also chairman and president of C.J.
Lawrence Inc. from 1973 to 1994. Mr. Moltz is a former Director of both the New
York Stock Exchange and the Securities Industry Association. He is a member of
the New York Society of Security Analysts and a Chartered Financial Analyst.

DEUT012K

-17-

<PAGE>

ADMINISTRATOR. Under a master agreement for administration services with the
Corporation , Federated Services Company serves as Administrator to the Funds .
In connection with its responsibilities as Administrator of the Funds ,
Federated Services Company, among other things (i) prepares, files and maintains
the Funds' governing documents , registration statements and regulatory filings;
(ii) prepares and coordinates the printing of publicly disseminated documents ;
(iii) monitors declaration and payment of dividends and distributions; (iv)
projects and reviews the Funds' expenses; (v) performs internal audit
examinations; (vi) prepares and distributes materials to the Directors of the
Corporation, (vii) coordinates the activities of all service providers; (viii)
monitors and supervises collection of tax reclaims; and (ix) prepares
shareholder meeting materials.

OPERATIONS AGENT. Under an operations agency agreement with the Portfolio Trust,
Federated Services Company serves as Operations Agent to the Portfolio. In
connection with its responsibilities as Operations Agent of the Portfolios,
Federated Services Company, among other things, (i) prepares governing
documents, registration statements and regulatory filings; (ii) prepares
internal audit examinations (iii) prepare expense projections; (iv) prepares
materials to the Trustees of the Portfolio Trust, (v) coordinates the activities
of all service providers; (vi) conducts compliance training for the Adviser;
(vii) prepares investor meeting materials and (viii) monitors and supervises
collection of tax reclaims.

As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee
from each Portfolio, which is computed daily and may be paid monthly, at the
annual rate of 0.025% of the average daily net assets of each Portfolio up to
$200 million, 0.02% of the average daily net assets of each Portfolio greater
than $200 million and less than $800 million, and 0.01% of the average daily net
assets of each Portfolio greater than $1 billion for the Portfolio's
then-current fiscal year. The Administrative Agent will receive a minimum fee of
$40,000 per Portfolio for the first full year of operation, $45,000 for the
second year of operation, and $50,000 for the third year of operation.

DEUT012K

-18-

<PAGE>

Securities laws may require certain Financial Intermediaries (as defined
below) such as depository institutions to register as dealers. The Distributor
may pay dealers an amount up to 5.0% of the net asset value of Class B Shares
purchased by their clients or customers as an advance payment. These payments
will be made directly by the Distributor from its assets, and will not be made
from the assets of a Fund. Dealers may voluntarily waive receipt of all or any
portion of these advance payments. The Distributor may pay all or a portion of
the distribution fee discussed below to Financial Intermediaries (as defined
below) that waive all or any portion of the advance payments.

DEUT012K

-19-

<PAGE>

Under the Service Plan, each Fund pays to DFM for the provision of
certain services to the holders of Class A Shares and Class B Shares a fee
computed at an annual rate of 0.25% of the average daily net assets of each such
Class of Shares. The service provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund, providing reports and other information to shareholders and financial
intermediaries ("Financial Intermediaries"), and services related to the
maintenance of shareholder accounts, and other services. DFM determines the
amounts to be paid to Financial Intermediaries, the schedules of such fees and
the basis upon which such fees will be paid .

DFM may pay Financial Intermediaries a shareholder services fee of up to
0.25% of the amount invested in Class A shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have a
minimum of 250 employees eligible for participation in such plans or programs,
or (ii) such plan's or program's aggregate investment in the series of the
Corporation (the "Deutsche Funds") or certain other products made available by
the Distributor to such plans or programs is $1,000,000 or more ("Eligible
Benefit Plans"). Shares in the Deutsche Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. DFM reserves the right to
cease paying these fees at any time. DFM may pay such fees from its own funds in
addition to amounts received from the Funds under the Service Plan, including
past profits or any other source available to it.

Such payments are subject to a reclaim from the Financial Intermediary should
the assets leave the plan or program within 12 months after purchase.

DEUT012K

-20-

<PAGE>

(i) calculation of the daily net asset value for the Funds and the Portfolios;
(ii) monitoring compliance with investment portfolio restrictions, including all
applicable federal and state securities and other regulatory requirements; and
(iii) monitoring each Fund's and Portfolio's compliance with the requirements
applicable to a regulated investment company under the Code.

EXPENSES. In addition to the fees payable under the various agreements discussed
above, each Fund and each Portfolio is responsible for usual and customary
expenses associated with its respective operations. Such expenses may include
organization expenses, legal fees, audit fees and expenses, insurance costs, the
compensation and expenses of the Directors or Trustees, as the case may be,
registration fees under applicable securities laws, fund accounting fees,
custodian fees and extraordinary expenses. For each Fund, such expenses also
include transfer, registrar and dividend disbursing costs, and the expenses of
printing and mailing reports and notices and proxy statements to Fund
shareholders. For each Portfolio, such expenses also include brokerage expenses.

DFM has agreed that it will reimburse each Fund through at least August
31, 1998, or until the average net assets of the Fund exceed $25 million,
whichever occurs first, to the extent necessary to maintain each Fund's total
operating expenses (which includes expenses of the Fund and its corresponding
Portfolio but does not cover extraordinary expenses during the period) at not
more than 1.60% and 2.35% of the average annual net assets of Class A and Class
B Shares, respectively, of the Top 50 World, Top 50 Europe and Top 50 Asia and
not more that 1.80% and 2.25% of the average annual net assets of Class A Shares
and Class B Shares, respectively, of Top 50 US. There is no assurance that DFM
will continue this reimbursement beyond the specified period.

DEUT012K

-21-

<PAGE>

PORTFOLIO BROKERAGE. The estimated annual portfolio turnover rate for the Top 50
World Portfolio, Top 50 Europe Portfolio, Top 50 Asia Portfolio and Top 50 US
Portfolio is generally not expected to exceed 80%, 80%, 100% and 80%,
respectively. A 100% annual turnover rate would occur, for example, if all
portfolio securities (excluding short-term obligations) were replaced once in a
period of one year, or if 10% of the portfolio securities were replaced ten
times in one year. The amount of brokerage commissions and taxes on realized
capital gains to be borne by the shareholders of a Fund tend to increase as the
level of portfolio activity increases.

DEUT012K

-22-

<PAGE>

its customers, including the Portfolio. In some instances, this
procedure might adversely affect a Portfolio.

INVESTING IN THE FUNDS

Each Fund offers investors two classes of Shares that carry sales charges
and contingent deferred sales charges in different forms and amounts and which
bear different levels of expenses.

CLASS A SHARES. An investor who purchases Class A Shares of a Fund pays a
maximum sales charge of 5.50% at the time of purchase. Certain purchases of
Class A Shares are not subject to a sales charge. See "Purchase of Shares
- -Investing in Class A Shares." As a result, Class A Shares are not subject to
any charges when they are redeemed (except for special programs offered under
"Purchase of Shares - Purchases with Proceeds From Redemptions of Unaffiliated
Investment Companies.") Certain purchases of Class A Shares qualify for reduced
sales charges. See "Purchase of Shares - Reducing or Eliminating the Sales
Charge." Class A Shares have no conversion feature.

CLASS B SHARES. Class B Shares of each Fund are sold without an initial sales
charge, but are subject to a contingent deferred sales charge in accordance with
the following schedule:

Contingent
Year of Redemption Deferred
AFTER PURCHASE SALES CHARGE

First 5.00%

Second 4.00%

Third 3.00%

Fourth 3.00%

Fifth 2.00%

Sixth 1.00%

Seventh and thereafter 0.00%

PURCHASE OF SHARES

DEUT012K

-23-

<PAGE>

for as little as $500. The minimum subsequent investment for retirement plan
participants is $100. (Financial Intermediaries may impose different minimum
investment requirements on their customers.)

INVESTING IN CLASS A SHARES

Class A Shares of each Fund are sold at their net asset value next
determined after an order is received, plus a sales charge as follows:

Sales Charge Dealer
Sales Charge as as a Percentage Concession
a Percentage of Net As a Percentage
Amount of Offering Amount of Public

TRANSACTION PRICE INVESTED OFFERING PRICE
- ----------- ----- -------- -------------
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less
than $100,000 4.50% 4.71% 3.75%
$100,000 but less
than $250,000 3.50% 3.63% 2.75%
$250,000 but less
than $500,000 2.50% 2.56% 2.00%
$500,000 but less
than $1 million 2.00% 2.04% 1.75%
$1 million or
greater None None up to 1.00%*

* See "Dealer Concession" below.

DEALER CONCESSION. The dealer concession may be changed from time to
time but will remain the same for all dealers. Dealer concession will be paid to
dealers who initiate and are responsible for purchases of $1 million or more.
Any portion of the sales charge which is not paid to a dealer will be retained
by the Distributor. The Distributor, at its expense, may provide additional
promotional incentives to dealers. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant numbers of
shares of the Fund or other Deutsche Funds.

DEUT012K

-24-

<PAGE>

REDUCING OR ELIMINATING THE SALES CHARGE. The sales charge can be
reduced or eliminated on the purchase of Class A Shares through:

3. Registered representatives, bank trust officers, certified
financial planners and other employees (and their immediate
families) of investment professionals who have entered into a
supplemental agreement with the Distributor;

DEUT012K

-25-

<PAGE>

of such distribution, such qualified retirement plan or 403(b)(7) plan met the
requirements of an Eligible Benefit Plan and all or a portion of such plan's
assets were invested in the Deutsche Funds or certain other products made
available by the Distributor to such plans;

5. As part of an Eligible Benefit Plan having a minimum of 250 eligible
employees or a minimum of $1,000,000, or such lesser amouns as may be
determined by the Distributor, invested in Deutsche Funds;

7. Qualified separate accounts maintained by an insurance company pursuant to
the laws of any State or territory of the United States;

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. Larger purchases reduce the sales
charge paid. A Fund will combine purchases of Class A Shares made on the same
day by the investor, the investor's spouse, and the investor's children under
age 21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made in a Fund, the Fund will
consider the previous purchases still invested in the Fund. For example, if a
shareholder already owns Class A Shares having a current value at the public
offering price of $30,000 and he purchases $20,000 more at the current public
offering price, the sales charge on the additional purchase according to the
schedule now in effect would be 4.50%, not 5.50%.

DEUT012K

-26-

<PAGE>

will reduce the sales charge after it confirms the purchases.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Shares of any Deutsche Fund,
excluding the Deutsche U.S. Money Market Fund, will be aggregated to provide a
purchase credit towards fulfillment of the letter of intent. Prior trade prices
will not be adjusted.

DEUT012K

-27-

<PAGE>

made within 60 days of the redemption, and the Distributor must be notified by
the investor in writing, or by his Financial Intermediary, at the time the
purchase is made. From time to time, the Distributor may offer dealers
compensation for Shares purchased under this program. If Shares are purchased in
this manner, redemptions of these Shares will be subject to a contingent
deferred sales charge for one year from the date of purchase. Shareholders will
be notified prior to the implementation of any special offering as described
above.

CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares on or about the fifteenth of the month eight full years after the
purchase date, except as noted below. Such conversion will be on the basis of
the relative net asset values per share, without the imposition of any sales
charge, fee, or other charge. Class B Shares acquired by exchange from Class B
Shares of another Deutsche Fund will convert into Class A Shares based on the
time of the initial purchase. For purposes of conversion to Class A Shares,
Shares purchased through the reinvestment of dividends and distributions paid on
Class B Shares will be considered to be held in a separate sub-account. Each
time any Class B Shares in the shareholder's account (other than those in the
sub-account) convert to Class A Shares, an equal pro rata portion of the Class B
Shares in the sub-account will also convert to Class A Shares. The conversion of
Class B Shares to Class A Shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes. There
can be no assurance that such ruling or opinion will be available, and the
conversion of Class B Shares to Class A Shares will not occur if such ruling or
opinion is not available. In such event, Class B Shares would continue to be
subject to higher expenses than Class A Shares for an indefinite period.

DEUT012K

-28-

<PAGE>

PURCHASING SHARES BY WIRE. Once an account has been established, Shares may be
purchased by Federal Reserve wire by calling the Transfer Agent. All information
needed will be taken over the telephone, and the order is considered received
when IBT receives payment by wire. Federal funds should be wired as follows:
[WIRE ADDRESS]; For Credit to: (Fund Name) (Fund Class); (Fund Number, this
number can be found on the account statement or by contacting the Fund); Account
Number; Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; and ABA Number [#]. Shares cannot be purchased by wire on
holidays when wire transfers are restricted.

SPECIAL PURCHASE FEATURES

DEUT012K

-29-

<PAGE>

the Fund, plus the sales charge, if applicable. Shareholders should contact
their Financial Intermediary or the Funds directly to participate in this
program.

RETIREMENT PLANS. Fund Shares can be purchased as an investment
for retirement plans or IRA accounts. For further details,
contact the Funds and consult a tax adviser.

EXCHANGE PRIVILEGE

Please contact your Financial Intermediary directly or the Distributor for
information on and prospectuses for the Deutsche Funds into which your Shares
may be exchanged free of charge.

MAKING AN EXCHANGE. Instructions for exchanging may be given in

DEUT012K

-30-

<PAGE>

writing or by telephone. Written instructions may require a signature guarantee.
Shareholders of a Fund may have difficulty in making exchanges by telephone
through brokers and other Financial Intermediaries during times of drastic
economic or market changes. If a shareholder cannot contact his broker or
Financial Intermediary by telephone, it is recommended that an exchange request
be made in writing and sent by overnight mail to: Deutsche Family of Funds,
Inc., Federated Shareholder Services Company, Federated Investors Tower,
Pittsburgh, PA 15222-3779.

REDEMPTION OF SHARES

DEUT012K

-31-

<PAGE>

Intermediary is responsible for promptly submitting redemption requests and
providing proper written redemption instructions. Customary fees and commissions
may be charged by the Financial Intermediary for this service.

Each Fund and the Transfer Agent have adopted standards for
accepting signature guarantees from the above institutions. A

DEUT012K

-32-

<PAGE>

Fund may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. Each Fund and
the Transfer Agent reserve the right to amend these standards at any time
without notice.

SPECIAL REDEMPTION FEATURES

CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

DEUT012K

-33-

<PAGE>

Shares were acquired in an exchange of Class B Shares of another Fund, at the
time of purchase of the Class B Shares of the exchanged-from Fund) or (ii) the
net asset value of the redeemed Shares at the time of redemption.

DEUT012K

-34-

<PAGE>

Distributor or its affiliates, or any other Financial Intermediary, to the
extent that no payments were advanced for purchases made through such entities.
The Trustees reserve the right to discontinue elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Shares purchased prior to the termination of such waiver would have the
contingent deferred sales charge eliminated as provided in the Fund's Prospectus
at the time of the purchase of the Shares. If a shareholder making a redemption
qualifies for an elimination of the contingent deferred sales charge, the
shareholder must notify the Distributor or the transfer agent in writing that he
is entitled to such elimination.

ACCOUNT AND SHARE INFORMATION

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual statements are sent to report dividends paid during the
year.

DIVIDENDS AND DISTRIBUTIONS

Dividends consisting of substantially all of a Fund's net investment income, if
any, are declared and paid annually. A Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise tax on the Fund.

DEUT012K

-35-

<PAGE>

or limit the automatic reinvestment privilege at any time.

NET ASSET VALUE

A Fund's net asset value per Share fluctuates. The net asset value for Shares
of each class is determined by adding the interest of such class of Shares in
the market value of a Fund's total assets (i.e., the value of its investment in
the Portfolio and other assets), subtracting the interest of such class of
Shares in the liabilities of such Fund and those attributable to such class of
Shares, and dividing the remainder by the total number of such class of Shares
outstanding. The net asset value for each class of Shares may differ due to the
variance in daily net income realized by each class. Such variance will reflect
only accrued net income to which the shareholders of a particular class are
entitled. Values of assets in each Portfolio are determined on the basis of
their market value or where market quotations are not determinable, at fair
value as determined by the Trustees of the Portfolio Trust. See "Net Asset
Value" in the Statement of Additional Information for information on valuation
of portfolio securities.

ORGANIZATION

The Articles of Incorporation currently permit the Corporation to issue
2,500,000,000 shares of common stock, par

DEUT012K

-36-

<PAGE>

value $0.001 per share, of which 10,000,000 shares have been classified as
shares of each Fund. The Board of Directors of the Corporation may increase the
number of shares the Corporation is authorized to issue without the approval of
shareholders. The Board of Directors of the Corporation also has the power to
designate one or more additional series of shares of common stock and to
classify and reclassify any unissued shares with respect to such series.
Currently there are 10 such series and two classes of shares for each Fund
(except for the Deutsche U.S. Money Market Fund) known as Class A Shares and
Class B Shares.

The Corporation's Articles of Incorporation provide that the presence in person
or by proxy of the holders of record of one third of the shares outstanding and
entitled to vote thereat shall constitute a quorum at all meetings of
shareholders of a Fund, except as otherwise required by applicable law. The
Articles of Incorporation further provide that all questions shall be decided by
a majority of the votes cast at any such meeting at which a quorum is present,
except as otherwise required by applicable law.

DEUT012K

-37-

<PAGE>

and common and commingled trust funds) are each liable for all obligations of
the Portfolio. However, the risk of a Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Directors of the Corporation believe that neither a Fund nor
its shareholders will be adversely affected by reason of the investment of all
of the assets of a Fund in its corresponding Portfolio.

Each investor in a Portfolio, including its corresponding Fund, may add
to or reduce its investment in the Portfolio on each day the New York Stock
Exchange is open for regular trading. At 4:00 p.m. (Eastern time) on each such
business day, the value of each investor's beneficial interest in a Portfolio is
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day that represents that investor's share of the
aggregate beneficial interests in the Portfolio. Any additions or withdrawals,
which are to be effected on that day, are then effected. The investor's
percentage of the aggregate beneficial interests in the Portfolio is then
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of 4:00 p.m.
(Eastern time) on such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the Portfolio
effected on such day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of 4:00 p.m. (Eastern time) on such day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investments in the Portfolio by all investors in the
Portfolio. The percentage so determined is then applied to determine the value
of the investor's interest in the Portfolio as of 4:00 p.m. (Eastern time) on
the following business day of the Portfolio.

TAXES

DEUT012K

-38-

<PAGE>

annually at least 90% of its net investment income (which includes income, other
than capital gains, net of operating expenses, and the Fund's net short-term
capital gains in excess of its net long-term capital losses) and capital loss
carry forward, if any. Each Fund intends to distribute at least annually to its
shareholders substantially all of its net investment income and realized net
capital gains. Each Portfolio intends to elect to be treated as a partnership
for U.S. federal income tax purposes. As such, each Portfolio generally should
not be subject to U.S. taxes.

Dividends of net investment income are taxable to a U.S. shareholder as
ordinary income whether such distributions are taken in cash or are reinvested
in additional shares. Distributions of net capital gains, if any, are taxable to
a U.S. shareholder as long-term capital gains, regardless of how long the
shareholder has held the Fund's shares and regardless of whether taken in cash
or reinvested in additional shares. Dividends of net investment income paid by
the Top 50 US or the Top 50 World which are designated as derived from such
Fund's dividend income from U.S. corporations will be eligible, subject to
certain restrictions, for the deduction for dividends received by corporations.
Distributions of net capital gains and dividends and distributions paid by Top
50 Europe or Top 50 Asia will not be eligible for the dividends-received
deduction. However, Congress has passed legislation under which the restrictions
on the eligibility of the dividends-received deduction would be modified such
that a shareholder would not be entitled to the dividends-received deduction if
the shareholder did not satisfy the holding period requirement during a period
overlapping the day on which the shareholder becomes entitled to receive the
dividend. There can be no assurances as to whether such legislation will be
enacted into law and, if so, what its effective date might be.

If the net asset value of shares in any Fund is reduced below a shareholder's
cost as a result of a distribution by the Fund, such distribution will be
taxable even though it represents a return of invested capital. Investors should
consider the tax implications of buying shares just prior to a distribution when
the price of the shares may reflect the amount of the forthcoming distribution.
Annual statements as to the current federal tax status of distributions will be
mailed to shareholders at the end of each taxable year.

Any gain or loss realized on the redemption or exchange of a Fund's
shares by a shareholder who is not a dealer in securities

DEUT012K

-39-

<PAGE>

generally will be treated as long-term capital gain or loss if the shares have
been held for more than one year, and otherwise as short-term capital gain or
loss. However, any loss realized by a shareholder upon the redemption or
exchange of shares in a Fund held for six months or less will be treated as a
long-term capital loss to the extent of any long-term capital gain distributions
received by the shareholder with respect to such shares. In addition, no loss
will be allowed on the sale or other disposition of shares of a Fund if, within
a period beginning 30 days before the date of such sale or disposition and
ending 30 days after such date, the holder acquires (such as through dividend
reinvestment) securities that are substantially identical to the shares of such
Fund. For additional information regarding the tax consequences of the
reinvestment of the proceeds of a redemption see "Tax Treatment of
Reinvestments" above.

It is anticipated that certain income of the Funds will be subject to foreign
withholding or other taxes and that each Fund (except Top 50 US) will be
eligible to elect to "pass through" to its shareholders the amount of foreign
income taxes (including withholding taxes) paid by such Fund. If a Fund makes
this election, a shareholder would include in gross income his pro rata share of
the foreign income taxes passed through and would be entitled either to deduct
such taxes in computing his taxable income (if the shareholder itemizes
deductions) or to claim a credit (which would be subject to certain limitations)
for such taxes against his U.S. federal income tax liability. A Fund will make
such an election only if it deems it to be in the best interests of its
shareholders and will notify each shareholder in writing each year that it makes
the election of the amount of foreign taxes, if any, to be treated as paid by
the shareholder.

A Fund may be required to backup withhold for U.S. federal income tax purposes
of 31% of any dividends and distributions (including the proceeds of any
redemption) payable to a shareholder who fails to provide the Fund with his
correct TIN or to make required certifications, or who has been notified by the
IRS that he is subject to backup withholding. Backup withholding is not an
additional tax; amounts withheld may be credited against the shareholder's U.S.
federal income tax liability.

For further information on taxes, see "Taxes" in the Statement of Additional
Information.

ADDITIONAL INFORMATION

Each Fund sends to its shareholders annual and semiannual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements, reflecting all other account activity,
including dividends and any distributions reinvested in additional shares or
credited as cash.

DEUT012K

-40-

<PAGE>

will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio may sell shares of their own fund using a
different pricing structure than the corresponding Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in returns are not
uncommon and are present in other mutual fund structures. Information concerning
other holders of interests in the Portfolio is available from the Administrator
at (800)[#].

DEUT012K

-41-

<PAGE>

APPENDIX A
MEMBER STATES OF THE EUROPEAN UNION

Austria Belgium Denmark
Finland France Germany
Greece Italy Ireland
Luxembourg Netherlands Norway
Portugal Sweden Spain
United Kingdom

ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT MEMBERS

Spain Sweden Switzerland

Turkey United Kingdom United States

EXCHANGES IN EUROPEAN COUNTRIES WHICH ARE NOT MEMBER STATES OF THE EUROPEAN
UNION AND NOT STATES PARTY TO THE CONVENTION ON THE EUROPEAN ECONOMIC AREA.

SWITZERLAND SLOVAKIA CZECH REPUBLIC HUNGARY*
Zurich Bratislavia Prague Budapest
Geneva
Basel

EXCHANGES IN NON-EUROPEAN COUNTRIES

ARGENTINA CANADA SINGAPORE
Buenos Aires Toronto Singapore Stock Exchange
Vancouver
AUSTRALIA Montreal SOUTH AFRICA
ASX (Sydney, Johannesburg
Hobart, Melbourne,
Perth) THAILAND
Bangkok
BRAZIL SOUTH KOREA
Sao Paulo Seoul USA
Rio de Janiero American Stock Exchange (AMEX)
Boston
CHILE MALAYSIA Chicago
Santiago Kuala Lumpur Cincinnati
Los Angeles Pacific Stock Exchange
HONG KONG MEXICO New York
Hongkong Stock Mexico City New York Stock Exchange (NYSE)
Exchange Philadelphia
San Francisco Pacific Stock Exchange
INDONESIA NEW ZEALAND
Jakarta Stock Exchange Wellington
Christchurch/Invercargill
JAPAN Auckland
Tokyo
Osaka PERU
Nagoya Lima
Kyoto
Fukuoto PHILIPPINES
Niigata Manilla
Sapporo
Hiroshima

REGULATED MARKETS IN COUNTRIES WHICH ARE NOT MEMBERS ON THE EUROPEAN UNION AND
NOT CONTRACTING STATES OF THE TREATY ON THE EUROPEAN ECONOMIC AREA

JAPAN
Over-the-Counter Market

CANADA
Over-the-Counter Market

SOUTH KOREA
Over-the Counter Market

SWITZERLAND
Free Trading Zurich
Free Trading Geneva
Exchange Bern
Over the Counter Market of the members of the International
Securities Market Association (ISMA), Zurich

UNITED STATES
NASDAQ-System
Over-the-Counter Market (organized markets by the National
Association of Securities Dealers, Inc.)

* TOP 50 WORLD ONLY

DEUT012K

<PAGE>

DEUT012K

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

DEUTSCHE TOP 50 WORLD
DEUTSCHE TOP 50 EUROPE
DEUTSCHE TOP 50 ASIA
DEUTSCHE TOP 50 US
DEUTSCHE EUROPEAN MID-CAP FUND
DEUTSCHE GERMAN EQUITY FUND
DEUTSCHE JAPANESE EQUITY FUND
DEUTSCHE GLOBAL BOND FUND

DEUTSCHE EUROPEAN BOND FUND

FEDERATED INVESTORS TOWER, PITTSBURGH, PA 15222-3779

==============================================================================

The Deutsche Top 50 World (the "Top 50 World"), Deutsche Top 50 Europe
(the "Top 50 Europe"), Deutsche Top 50 Asia (the "Top 50 Asia"), Deutsche Top 50
US (the "Top 50 US"), Deutsche European Mid-Cap Fund (the "European Mid-Cap
Fund"), Deutsche German Equity Fund (the "German Equity Fund"), Deutsche
Japanese Equity Fund (the "Japanese Equity Fund"), Deutsche Global Bond Fund
(the "Global Bond Fund") and Deutsche European Bond Fund (the "European Bond
Fund") (each, a "Fund" and collectively, the "Funds") are each a series of the
Deutsche Family of Funds, Inc. (the "Corporation"), a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Each Fund has its own investment objective.

The Corporation seeks to achieve the investment objective of each Fund
by investing all of the Fund's investable assets in a corresponding
non-diversified, open-end management investment company (each, a "Portfolio" and
collectively the "Portfolios") listed in Appendix A.

Each Portfolio is a series of the Deutsche Portfolios (the "Portfolio
Trust"), an open-end investment company organized as a trust under the laws of
the State of New York. Each Portfolio has the same investment objective as its
corresponding Fund. There can be no assurance that any Fund or any Portfolio
will achieve its investment objective.

Shares of each Fund are offered in two classes known as Class A Shares
and Class B Shares (individually and collectively referred to as "Shares" as the
context may require). This Statement of Additional Information relates to both
classes of the above-mentioned Shares.

Deutsche Fund Management, Inc. ("DFM"), a registered investment adviser
and an indirect subsidiary of Deutsche Bank AG, a major global financial
institution, is the investment manager (the "Manager") of each Portfolio. DWS
International

DEUT001P

<PAGE>

Portfolio Management GmbH is the investment adviser (the "DWS Adviser") of each
Portfolio except Top 50 US Portfolio. Deutsche Asset Management North America
Inc. is the investment adviser of the Top 50 US Portfolio (the "DAMNA Adviser";
and together with the DWS Adviser or severally as the context may require, the
"Adviser"). This Statement of Additional Information is not a prospectus and
should be read in conjunction with the relevant Fund's Prospectus dated [DATE]
1997, a copy of which may be obtained from the Corporation at the address noted,
above.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS [DATE,] 1997.

DEUT001P
2

<PAGE>

TABLE OF CONTENTS

CROSS-REFERENCE TO
PAGE PAGE IN PROSPECTUS

Investment Objective and Policies
Investment Restrictions
Directors, Trustees and Officers
Manager
Adviser
Administrator
Operations Agent
Administrative Agent
Distributor

Transfer Agent, Custodian and Fund Accountant
Independent Accountants
Purchase of Shares
Redemption of Shares
Net Asset Value; Redemption in Kind
Computation of Performance
Portfolio Transactions
Federal Taxes
Description of Shares
Additional Information
Financial Statements

DEUT001P
3

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The following supplements the information contained in each Fund's
Prospectus concerning the investment objectives, policies and techniques of the
Portfolios. The descriptions are general and may not be applicable in certain
countries in which the Portfolios invest.

EQUITY INVESTMENTS

As discussed in each Fund's Prospectus, each Portfolio may invest in
the equity securities of domestic and foreign issuers to the extent consistent
with its investment objectives and policies. Equity investments may or may not
pay dividends and may or may not carry voting rights. Common stock occupies the
most junior position in a company's capital structure. Preferred stock generally
carries preferential rights to dividends and amounts payable upon liquidation of
the issuer, but may have no voting rights. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain period
of time and to receive interest or dividends until the holder elects to convert.
The provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible securities, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of common shareholders.

DEUT001P
4

<PAGE>

INVESTMENT COMPANIES

Up to 5% of the total assets of each Portfolio except the Top 50 US
Portfolio may be invested in shares of investment companies, provided these
shares are offered to the public without limitation on the number of shares, the
shareholders have the right to redeem their shares, and have investment policies
consistent with those of the Portfolio. The Top 50 US Portfolio may invest up to
5% of its total assets in the securities of any one investment company and
invest in the aggregate up to 10% of its total assets in the securities of
investment companies as a group. However, the Top 50 US Portfolio intends that
less than 5% of the Portfolio's total assets will be invested in investment
company securities during its first year of operations. Each Portfolio may not
own more than 3% of the total outstanding voting stock of any other investment
company. As a shareholder of another investment company, a Portfolio would bear,
along with other shareholders, its PRO RATA portion of the other investment
company's expenses, including advisory fees.

Subject to the foregoing limitations, shares of another securities
investment fund managed by the Manager or the Adviser or by another investment
adviser affiliated with the Manager or the Adviser through a substantial direct
or indirect interest may be purchased, subject to certain limitations, if the
other investment fund according to its investment policies is specialized in a
specific geographic area or economic sector. A Portfolio would not, however, pay
a sales charge when investing in an investment company managed by the Manager,
the Adviser or their affiliates. In addition, no management or advisory fees
would be paid by a Portfolio with respect to its assets which are invested in
investment companies managed by the Manager, the Adviser or their affiliates.

PARTICIPATION CERTIFICATES

Certain companies have issued participation certificates, which entitle
the holder to participate only in dividend distributions, generally at rates
above those declared on the issuers' common stock, but not to vote, nor usually
to any claim for assets in liquidation. Participation certificates trade like
common stock on their respective stock exchanges. Such securities may have
higher yields; however, they may be less liquid than common stock. The Adviser
believes that certain participation certificates have potential for long-term
appreciation, depending on their price relative to that of the issuer's equity
securities, if publicly traded, and other criteria.

SHORT-TERM INSTRUMENTS

Although it is intended that the assets of each Portfolio stay invested
in the securities described above and in each Fund's Prospectus to the extent
practical in light of each

DEUT001P
5

<PAGE>

Portfolio's investment objective and long-term investment perspective, assets of
each Portfolio may be invested in bank deposits and money market instruments
maturing in less than 12 months to meet anticipated expenses or for day-to-day
operating purposes and when, in the Adviser's opinion, it is advisable to adopt
a temporary defensive position because of unusual and adverse conditions
affecting the equity or fixed income markets. In addition, when a Portfolio
experiences large cash inflows through additional investments by its investors
or the sale of portfolio securities, and desirable securities that are
consistent with its investment objective are unavailable in sufficient
quantities, assets may be held in short-term investments for a limited time
pending availability of such securities. Bank deposits and money market
instruments include credit balances and bank certificates of deposit, discounted
treasury notes and bills issued by the Federal Republic of Germany ("FRG"), the
states of the FRG, the European Union, other member states of the OECD or
quasi-government entities of any of the foregoing.

ZERO COUPON OBLIGATIONS

Each Portfolio may also invest in zero coupon obligations, such as zero coupon
bonds. Zero coupon obligations pay no current interest, and as a result their
prices tend to be more volatile than those of securities that offer regular
payments of interest.

In order to pay cash distributions representing income on zero coupon
obligations, a Portfolio may have to sell other securities on unfavorable terms,
and these sales may generate taxable gains for investors in the corresponding
Fund.

OPTIONS

Each Portfolio may write call and put options and purchase call and put
options on securities. A Portfolio will write options on securities for the
purpose of increasing its return on such securities and/or to protect the values
of its portfolio.

The buyer of a typical put option can expect to realize a gain if the
price of the underlying instrument falls substantially. However, if the price of
the instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs). A call buyer
typically attempts to participate in potential price increases of the instrument
underlying the option with risk limited to the cost of the option if security
prices fall. At the same time, the buyer can expect to suffer a loss if security
prices do not rise sufficiently to offset the cost of the option (limited to the
amount of the premium paid, plus related transaction costs). A Portfolio may
seek to terminate its position in a put option it writes before exercise by
purchasing an offsetting option in the market at its current price. If the
market is not liquid for a put option the

DEUT001P
6

<PAGE>

Portfolio has written, however, the Portfolio must continue to be prepared to
pay the strike price while the option is outstanding, regardless of price
changes, and must continue to post margin as discussed below.

If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline. The
characteristics of writing call options are similar to those of writing put
options, except that writing calls generally is a profitable strategy if prices
remain the same or fall. Through receipt of the option premium a call writer
offsets part of the effect of a price decline. At the same time, because a call
writer must be prepared to deliver the underlying instrument in return for the
strike price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.

Transaction in options, futures contracts, options on futures contracts
and forward contracts entered into for non-hedging purposes involve greater risk
and could result in losses which are not offset by gains on other portfolio
assets.

All options purchased or sold by a Portfolio will be traded on a
securities exchange or, in the case of Top 50 US Portfolio (US Dollar), will be
purchased or sold by securities dealers (in the case of over-the-counter, or
"OTC," options) that meet creditworthiness standards approved by the Portfolio
Trust's Board of Trustees. In the case of OTC options, the Top 50 US Portfolio
relies on the dealer from which it purchased the option to perform if the option
is exercised. Thus, when the Portfolio purchases an OTC option, it relies on the
dealer from which it purchased the option to make or take delivery of the
underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Portfolio as well as loss of the expected benefit of
the transaction.

The staff of the SEC has taken the position that, in general, purchased
OTC options and the underlying securities used to cover written OTC options are
illiquid securities. However, the Top 50 US Portfolio may treat as liquid the
underlying securities used to cover written OTC options, provided it has
arrangements with certain qualified dealers who agree that such Portfolio may
repurchase any option it writes for a maximum price to be calculated by a
predetermined formula. In these cases, the OTC option itself would only be
considered illiquid to the extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option.

DEUT001P
7

<PAGE>

FOREIGN CURRENCY EXCHANGE TRANSACTIONS

Each Portfolio (except the Top 50 US Portfolio (US Dollar)) may enter
into foreign currency exchange transactions in an attempt to protect against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or anticipated securities
transactions. The Japanese Equity Portfolio may enter into foreign exchange
transactions in order to hedge the U.S. dollar value of all or any part of the
assets denominated in foreign currencies then held or expected to be acquired by
the Portfolio. The Global Bond Portfolio and the European Bond Portfolio may
enter into foreign exchange transactions to hedge the value of its assets
against currencies other than the U.S. Dollar. Each other Portfolio may also
enter into forward contracts to hedge against a change in foreign currency
exchange rates that would affect the U.S. Dollar value of existing investments
denominated or principally traded in a foreign currency. In the case of the
Provesta Portfolio and the Investa Portfolio, such hedging activity will be
limited to those circumstances in which the Adviser believes that one or more
currencies in which such Portfolio's assets are denominated may suffer a
substantial decline against the U.S. dollar. To conduct the hedging discussed
above, the Portfolio would enter into a forward contract to sell the foreign
currency in which the investment is denominated in exchange for the U.S. dollars
or other currency in which the Adviser desires to protect the value of the
Portfolio.

At such time as the Adviser believes that one or more currencies in
which a Portfolio's securities are denominated might suffer a substantial
decline against the U.S. dollar, a Portfolio may, in order to hedge the value of
the Portfolio, enter into forward contracts to sell fixed amounts of such
currencies for fixed amounts of U.S. dollars. The Provesta Portfolio, Top 50
Europe Portfolio and Japan Portfolio may also, in circumstances where the
Adviser considers it appropriate, enter into foreign currency exchange
transactions for the purpose of hedging the value in Deutsche Marks ("DMs") of
such Portfolios' non-DM assets.

Although these transactions are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
limit any potential gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the date
the forward contract is entered into and the date it matures. The projection of
currency market movements is difficult, and the successful execution of a
hedging strategy is highly uncertain.

DEUT001P
8

<PAGE>

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Each Portfolio may purchase or sell futures contracts and purchase put
and call options, including put and call options on futures contracts. In
addition, each Portfolio may purchase put and call options on futures. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index.

Futures contracts and options on futures contracts may be entered into
on foreign exchanges. Investors should recognize that transactions involving
foreign securities or foreign currencies, and transactions entered into in
foreign countries may involve considerations and risks not typically associated
with investing in U.S. markets.

FUTURES CONTRACTS. When a Portfolio purchases a futures contract, it
agrees to purchase a specified quantity of an underlying instrument at a
specified future date and price or to make or receive a cash payment based on
the value of a securities index or a financial instrument. When a Portfolio
sells a futures contract, it agrees to sell a specified quantity of the
underlying instrument at a specified future date and price or to receive or make
a cash payment based on the value of a securities

DEUT001P
9

<PAGE>

index or a financial instrument. When a Portfolio purchases or sells a futures
contract, the value of the futures contract tends to increase and decrease in
tandem with the value of its underlying instrument or index. The price at which
the purchase and sale will take place is fixed when a Portfolio enters into the
contract. Futures can be held until their delivery dates or the positions can be
(and normally are) closed out, by entering into an opposing contract, before
then.

When a Portfolio purchases or sells a futures contract, it is required
to make an initial margin deposit. Although the amount may vary, initial margin
can be as low as 1% or less of the notional amount of the contract. Additional
margin may be required as the contract fluctuates in value. Since the amount of
margin is relatively small compared to the value of the securities covered by a
futures contract, the potential for gain or loss on a futures contract is much
greater than the amount of the Portfolio's initial margin deposit.

OPTIONS ON FUTURES. Put and call options on futures contracts may be
purchased by each Portfolio in order to protect against declines in values of
portfolio securities or against increases in the cost of securities to be
acquired. Unlike a futures contract, which requires parties to buy or sell the
underlying financial instrument or make a cash settlement payment based on
changes in the price of the financial instrument on an agreed date, an option on
a futures contract entitles its holder to decide on or before a future date
whether to enter into such a contract. If the holder decides not to exercise its
option, the holder may close out the option position by entering into an
offsetting transaction or may decide to let the option expire and forfeit the
premium thereon. The purchaser of an option on a futures contract pays a premium
for the option but makes no initial margin payments or daily payments of cash in
the nature of "variation" margin payments to reflect the change in the value of
the underlying contract as does a purchaser or seller of a futures contract. The
seller of an option on a futures contract receives the premium paid by the
purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by a Portfolio are paid by that Portfolio into a segregated
account as required by the 1940 Act and the SEC's interpretations thereunder.

Purchase of options on futures contracts may present less risk in
hedging a Portfolio than the purchase or sale of the underlying futures
contracts since the potential loss is limited to the amount of the premium plus
related transaction costs.

DEUT001P
10

<PAGE>

COMBINED POSITIONS. Each Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

OPTIONS ON SECURITIES INDICES. Each Portfolio is also permitted to
purchase call and put options on any securities index based on securities in
which the Portfolio may invest. Options on securities indices are similar to
options on securities, except that the exercise of securities index options is
settled by cash payment and does not involve the actual purchase or sale of
securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. A Portfolio, in purchasing index
options for hedging purposes, is subject to the risk that the value of its
portfolio securities may not change as much as that of an index because the
Portfolio's investments generally will not match the composition of an index.

WARRANTS. Each Portfolio may purchase warrants which, like options on
futures contracts and options on securities indices, entitle the holder to
purchase or sell a futures contract or to a cash payment reflecting the price
fluctuation in an index of securities. A Portfolio may also purchase warrants
that entitle the holder to a cash payment reflecting the fluctuation in the
value of certain financial futures contracts. Warrants on futures contracts and
warrants on securities indices differ from the equivalent options in that: (1)
they are securities issued by a financial institution/special purpose issuer
rather than contracts entered into with a futures exchange and (2) they are
traded on a securities exchange rather than on a futures exchange. The use of
warrants will generally entail the same risks that are associated with a
Portfolio's positions in options on futures and options on securities indices.

OTHER LIMITATIONS. The Commodity Exchange Act prohibits U.S. persons,
such as a Portfolio, from buying or selling certain foreign futures contracts or
options on such contracts. Accordingly, each Portfolio will not engage in
foreign futures or options transactions unless the contracts in question may
lawfully be purchased and sold by U.S. persons in accordance with applicable
Commodity Futures Trading Commission ("CFTC") regulations or CFTC staff
advisories, interpretations and no

DEUT001P
11

<PAGE>

action letters. In addition, in order to assure that a Portfolio will not be
considered a "commodity pool" for purposes of CFTC rules, the Portfolio will
enter into transactions in futures contracts or options on futures contracts
only if (1) such transactions constitute BONA FIDE hedging transactions, as
defined under CFTC rules or (2) no more than 5% of the Portfolio's net assets
are committed as initial margin or premiums to positions that do not constitute
BONA FIDE hedging transactions.

CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a
Portfolio's current or anticipated investments exactly. Each Portfolio may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of a Portfolio's other investments.

Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match a
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it

DEUT001P
12

<PAGE>

could prevent prompt liquidation of unfavorable positions, and could potentially
require a Portfolio to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, a Portfolio's access to other
assets held to cover its options or futures positions could also be impaired.
(See "Exchange Traded and Over-the-Counter Options" above for a discussion of
the liquidity of options not traded on an exchange.)

POSITION LIMITS. Futures exchanges can limit the number of futures and options
on futures contracts that can be held or controlled by an entity. If an adequate
exemption cannot be obtained, a Portfolio or its Adviser may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.

ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. Each Portfolio
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Portfolio can commit assets to
initial margin deposits and option premiums. In addition, each Portfolio will
comply with guidelines established by the SEC with respect to coverage of
options and futures contracts by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures contract or option is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that segregation
of a large percentage of a Portfolio's assets could impede portfolio management
or a Portfolio's ability to meet redemption requests or other current
obligations.

RISK MANAGEMENT

Each Portfolio may employ non-hedging risk management techniques.
Examples of such strategies include synthetically altering the duration of a
portfolio or the mix of securities in a portfolio. For example, if the Adviser
wishes to extend maturities in a fixed income portfolio in order to take
advantage of an anticipated decline in interest rates, but does not wish to
purchase the underlying long term securities, it might cause the Portfolio to
purchase futures contracts on long term debt securities. Similarly, if the
Adviser wishes to decrease fixed income securities or purchase equities, it
could cause a Portfolio to sell futures contracts on debt securities and
purchase futures contracts on a stock index. Because these risk management
techniques involve leverage, they include, as do all leveraged transactions, the
possibility of losses as well as gains that are greater than if these techniques
involved the purchase and sale of the securities themselves rather than their
synthetic derivatives.

DEUT001P
13

<PAGE>

INVESTMENT RESTRICTIONS

The investment restrictions of each Fund and its corresponding
Portfolio are identical, unless otherwise specified. Accordingly, references
below to a Fund also include its corresponding Portfolio unless the context
requires otherwise; similarly, references to a Portfolio also include its
corresponding Fund unless the context requires otherwise.

The investment restrictions below have been adopted by the Corporation
with respect to each Fund as indicated and by the Portfolio Trust with respect
to each Portfolio as indicated. Except where otherwise noted, these investment
restrictions are "fundamental" policies which, under the 1940 Act, may not be
changed without the vote of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of a Fund or a Portfolio, as the case may be. The
percentage limitations contained in the restrictions below apply at the time of
the purchase of securities except as otherwise noted. Whenever a Fund is
requested to vote on a change in the fundamental investment restrictions of its
corresponding Portfolio, the Corporation will hold a meeting of Fund
shareholders and will cast its votes as instructed by such Fund's shareholders.

Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof are amended or modified and except that the
Corporation may invest all of each Fund's assets in its corresponding Portfolio,
each of the Funds and its corresponding Portfolio may not:

1. Purchase any security if, as a result, 25% or more of its total assets would
be invested in securities of issuers in any single industry, except that the
European Bond Fund and the Global Bond Fund will each invest more than 25% of
its total assets in the securities issued by foreign governments and their
agencies and instrumentalities. This limitation shall not apply to securities
issued or guaranteed as to principal or interest by the U.S. Government or
instrumentalities.

2. Issue senior securities. For purposes of this restriction, borrowing money in
accordance with paragraph 3 below, making loans in accordance with paragraph 7
below, the issuance of shares in multiple classes or series, the purchase or
sale of options, futures contracts, forward commitments, swaps and transactions
in repurchase agreements are not deemed to be senior securities.

3. Borrow money, except in amounts not to exceed one third of the Fund's total
assets (including the amount borrowed) (i) from banks for temporary or
short-term purposes or for the clearance of transactions, (ii) in connection
with the redemption of Fund shares or to finance failed settlements of portfolio
trades without immediately liquidating portfolio securities or other assets,
(iii) in order to fulfill commitments or plans to

DEUT001P
14

<PAGE>

purchase additional securities pending the anticipated sale of other portfolio
securities or assets and (iv) pursuant to reverse repurchase agreements entered
into by the Fund.

4. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
to be an underwriter under the Securities Act of 1933, as amended (the "1933
Act").

5. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that invest
in real estate or interests therein, (iii) invest in securities that are secured
by real estate or interests therein, (iv) purchase and sell mortgage-related
securities and (v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.

6. Purchase or sell commodities or commodity contracts, except the Fund may
purchase and sell financial futures contracts, options on financial futures
contracts and warrants and may enter into swap and forward commitment
transactions.

7. Make loans, except that the Fund (1) may lend portfolio securities with a
value not exceeding one-third of the Fund's total assets, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an issue of debt
securities (including privately issued debt securities), bank loan participation
interests, bank certificates of deposit, bankers' acceptances, debentures or
other securities, whether or not the purchase is made upon the original issuance
of the securities.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions described
below are not fundamental policies of the Funds and their corresponding
Portfolios and may be changed by their respective Directors or Trustees. These
non-fundamental investment policies require that, each Fund and its
corresponding Portfolio may not (except that the Corporation may invest all of
each Fund's assets in its corresponding Portfolio):

(i) Acquire securities of other investment companies, except as permitted by the
1940 Act or any rule, order or interpretation thereunder, or in connection with
a merger, consolidation, reorganization, acquisition of assets or an offer of
exchange, provided that Provesta Portfolio and Investa Portfolio shall each be
limited to 5% in the amount of its total assets that may be invested in the
aggregate in securities of investment companies as a group. Currently the 1940
Act prohibits a Fund from acquiring securities of other investment companies if
as a result (i) more than 5% of the value of a Fund's total assets will be
invested in the securities of any one investment company, (ii) more than 10% of
the value of its total assets will be invested in the aggregate in securities of
investment companies as a group, or (iii) more than 3% of the outstanding voting
stock of any one investment company will be owned by a Fund or Portfolio;

DEUT001P
15

<PAGE>

(ii) Acquire any illiquid investments, such as repurchase agreements with more
than seven days to maturity , if as a result thereof, more than 15% of the
market value of the Fund's net assets would be in investments that are illiquid;

(iii) invest more than 10% of its net assets in unlisted securities and Notes
(as defined in the Fund's prospectus)

(iv) Sell any security short, except to the extent permitted by the 1940 Act.
Transactions in futures contracts and options shall not constitute selling
securities short;

(v) Purchase securities on margin, but the Fund may obtain such short term
credits as may be necessary for the clearance of transactions;

The DWS Funds are subject to regulation under the German Investment
Companies Act, therefore, in addition to the investment policies discussed
herein and in the Prospectus, each Fund, except Top 50 US and its corresponding
Portfolio, has adopted additional non-fundamental investment policies. These
non-fundamental investment policies require that each such Fund and its
corresponding Portfolio may not (except that the Corporation may invest all of
each Fund's assets in its corresponding Portfolio):

(i) invest more than 10% of its net assets in the securities of any one issuer
or invest more than 40% of its net assets in the aggregate in the securities of
those issuers in which the Portfolio has invested in excess of 5% but not more
than 10% of its net assets. For purposes of this restriction, mortgage bonds and
municipal bonds as well as bonds and Notes issued by the FRG, the states of the
FRG, a member state of the European Union ("EU"), a state party to the
Convention on the European Economic Area ("CEEA"), a member state of the
Organization for Economic Cooperation and Development ("OECD") or the EU shall
be valued at half of their value. Bonds of credit institutions situated in a
member state of the EU or state party to the CEEA shall be valued at half their
value provided that the credit institutions are by law subject to a special
public supervision to protect the holders of such bonds and provided the funds
raised through the issue of such bonds are invested in accordance with the legal
provisions in assets, which provide sufficient coverage for the ensuing
liabilities throughout the entire life of the bonds and which in case of
deficiency of the issuer are earmarked for prior redemption of principal and
payment of interest. Securities and Notes issued by companies in the same
affiliated group shall be considered securities of the same issuer (borrower);

DEUT001P
16

<PAGE>

(ii) purchase bonds of the same issuer to the extent that their total value
exceeds 10% of the total value of the bonds outstanding of the same issuer. This
restriction does not apply to bonds issued by a national government, a local
authority of a member state of the EU, a state party to the CEEA or by the EU,
or if one of these bodies guarantees the payment of interest or the repayment of
principal. For purchases, the above limit need not be complied with if the total
value of the outstanding bonds of the same issuer cannot be determined;

(iii) purchase non-voting shares of the same issuer to the extent that the total
value exceeds 10% of the total value of non-voting shares of the issuer; and

(iv) borrow money, except in amounts not to exceed 10% of the Fund's total
assets (including the amount borrowed).

The European Bond Fund is subject to an additional non-fundamental
investment restriction: no more than 10% of the value of its total assets will
be invested in equity securities (including warrants).

ALL FUNDS. There will be no violation of any investment restriction if
that restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.

For purposes of fundamental investment restrictions regarding industry
concentration, the Adviser may classify issuers by industry in accordance with
classifications used by Datastream, a provider of financial information
databases and related services, or other sources. In the absence of such
classification or if the Adviser determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Adviser may classify an issuer accordingly. For instance, personal credit
finance companies and business credit finance companies are deemed to be
separate industries and wholly owned finance companies are considered to be in
the industry of their parents if their activities are primarily related to
financing the activities of their parents. The Adviser expects that the European
Bond Portfolio and Global Bond Portfolio each will remain concentrated in the
securities of foreign government and their agencies and instrumentalities.

DIRECTORS, TRUSTEES AND OFFICERS

The Directors of the Corporation, Trustees of the Portfolio

DEUT001P
17

<PAGE>

Trust and executive officers of the Corporation , and principal occupations
during the past five years (although their titles may have varied during the
period) and business addresses are:

DIRECTORS OF THE CORPORATION AND TRUSTEES OF THE PORTFOLIO TRUST

Edward C. Schmults - Member of the Board of Directors of Green Point Financial
Corp. Chairman of the Board of Trustees of The Edna McConnell Clark Foundation.
Director of The Germany Fund, Inc. and The Central European Equity Fund, Inc.
Senior Vice President-External Affairs and General Counsel of GTE

Corporation (prior to 1994).

Robert H. Wadsworth - President of The Wadsworth Group, First Fund Distributors,
Inc. and Guinness Flight Investment Funds, Inc. Director of The Germany Fund,
Inc., The New Germany Fund, Inc. and The Central European Equity Fund, Inc. Vice
President of Professionally Managed Portfolios and Advisors Series Trust.

Werner Walbroel - President and Chief Executive of the German American Chamber
of Commerce, Inc. Member of the United States German Youth Exchange Council.
Director of TUV Rheinland of North America, Inc. President and Director of
German American Partnership Program. Director of The Germany Fund, Inc., DB New
World Fund, Limited and LDC, and The Central European Equity Fund, Inc.

G. Richard Stamberger* **- Managing Director of Deutsche Morgan Grenfell Inc.
President, Deutsche Asset Management North America Inc. Director of The Germany
Fund, Inc. and The Central European Equity Fund, Inc. Managing Director of C.J.
Lawrence, Inc. (prior to 1993).

Christian Strenger* ** - Managing Director of DWS Deutsche Gesellschaft fuer
Wertpapiersparen mbH (since 1991). Director of The Germany Fund, Inc., The New
Germany Fund, Inc. and The Central European Equity Fund, Inc. Managing Director
of Deutsche Bank Securities Corp. (prior to 1991).

OFFICERS OF THE CORPORATION

Brian A. Lee* - President. President and Managing Director of DFM (since January
1997). Director of Deutsche Bank Trust Company (since 1994). President and Chief
Operating Officer of Deutsche Bank Trust Company (1994 -1997). Director of
Deutsche Bank Securities Corp. (1993-1994). Director of Value Line Securities,
Inc. (1992-1993). National Director and Head of Retail Sales and Service
Division, The Dreyfus Corporation (prior to 1992).

Joseph Cheung* - Treasurer. Vice President (since 1996), Assistant Vice
President (1994-1996) and Associate (1991-1994) of Deutsche Morgan Grenfell Inc.
Treasurer of the CountryBaskets Index Fund, Inc. (1996-1997). Assistant
Secretary

DEUT001P
18

<PAGE>

and Assistant Treasurer of The Germany Fund, Inc., The Central European Equity
Fund, Inc. and the New Germany Fund, Inc. (since 1993).

Robert R. Gambee* - Secretary. Director of Deutsche Morgan Grenfell, Inc. (since
1992). First Vice President of Deutsche Morgan Grenfell, Inc. (1987 -1991).

Laura Weber* - Assistant Secretary and Assistant Treasurer. Associate of
Deutsche Morgan Grenfell Inc. (since June, 1997). Manager of Raymond James
Financial (1996-1997). Portfolio Accountant of Oppenheimer Capital (1995-1996).
Supervisor (1994-1995) and Mutual Fund Accountant (1993-1994) of Alliance
Capital Management.

* is an "interested person" of the Corporation or the Portfolio Trust as that
term is defined in the 1940 Act.

** Mr. Lee, Mr. Strenger and Mr. Stamberger own less than 1% of the shares of
Deutsche Bank AG, of which the Manager and Adviser are indirect subsidiaries.

The address of each officer of the Corporation is 31 West 52nd Street,
New York, NY 10019.

The Portfolio Trust does not have officers, but instead acts
exclusively through its Trustees and agent of the Portfolio Trust authorized by
the Trustees.

DEUT001P
19

<PAGE>

COMPENSATION TABLE
DIRECTORS OF THE CORPORATION

PENSION OR
RETIREMENT ESTIMATED TOTAL
AGGREGAGE BENEFITS ACCRUED ESTIMATED ANNUAL COMPENSATION FROM
COMPENSATION FROM AS PART OF FUND BENEFITS UPON THE CORPORATION
THE CORPORATION EXPENSES RETIREMENT AND FUND COMPLEX*

Edward C. Schmults, $7,000 None None $44,750
Director

Robert H. Wadsworth,
Director $7,000 None None $62,000

Werner Walbroel, $7,000 None None $46,250
Director

G. Richard Stamberger*,
Director None None None None

Christian Strenger, None None None None
Director
================================================================================================================================
</TABLE>

COMPENSATION TABLE
TRUSTEES OF THE PORTFOLIO TRUST

Edward C. Schmults, $7,000 None None $44,750
Trustee

Robert H. Wadsworth, $7,000 None None $62,000
Trustee

Werner Walbroel, $7,000 None None $46,250
Trustee

G. Richard None None None None
Stamberger*,
Trustee

Christian Strenger, None None None None
Trustee
================================================================================================================================
</TABLE>

* The Fund Complex consists of the Corporation, the Trust, The New Germany Fund,
Inc., The Central European Equity Fund, Inc. and The Germany Fund, Inc.

<PAGE>

The non-interested Directors of the Corporation receive a base annual
fee of $5,000 and $500 per meeting attended plus expenses which is paid jointly
by all series of the Corporation and allocated among the series based upon their
respective net assets.

The non-interested Trustees of the Portfolio Trust receive a base
annual fee of $5,000 and $500 per meeting attended plus expenses which is paid
jointly by all series of the Portfolio Trust and allocated among the series
based upon their respective net assets.

Neither the Corporation nor the Portfolio Trust requires employees and
none of the Corporation's officers devote full time to the affairs of the
Corporation or receive any compensation from a Fund or a Portfolio.

DEUT001P
21

<PAGE>

FUND OWNERSHIP. On the date of this Statement of Additional Information, the
Directors of the Corporation, Trustees of the Portfolio Trust and officers of
the Corporation as a group beneficially owned no outstanding shares of the
Corporation and none of the beneficial interests in any Portfolio. As of the
same date, no person owned 5% or more of the outstanding voting stock of a Fund
or a Portfolio except the Corporation owned 100% of the outstanding beneficial
interests in each Portfolio and Edgewood Services, Inc. owned 100% of the
outstanding voting shares of each Fund.

MANAGER

The investment manager to each Portfolio is DFM, an indirect subsidiary
of Deutsche Bank AG, a major global banking institution headquartered in
Germany. DFM, with principal offices at 31 West 52nd Street, New York, New York
10019, is a Delaware corporation and registered investment adviser under the
Investment Advisers Act of 1940.

Pursuant to an investment management agreement with the Portfolio Trust
with respect to each Portfolio (the "Management Agreement"), DFM acts as
investment manager to each Portfolio and, subject to the supervision of the
Board of Trustees of the Portfolio Trust, is responsible for, but may and has
delegated as described below, under "Adviser," the management of the investment
operations of each Portfolio's investments in accordance with its investment
objective, policies and restrictions. DFM also provides each Portfolio with
overall supervisory services over the other service providers and certain other
services. The investment management services DFM provides to each Portfolio are
not exclusive under the terms of the Management Agreement.

DFM is free to render similar investment management services to others.

The Management Agreement is dated July 28, 1997 and will remain in
effect until July 28, 1999 and from year to year thereafter, but only so long as
the agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the related Portfolio, or by the Portfolio Trust's Trustees, and
(ii) by a vote of a majority of the Trustees of the Portfolio Trust who are not
parties to such Management Agreement or "interested persons" (as defined in the
1940 Act) of the Portfolio Trust, cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement was approved at a
meeting held on July 28, 1997. The Management Agreement will terminate
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Portfolio Trust's Trustees, or by a vote of the
holders of a majority of the related Portfolio's outstanding voting securities,
on 60 days'

DEUT001P
22

<PAGE>

written notice to the Manager and by the Manager on 90 days' written notice to
the Portfolio Trust. The Management Agreement provides that neither DFM nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss or expense in connection with the matters in which the agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its obligations and duties under the
agreement. See "Additional Information."

As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Portfolio Trust with respect to each
Portfolio, DFM receives a fee from each of Top 50 World, Top 50 Europe and Top
50 Asia Portfolio, each Equity Portfolio (except the foregoing three Top 50
Portfolios) and each Bond Portfolio, which is computed daily and may be paid
monthly, equal to 1.00%, 0.85% and 0.75%, respectively, of the average daily net
assets of such Portfolio on an annualized basis for the Portfolio's then-current
fiscal year.

The Glass-Steagall Act and other applicable laws generally prohibit
banks (including foreign banks having U.S. operations, such as Deutsche Bank AG)
from engaging in the business of underwriting or distributing securities in the
United States, and the Board of Governors of the Federal Reserve System has
issued an interpretation to the effect that under these laws a bank holding
company registered under the Federal Bank Holding Company Act (or a foreign bank
subject to such Act's provisions) or certain subsidiaries thereof may not
sponsor, organize, or control a registered open-end investment company
continuously engaged in the issuance of its shares, such as the Corporation. The
interpretation does not prohibit a holding company (or such a foreign bank) or a
subsidiary thereof from acting as investment manager and custodian to such an
investment company. Deutsche Bank AG believes that DFM may perform the services
for the Portfolio Trust and the Corporation contemplated by the Management
Agreement without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. It is possible that future changes in federal
statutes and regulations concerning the permissible activities of banks or trust
companies, as well as further judicial or administrative decisions and
interpretations of present and future statutes and

DEUT001P
23

<PAGE>

regulations, might prevent DFM from continuing to perform such services for each
Portfolio.

ADVISER

DFM has entered into an investment advisory agreement (the "Advisory
Agreement") dated July 28, 1997 on behalf of the Portfolio Trust with respect to
each Portfolio except Top 50 US Portfolio with DWS International Portfolio
Management GmbH and with respect to Top 50 US Portfolio with Deutsche Asset
Management North America Inc. ("DAMNA"). It is the Adviser's responsibility,
under the overall supervision of DFM, to conduct the day-to-day investment
decisions of its respective Portfolio(s), arrange for the execution of portfolio
transactions and generally manage each Portfolio's investments in accordance
with its investment objective, policies and restrictions.

The DWS Adviser and DAMNA Adviser are each an indirect subsidiary of
Deutsche Bank AG. For these services, the respective Adviser receives from DFM a
fee, which is computed daily and may be paid monthly, equal to 0.75%, 0.60% and
0.50% of the average daily net assets of each of Top 50 World, Top 50 Europe and
Top 50 Asia Portfolio, each Equity Portfolio (except the foregoing Top 50
Portfolios) and each Bond Portfolio, respectively, on an annualized basis for
the Portfolio's then-current fiscal year.

The Advisory Agreement is dated July 28, 1997 and will remain in effect
until July 28, 1999 and from year to year thereafter, but only so long as the
agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the related Portfolio, or by the Portfolio Trust's Trustees, and
(ii) by a vote of a majority of the Trustees of the Portfolio Trust who are not
parties to such Advisory Agreement or "interested persons" (as defined in the
1940 Act) of the Portfolio Trust, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement was approved at a
meeting held on July 28, 1997. The Advisory Agreement will terminate
automatically if assigned or if its corresponding Management Agreement is
terminated and is terminable at any time without penalty by a vote of a majority
of the Portfolio Trust's Trustees, or by a vote of the holders of a majority of
the related Portfolio's outstanding voting securities, on 60 days' written
notice to the relevant Adviser and by each Adviser on 90 days' written notice to
the Manager and the Portfolio Trust. The Advisory Agreement provides that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss or

DEUT001P
24

<PAGE>

expense in connection with the matters in which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its obligations and duties under the agreement. See
"Additional Information."

ADMINISTRATOR

Under the master agreement for administration services with the
Corporation ("Administration Agreement"), Federated Services Company serves as
administrator to the Funds ("Administrator"). In connection with its
responsibilities as Administrator of the Funds , Federated Services Company,
among other things (i) prepares, files and maintains the Funds' governing
documents , registration statements and regulatory filings; (ii) prepares and
coordinates the printing of publicly disseminated documents ; (iii) monitors
declaration and payment of dividends and distributions; (iv) projects and
reviews the Funds' expenses; (v) performs internal audit examinations; (vi)
prepares and distributes materials to the Directors of the Corporation, (vii)
coordinates the activities of all service providers; (viii) monitors and
supervises collection of tax reclaims; and (ix) prepares shareholder meeting
materials.

The Administration Agreement between the Corporation and Federated
Services Company (dated July 28, 1997) with respect to each Fund has an initial
term of three years. Thereafter, the Administration Agreement will remain in
effect until terminated by either party thereto. The agreement is terminable by
the Corporation at any time after the initial term without penalty by a vote of
a majority of the Directors of the Corporation , or by a vote of the holders of
a "majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Corporation (see "Additional Information"). The Administration Agreement
is terminable by the Directors of the Corporation or shareholders of the Fund on
60 days' written notice to Federated Services Company. The

DEUT001P
25

<PAGE>

agreement is terminable by the Administrator on 90 days' written notice to the
Corporation . The Administration Agreement provides that neither Federated
Services Company nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in its services, except for wilful misfeasance, bad faith or gross
negligence or reckless disregard of its obligations and duties under the
Agreement. See "Additional Information."

DEUT001P
26

<PAGE>

As Administrator of the Funds, Federated Services Company receives a fee from
each Fund, which is computed daily and may be paid monthly, at the annual rate
of 0.065% of the average daily net assets of each Fund up to $200 million and
0.0525% of the average daily net assets of each Fund greater than $200 million
for the Fund's then-current fiscal year. The Administrator of the Funds will
receive a minimum fee of $75,000 per Fund annually.

OPERATIONS AGENT

Under an operations agency agreement with the Portfolio Trust
("Operations Agent Agreement"), Federated Services Company serves as operations
agent to the Portfolios ("Operations Agent"). In connection with its
responsibilities as Operations Agent of the Portfolios, Federated Services
Company, among other things, (i) prepares governing documents, registration
statements and regulatory filings; (ii) prepares internal audit examinations
(iii) prepare expense projections; (iv) prepares materials to the Trustees of
the Portfolio Trust, (v) coordinates the activities of all service providers;
(vi) conducts compliance training for the Adviser; (vii) prepares investor
meeting materials and (viii) monitors and supervises collection of tax reclaims.

The Operations Agent Agreement between the Portfolio Trust and
Federated Services Company (dated July 28, 1997) with respect to each Portfolio
has a minimum term of three years. Thereafter, the Operations Agent Agreement
will remain in effect until terminated by either party thereto. The agreement is
terminable by the Portfolio Trust at any time after the initial term without
penalty by a vote of a majority of the Trustees of the Portfolio Trust, or by a
vote of the holders of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio Trust (see "Additional Information").
The Operations Agent Agreement is terminable by the Trustees of the Portfolio
Trust or investors of the Portfolio on 60 days' written notice to Federated
Services Company. The agreement is terminable by Federated Services Company on
90 days'

DEUT001P
27

<PAGE>

written notice to the Portfolio. The Operations Agent Agreement provides that
neither Federated Services Company nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services, except for wilful
misfeasance, bad faith or gross negligence or reckless disregard of its
obligations and duties under the Agreement.

As Operations Agent of the Portfolios, Federated Services Company
receives a fee from each Portfolio, which is computed daily and paid monthly, at
the annual rate of 0.035% of the average daily net assets of each Portfolio for
the Portfolio's then-current fiscal year. The Operations Agent of the Portfolios
will receive a minimum fee of $60,000 per Portfolio annually and a minimum
aggregate fee for each Portfolio, corresponding Fund and any other fund
investing in the Portfolio, taken together, of $75,000 for the first year of the
Portfolio's operation and $125,000 for the second year, in each case payable to
the Operations Agent.

ADMINISTRATIVE AGENT

Under an administration agreement with the Portfolio Trust
("Administrative Agent Agreement"), IBT Trust Company (Cayman) Ltd. ("IBT
(Cayman)") serves as administrative agent to the Portfolios ("Administrative
Agent"). In connection with its responsibilities as Administrative Agent of the
Portfolios, IBT (Cayman) (i) files and maintains governing documents,
registration statements and regulatory filings; (ii) maintains a telephone line;
(iii) approves annual expense budget; (iv) authorizes expenses; (v) distributes
materials to the Trustees of the Portfolio Trust; (vi) authorizes dividend
distributions; (vii) maintains books and records; (viii) filing tax returns and
(ix) maintains an investor register.

The Administration Agreement between the Portfolio Trust and IBT
(Cayman) (dated July 28, 1997) with respect to each Portfolio has a minimum term
of three years. Thereafter, the Administration Agreement will remain in effect
until terminated by either party thereto. The agreement is terminable by the
Portfolio Trust at any time after the initial term without penalty by a vote of
a majority of the Trustees of the Portfolio Trust, or by a vote of the holders
of a "majority of the outstanding voting securities" (as defined in the 1940
Act) of the Portfolio Trust (see "Additional Information"). The Administrative
Agent Agreement is terminable by the Trustees of the Portfolio Trust or
investors of the Portfolio on 60 days' written notice to IBT (Cayman). The
agreement is terminable by IBT (Cayman) on 90 days' written notice to the
Portfolio. The Administrative Agent Agreement provides that neither IBT (Cayman)
nor its personnel shall be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in its
services, except for wilful

DEUT001P
28

<PAGE>

misfeasance, bad faith or gross negligence or reckless disregard of its
obligations and duties under the Agreement.

As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee
from each Portfolio, which is computed daily and may be paid monthly, at the
annual rate of 0.025% of the average daily net assets of each Portfolio up to
$200 million, 0.02% of the average daily net assets of each Portfolio greater
than $200 million and less than $800 million, and 0.01% of the average daily net
assets of each Portfolio greater than $1 billion for the Portfolio's
then-current fiscal year. The Administrative Agent will receive a minimum fee of
$40,000 per Portfolio for the first full year of operation, $45,000 for the
second year of operation, and $50,000 for the third year of operation.

DISTRIBUTOR

The distribution agreement (the "Distribution Agreement")(dated July
28, 1997) between the Corporation and Edgewood Services, Inc. (the
"Distributor") remains in effect indefinitely, but only so long as such
agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the related Fund, or by the Corporation's Directors, and (ii) by a
vote of a majority of the Directors of the Corporation who are not parties to
such Distribution Agreement or "interested persons" (as defined in the 1940 Act)
of the Corporation, cast in person at a meeting called for the purpose of voting
on such approval. The Distribution Agreement terminates automatically if
assigned by either party thereto and is terminable with respect to each Fund at
any time without penalty by a vote of a majority of the Directors of the
Corporation or by a vote of the holders of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Fund (see "Additional
Information"). The Distribution Agreement is terminable with respect to each
Fund by the Corporation's Directors or shareholders of a Fund on 60 days'
written notice to Edgewood. The Agreement is terminable by the Distributor on 90
days' written notice to the Corporation.

The Distributor is not obligated to sell any specific number of shares.
Under a plan adopted in accordance with Rule 12b-1 of the 1940 Act on July 28,
1997, Class B Shares are subject to a distribution plan (the "Distribution
Plan") and Class A Shares and Class B Shares are subject to a service plan (the
"Service Plan").

DEUT001P
29

<PAGE>

of the Fund subject to the Distribution Plan. A report of the amounts expended
pursuant to the Distribution Plan, and the purposes for which such expenditures
were incurred, must be made to the Directors of the Corporation for review at
least quarterly.

The Distribution Plan provides that it may not be amended to increase
materially the costs which a Fund may bear pursuant to the Distribution Plan
without shareholder approval and that other material amendments of the
Distribution Plan must be approved by the Directors of the Corporation, and by
the Directors who have no direct or indirect financial interest in the operation
of the Distribution Plan or any related agreement and are not "interested
persons" (as defined in the 1940 Act) of the Corporation ("Qualifying
Directors"), by vote cast in person at a meeting called for the purpose of
considering such amendments. While the Distribution Plan is in effect, the
selection and nomination of the Directors of the Corporation has been committed
to the discretion of the Qualifying Directors. The Distribution Plan has been
approved, and is subject to annual approval, by the Directors of the Corporation
and the Qualifying Directors, by vote cast in person at a meeting called for the
purpose of voting on the Distribution Plan. The Qualifying Directors voted to
approve the Distribution Plan at a meeting held on July 28, 1997. The
Distribution Plan is terminable with respect to the Class B Shares of a Fund at
any time by a vote of a majority of the Qualifying Directors or by vote of the
holders of a majority of the Class B Shares of that Fund.

TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT

Federated Shareholder Services Company, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779, serves as the transfer agent and dividend
disbursing agent for each Fund. As Transfer Agent and Dividend Disbursing Agent,
Federated Shareholder Services Company is responsible for maintaining account
records detailing the ownership of Fund shares and for crediting income, capital
gains and other changes in share ownership to shareholder accounts. Investors
Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116 acts as the
custodian of each Fund's and each Portfolio's assets. Pursuant to the Custodian
Contract with the Portfolio Trust, IBT is responsible for maintaining the books
and records of portfolio transactions and holding portfolio securities and cash.
In the case of foreign assets held outside the United States, IBT employs
various subcustodians who were approved in accordance with the regulations of
the SEC. The Custodian maintains portfolio transaction records. IBT Fund
Services (Canada) Inc., One First Canadian Place, King Street West, Suite 2800,
P.O. Box 231, Toronto, Ontario M5X1C8, provides fund accounting services to the
Funds and the Portfolios including (i) calculation of the daily net asset value
for the Funds and the Portfolios; (ii) monitoring compliance with investment
portfolio restrictions, including all applicable federal and state

DEUT001P
30

<PAGE>

securities and other regulatory requirements; and (iii) monitoring each Fund's
and Portfolio's compliance with the requirements applicable to a regulated
investment company under the Code.

INDEPENDENT ACCOUNTANTS

The independent accountants of the Corporation are Price Waterhouse
LLP, 1177 Avenue of the Americas, New York, NY 10036. The independent
accountants of the Portfolio Trust are Price Waterhouse, [ADDRESS], George Town,
Grand Cayman. The independent accountants conduct annual audits of financial
statements, assist in the preparation and/or review of federal and state income
tax returns and provide consulting as to matters of accounting and federal and
state income taxation for each Fund or Portfolio, as the case may be.

PURCHASE OF SHARES

Except under certain circumstances described in a Fund's Prospectus,
Shares are sold at their net asset value (plus a sales charge on Class A Shares
only) on days the New York Stock Exchange is open for business. The procedure
for purchasing Shares is explained in each Prospectus under "Purchase of
Shares."

CONVERSION TO FEDERAL FUNDS. It is each Fund's policy to be as fully invested as
possible so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Federated Shareholder Services Company
acts as the shareholder's agent in depositing checks and converting them to
federal funds.

REDEMPTION OF SHARES

Each Fund redeems Shares at the next computed net asset value, less any
applicable contingent deferred sales charge, after a Fund receives the
redemption request. Redemption procedures are explained in each Fund's
Prospectus under "Redemption of Shares." Although the transfer agent does not
charge for telephone redemptions, it reserves the right to charge a fee for the
cost of wire-transferred redemptions of less than $5,000.

Class B Shares redeemed within six years of purchase and applicable
Class A Shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge. The amount of the contingent deferred sales
charge is based upon the amount of the administrative fee paid at the time of
purchase by the Distributor to the financial institution for services rendered,
and the length of time the investor remains a shareholder in a Fund. Should
Financial Intermediaries elect to receive an amount less than the fee that is
stated in a Fund's Prospectus for servicing a particular shareholder, the
contingent deferred sales

DEUT001P
31

<PAGE>

charge and/or holding period for that particular shareholder will be reduced
accordingly.

Since portfolio securities of each Portfolio may be traded on foreign
exchanges which trade on Saturdays or on holidays on which a Fund will not make
redemptions, the net asset value of each class of Shares of a Fund may be
significantly affected on days when shareholders do not have an opportunity to
redeem their Shares.

REDEMPTION IN KIND. Although the Corporation intends to redeem Shares in cash,
it reserves the right under certain circumstances to pay the redemption price in
whole or in part by a distribution of securities from the respective Fund's
portfolio. In such a case, the

portfolio instruments to be distributed as redemption proceeds would be, valued
in the same way as the Portfolio determines net asset value. The portfolio
instruments will be selected in a manner that the Directors of the Corporation
and Trustees of the Portfolio deem fair and equitable. To the extent available,
such securities will be readily marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their securities
and could incur certain transaction costs.

ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE. The Systematic Withdrawal
Program permits the shareholder to request withdrawal of a specified dollar
amount (minimum $100) on either a monthly or quarterly basis from accounts with
$10,000 minimum at the time the shareholder elects to participate in the
Systematic Withdrawal Program. The amounts that a shareholder may withdraw under
a Systematic Withdrawal Program that qualify for elimination of the contingent
deferred sales charge may not exceed 12% annually with reference initially to
the value of the Class B Shares upon establishment of the Systematic Withdrawal
Program and then as calculated at the fiscal year end. Amounts that exceed the
12% annual limit for redemption, as described, will be subject to the contingent
deferred sales charge. In determining the applicability of the contingent
deferred sales charge, the 12 month holding requirement for any new Class B
Shares received through an exchange will include the period for which the
exchanged Class B Shares were held. However, for purposes of meeting the $10,000
minimum account value requirement, Class B Share account values will not be
aggregated.

DEUT001P
32

<PAGE>

EXCHANGE OF SHARES

An investor may exchange shares from any series of the Deutsche Family
of Funds (a "Deutsche Fund") into any other Deutsche Fund, as described under
"Exchange of Shares" in each Fund's Prospectus. For complete information, the
prospectus as it relates to each Fund into which a transfer is being made should
be read prior to the transfer. Requests for exchange are made in the same manner
as requests for redemptions. See "Redemption of Shares." Shares of a Fund to be
acquired are purchased for settlement when the proceeds from redemption become
available. The Corporation reserves the right to discontinue, alter or limit the
exchange privilege at any time.

NET ASSET VALUE

Each Fund computes its net asset value once daily on Monday through
Friday as described under "Net Asset Value" in the Prospectus. The net asset
value will not be computed on the day the following legal holidays are observed:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. On days when U.S. trading
markets close early in observance of these holidays, each Fund and its
corresponding Portfolio would expect to close for purchases and redemptions at
the same time. The days on which net asset value is determined are the Fund's
business days.

The net asset value of a Fund is equal to the value of such Fund's
investment in its corresponding Portfolio (which is equal to that Fund's pro
rata share of the total investment of the Fund and of any other investors in the
Portfolio less the Fund's pro rata share of the Portfolio's liabilities) less
the Fund's liabilities.

FIXED INCOME SECURITIES. The fixed income portion of the Portfolios and
portfolio securities with a maturity of 60 days or more, including securities
that are listed on an exchange or traded over the counter, are valued using
prices supplied daily by an independent pricing service or services that (i) are
based on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid and
asked prices on such exchange or at the average of readily available closing bid
and asked prices in the over-the-counter market, if such exchange or market
constitutes the broadest and most representative market for the security and
(ii) in other cases, take into account various factors affecting market value,
including yields and prices of comparable securities, indication as to value
from dealers and general market conditions. If such prices are not supplied by a
Portfolio's independent pricing service, such securities are priced in
accordance with procedures adopted by the Trustees of the Portfolio Trust. All
portfolio securities with a remaining maturity of less than 60 days are valued
by the amortized cost method.

DEUT001P
33

<PAGE>

OTHER SECURITIES. The value of investments listed on a U.S. securities exchange,
other than options on stock indexes, is based on the last sale prices on the New
York Stock Exchange at 4:00 P.M. or, in the absence of recorded sales, at the
average of readily available closing bid and asked prices on such exchange.
Securities listed on a foreign exchange considered by the Adviser to be a
primary market for the securities are valued at the last quoted sale price
available before the time when net assets are valued. Unlisted securities, and
securities for which the Adviser determines the listing exchange is not a
primary market, are valued at the average of the quoted bid and asked prices in
the over-the-counter market. The value of each security for which readily
available market quotations exist is based on a decision as to the broadest and
most representative market for such security. For purposes of calculating net
asset value, all assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars at the prevailing market rates
available at the time of valuation.

Options on stock indexes traded on U.S. national securities exchanges
are valued at the close of options trading on such exchanges which is currently
4:10 P.M., New York time. Stock index futures and related options, which are
traded on U.S. futures exchanges, are valued at their last sales price as of the
close of such futures exchanges which is currently 4:15 P.M., New York time.
Options, futures contracts and warrants traded on a foreign stock exchange or on
a foreign futures exchange are valued at the last price available before the
time when the net assets are valued. Securities or other assets for which market
quotations are not readily available (including certain restricted and illiquid
securities) are valued at fair value in accordance with procedures established
by and under the general supervision and responsibility of the Trustees of the
Portfolio Trust. Such procedures include the use of independent pricing services
that use prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days on which the New York Stock Exchange is closed.
If events materially affecting the value of securities occur between the time
when the exchange on which they are traded closes and the time when a
Portfolio's net asset value is calculated, such securities will be valued at
fair value in accordance with procedures established by and under the general
supervision of the Trustees.

DEUT001P
34

<PAGE>

PERFORMANCE DATA

From time to time, a Fund may quote performance in reports, sales
literature and advertisements published by the Corporation.

Current performance information for a Fund may be obtained by calling the
number provided on the cover page of this Statement of Additional Information.
See also "Management of the Corporation and the Portfolio Trust - Performance
Information" in the Prospectus.

TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized total return of a Fund for a period is computed by assuming a
hypothetical initial payment of $1,000. It is then assumed that all of the
dividends and distributions by a Fund over the period are reinvested. It is then
assumed that at the end of the period, the entire amount is redeemed. The
annualized total return is then calculated by determining the annual rate
required for the initial payment to grow to the amount which would have been
received upon redemption.

Average annual total return for each class of Shares of the Funds is
the average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of Shares owned at
the end of the period by the net asset value per share at the end of the period.
The number of Shares owned at the end of the period is based on the number of
Shares purchased at the beginning of the period with $1,000, less any applicable
sales charge, adjusted over the period by any additional Shares, assuming the
annual reinvestment of all dividends and distributions.

Any applicable contingent deferred sales charge is deducted from the
ending value of the investment based on the lesser of the original purchase
price or the net asset value of Shares redeemed.

Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.

YIELD. The yield for each class of Shares of the Funds is determined by
dividing the net investment income per share (as defined by the SEC) earned by
any class of Shares over a 30-day period by the maximum offering price per share
of the respective class on the last day of the period. This value is annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by a Fund because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to the shareholders.

To the extent that Financial Intermediaries and broker-dealers charge
fees in connection with services provided

DEUT001P
35

<PAGE>

in conjunction with an investment in any class of Shares, the performance will
be reduced for those shareholders paying those fees.

GENERAL. The performance of each of the classes of Shares will vary
from time to time depending upon market conditions, the composition of a
Portfolio, and its operating expenses. Consequently, any given performance
quotation should not be considered representative of a Fund's performance for
any specified period in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in a Fund with
certain bank deposits or other investments that pay a fixed yield or return for
a stated period of time.

Comparative performance information may be used from time to time in
advertising a Fund's shares, including appropriate market indices or data from
Lipper Analytical Services, Inc., Micropal, Inc., Ibbotson Associates,
Morningstar Inc., the Dow Jones Industrial Average and other industry
publications.

INFORMATION AND COMPARISONS RELATING TO THE FUNDS, SECONDARY MARKET
TRADING, NET ASSET SIZE, PERFORMANCE AND TAX TREATMENT. Information regarding
various aspects of each Fund, including the net asset size thereof, as well as
the performance and the tax treatment of Fund shares, may be included from time
to time in advertisements, sales literature and other communications as well as
in reports to current or prospective investors.

Information may be provided to prospective investors to help such
investors assess their specific investment goals and to aid in their
understanding of various financial strategies. Such information may present
current economic and political trends and conditions and may describe general
principles of investing such as asset allocation, diversification and risk
tolerance, as well as specific investment techniques.

Information regarding the net asset size of a Fund may be stated in
communications to prospective or current investors for one or more time periods,
including annual, year-to-date or daily periods. Such information may also be
expressed in terms of the total number of Fund Shares outstanding as of one or
more time periods. Factors integral to the size of a Fund's net assets, such as
the volume and activity of purchases and redemptions of Fund Shares, may also be
discussed, and may be specified from time to time or with respect to various
periods of time. Comparisons of such information during various periods may also
be made and may be expressed by means of percentages.

Information may be provided to investors regarding capital gains
distributions by the Funds, including historical information relating to such
distributions. Comparisons between the Funds and other investment vehicles such
as mutual funds may be made regarding such capital gains distributions,
including the

DEUT001P
36

<PAGE>

expected effects of differing levels of portfolio adjustments on such
distributions and the potential tax consequences thereof.

Information may also be provided in communications to prospective or
current investors comparing and contrasting the relative advantages of investing
in Fund Shares as compared to other investment vehicles, such as mutual funds,
both on an individual and a group basis (E.G., stock index mutual funds). Such
information may include comparisons of costs, expense ratios, expressed either
in dollars or basis points, stock lending activities, permitted investments and
hedging activities (E.G., engaging in options or futures transactions), price
volatility and portfolio turnover data and analyses. In addition, such
information may quote, reprint or include portions of financial, scholarly or
business publications or periodicals, including model allocation schedules or
portfolios as the foregoing relate to the comparison of Fund Shares to other
investment vehicles, current economic financial and political conditions,
investment philosophy or techniques or the desirability of owning Fund Shares.
Such information may be provided both before and after deduction of sales
charges.

Information on the performance of a Fund on the basis of changes in net
asset value per fund share, with or without reinvesting all dividends and/or any
distributions of capital in additional Fund Shares, may be included from time to
time in a Fund's performance reporting. The performance of a Fund may also be
compared to the performance of money managers as reported in market surveys such
as SEI Fund Evaluation Survey (a leading data base of tax-exempt fund) or mutual
funds such as those reported by Lipper Analytical Services, Morningstar,
Micropal, Money Magazine's Fund Watch or Wiesenberger Investment Companies
Service, each of which measures performance following their own specific and
well-defined calculation measures, or of the NYSE Composite Index, the American
Stock Exchange Index (indices of stocks traded on the New York and American
Stock Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks), any widely recognized foreign stock and
bond index or similar measurement standards during the same period of time.

Information relating to the relative net asset value performance of
Fund Shares may be compared against a wide variety of investment categories and
asset classes, including common stocks, small capitalization stocks, ADRs, long
and intermediate term corporate and government bonds, Treasury bills, futures
contracts, the rate of inflation in the United States (based on the Consumer
Price Index ("CPI") or other recognized indices) and other capital markets and
combinations thereof. Historical returns of the capital markets relating to a
Fund may be provided by independent statistical studies and sources, such as
those provided to Ibbotson Associates. The performance of these capital markets
is based on the returns of different indices. Information may be presented using
the performance of these and

DEUT001P
37

<PAGE>

other capital markets to demonstrate general investment strategies. So, for
example, performance of Fund Shares may be compared to the performance of
selected asset classes such as short-term U.S. Treasury bills, long-term U.S.
Treasury bonds, long-term corporate bonds, mid-capitalization stocks, small
capitalization stocks and various classes of foreign stocks and may also be
measured against the rate of inflation as set forth in well-known indices (such
as the CPI). Performance comparisons may also include the value of a
hypothetical investment in any of these capital markets. Performance of Fund
Shares may also be compared to that of other indices or compilations that may be
developed and made available to the investing public in the future. Of course,
such comparisons will only reflect past performance of Fund Shares and the
investment categories, indices or compilations chosen and no guarantees can be
made of future results regarding the performance of either Fund Shares or the
asset classes chosen for such comparisons.

Comparative performance information may be used from time to
time in advertising each Fund's shares. The performance of the

o European Mid-Cap Fund may be compared to []
o German Equity Fund may be compared to []
o Japanese Equity Fund may be compared to []
o Global Bond Fund may be compared to []
o European Bond Fund may be compared to []
o Top 50 World may be compared to []
o Top 50 Europe may be compared to []
o Top 50 Asia may be compared to []
o Top 50 US may be compared to []

Each index is an unmanaged index of common security prices, converted
into U.S. dollars where appropriate. Any index selected by a Fund for
information purposes may not compute total return in the same manner as the
Funds and may exclude, for example, dividends paid, brokerage and other fees.

Information comparing the portfolio holdings relating to a particular
Fund, with those of relevant stock indices or other investment vehicles, such as
mutual funds or futures contracts, may be advertised or reported by the Fund.
Equity analytic measures, such as price/earnings ratio, price/book value and
price/cash flow and market capitalizations, may be calculated for the portfolio
holdings and may be reported on an historical basis or on the basis of
independent forecasts.

Information may be provided by a Fund on the total return for various
composites of the different Funds. These composite returns might be compared to
other securities or indices utilizing any of the comparative measures that might
be used for the individual Fund, including correlations, standard deviation, and
tracking error analysis.

Past results may not be indicative of future performance.

DEUT001P
38

<PAGE>

The investment return and net asset value of shares of each Fund will fluctuate
so that the shares, when redeemed, may be worth more or less than their original
cost.

PORTFOLIO TRANSACTIONS

The Portfolio Trust trades securities for a Portfolio if it believes that a
transaction net of costs (including custodian charges) will help achieve the
Portfolio's investment objective. Changes in a Portfolio's investments are made
without regard to the length of time a security has been held, or whether a sale
would result in the recognition of a profit or loss. Therefore, the rate of
turnover is not a limiting factor when changes are appropriate. Specific
decisions to purchase or sell securities for a Portfolio are made by its
portfolio manager who is an employee of the Adviser. The portfolio manager may
serve other clients of the Adviser in a similar capacity.

The primary consideration in placing portfolio securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolios and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser on the tender of a
Portfolio's securities in so-called tender or exchange offers.

In connection with the selection of such brokers or dealers and the placing
of such orders, the Adviser seeks for each Portfolio in its best judgment,
prompt execution in an effective manner at the most favorable price. Subject to
this requirement of seeking the most favorable price, securities may be bought
from or sold to broker-dealers who have furnished statistical, research and
other information or services to the Adviser or the Portfolio, subject to any
applicable laws, rules and regulations.

The investment advisory fee that each Portfolio pays to the Adviser will
not be reduced as a consequence of the Adviser's receipt of brokerage and
research services. While such services are not expected to reduce the expenses
of the Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain

DEUT001P
39

<PAGE>

such services independently.

In certain instances there may be securities that are suitable as an
investment for a Portfolio as well as for one or more of the Adviser's other
clients. Investment decisions for the Portfolios and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect the
price of or the size of the position obtainable in a security for a Portfolio.
When purchases or sales of the same security for a Portfolio and for other
portfolios managed by the Adviser occur contemporaneously, the purchase or sale
orders may be aggregated in order to obtain any price advantages available to
large volume purchases or sales.

TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE PROSPECTUS ENTITLED "THE FUND -- DIVIDENDS AND
DISTRIBUTIONS" AND "-- TAXES".

UNITED STATES TAXATION

GENERAL. Each Fund intends to qualify and intends to remain qualified
as a regulated investment company (a "RIC") under Subchapter M of the Code. As a
RIC, a Fund must, among other things: (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of stock and
securities, gains from the sale or other disposition of stock, securities or
foreign currency and other income (including but not limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months; and (c) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's total assets is represented by cash, U.S. Government
securities, investments in other RICs and other securities limited in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets, and
10% of the outstanding voting securities of such issuer and (ii) not more

DEUT001P
40

<PAGE>

than 25% of the value of its total assets is invested in the securities of any
one issuer (other than U.S. Government securities or the securities of other
RICs). As a RIC, a Fund (as opposed to its shareholders) will not be subject to
federal income taxes on the net investment income and capital gains that it
distributes to its shareholders, provided that at least 90% of its net
investment income and realized net short-term capital gains in excess of net
long-term capital losses for the taxable year is distributed. Legislation
recently passed by Congress would, if enacted, eliminate the short-short rule
described above in clause (b). There can be no assurance that such legislation
will be enacted or, if enacted, what the effective date of such legislation will
be.

A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specific percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses) for each calendar year. Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.

Any dividend declared by a Fund in October, November or December of any
calendar year and payable to shareholders of record on a specified date in such
a month shall be deemed to have been received by each shareholder on December 31
of such calendar year and to have been paid by the Fund not later than such
December 31 so long as the dividend is actually paid by the Fund during January
of the following calendar year.

If a Portfolio purchases shares in certain foreign investment entities,
referred to as "passive foreign investment companies," the Fund may be subject
to U.S. federal income tax, and an additional charge in the nature of interest,
on a portion of any "excess distribution" from such company or gain from the
disposition of such shares, even if the distribution or gain is paid by the Fund
as a dividend to its shareholders. If the Fund were able and elected to treat a
passive foreign investment company as a "qualified electing fund," in lieu of
the treatment described above, the Fund would be required each year to include
in income, and distribute to shareholders in accordance with the distribution
requirement set forth above, the Fund's pro rata share of the ordinary earnings
and net capital gains of the company, whether or not distributed to the Fund.
Under proposed Regulations, if finalized, or proposed legislation, if enacted,
the Fund could instead elect to mark-to-market the shares annually, in which
case the treatment provided in the first

DEUT001P
41

<PAGE>

sentence above also would not apply.

Gains or losses attributable to disposition of foreign currency or to
foreign currency contracts, or to fluctuations in exchange rates between the
time a Portfolio accrues income or receivables or expenses or other liabilities
denominated in a foreign currency and the time a Portfolio actually collects
such income or pays such liabilities, are generally treated as ordinary income
or ordinary loss. Similarly, gains or losses, if any, on the disposition of debt
securities held by a Portfolio and denominated in foreign currency are also
treated as ordinary income or loss to the extent such gains or losses are
attributable to fluctuations in exchange rates between the acquisition and
disposition dates . These gains and losses increase or decrease the amount of
the Fund's net investment income available for distribution rather than its net
capital gains.

Forward currency contracts, options and futures contracts entered into
by a Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by a
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. "Straddles" may also result in the loss of the holding
period of underlying securities for purposes of the 30% gross income test
described above, and therefore, a Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.

Dividends paid from net investment income will generally be taxable to
a shareholder as ordinary income. Regardless of the length of time a shareholder
has held his shares, distributions designated as being from a Fund's net
long-term capital gains (I.E., the excess of net long-term capital gains over
net short-term capital losses) will be taxable as such. Distributions in excess
of a Fund's current and accumulated earnings and profits will be treated as a
tax-free return of capital to the extent of the shareholder's basis in his
shares and as a capital gain thereafter.

FOREIGN TAXES. As set forth in the Prospectus under "Taxation," the
Funds are expected to be subject to foreign withholding and other taxes with
respect to income received from sources within certain foreign countries. Each
Fund (except the Top 50 US) that is liable for foreign income taxes, including
such withholding taxes, expects to meet the requirements of the Code for
"passing through" to its shareholders the foreign taxes paid, but there can be
no assurance that it will be able to do so. Under the Code, if more than 50% of
the value of a Portfolio's total assets at the close of any taxable year
consists of stock or securities of foreign corporations, its corresponding Fund
may elect to treat the proportionate share of foreign income taxes paid by the
Fund as paid directly by the Fund's shareholders. If the Fund elects to pass
through

DEUT001P
42

<PAGE>

foreign taxes to the shareholders, no deduction for such foreign taxes may be
claimed by a shareholder who does not itemize deductions and no deduction is
available in computing an individual shareholder's alternative minimum tax
liability. A shareholder who is a nonresident alien individual or a foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the election described in this paragraph, but may not be able to claim a credit
or deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. A tax-exempt shareholder will not ordinarily benefit
from this election. Shareholders who choose to utilize a credit (rather than a
deduction) for foreign taxes will be subject to the limitation that the credit
may not exceed the shareholder's U.S. tax (determined without regard to the
availability of the credit) attributable to his or her total foreign source
taxable income. For this purpose, the portion of dividends and distributions
paid by a Fund from its foreign source net investment income will be treated as
foreign source income. A Portfolio's gains and losses from the sale of
securities will generally be treated as derived from U.S. sources, however, and
certain foreign currency gains and losses likewise will be treated as derived
from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source "passive income," such as the portion of dividends
received from a Portfolio that qualifies as foreign source income. In addition,
the foreign tax credit is allowed to offset only 90% of the alternative minimum
tax imposed on corporations and individuals. Because of these limitations, a
shareholder may be unable to claim a credit for the full amount of his
proportionate share of the foreign income taxes paid by a Portfolio.

Additionally, Congress has passed legislation under which the foreign
tax credit for taxes withheld with respect to dividends received by a Portfolio
would be disallowed if the Portfolio has not held the shares of the foreign
corporation for a 16-day period (or 46-day period in the case of preferred
shares) overlapping the dividend payment date and during which the Portfolio is
not protected from risk of loss. If the Fund elects to pass through foreign
taxes to the shareholders, the proposed legislation would also deny such credit
where the shareholder of the Fund does not satisfy the above holding requirement
with respect to its shares in the Fund. There can be no assurances as to whether
such legislation will be enacted into law, and, if so, what its effective date
might be.

The foregoing is only a general description of the foreign tax credit
under current law. Because application of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.

STATE AND LOCAL TAXES. Each Fund may be subject to state or
local taxes in jurisdictions in which that Fund is deemed to be
doing business. In addition, the treatment of a Fund and its

DEUT001P
43

<PAGE>

shareholders in those states that have income tax laws might differ from
treatment under the federal income tax laws. For example, a portion of the
dividends received by shareholders may be subject to state income tax.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.

FOREIGN SHAREHOLDERS. Distributions of net investment income and
realized net short-term capital gains in excess of net long-term capital losses
to a shareholder who, as to the United States, is a non-resident alien
individual, fiduciary of a foreign trust or estate, foreign corporation or
foreign partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless the dividends
are effectively connected with a U.S. trade or business of the shareholder, in
which case the dividends will be subject to tax on a net income basis at the
graduated rates applicable to U.S. individuals or domestic corporations.
Distributions of net long-term capital gains to foreign shareholders will not be
subject to U.S. tax unless the distributions are effectively connected with the
shareholder's trade or business in the United States or, in the case of a
shareholder who is a non-resident alien individual, the shareholder was present
in the United States for more than 182 days during the taxable year and certain
other conditions are met.

In the case of a foreign shareholder who is a nonresident alien
individual and who is not otherwise subject to withholding as described above, a
Fund may be required to withhold U.S. federal income tax at the rate of 31%
unless IRS Form W-8 is provided. See "Taxation" in the Prospectus. Transfers by
gift of shares of a Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of shares
of the Fund held by such a shareholder at his or her death will be includible in
his or her gross estate for U.S. federal estate tax purposes.

REPORTS TO SHAREHOLDERS. The Fund will make annual reports of the
federal income tax status of distributions to owners of shares. Such reports
will set forth the dollar amounts of dividends from net investment income and
long-term capital gains and, if the Fund elects to pass through foreign taxes,
the shareholder's portion of the foreign income taxes paid to each country and
the portion of the dividends that represents income derived from sources within
each country.

The foregoing discussion is based on U.S. federal tax laws in effect on
the date hereof. These laws are subject to change by legislative or
administrative action, possibly with retroactive effect.

THE FOREGOING DISCUSSION IS A SUMMARY ONLY AND IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. PROSPECTIVE INVESTORS IN SHARES OF A FUND
SHOULD CONSULT THEIR OWN TAX

DEUT001P
44

<PAGE>

ADVISERS AS TO THE TAX CONSEQUENCES OF INVESTING IN SUCH SHARES, INCLUDING THE
CONSEQUENCES UNDER STATE, LOCAL AND OTHER TAX LAWS.

DESCRIPTION OF SHARES

The Corporation is an open-end management investment company organized
as a Maryland corporation on May 22, 1997. The Articles of Incorporation
currently permit the Corporation to issue 2,500,000,000 shares of common stock,
par value $0.001 per share, of which 10,000,000 shares have been classified as
shares of each Fund. The Corporation currently consists of nine such series and
two classes of shares for each Fund known as Class A Shares and Class B Shares.
In addition, a tenth series has four classes known as DB Class, Institutional
Class, Class A and Class B.

Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Corporation do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Corporation may elect all of the Directors of the
Corporation if they choose to do so and in such event the other shareholders in
the Corporation would not be able to elect any Director. The Corporation is not
required and has no current intention to hold meetings of shareholders annually,
but the Corporation will hold special meetings of shareholders when in the
judgment of the Corporation's Directors it is necessary or desirable to submit
matters for a shareholder vote. Shareholders have under certain circumstances
(E.G., upon application and submission of certain specified documents to the
Directors by a specified number of shareholders) the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Directors. Shareholders also have the right
to remove one or more Directors without a meeting by a declaration in writing by
a specified number of shareholders. Shares have no preference, pre-emptive,
conversion or similar rights (except the automatic conversion of Class B Shares
into Class A Shares as discussed in the Prospectus under "Purchase of Shares").
Shares, when issued, are fully paid and non-assessable.

Stock certificates are not issued by the Corporation except upon
written request. No certificates will be issued for fractional shares.

The Articles of Incorporation of the Corporation contain a provision
permitted under Maryland Corporation Law which under certain circumstances
eliminates the personal liability of the Corporation's Directors to the
Corporation or its shareholders.

The Articles of Incorporation and the By-Laws of the Corporation
provide that the Corporation indemnify the Directors and officers of the
Corporation to the full extent permitted by the Maryland Corporation Law, which
permits indemnification of

DEUT001P
45

<PAGE>

such persons against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices with the
Corporation. However, nothing in the Articles of Incorporation or the By-Laws of
the Corporation protects or indemnifies a Director or officer of the Corporation
against any liability to the Corporation or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

Interests in a Portfolio have no preference, preemptive, conversion or
similar rights and are fully paid and non-assessable. The Portfolio Trust is not
required to hold annual meetings of investors, but will hold special meetings of
investors when, in the judgment of its Trustees, it is necessary or desirable to
submit matters for an investor vote. Each investor is entitled to a vote in
proportion to the share of its investment in a Portfolio.

ADDITIONAL INFORMATION

As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" (as defined in the 1940
Act) currently means the vote of (i) 67% or more of the outstanding voting
securities present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.

Fund shareholders receive semi-annual reports containing unaudited
financial statements and annual reports containing financial statements audited
by independent auditors.

A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange or foreign stock exchange is closed for
other than weekends and holidays or when regular trading on such Exchange is
restricted as determined by the Securities and Exchange Commission by rule or
regulation, (ii) during periods in which an emergency exists which causes
disposal of, or evaluation of the net asset value of, portfolio securities to be
unreasonable or impracticable, or (iii) for such other periods as the SEC may
permit.

Telephone calls to any Fund, the Transfer Agent, the Distributor, or
Financial Intermediaries with respect to shareholder servicing may be tape
recorded. With respect to the securities offered hereby, this Statement of
Additional Information and the Prospectus do not contain all the information
included in the Corporation's Registration Statement filed with the SEC under
the 1933 Act and the Corporation's and the Portfolio Trust's Registration
Statement filed under the 1940

DEUT001P
46

<PAGE>

Act. Pursuant to the rules and regulations of the SEC, certain portions have
been omitted. The Registration Statements including the exhibits filed therewith
may be examined at the office of the SEC in Washington, D.C.

Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION, IN CONNECTION WITH THE
OFFER CONTAINED THEREIN AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR THE DISTRIBUTOR. THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL
INFORMATION DO NOT CONSTITUTE AN OFFER BY ANY FUND OR BY THE DISTRIBUTOR TO SELL
OR SOLICIT ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS OR THE
DISTRIBUTOR TO MAKE SUCH OFFER IN SUCH JURISDICTIONS.

DEUT001P
47

<PAGE>

APPENDIX A

FUNDS AND CORRESPONDING PORTFOLIOS

The Corporation seeks to achieve the investment objective of each Fund
by investing all of the Fund's investable assets in the corresponding
non-diversified, open-end management investment company (each, a "Portfolio" and
collectively the "Portfolios") listed below:

Top 50 World Top 50 World Portfolio (US Dollar)
Top 50 Europe Top 50 Europe Portfolio (US Dollar)
Top 50 Asia Top 50 Asia Portfolio (US
Dollar)

Top 50 US Top 50 US Portfolio (US Dollar)
(collectively, the "Top 50 Funds") (collectively, the "Top 50 Portfolios")
European Mid-Cap Fund Provesta Portfolio (US Dollar)
German Equity Fund Investa Portfolio (US Dollar)
Japanese Equity Fund Japanese Equity Portfolio (US Dollar)
(collectively with the Top 50 collectively with the Top 50 Portfolios,
Funds, the "Equity Funds") the "Equity Portfolios")
Global Bond Fund Global Bond Portfolio (US Dollar)

European Bond Fund European Bond Portfolio (US Dollar)
(collectively, the Bond Funds) (collectively, the Bond Portfolios)

DEUT001P
48

<PAGE>

APPENDIX B - DESCRIPTION OF SECURITY RATINGS

STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS

AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

MOODY'S
CORPORATE AND MUNICIPAL BONDS

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

DEUT001P

<PAGE>

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

DEUT001P

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements included in Part A:

Not Applicable.

Financial Statements included in Part B:

To be filed by amendment.

C-1

<PAGE>
(b) Exhibits:

1 -- Articles of Incorporation of the Registrant.(1)

1(a) Articles of Amendment and Restatement.(3)

2 -- By-Laws of the Registrant.(1)

3 -- Not Applicable.

4 -- Not Applicable.

5 -- Not Applicable

6 -- Distribution Agreement.(3)

7 -- Not Applicable.

8 -- (a) Custody Agreement.(3)

(b) Transfer Agency Agreement.(3)

9 -- (a) Master Agreement for Administration Services.(3)

10 -- Opinion of Counsel (including consent).(3)

11 -- Independent auditors' consent.(3)

12 -- Not Applicable.

13 -- Copies of investment representation letters from initial
shareholders.(3)

14 -- Not Applicable.

15 -- Distribution and Services Plan. (3)

16 -- Schedule for Computation of Performance Quotations.(3)

17 -- Financial Data Schedule.(3)

18 -- Multiple Class (Rule 18f-3) Agreement.(3)

19 -- Power of Attorney. (2)

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

(1) Incorporated by reference to the Registrant's registration statement on
Form N-1A as filed with the Commission on May 23, 1997.

(2) Filed herewith.

(3) To be filed by amendment.

C-2

Item 25. Persons Controlled by or Under Common Control with Registrant.

See "Directors and Officers" in the Statement of Additional Information
filed as part of this Registration Statement.

Item 26. Number of Holders of Securities.

Title of Class Number of Record Holders
Common Stock (as of August 1, 1997)

Deutsche European Mid-Cap Fund 0
Deutsche German Equity Fund 0
Deutsche Japanese Equity Fund 0
Deutsche Global Bond Fund 0
Deutsche European Bond Fund 0
Deutsche Top 50 World 0
Deutsche Top 50 Europe 0
Deutsche Top 50 Asia 0
Deutsche Top 50 US 0

C-3
<PAGE>
Item 27. Indemnification

Reference is made to Article EIGHTH of Registrant's Articles of
Incorporation.

Registrant, its Directors and officers, and persons affiliated with
them are insured against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might be imposed as
a result of such actions, suits or proceedings.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Adviser.

To be filed by amendment.

C-4

<PAGE>

Item 29. Principal Underwriters.

(a) Edgewood Services, Inc. ("Edgewood") the Distributor
for shares of the Registrant, also acts as principal
underwriter for the following open-end investment
companies: Excelsior Institutional Trust (formerly,
UST Master Funds, Inc.), Excelsior Tax-Exempt Funds,
Inc. (formerly, UST Master Tax-Exempt Funds, Inc.),
Excelsior Institutional Trust, FTI Funds, FundManager
Portfolios, Marketvest Funds, Marketvest Funds, Inc.,
Old Westbury Funds, Inc., BT Advisor Funds, BT
Pyramid Funds, BT Investment Funds and BT
Institutional Funds.

(b) Set forth below are the names and positions of each
Director and officer of Edgewood. The principal
business address of these individuals is Federated
Investors Tower, Pittsburgh, PA 15222. Unless
otherwise specified, no officer or Director of
Edgewood serves as an officer or Director of the
Registrant.

Position and Offices with Position and Offices
Name Edgewood with the Registrant
- ------------- --------------------------- --------------------
Lawrence Caracciolo Director, President, --
Edgewood Services, Inc.

Arthur L. Cherry Director, --
Edgewood Services, Inc.

J. Christopher Donohue Director, --
Edgewood Services, Inc.

Thomas P. Sholes Director, --
Edgewood Services, Inc.

Ronald M. Petnuch Vice President, --
Edgewood Services, Inc.

Thomas P. Schmitt Vice President, --
Edgewood Services, Inc.

Ernest L. Linane Assistant Vice President, --
Edgewood Services, Inc.

S. Elliot Cohan Secretary, --
Edgewood Services, Inc.

Thomas J. Ward Assistant Secretary, --
Edgewood Services, Inc.

Kenneth W. Pegher, Jr. Treasurer, --
Edgewood Services, Inc.

C-5

<PAGE>

Item 30. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of:

Deutsche Family of Funds, Inc.
2nd Federated Square
Pittsburgh, PA 15222

Deutsche Fund Management, Inc.
31 West 52nd Street
New York, NY 10019
(investment adviser and servicing agent)

Edgewood Services, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
(distributor)

Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
(administrator)

Federated Shareholder Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
(transfer agent)

Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
(Custodian)

IBT Fund Services (Canada) Inc.
One First Place
King Street West, Suite 2800
P.O. Box 231
Toronto, Ontario M5X1C8
(Fund Accountant)

Item 31. Management Services.

Other than as set forth under the caption "Management of the
Corporation and the Portfolio Trust" in the Prospectus constituting Part A of
the Registration Statement, Registrant is not a party to any management-related
service contract.

Item 32. Undertakings.

(a) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders upon request and without charge.

(b) The Registrant undertakes to file a post-effective amendment,
including financials, which need not be certified, within four to six months
following the commencement of operations of each of its series. The financial
statements included in such amendment will be as of and for the time period
ended on a date reasonably close or as soon as practicable to the date of the
amendment.

C-6

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereto duly authorized in Hamilton, Bermuda on the 1st day of August, 1997.

DEUTSCHE FAMILY OF FUNDS, INC.

By /S/ BRIAN A. LEE
Brian A. Lee
President

Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated above.

Signature Title

EDWARD C. SCHMULTS* Director
Edward C. Schmults

ROBERT A. WADSWORTH* Director
Robert A. Wadsworth

WERNER WALBROEL* Director
Werner Walbroel

G. RICHARD STAMBERGER* Director
G. Richard Stamberger

CHRISTIAN STRENGER* Director
Christian Strenger

JOSEPH E. CHEUNG* Treasurer
Joseph E. Cheung

*By: /S/ BRIAN A. LEE
Brian A. Lee
as Attorney-in-Fact pursuant to a
Power of Attorney filed herewith.

<PAGE>

SIGNATURES

Deutsche Portfolios has duly caused this Pre-effective Amendment to the
Registration Statement on Form N-1A of Deutsche Family of Funds, Inc. (File No.
333-7008) to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hamilton, Bermuda on the 1st day of August, 1997.

DEUTSCHE PORTFOLIOS

By /S/ BRIAN A. LEE
Brian A. Lee
President

This Pre-effective Amendment to the Registration Statement on Form N-1A
of Deutsche Family of Funds, Inc. (File No. 333-7008) has been signed below by
the following persons in the capacities indicated on the date indicated above.

Signature Title

EDWARD C. SCHMULTS* Trustee
Edward C. Schmults

ROBERT A. WADSWORTH* Trustee
Robert A. Wadsworth

WERNER WALBROEL* Trustee
Werner Walbroel

G. RICHARD STAMBERGER* Trustee
G. Richard Stamberger

CHRISTIAN STRENGER* Trustee
Christian Strenger

JOSEPH E. CHEUNG* Treasurer
Joseph E. Cheung

*By: /s/ BRIAN A. LEE
Brian A. Lee
as Attorney-in-Fact pursuant to a
Power of Attorney filed herewith.
<PAGE>

DUETSCHE FAMILY OF FUNDS, INC.

EXHIBITS TO REGISTRATION STATEMENT

ON FORM N-1A

EXHIBIT INDEX

EXHIBIT NO.

EX-99.B.17 Powers of Attorney

POWER OF ATTORNEY

EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND
APPOINTS THE DEPUTY GENERAL COUNSEL OF FEDERATED INVESTORS*, HIS TRUE AND LAWFUL
ATTORNEY- IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION
FOR THEM AND THEIR NAMES, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN
ANY AND ALL DOCUMENTS TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
BEHALF OF DEUTSCHE FAMILY OF FUNDS, INC. PURSUANT TO THE SECURITIES ACT OF 1933,
THE SECURITIES EXCHANGE ACT OF 1934 AND THE INVESTMENT COMPANY ACT OF 1940, BY
MEANS OF THE SECURITIES AND EXCHANGE COMMISSION'S ELECTRONIC DISCLOSURE SYSTEM
KNOWN AS EDGAR; AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER
AND AUTHORITY TO SIGN AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY TO BE DONE IN CONNECTION THEREWITH, AS FULLY TO ALL INTENTS AND
PURPOSES AS EACH OF THEM MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR
OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
THEREOF.

SIGNATURES TITLE DATE

/S/ BRIAN A. LEE PRESIDENT JULY 28, 1997
BRIAN A. LEE

/S/ JOSEPH CHEUNG TREASURER JULY 28, 1997
JOSEPH CHEUNG

/S/ EDWARD C. SCHMULTS JULY 28, 1997
EDWARD C. SCHMULTS

/S/ ROBERT H. WADSWORTH JULY 28, 1997
ROBERT H. WADSWORTH

/S/ WERNER WALBROEL JULY 28, 1997
WERNER WALBROEL

/S/ G. RICHARD STAMBERGER JULY 28, 1997
G. RICHARD STAMBERGER

/S/ CHRISTIAN STRENGER JULY 28, 1997
CHRISTIAN STRENGER

/S/ ROBERT R. GAMBEE SECRETARY JULY 28, 1997
ROBERT R. GAMBEE

* BRIAN A. LEE, JOSEPH M. CHEUNG, ROBERT R. GAMBEE AND LAURA WEBER