DEUTSCHE FUNDS INC, 497, 1998-11-04

DEUTSCHE FUNDS INC
497, 1998-11-04

Previous: GROUP MAINTENANCE AMERICA CORP, 8-K, 1998-11-04

Next: GREENLIGHT CAPITAL LLC, SC 13D/A, 1998-11-04

prospectus

dated October 31, 1998

Deutsche Top 50 World
(Class A Shares and Class B Shares)
Deutsche Top 50 Europe

(Class A Shares, Class B Shares and Class C Shares)

Deutsche Top 50 Asia
(Class A Shares and Class B Shares)
Deutsche Top 50 US

(Class A Shares, Class B Shares and Class C Shares)

An Open-End
Management
Investment
Company

DEUTSCHE TOP 50 WORLD (Class A Shares and Class B Shares)

DEUTSCHE TOP 50 EUROPE (Class A Shares, Class B Shares and Class C Shares)

DEUTSCHE TOP 50 ASIA (Class A Shares and Class B Shares)

DEUTSCHE TOP 50 US (Class A Shares, Class B Shares and Class C Shares)

5800 Corporate Drive

Pittsburgh, PA 15237-7010

For information call toll-free 888-4-DEUTSCHE (888-433-8872)

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 Funds, Inc., an open-end
management investment company organized as a Maryland corporation (the
"Corporation") (together with the Funds, the "Deutsche Funds"). The investment
objective of each Fund is primarily to achieve high capital appreciation and, as
a secondary objective, reasonable dividend 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 ("SEC") in a Statement of Additional
Information dated October 31, 1998 (as supplemented from time to time). This
information is incorporated herein by reference and is available without charge
upon written request from the Funds' transfer agent, Federated Shareholder
Services Company, or by calling toll-free 888-4-DEUTSCHE.

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, CLASS B SHARES OR CLASS C 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.

Prospectus dated October 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Expense Summary........................................ 2
Financial Highlights................................... 4

The Funds.............................................. 6
Investment Objective, Policies and Restrictions........ 6
All Funds............................................. 7
Risk Factors........................................... 10
Equity Investments.................................... 10
Foreign Investments (Each Portfolio Except Top 50
US Portfolio)......................................... 10
Emerging Markets (Each Portfolio Except Top 50
US Portfolio)......................................... 11
Fixed Income Securities............................... 11
Futures, Options and Warrants......................... 11
Geographic Investment Emphasis........................ 12
Local Securities Markets.............................. 12
Management of the Corporation and the Portfolio Trust.. 12
Manager............................................... 12
Adviser............................................... 12
Portfolio Management.................................. 13
Administrator......................................... 13
Operations Agent...................................... 13
Administrative Agent.................................. 13
Distributor........................................... 14
Transfer Agent, Custodian and Fund Accountant......... 14
Year 2000 Statement................................... 14
Expenses.............................................. 15
Portfolio Brokerage................................... 15
Investing in the Funds................................. 16
Class A Shares........................................ 16
Class B Shares........................................ 16
Class C Shares........................................ 16
Other Share Differences............................... 16
Purchase of Shares..................................... 16
Investing in Class A Shares........................... 16
Investing in Class B Shares and Class C Shares........ 18
Conversion of Class B Shares.......................... 18
Purchasing Shares Through a Financial Intermediary.... 18
Purchasing Shares by Wire............................. 19
Purchasing Shares by Check............................ 19
Special Purchase Features.............................. 19
Systematic Investment Program......................... 19
Retirement Plans...................................... 19
Exchange Privilege..................................... 19
Class A Shares........................................ 19
Class B Shares........................................ 19
Class C Shares........................................ 19
Requirements for Exchange............................. 19
Tax Consequences...................................... 19
Making an Exchange.................................... 20
Telephone Instructions................................ 20
Redemption of Shares................................... 20
Redeeming Shares Through a Financial Intermediary..... 20
Redeeming Shares by Telephone......................... 20
Redeeming Shares by Mail.............................. 20
Special Redemption Features............................ 21
Systematic Withdrawal Program......................... 21
Contingent Deferred Sales Charge....................... 21
Class A Shares........................................ 21
Class B Shares........................................ 21
Class C Shares........................................ 21
Class A Shares, Class B Shares and Class C Shares..... 21
Elimination of Contingent Deferred Sales Charge....... 21
Account and Share Information.......................... 22
Certificates and Confirmations........................ 22
Accounts with Low Balances............................ 22
Dividends and Distributions............................ 22
Net Asset Value........................................ 22
Organization........................................... 22
Taxes.................................................. 23
Additional Information................................. 24
Appendix A............................................. 24

</TABLE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses of Class A Shares and Class B Shares of each Fund and Class C
Shares for Top 50 Europe and Top 50 US, and the allocable operating expenses of
their corresponding Portfolios. 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."

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None None None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) 0.00%(1) 5.00%(2) 1.00%(3)
Redemption Fees (as a percentage of amount redeemed, if applicable) None None None
Exchange Fees 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."
<TABLE>
<C> <S>
2) In the first year, declining to 1.00% in the sixth year and 0% thereafter.
</TABLE>
(3) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within
one year of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge."

Expense Table
Annual Operating Expenses (After Expense Reimbursement)
(As a percentage of average net assets)
<TABLE>
<CAPTION>
Top 50 World
Top 50 Europe Top 50 Asia Top 50 US
Class B Class B
and and
Class A Class C Class A Class B Class A Class C
<S> <C> <C> <C> <C> <C> <C>
Advisory fees 1.00% 1.00% 1.00% 1.00% 0.85% 0.85%
12b-1 Fees
Service 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Distribution 0.00% 0.75% 0.00% 0.75% 0.00% 0.75%
Other Expenses (after expense reimbursement) 0.35% 0.35% 0.35% 0.35% 0.40% 0.40%

Total Operating Expenses (after expense reimbursement) 1.60% 2.35% 1.60% 2.35% 1.50% 2.25%

</TABLE>

EXPENSE SUMMARY (CONTINUED)

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 C Class A Class B Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 70 $ 74 $ 34 $ 70 $ 75 $ 69 $ 74 $ 33
3 Years $103 $105 $ 73 $103 $106 $100 $103 $ 70
5 Years $137 $148 $126 $137 $148 $132 $143 $120
10 Years $235 $269 $269 $235 $269 $224 $258 $258
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) no redemption at the end of each time period:
1 Year $ 70 $ 24 $ 24 $ 70 $ 24 $ 69 $ 23 $ 23
3 Years $103 $ 73 $ 73 $103 $ 73 $100 $ 70 $ 70
5 Years $137 $126 $126 $137 $126 $132 $120 $120
10 Years $235 $269 $269 $235 $269 $224 $258 $258

</TABLE>

The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in a
Fund 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 fiscal year ending August 31, 1999 and include (i)
fees paid to the Administrator, Administrative Agent, Operations Agent, Transfer
Agent, Fund Accounting Agent and Custodian (as each are defined herein); (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
the expenses of each Fund through at least August 31, 1999, to the extent
necessary to maintain each Fund's ratio of total operating expenses to average
annual net assets at the level indicated above. Absent reimbursement of
expenses, estimated "Other Expenses" for the first fiscal year of the Top 50
World, Top 50 Europe, Top 50 Asia and the Top 50 US were 126.24%%, 15.28%,
245.80% and 10.48%, respectively, and "Total Operating Expenses" were 127.49%,
16.53%, 247.05% and 11.58%, respectively, of the Fund's average daily net assets
attributed to Class A Shares and 128.24%, 17.28%, 247.80% and 12.33%,
respectively, of the Fund's average daily net assets attributed to Class B
Shares, and 17.28% and 12.33%, respectively of the Top 50 Europe and the Top 50
US average daily net assets attributed to Class C 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, investors should note that $1,000 is less than the minimum
investment requirement for each class of each Fund. See "Purchase of Shares."
Because the fees paid under the 12b-1 Plan of the Fund are charged against the
assets of the Fund, long-term shareholders may indirectly pay an amount that is
more than the economic equivalent of the maximum front-end sales charge that
such Fund would be permitted to charge. 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.

FINANCIAL HIGHLIGHTS

Deutsche Funds, Inc.

For the period from Commencement of Operations to August 31, 1998(a)

Selected data for a Class A share of common stock outstanding throughout the
period.

<TABLE>
<CAPTION>
Deutsche Deutsche Deutsche Deutsche
Top 50 Top 50 Top 50 Top 50
World Europe Asia US
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.50 $ 12.50 $ 12.50 $ 12.50
Investment operations:
Net investment income (loss) 0.01 0.02 0.01 (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency
allocated from corresponding Deutsche Portfolio (0.16) 0.51 (4.33) 0.15
Increase (decrease) from investment operations (0.15) 0.53 (4.32) 0.12
Net asset value at end of period $ 12.35 $ 13.03 $ 8.18 $ 12.62
Total Return (based on net asset value)(c)* (1.20)% 4.24% (34.56)% 0.96%
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 181 $ 1,208 $ 41 $ 2,056
Ratios to average net assets:
Expenses(b)** 1.60% 1.60% 1.60% 1.50%
Net investment income (loss)(b)** 0.13% 0.50% 0.15% (0.44)%
(a) Commencement of operations: 10/2/97 10/2/97 10/14/97 10/2/97
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income (loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses to average net assets** 127.49% 16.53% 247.05% 11.58%
Net investment loss to average net assets** (125.76)% (14.43)% (245.30)% (10.52)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at commencement of operations, reinvestment of distributions at net asset
value and a sale on the last day of the period, also at net asset value.
During the period, total return would have been lower had certain expenses
not been

reimbursed by the Manager.
* Not annualized
** Annualized

FINANCIAL HIGHLIGHTS (CONTINUED)

Deutsche Funds, Inc.

For the period from Inception Date to August 31, 1998(a)

Selected data for a Class B share of common stock outstanding throughout the
period.

<TABLE>
<CAPTION>
Deutsche Deutsche Deutsche Deutsche
Top 50 Top 50 Top 50 Top 50
World Europe Asia US
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.50 $ 12.50 $ 12.50 $ 12.50
Investment operations:
Net investment loss (0.01) (0.01) (0.02) (0.06)
Net realized and unrealized loss on investments and foreign currency
allocated from corresponding Deutsche Portfolio (1.41) (0.84) (3.20) (1.48)
Decrease from investment operations (1.42) (0.85) (3.22) (1.54)
Net asset value at end of period $ 11.08 $ 11.65 $ 9.28 $ 10.96
Total Return (based on net asset value)(c)* (11.36)% (6.80)% (25.76)% (12.32)%
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 90 $ 3,120 $ 50 $ 436
Ratios to average net assets:
Expenses(b)** 2.35% 2.35% 2.35% 2.25%
Net investment loss(b)** (0.84)% (0.46)% (0.51)% (1.35)%
(a) Inception date: 5/4/98 3/30/98 5/5/98 3/18/98
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment loss to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses to average net assets** 128.24% 17.28% 247.80% 12.33%
Net investment loss to average net assets** (126.73)% (15.39)% (245.96)% (11.43)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at inception date, reinvestment of distributions at net asset value and a
sale on the last day of the period, also at net asset value. During the
period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
* Not annualized
** Annualized

THE FUNDS

Shares of the Funds are sold continuously by the Funds' distributor, Edgewood
Services, Inc. ("Edgewood" or 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."

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 Bank Securities Investment Management Inc. is the investment
adviser of the Top 50 US Portfolio (the "DBSIM Adviser"); and together with the
DWS Adviser or severally as the context may require, the "Adviser." DFM and the
Advisers are indirect subsidiaries of Deutsche Bank AG. Federated Services
Company is the administrator of the Funds (the "Administrator") and the
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 (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 "Directors, Trustees, and Officers" 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.

Each Fund seeks to achieve its investment objective by investing all of its
investable assets in a corresponding Portfolio, an open-end management
investment 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.

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:

. strong market position within its respective market;

. profitability, predictability and duration of earnings growth, reflected in
sound balance sheet ratios and financial statements;

. high quality of management with an orientation toward strong, long-term
earnings;

. long-range strategic plans in place;

. generally publicly-held with a 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
analyses 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.

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 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.

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 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 ("Member States"), those which are party to the
Convention on the European Economic Area ("CEEA"), Poland, 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 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, and 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.

The Top 50 US Portfolio 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. price/earnings or P/Eratio), 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 Portfolio 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 at least one of the following requirements: (a) they are listed on a
stock exchange in a 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:

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

. 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),

. 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,
. other debtors, if guaranteed as to the payment of interest and repayment of
principal by one of the aforementioned bodies, or
. 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, 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 rating categories of Moody's
Investors Service, Inc. ("Moody's"), currently Aaa, Aa, A and Baa, or of
Standard & Poor's ("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. Fixed income securities rated Baa by Moody's or BBB by S&P have
speculative characteristics. 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 Germany, the states of Germany, 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. 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.

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 (written) 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." 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.

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, options 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. Each Portfolio other than the Top 50
US Portfolio may enter into transactions for non-hedging purposes 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 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 for 50 US Portfolio, may enter into foreign currency
transactions to hedge currency risks associated with the assets of the Portfolio
denominated in foreign currencies. A Portfolio may purchase or sell foreign
currency contracts for forward delivery. A Portfolio may also 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 currency
transactions as an investment strategy. However, each Portfolio (except for Top
50 US 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 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.\\

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 total 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 each Portfolio's, except the Top
50 US Portfolio's, total assets at the time of such borrowing. The Top 50 US
Portfolio may take up short-term loans up to a limit of one-third of the
Portfolio's total assets.

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.

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 each Fund and each Portfolio, 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 in effect 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.

The Top 50 World Portfolio will invest at least 65% of its total assets in
equity securities. The Top 50 Europe Portfolio will invest at least 65% of its
total assets in the equity securities of issuers located in European countries.
The 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. The 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 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, provided 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 is permitted to borrow money although, as an operating policy,
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.

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 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.

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.

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. Because the Top 50
Europe Portfolio does not presently intend to engage in currency transactions to
hedge currency risks, this Portfolio may be more exposed to the aforementioned
currency risks. See "Foreign Currency Exchange Transactions" in the Statement of
Additional Information.

On January 1, 1999, eleven of the fifteen Member States will have their currency
exchange rate irrevocably fixed to a single European currency, the euro. The
euro will become legal tender in those countries from this date. National
currencies will continue to circulate until they are replaced by euro coins and
bank notes on July 1, 2002. The pending unification of European currency and
decision by certain countries not to participate are likely to create
uncertainty in the European markets and thereby increase volatility of the
various currencies and securities. The European securities markets may become
less liquid. These events can adversely affect the Portfolios' investment and
performance, as detailed under "European Currency Unification" in the Statement
of Additional Information.

Certain of the risks associated with foreign investments are heightened for the
Top 50 Asia Portfolio and Top 50 World Portfolio, which invest in certain Asian
countries. In some cases, political uncertainty and political corruption in such
countries could threaten to reverse favorable trends toward market and economic
reform, privatization and removal of trade barriers, and further disruptions in
Asian securities markets could result. In addition, certain Asian countries have
managed currencies which are maintained at artificial levels relative to the
U.S. dollar rather than at levels determined by the market. This type of system
can lead to sudden and large adjustments in the currency which, in turn, may
have a disruptive and negative effect on foreign investors. For example, in 1997
the Thai baht lost 46.75% of its value against the U.S. dollar. A number of
Asian companies are highly dependent on foreign loans for their operation. In
1997, several Asian countries were forced to negotiate loans from the
International Monetary Fund and other supranational organizations which impose
strict repayment term schedules and require significant economic and financial
restructuring. There can be no assurance that such restructurings will not have
an adverse effect on individual companies, or securities markets, in which the
Top 50 Asia Portfolio or the Top 50 World Portfolio is invested. The Top 50 Asia
Portfolio may invest in Hong Kong, which reverted to Chinese administration in
1997. Investments in Hong Kong may be subject to expropriation, nationalization
or confiscation, and to the risk that the Hong Kong dollar will be devalued. The
Corporation cannot predict the effects of a possible loss of investor confidence
in the currency or stock market of Hong Kong.

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.

The risks involved in making investments in securities of issuers in emerging
markets have been underscored by recent events. For example, issuers in the Asia
region have experienced currency volatility, political instability and economic
declines in recent months. In response to these declines, Malaysia has recently
enacted currency exchange controls, restricting the repatriation of assets for a
period of one year. Earlier this year, Russia declared a moratorium on repayment
of its own debt, substantially devalued its currency and suspended the
government-

sponsored foreign exchange market for its currency.

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.

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.

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 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 Contracts and Options on Futures Contracts" in the Statement of
Additional Information.

Geographic Investment Emphasis

Local Securities Markets
The German Securities Markets

Equity securities trade on the country's eight regional stock exchanges of which
Frankfurt accounted for approximately 78% of the total volume as of August 31,
1998.

Share prices of companies traded on German stock exchanges declined in 1991 and
1992 as the German economy entered a recessionary period following unification
of eastern and western Germany in 1990. The DM total return of the CDAX German
Composite Index of stocks was 6.39% in 1992, 44.56% in 1993, 5.83% in 1994,
4.75% in 1995, 22.14% in 1996, 40.83% in 1997, and 3.22% year-to-date as of
August 31, 1998.

Trading volume tends to concentrate on the relatively few companies having both
large market capitalization and a broad distribution of their stock with few or
no large holders. The five companies having the largest annual trading volume of
their stock as of June 30, 1998 represented 24.2% of total trading volume on the
German stock exchanges: Daimler Benz AG with DM 312 billion, Deutsche Bank AG
with DM 242 billion, Siemens AG with DM 190 billion, SAP AG with DM 175 billion,
and VWAG with DM 173 billion.

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 of each Portfolio except the Top 50 US Portfolio. DFM
has retained the services of DBSIM as Adviser of the Top 50 US 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 $672.4 billion and 74,100 employees as of
June 30, 1998, Deutsche Bank AG is one of Europe's largest universal banks. It
is engaged in a wide range of financial services, including retail and
commercial banking, investment banking and insurance. Deutsche Bank AG and its
affiliates may have commercial lending relationships with companies whose
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, France, Poland and Italy. Together, DFH subsidiaries serve as
manager and/or investment adviser to more than 160 mutual funds, having
aggregate assets under management of more than the equivalent of $77 billion as
of June 30, 1998. DFH and its subsidiaries employ approximately 600
professionals and is one of the largest mutual fund operators 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 June 30, 1998. DFH and its subsidiaries
are known in the financial market as "DWS Group, Investment Group 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; 1997: 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
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 DBSIM 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 except the Top 50 US Portfolio and equal to 0.60% of the average daily
net assets of the 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 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 16 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, Investment Group
of Deutsche Bank, supervising funds holding assets under management of DM 13.9
billion ($7.4 billion) as of June 30, 1998.

Klaus Martini and Elisabeth Weisenhorn are co-senior portfolio managers for the
Top 50 Europe Portfolio. Mr. Martini joined the DWS Group in 1984, where he has
managed European stock funds since 1988. Mr. Martini also serves as senior
portfolio manager for Top 50 Europa, a German registered mutual fund with the
same investment objective, policies and restrictions as the Top 50 Europe
Portfolio. He is Senior Investment Officer, head of the European equity team,
supervising funds holding assets under management of DM 9.0 billion ($5.0
billion) as of June 30, 1998. Ms. Weisenhorn also serves as the senior portfolio
manager for the Investa Portfolio and the Provesta Portfolio, additional series
of the Portfolio Trust. Ms. Weisenhorn has 13 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 18.4 billion ($10.1 billion) as of June 30, 1998. Mr. Martini
and Ms. Weisenhorn are based at DWS Group's office in Frankfurt, Germany.

James E. Moltz, the chief investment officer of Deutsche Bank Securities Inc.,
is the senior portfolio manager of the Top 50 US Portfolio. Mr. Moltz is also
the chief equities strategist of Deutsche Bank Securities 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.

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, Federated Services Company, among
other things, (i) prepares, files and maintains the Funds' governing documents,
registration statements and regulatory documents; (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.

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, except that during the first two years of the
agreement (commencing in 1997), 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 Fund's operation and $125,000 for
the second year will be paid to the Operations Agent and the Administrator.

Operations Agent

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, except that during
the first two years of the agreement minimum aggregate fees 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 will be paid to the Operations Agent and the
Administrator.

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 budgets; (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
the investor register.

The Portfolio Trust has entered into an administrative agreement with IBT
(Cayman). As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee
from each Portfolio, which is computed daily and paid monthly at an annual rate
of 0.025% on the first $200 million, 0.02% on the next $800 million and 0.01% on
assets in excess of $1 billion, subject to a minimum of $40,000 during the first
year of the Portfolio's operations, $45,000 in the second year of operations and
$50,000 in the third year.

Distributor

Edgewood serves as principal Distributor for shares of each Fund. Edgewood is
located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-5829. 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, Inc. and an
affiliate of Federated Services Company.

Securities laws may require certain financial intermediaries 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 and 1.0% of the net asset
value of Class C 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 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 and Class C Shares are subject to a distribution
plan (the "Distribution Plan") and Class A Shares, Class B Shares and Class C
Shares are subject to a service plan (the "Service Plan").

Under the Distribution Plan, Class B Shares and Class C Shares 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 a Fund represented by Class B Shares and Class C Shares to
finance any activity which is principally intended to result in the sale of
Class B Shares and Class C Shares of a 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' and Class C 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 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, Class B Shares and Class C Shares a
fee computed at an annual rate of 0.25% of the average daily net assets of each
such class of shares. The services 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 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 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, Class B Shares and Class C 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, 1001 Liberty
Avenue, 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 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.

Year 2000 Statement

Like other mutual funds and business organizations worldwide, the Funds' service
providers (among them, the Manager, Adviser, Distributor, Administrator,
Custodian and Transfer Agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Funds and their service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and the Funds' service providers have represented to
the Funds that they believe their systems will be year 2000 compliant when
required. Analysis continues regarding whether the financial impact of
instituting a year 2000 compliant program will have any financial impact on the
Funds' operations.

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,
1999, 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 Shares and Class B Shares,
respectively, of the Top 50 World, and Top 50 Asia and not more than 1.60%,
2.35% and 2.35% of Class A Shares, Class B Shares and Class C Shares,
respectively, of the Top 50 Europe, and not more than 1.50%, 2.25% and 2.25% of
the average annual net assets of Class A Shares, Class B Shares and Class C
Shares, respectively, of Top 50 US. There is no assurance that DFM will continue
this reimbursement beyond the specified period.

Expenses of Class A Shares, Class B Shares and Class C Shares

Holders of Class A Shares, Class B Shares and Class C 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, Class B Shares and Class C
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, Class B Shares and Class C 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, Class B
Shares and Class C 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, Class B
Shares and Class C Shares; registration fees paid to the SEC and to state
securities commissions as attributable to holders of Class A Shares, Class B
Shares and Class C Shares; expenses related to administrative personnel and
services as required to support holders of Class A Shares, Class B Shares and
Class C Shares; legal fees relating solely to Class A Shares, Class B Shares or
Class C Shares; and Directors' fees incurred as a result of issues related
solely to Class A Shares, Class B Shares or Class C Shares.

Portfolio Brokerage

Although each Portfolio does not intend to invest for the purpose of seeking
short-term profits, securities in the Portfolios will be sold whenever the
Adviser believes it is appropriate to do so in light of the investment objective
of each Fund and each Portfolio, without regard to the length of time a
particular security may have been held. 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 rate of portfolio turnover of each
Portfolio may exceed that of certain other mutual funds with the same investment
objective. 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. See "Taxes."

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 ("Deutsche Agent") may
act as one of the agents of the Portfolios in the purchase and sale of portfolio
securities, futures contracts or options on futures contracts when, in the
judgment of the Adviser, that Deutsche Agent will be able to obtain a price and
execution at least as favorable as other qualified brokers or futures commission
merchants, as applicable. As one of the primary brokers used by the Portfolios,
Deutsche Bank AG or its affiliates receives brokerage commissions from each
Portfolio, and may receive compensation for executing futures transactions.

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.

From commencement of operations through August 31, 1998, the Top 50 World
Portfolio, Top 50 Europe Portfolio, Top 50 Asia Portfolio, and the Top 50 US
Portfolio paid the following aggregate brokerage commissions, respectively:
$46,910, $39,913, $233,262, and $24,027.

INVESTING IN THE FUNDS

Each Fund offers investors 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"
and except for shares purchased without a sales charge that are redeemed within
one year of purchase as described under "Contingent Deferred Sales Charge--Class
A Shares"). 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:

<TABLE>
<CAPTION>
Contingent
Year of Redemption Deferred
After Purchase Sales Charge
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

</TABLE>
Class C Shares

Class C Shares are sold without an initial sales charge, but a contingent
deferred sales charge of 1.00% will be charged on assets redeemed within the
first full 12 months following purchase.

Other Share Differences

Class B Shares and Class C Shares also bear a fee pursuant to a Distribution
Plan, adopted in accordance with Rule 12b-1 under the 1940 Act, while Class A
Shares do not bear such a fee. Class A Shares, Class B Shares and Class C 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
and Class C 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 in the case of Class B Shares) 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
("NYSE") 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. 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 and may separately charge a
fee for Fund transactions.)

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.

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:

<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested Price
<S> <C> <C> <C>
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 but less
than $2 million None None 1.00%*
$2 million but less
than $5 million None None 0.80%*
$5 million but less
than $50 million None None 0.50%*
$50 million but less
than $100 million None None 0.25%*
$100 million or more None None 0.15%*
*See "Dealer Concession" below.
</TABLE>
Dealer Concession

Dealer concession will be paid to dealers who initiate and are responsible for
purchases of $1 million or more. The dealer concession may be changed from time
to time and any portion of the sales charge which is not paid to a dealer will
be retained by the Distributor. However, the distributor may offer to pay
dealers up to 100% of the sales charge retained by it. The Distributor, at its
expense, may provide additional promotional incentives to dealers. Such payments
may take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees to attend informational meetings about
the Funds or other special events at recreational type facilities, or items of
material value.

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:

. sales charge waiver;

. quantity discounts and accumulated purchases;

. concurrent purchases;

. signing a 13-month letter of intent;

. using the reinvestment privilege; or

. 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 the National Association of Securities Dealers, Inc.
("NASD") member firms and full-time employees of other financial
intermediaries 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 intermediaries affiliated with NASD member firms whose
full-time employees are eligible to purchase Class A Shares at net asset
value;

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 acts 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 Securities Inc., Deutsche
Bank Trust Company, or any of their 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;

7. Investment advisers or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of such investment
advisers or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker or agent;
8. Retirement and deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in section 401(a),
403(b), or 457 of the Code and "rabbi trusts;"

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

10. 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;

11. 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 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 the shareholder 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 the shareholder's 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 the shareholder's 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 in escrow (in shares) up to the maximum
sales charge of the total amount intended to be purchased 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 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 the shareholder's financial
intermediary of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems 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 the investor's 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 and Class C Shares

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

Conversion of Class B Shares

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 ("IRS") 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 a 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. (U.S. Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (U.S. 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. (U.S. Eastern time) in order for
shares to be purchased at that day's price. With respect to Top 50 US, orders
must be received and transmitted to the Fund by the close of regular trading on
the NYSE (generally 4:00 p.m. U.S. Eastern time). With respect to Top 50 World,
orders must be received and transmitted to the Fund by the later of: (a) the
close of regular trading on the NYSE (generally 4:00 p.m. U.S. Eastern time), or
(b) the latest close of regular trading on any European securities exchange on
which that Fund's portfolio securities may trade. It is the financial
intermediary's responsibility to transmit orders promptly.

The financial intermediary which maintains investor accounts in Class B Shares
or Class C 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.

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: Investors Bank & Trust, Boston,
MA; ABA Number 0110-0143-8; BNF Account Number 570000307; 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; and Nominee or Institution Name. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.

Purchasing Shares by Check

Once a Fund 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 Funds, Inc., P.O. Box 8612, Boston, MA 02266-
8612. Please include an account number on the check. 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 Individual
Retirement Accounts ("IRAs"). 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 other Deutsche Funds. 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."

Class C Shares

Class C shareholders may exchange all or some of their shares for Class C Shares
of the Deutsche Funds. Contact your financial intermediary regarding the
availability of other Class C 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 C 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.

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 realized 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 a broker or financial intermediary by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail to: Deutsche Funds, Inc., c/o Federated Shareholder Services Company, 1099
Hingham Street, Rockland, MA 02370-3317.

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. (U.S. Eastern time), and must be received by the Fund
before that time for shares to be exchanged the same day. With respect to Top 50
US, instructions must be received by the Fund before the close of regular
trading on the NYSE (generally 4:00 p.m. U.S. Eastern time). With respect to Top
50 World, instructions must be received by the Fund by the later of: (a) the
close of regular trading on the NYSE (generally 4:00 p.m. U.S. Eastern time) or
(b) the latest close of regular trading on any European securities exchange on
which that Fund's portfolio securities may trade. This privilege may be modified
or terminated at any time.

REDEMPTION OF SHARES

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. 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. (U.S. Eastern time) and must be transmitted by the broker to a
Fund before 5:00 p.m. (U.S. 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. (U.S. Eastern time) in order for
shares to be redeemed at that day's net asset value. With respect to Top 50 US,
requests must be received by the financial intermediary and transmitted to the
Fund before the close of regular trading on the NYSE (generally 4:00 p.m. U.S.
Eastern time). With respect to Top 50 World, requests must be received by the
financial intermediary and transmitted to the Fund by the later of: (a)the close
of regular trading on the NYSE (generally 4:00 p.m. U.S. Eastern time), or (b)
the latest close of regular trading on any European securities exchange on which
that Fund's portfolio securities may trade. 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 the Fund, provided that Fund has
received a properly completed authorization form. These forms can be obtained
from the Transfer Agent. 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 an 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. Wire
transferred redemptions of less than $5,000 may be subject to additional fees.

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
Funds, Inc., Federated Shareholder Services Company, P.O. Box 8612, Boston, MA
02266-8612. 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.

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 U.S. 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. A
shareholder may apply for participation in this program through such
shareholder's 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 and Class C Shares.

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 C Shares

Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those shares will be charged a contingent deferred
sales charge of 1% 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 C Shares of another Fund, at the time of purchase of the Class
C Shares of the exchanged-from Fund) or (ii) the net asset value of the redeemed
shares at the time of redemption.

Class A Shares, Class B Shares and Class C 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 and
Class C 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 and Class C 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 and Class C 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 Fund shares issued
in an exchange from another Deutsche Fund shares are redeemed is calculated as
if the shareholder had held the shares from the date on which such shareholder
became a shareholder of the exchanged-from Fund. Moreover, the contingent
deferred sales charge will be eliminated with respect to certain redemptions
(see "Elimination of Contingent Deferred Sales Charge").

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 IRA or other retirement plan
to a shareholder who has attained the age of 70/1//\\2; and (3) 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 such shareholder 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.

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.

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.

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
shareholder'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 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 the Funds 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 Funds to institute backup withholding if the IRS determines a shareholder's
TIN is incorrect. Backup withholding is not an additional tax; amounts withheld
may be credited against the shareholder's U.S. federal income tax ability.

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.

Each Fund computes its net asset value once daily at 4:00 p.m. (U.S. Eastern
time) on Monday through Friday, except on the holidays listed under "Net Asset
Value" in the Statement of Additional Information. However, Top 50 World and Top
50 US will compute their respective net asset values at the close of regular
trading on the NYSE (generally 4:00 p.m. U.S. Eastern time), but in the case of
Top 50 World, no earlier than the latest close of regular trading on any
European securities exchange on which that Fund's portfolio securities may
trade.

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 5800 Corporate Drive, Pittsburgh, PA 15237-7010; its toll-free
telephone number is 888-4-DEUTSCHE.

The Articles of Incorporation currently permit the Corporation to issue
17,500,000,000 shares of common stock, par value $0.001 per share, of which
250,000,000 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 11 such series
and two classes of shares for 10 of the Funds known as Class A Shares and Class
B Shares. Five of the Funds also offer Class C Shares and one Fund offers Class
Y 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. Shareholders in each Fund generally
vote in the aggregate and not by class, unless the law expressly requires
otherwise or the Directors determine that the matter to be voted upon affects
only the interests of shareholders of a particular Fund or class of 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 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 a 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 laws 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 the Funds nor their
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. (U.S. 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. (U.S.
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. (U.S. 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. (U.S. Eastern
time) on the following business day of the Portfolio. In the case of Top 50
World Portfolio and the Top 50 US Portfolio, the above-referenced calculations
will be determined as of the close of regular trading on the NYSE (generally
4:00 p.m. U.S. Eastern time), but in the case of Top 50 World Portfolio, no
earlier than the latest close of regular trading on any European securities
exchange on which that Portfolio's portfolio securities may trade.

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.

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. Individual shareholders will be subject to
federal income tax on distributions of net capital gains at capital gains rates
if designated as derived from the Fund's capital gains from property held for
more than one year. 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.

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, such distribution could 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. Individual shareholders will
be subject to federal income tax on net capital gain at capital gains rates in
respect of shares held for more than one year. Net capital gain of a corporate
shareholder is taxed at the same rate as ordinary income. 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 the 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.

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

ADDITIONAL INFORMATION

Each Fund sends to its shareholders annual and semi-annual 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.

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 888-4-DEUTSCHE.

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.

APPENDIX A

Member States of the European Union
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland,
Luxembourg, Netherlands, 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, 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,
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.
Czech Republic
Prague

Hungary
Budapest

Poland*
Warsaw

Slovakia
Bratislavia

Switzerland

Basel, Geneva, Zurich

Exchanges in Non-European countries
Argentina
Buenos Aires

Australia
ASX (Sydney, Hobart, Melbourne, Perth)

Brazil
Sao Paulo, Rio de Janiero

Canada
Toronto, Vancouver, Montreal

Chile
Santiago

Hong Kong
Hong Kong Stock Exchange

India**
Mumbai, Calcutta, Delhi, Madras

Indonesia
Jakarta Stock Exchange

Japan
Tokyo, Osaka, Nagoya, Kyoto, Fukuoto, Niigata, Sapporo, Hiroshima

Malaysia
Kuala Lumpur

Mexico
Mexico City

New Zealand
Wellington Christchurch/Invercargill, Auckland

Peru
Lima

* Top 50 World, Top 50 Europe and Top 50 Asia Only

** Top 50 Asia Only
Philippines
Manila

Singapore
Singapore Stock Exchange

South Africa
Johannesburg

South Korea
Seoul

Taiwan
Taipei

Thailand
Bangkok

USA
American Stock Exchange (AMEX), Boston, Chicago, Cincinnati, New York, New York
Stock Exchange (NYSE), Philadelphia, San Francisco Pacific Stock Exchange, Los
Angeles Pacific Stock Exchange

Regulated Markets in countries which are not members of 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.)

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.

Deutsche Top 50 World
Deutsche Top 50 Europe
Deutsche Top 50 Asia
Deutsche Top 50 US
Investment Manager
Deutsche Fund Management, Inc.
31 West 52nd Street
New York, NY 10019

Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829

Transfer Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Custodian
Investors Bank & Trust Co.
200 Clarendon Street
Boston, MA 02116

GO2179-01 (10/98)

prospectus
dated October 31, 1998
Deutsche European Mid-Cap Fund
(Class A Shares, Class B Shares and Class C Shares) Deutsche German Equity Fund
(Class A Shares, Class B Shares and Class C Shares) Deutsche Japanese Equity
Fund (Class A Shares and Class B Shares) Deutsche Global Bond Fund (Class A
Shares and Class B Shares) Deutsche European Bond Fund (Class A Shares, Class B
Shares and Class C Shares)

An Open-End
Management
Investment
Company

DEUTSCHE EUROPEAN MID-CAP FUND (Class A Shares, Class B Shares and Class C
Shares)

DEUTSCHE GERMAN EQUITY FUND (Class A Shares, Class B Shares and Class C Shares)

DEUTSCHE JAPANESE EQUITY FUND (Class A Shares and Class B Shares)

DEUTSCHE GLOBAL BOND FUND (Class A Shares and Class B Shares)

DEUTSCHE EUROPEAN BOND FUND (Class A Shares, Class B Shares and Class C Shares)

5800 Corporate Drive

Pittsburgh, PA 15237-7010

For information call toll-free 888-4-DEUTSCHE (888-433-8872)

This Prospectus relates to the Deutsche European Mid-Cap Fund ("European Mid-
Cap Fund"), Deutsche German Equity Fund ("German Equity Fund"), Deutsche
Japanese Equity Fund ("Japanese Equity Fund") (collectively, the "Equity
Funds"), 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 Funds, Inc., an open-end management investment company organized as a
Maryland corporation (the "Corporation") (together with the Funds, the "Deutsche
Funds"). The investment objective of the 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 the
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.

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 ("SEC") in a Statement of Additional
Information dated October 31, 1998. This information is incorporated herein by
reference and is available without charge upon written request from the Funds'
transfer agent, Federated Shareholder Services Company, or by calling toll-free
888-4-DEUTSCHE.

Prospectus dated October 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Expense Summary........................................ 2
Financial Highlights................................... 4

The Funds.............................................. 6
Investment Objective, Policies and Restrictions........ 6
Equity Funds.......................................... 6
Bond Funds............................................ 7
All Funds............................................. 7
Risk Factors........................................... 10
Equity Investments.................................... 10
Fixed Income Securities............................... 10
Foreign Investments................................... 10
Emerging Markets (Provesta Portfolio and
Global Bond Portfolio Only)........................... 11
Futures, Options and Warrants......................... 11
Geographic Investment Emphasis........................ 11
Local Securities Markets.............................. 11
Management of the Corporation and the Portfolio Trust.. 12
Manager............................................... 12
Adviser............................................... 12
Historical Performance of Corresponding DWS Funds..... 12
Portfolio Management.................................. 14
Administrator......................................... 14
Operations Agent...................................... 14
Administrative Agent.................................. 15
Distributor........................................... 15
Transfer Agent, Custodian and Fund Accountant......... 16
Year 2000 Statement................................... 16
Expenses.............................................. 16
Portfolio Brokerage................................... 16
Investing in the Funds................................. 17
Class A Shares........................................ 17
Class B Shares........................................ 17
Class C Shares........................................ 17
Other Share Differences............................... 17
Purchase of Shares..................................... 17
Investing in Class A Shares........................... 18
Investing in Class B Shares and Class C Shares........ 20
Conversion of Class B Shares.......................... 20
Purchasing Shares Through a Financial Intermediary.... 20
Purchasing Shares by Wire............................. 20
Purchasing Shares by Check............................ 20
Special Purchase Features.............................. 20
Systematic Investment Program......................... 20
Retirement Plans...................................... 21
Exchange Privilege..................................... 21
Class A Shares........................................ 21
Class B Shares........................................ 21
Class C Shares........................................ 21
Requirements for Exchange............................. 21
Tax Consequences...................................... 21
Making an Exchange.................................... 21
Telephone Instructions................................ 21
Redemption of Shares................................... 21
Redeeming Shares Through a Financial Intermediary..... 21
Redeeming Shares by Telephone......................... 22
Redeeming Shares by Mail.............................. 22
Special Redemption Features............................ 22
Systematic Withdrawal Program......................... 22
Contingent Deferred Sales Charge....................... 22
Class A Shares........................................ 22
Class B Shares........................................ 22
Class C Shares........................................ 22
Class A Shares, Class B Shares and Class C Shares..... 23
Elimination of Contingent Deferred Sales Charge....... 23
Account and Share Information.......................... 23
Certificates and Confirmations........................ 23
Accounts with Low Balances............................ 23
Dividends and Distributions............................ 23
Net Asset Value........................................ 24
Organization........................................... 24
Taxes.................................................. 25
Additional Information................................. 26
Appendix A............................................. 26

</TABLE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses of Class A Shares and Class B Shares of each Fund and Class C
Shares of the European Bond Fund, European Mid-Cap Fund and the German Equity
Fund, and the allocable operating expenses of their corresponding Portfolios.
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."

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Equity Equity and
Funds Bond Funds Bond Funds
Class A Class A Class B Class C
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 5.50% 4.50% None 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) 0.00% 5.00%(2) 1.00%(3)
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."
(2) In the first year, declining to 1.00% in the sixth year and 0% thereafter.

(3) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within one
year of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge."

Expense Table
Annual Operating Expenses (After Expense Reimbursement)
(As a percentage of average net assets)
<TABLE>
<CAPTION>
Equity Funds Bond Funds
Class B Class B
and and
Class A Class C Class A Class C
<S> <C> <C> <C> <C>
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%

</TABLE>

EXPENSE SUMMARY (CONTINUED)

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:

<TABLE>
<CAPTION>
Equity Funds Bond Funds
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 70 $ 75 $ 34 $ 58 $ 72 $ 31
3 Years $103 $106 $ 73 $ 84 $ 97 $ 64
5 Years $137 $148 $126 $113 $133 $110
10 Years $235 $250 $250 $195 $219 $219
An investor would pay the following expenses on a $1,000 investment,
assuming
(1) a 5% annual return and (2) no redemption at the end of each time period:
1 Year $ 70 $ 24 $ 24 $ 58 $ 21 $ 21
3 Years $103 $ 73 $ 73 $ 84 $ 64 $ 64
5 Years $137 $126 $126 $113 $110 $110
10 Years $235 $250 $250 $195 $219 $219
</TABLE>

The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in a
Fund 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 fiscal year ending August 31, 1999 and include (i) the
fees paid to the Administrator, Administrative Agent, Operations Agent, Transfer
Agent, Fund Accounting Agent, and Custodian (as each are defined herein); (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
the expenses of each Fund through at least August 31, 1999 to the extent
necessary to maintain such Fund's ratio of total operating expenses to average
annual net assets at the level indicated above. Absent reimbursement of
expenses, estimated "Other Expenses" for the first fiscal year of the European
Mid-Cap Fund, German Equity Fund, Japanese Equity Fund, Global Bond Fund and the
European Bond Fund were 17.76%, 72.51%, 453.14%, 242.87% and 453.22%,
respectively, and "Total Operating Expenses" were 18.86%, 73.61%, 454.24%,
243.87% and 454.22%, respectively, of the Fund's average daily net assets
attributed to Class A Shares, and 19.61%, 74.36% 454.99%, 0.00% and 454.97%,
respectively, of the Fund's average daily net assets attributed to Class B
Shares, and 19.61%, 74.36%, and 454.99%, respectively, of the European Mid-Cap
Fund, German Equity Fund, and the European Bond Fund average daily net assets
attributed to Class C 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,
investors should note that $1,000 is less than the minimum investment
requirement for each class of each Fund. See "Purchase of Shares." Because the
fees paid under the 12b-1 Plan of the Fund are charged against the assets of the
Fund, long-term shareholders may indirectly pay an amount that is more than the
economic equivalent of the maximum front-end sales charge that such Fund would
be permitted to charge. 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.

FINANCIAL HIGHLIGHTS

Deutsche Funds, Inc.

For the period from Commencement of Operations to August 31, 1998(a)

Selected data for a Class A share of common stock outstanding throughout the
period.

Deutsche Deutsche Deutsche Deutsche Deutsche
European German Japanese Global European
Mid-Cap Equity Equity Bond Bond
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50
Investment operations:
Net investment income (loss) 0.01 0.02 (0.07) 0.26 0.19
Net realized and unrealized gain (loss) on
investments and foreign currency allocated
from
corresponding Deutsche Portfolio 1.71 1.94 (2.58) 0.22 0.58
Increase (decrease) from investment operations 1.72 1.96 (2.65) 0.48 0.77
Distributions to Shareholders:
Dividends from net investment income -- -- -- (0.19) (0.12)
Total distributions -- -- -- (0.19) (0.12)
Net asset value at end of period $14.22 $ 14.46 $ 9.85 $ 12.79 $ 13.15
Total Return (based on net asset value)(c)* 13.76% 15.68% (21.20)% 3.85% 6.17%
Ratios and Supplemental Data:
Net assets, end of period (000's) $2,402 $ 462 $ 14 $ 84 $ 28
Ratios to average net assets:
Expenses(b)** 1.60% 1.60% 1.60% 1.30% 1.30%
Net investment income (loss)(b)** 0.23% 0.75% (1.00)% 3.62% 2.67%
(a) Commencement of operations: 10/17/97 10/17/97 10/20/97 10/15/97 10/17/97
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income (loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses to average net assets** 18.86% 73.61% 454.24% 243.87% 454.22%
Net investment loss to average net assets** (17.03)% (71.26)% (453.64)% (238.95)% (450.25)%

</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value at
commencement of operations, reinvestment of distributions at net asset value
and a sale on the last day of the period, also at net asset value. During the
period, total return would have been lower had certain expenses not been
reimbursed by the Manager. * Not annualized ** Annualized

FINANCIAL HIGHLIGHTS (CONTINUED)

Deutsche Funds, Inc.
For the period from Inception Date to August 31, 1998(a)

Selected data for a Class B share of common stock outstanding throughout the
period.

Deutsche Deutsche Deutsche Deutsche Deutsche
European German Japanese Global European
Mid-Cap Equity Equity Bond Bond
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.50 $ 12.50 $ 12.50 -- $12.50
Investment operations:
Net investment income (loss) (0.02) (0.01) (0.01) -- 0.08
Net realized and unrealized gain (loss) on investments and
foreign currency allocated
from corresponding Deutsche Portfolio 0.07 0.14 (0.38) -- 0.35
Increase (decrease) from investment operations 0.05 0.13 (0.39) -- 0.43
Distributions to Shareholders:
Dividends from net investment income -- -- -- -- (0.11)
Total distributions -- -- -- -- (0.11)
Net asset value at end of period $ 12.55 $ 12.63 $ 12.11 -- $12.82
Total Return (based on net asset value)(c)* 0.40% 1.04% (3.12)% -- 3.44%
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 4,287 $ 278 $ 283 -- $ 85
Ratios to average net assets:
Expenses(b)** 2.35% 2.35% 2.35% -- 2.05%
Net investment income (loss)(b)** (0.70)% (0.19)% (1.25)% -- 2.38%
(a) Inception date: 3/30/98 3/16/98 8/10/98 -- 6/25/98
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income (loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses to average net assets** 19.61% 74.36% 454.99% - 454.97%
Net investment loss to average net assets** (17.96)% (72.20)% (453.89)% - (450.54)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at inception date, reinvestment of distributions at net asset value and a
sale on the last day of the period, also at net asset value. During the
period, total return would have been lower had certain expenses not been
reimbursed by the Manager.
* Not annualized
** Annualized

THE FUNDS

Each Fund is a non-diversified, open-end management investment company and is a
series of shares of common stock of the Corporation (see "Organization"). The
investment objective of the 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 the Japanese Equity Fund
is to achieve high capital appreciation. The investment objective of the Bond
Funds is to achieve steady, high income.

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)("Provesta Portfolio"); the German
Equity Fund invests all of its investable assets in the Investa Portfolio (US
Dollar)("Investa Portfolio"); the Japanese Equity Fund invests all of its
investable assets in the Japanese Equity Portfolio (US Dollar)("Japanese Equity
Portfolio"); the Global Bond Fund invests all of its investable assets in the
Global Bond Portfolio (US Dollar)("Global Bond Portfolio"); and the European
Bond Fund invests all of its investable assets in the European Bond Portfolio
(US Dollar)("European Bond Portfolio"). The Provesta Portfolio, Investa
Portfolio and Japanese Equity Portfolio are referred to herein individually, as
an "Equity Portfolio" and collectively, as the "Equity Portfolios." The Global
Bond Portfolio and the European Bond Portfolio are referred to herein
individually, as a "Bond Portfolio" and collectively, as the "Bond 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").

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 (the "Adviser"). DFM and the Adviser are
indirect subsidiaries of Deutsche Bank AG. Federated Services Company is the
administrator of the Funds (the "Administrator") and the 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, (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 "Directors, Trustees, and Officers" in the Statement of
Additional Information.

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

Equity Funds

The investment objective of the 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 the Japanese Equity Fund
is to achieve high capital appreciation.

The 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"), Poland, 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 $115 million and $19 billion.

The 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 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, which may
include, for the purpose of meeting such 65% minimum, up to 5% of total assets
in 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 the 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) 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.

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

The European Bond Portfolio (US Dollar) 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 bonds issued by European issuers.

Each Bond Portfolio's investment in equity securities will not exceed 25% of
each Portfolio's net assets. For purposes of the foregoing investment policies,
the term "bonds" includes all fixed-income 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 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:

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

Investments in Notes are subject to the Provesta Portfolio's and the 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

Bank Deposits and Money Market Instruments

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.

Options Transactions on Securities

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.

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 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 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. 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 or principally
traded in foreign currencies. The Provesta Portfolio and the Investa Portfolio,
however, do not presently intend to engage in such hedging activity but reserve
the ability to do so under 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. Each Portfolio other than the
Provesta Portfolio and the Investa Portfolio may also enter into foreign
currency transactions to hedge against currencies other than the U.S. dollar.

A Portfolio may purchase or sell foreign currency contracts for forward
delivery. A Portfolio may also 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.

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 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 the Portfolio's total assets, at
the time of such borrowing.

Warrants

Convertible Securities

Short-Term Trading

Investment Restrictions

Fundamental Investment Restrictions

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, which may include, for the purposes of
meeting such 65% minimum, up to 5% of the total assets in securities that grant
the right to acquire Japanese securities. At least 65% of the Global Bond
Portfolio's total assets are invested in bonds 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 bonds issued
by European issuers.

No Portfolio may purchase securities or other obligations of 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, provided that the foregoing limitation shall not apply to investments
in securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

Non-Fundamental Investment Restrictions

Each Portfolio is permitted to borrow money although, as an operating policy,
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.

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

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.

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. Because the Provesta
Portfolio and Investa Portfolio do not presently intend to engage in currency
transactions to hedge currency risks, these Portfolios may be more exposed to
the aforementioned currency risks. See "Foreign Currency Exchange Transactions"
in the Statement of Additional Information.

Emerging Markets (Provesta Portfolio and Global Bond Portfolio Only)

The risks involved in making investments in securities of issuers in emerging
markets have been underscored by recent events. For

example, issuers in the Asia region have experienced currency volatility,
political instability and economic declines in recent months. In response to
these declines, Malaysia has recently enacted currency exchange controls,
restricting the repatriation of assets for a period of one year. Earlier this
year, Russia declared a moratorium on repayment of its own debt, substantially
devalued its currency and suspended the government-sponsored foreign exchange
market for its currency.

Futures, Options and Warrants

Geographic Investment Emphasis

From time to time, due to investment opportunities perceived by the Manager to
be attractive, a Portfolio or a Fund may invest a relatively larger portion of
its assets in the issuers of securities domiciled, or principally traded, in one
or more individual countries. In the event that such geographic investment
emphasis occurs, the relevant Portfolio or Fund could be subject to greater risk
due to unanticipated, and negative, economic events and/or market action in such
country or countries. Since inception, the Provesta Portfolio has had more than
a majority of its assets invested in German securities. This overweighting may
be continued, or be changed, by the Manager in the future based on its
perceptions of market opportunities.

Local Securities Markets
The German Securities Markets
Equity securities trade on the country's eight regional stock exchanges of which
Frankfurt accounted for approximately 78% of the total volume as of August 31,
1998.

August 31, 1998.

Japanese Equity Securities Markets

Listed securities in Japan trade on three main Japanese exchanges (including the
Tokyo Stock Exchange) and five regional stock exchanges, although the Tokyo
Stock Exchange ("TSE") has generally represented over 72% of annual trade of
volume. In 1997, three industrial groups (banks, electric appliances and
transportation equipment) accounted for approximately 41% of the total market
value of TSE stocks. Share prices of companies traded on Japanese stock
exchanges reached historical peaks in 1989 and 1990. Afterwards, stock prices
decreased significantly (with the Nikkei index of 225 stocks at 14309 in 1992).
After stabilizing at low levels during the next six years, new low levels were
once again reached in 1998 (with the Nikkei attaining a new twelve year low of
12879 in early October, 1998).

Japanese banks have experienced, and may continue to experience, substantial
levels of non-performing loans, making the nationalization of some institutions
a significant concern. The decline in stock prices after 1989 has raised the
cost of capital for industry and has reduced the value of stock holdings by
banks and corporations. These effects have, in turn, contributed to the recent
weakness in Japan's economy and could continue to have an adverse impact in the
future.

MANAGEMENT OF THE CORPORATION

AND THE PORTFOLIO TRUST

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 $672.4 billion and 74,100 employees as of
June 30, Deutsche Bank AG is one of Europe's largest universal banks. It is
engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. Deutsche Bank AG and its affiliates
may have commercial lending relationships with companies whose securities may be
held by a Portfolio.

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 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.

Historical Performance of Corresponding DWS Funds

Provesta and Investa are German-registered mutual funds and are referred to
herein as the "DWS Funds." Each of their investment policies and restrictions
are the same as those of the corresponding Provesta and Investa Portfolios
except as noted below. The Provesta and Investa Portfolios (and therefore
indirectly the corresponding European Mid-Cap Fund and German Equity Fund)are
designed to produce investment results substantially the same as the DWS Funds,
Provesta and Investa, respectively. The Provesta and Investa Portfolios seek to
accomplish this by duplicating to the extent practical the portfolio holdings
and transactions of Provesta and Investa. The Adviser manages the investment
operations of each Portfolio with a portfolio manager and a 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.

The European Mid-Cap Fund and its corresponding Provesta Portfolio and the
German Equity Fund and its corresponding Investa Portfolio commenced operations
during October of 1997 and did not have operating or performance history prior
to that time.

Information about the performance of the European Mid-Cap Fund, German Equity
Fund, and the two corresponding DWS Funds--Provesta (corresponding to the
European Mid-Cap Fund) and Investa (corresponding to the German Equity Fund) is
set forth below. Although each Equity Fund and its corresponding Portfolio have
the same investment objectives, policies and restrictions as their corresponding
DWS Fund, and each Portfolio has the same staff of investment professionals and
the same portfolio manager as its corresponding DWS Fund, the DWS Fund 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. The DWS
Funds operate under the German regulatory and tax framework and the Portfolios
operate under the U.S. regulatory and tax framework (each with differing
diversification requirements, specific tax restrictions and investment
limitations). Since the historical performance of the DWS Funds would not have
been materially affected by the differences in the regulation of investment
companies under U.S. federal securities and tax laws and regulations, the
differences in regulation are not expected to result in any material differences
in performance (net of fees) between the DWS Funds and their corresponding
Portfolios going forward. Investors should note that the past performance of the
DWS Funds is not predictive of the future performance of the European Mid-Cap
Fund or the German Equity Fund or their corresponding Portfolios.

The following tables show the total return for the Class A Shares of the
European Mid-Cap Fund and the German Equity Fund, and for securities indices
believed by the Adviser to be suitable for performance comparisons, for the
period from the commencement of operations on October 17, 1997 to August 31,
1998, and the average annualized total return for the Provesta and Investa
Funds, and of securities indices believed by the Adviser to be suitable for
performance comparisons with the Provesta and Investa Portfolios and the
corresponding DWS Funds, for the three-, five- and ten-year periods ended August
31, 1998. The information in the table for the one-year period reflects actual
total returns for the first-year of operations of the European Mid-Cap Fund and
the German Equity Fund. One-year information for the corresponding DWS Funds
appears in a note to the table. These figures, which are unaudited, are based on
the actual gross investment performance of the DWS Funds with the adjustments
indicated below. These figures were not adjusted to reflect the expense ratios
of the Funds (described in the expense table under "Expenses") which are higher
than the actual expenses of the DWS Funds (which bear a combined fund management
and expense fee of 0.50% per annum of net assets). Any such adjustment would
reduce the performance shown below.

PROVESTA(1)
(Corresponding to the Provesta Portfolio and
the European Mid-Cap Fund(6))

Total Return for the Periods Ended August 31, 1998
Historical Performance
European in U.S. Dollars (unaudited)
Mid-Cap Without With CDAX Index MSCI Europe
Fund(6) Sales Load(2) Sales Load(3) (in U.S. Dollars)(4) (in U.S. Dollars)(5)
<S> <C> <C> <C> <C>
10/17/97 to
8/31/98 13.76% 7.48% 14.43% 12.47%
Provesta(1)
- ------------
Three Years 16.02% 13.96% 16.63% 19.36%
Five Years 17.46% 16.21% 15.44% 15.73%
Ten Years 14.52% 13.90 14.07% 12.88%
</TABLE>
(1) Net Assets as of 8/31/98 were DM 1,937 million ($1,096 million). Provesta
commenced investment operations in November 1985. The table reflects the
performance of the Provesta for the three-, five-, and ten-year periods
ended 8/31/98. The performance of the Provesta for the period from 10/17/97
to 8/31/98, was 13.51% without the sales load, and 7.59% with the sales
load.
(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 the Sales Charge."
(3) Adjusted to reflect deduction for the maximum sales charge of 5.50%
applicable to Class A Shares.
(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. "CDAX" is a registered trademark of
Deutsche Bsrse AG.
(5) The Morgan Stanley Capital Market Europe Index ("MSCI Europe") is an
unmanaged, capitalization-weighted securities index which represents 60% of
the market capitalization of 13 European countries.

(6) The table reflects the actual total return of the European Mid-Cap Fund from
the commencement of operations on October 17, 1997.

<TABLE>
<CAPTION>
INVESTA(1)
(Corresponding to the Investa Portfolio and
the German Equity Fund(6))

Total Returns for the Periods Ended August 31, 1998
Historical Performance
German in U.S. Dollars (unaudited)
Equity Without With DAX Index MSCI Germany
Fund(6) Sales Load(2) Sales Load(3) (in U.S. Dollars)(4) (in U.S. Dollars)(5)
<S> <C> <C> <C> <C>
10/17/97 to
8/31/98 15.68% 9.30% 18.32% 18.74%
Investa(1)
- -----------
Three Years 22.50% 20.33% 21.35% 18.18%
Five Years 18.60% 17.34% 18.53% 16.09%
Ten Years 14.78% 14.17% 15.86% 13.97%
</TABLE>
(1) Assets as of 8/31/98 were DM 4,943 million ($2,798 million). Investa
commenced investment operations in December 1956. The table reflects the
performance of the Investa for the three-, five-, and ten-year periods ended
8/31/98. The performance of the Investa for the period from 10/17/97 to
8/31/98, was 23.06% without the sales load, and 16.64% with the sales load.
(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 the Sales Charge."
(3) Adjusted to reflect deduction for the maximum sales charge of 5.50%
applicable to Class A Shares.
(4) DAX is a total rate of return index consisting of 30 selected German stocks
traded on the Frankfurt Stock Exchange. "DAX" is a registered trademark of
Deutsche Bsrse AG.
(5) The Morgan Stanley Capital Market Germany Index ("MSCI Germany") is an
unmanaged, capitalization-weighted securities index which represents 60% of
the market capitalization of Germany.

(6) The table reflects the actual total return of the German Equity Fund from
the commencement of operations on October 17, 1997.

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

In calculating the historical performance of the two DWS Funds shown above, the
first step was to calculate the historical performance according to a
methodology generally acknowledged in Germany and developed by the BVI
Bundesverband Deutscher Investment--Gesellschaften (Association of German Fund
Companies) ("BVI"). 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
is increased by including 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.

Second, for purposes of calculating the equivalent U.S. dollar returns from the
DM returns yielded by the BVI method, DWS made the following adjustments: (1)
the credit for the German corporate tax credit referred to above was subtracted
from the distributions reinvested since it will not be available to shareholders
of the Funds (but the effect of corporate income taxes incurred by the
corresponding DWS Funds was not eliminated); and (2) 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 adjustments resulted in the performance indicated in the first column. The
second column, "With Sales Load," made a further adjustment by reducing the
performance by assuming the maximum sales load was charged to the investor on
the initial investment.

Except as described below in the case of Investa, it is not expected that there
will be any material differences in the securities held by the Provesta and
Investa Portfolios and their corresponding DWS Funds and thus the investment
characteristics of each 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. The Investa
Portfolio may not invest in securities issued by Deutsche Bank AG or its
affiliated persons that are engaged in securities-related businesses, although
Investa was and is permitted to invest in such securities. However, the
elimination of Deutsche Bank AG securities from Investa's portfolio during the
periods shown in the table above would not have materially affected Investa's
performance. Consequently, there is no regulatory or tax difference between
either of the two Portfolios and its corresponding DWS Fund that would be
expected to have a material effect on the investment performance of the
Portfolio as compared to its corresponding DWS Fund.

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 13 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 18.4 billion ($10.1 billion) as of June 30, 1998. Ms. Weisenhorn is based at
DWS Group's office in Frankfurt, Germany.

Hannah Cunliffe is the portfolio manager for the Japanese Equity Portfolio. Ms.
Cunliffe also serves as portfolio manager of the DWS-Japan Fonds, a German
registered mutual fund with the same objective, policies, and restrictions as
the Japanese Equity Portfolio. 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.

Effective January 1, 1999, Henning Gebhardt will become the portfolio manager
for the Japanese Equity Portfolio, taking over the responsibility from Hannah
Cunliffe who will leave the company by the end of 1998. Mr. Gebhardt has two
years of experience as an investment manager, joining DWS in 1996. He was
employed by Bayerische Hypotheken- und Wechselbank from 1995 to 1996, in the
trading department for fixed income and option products. Prior to this, Mr.
Gebhardt studied at the University of Gsttingen, where he received a degree in
economics. Mr. Gebhardt is a member of the Asian Equity team at DWS, responsible
for funds holding assets under management of DM 1 billion ($553 million) as of
June 30, 1998.

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 23.6 billion ($13.1 billion) as of June
30, 1998.

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, Federated Services Company, among
other things (i) prepares, files and maintains the Funds' governing documents,
registration statements and regulatory documents; (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.

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, except that during the first two years of the
agreement 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 Fund's operation and $125,000 for the second year will be paid to
the Operations Agent and the Administrator.

Operations Agent

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, and the Administrator.

Administrative Agent

Distributor

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

Under the Service Plan, each Fund pays to DFM for the provision of certain
services to the holders of Class A Shares, Class B Shares and Class C Shares a
fee computed at an annual rate of 0.25% of the average daily net assets of each
such class of shares. The services 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, 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 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 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.

Transfer Agent, Custodian and Fund Accountant

Federated Shareholder Services Company, Federated Investors Tower, 1001 Liberty
Avenue, 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 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.

Year 2000 Statement

Like other mutual funds and business organizations worldwide, the Funds' service
providers (among them, the Manager, Adviser, Distributor, Administrator,
Custodian and Transfer Agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Funds and their service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and the Funds' service providers have represented to
the Funds that they believe that their systems will be year 2000 compliant when
required. Analysis continues regarding whether the financial impact of
instituting a year 2000 compliant program will have any financial impact on the
Funds' operations.

Expenses

DFM has agreed that it will reimburse each Fund through at least August 31,
1999, 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%, 2.05%, 2.35% and 2.05% of the average annual net assets of Class A
Shares of the Equity Funds, Class B Shares of the Equity Funds, Class A Shares
of the Bond Funds, Class B Shares of the Bond Funds, Class C Shares of the
European Mid-Cap Fund and the German Equity Fund; and Class C Shares of the
European Bond Fund, respectively. There is no assurance that DFM will continue
this reimbursement beyond the specified period.

Expenses of Class A Shares, Class B Shares and Class C Shares

Portfolio Brokerage

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 rate of
portfolio turnover of each Portfolio may exceed that of certain other mutual
funds with the same investment objective. 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. See "Taxes."

From commencement of operations through August 31, 1998, the Provesta Portfolio,
Investa Portfolio, and the Japanese Equity Portfolio paid the following
aggregate brokerage commissions, respectively: $41,688, $21,095, and $16,547. No
brokerage commissions were paid by the Global Bond Portfolio and the European
Bond Portfolio.

INVESTING IN THE FUNDS

Each Fund offers investors 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 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" and except for shares
purchased without a sales charge that are redeemed within one year of purchase
as described under "Contingent Deferred Sales Charge--Class A Shares"). 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:

<TABLE>
<CAPTION>
Contingent
Year of Redemption Deferred
After Purchase Sales Charge
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

</TABLE>
Class C Shares

Class C Shares are sold without an initial sales charge, but a contingent
deferred sales charge of 1.00% will be charged on assets redeemed within the
first full 12 months following purchase.

Other Share Differences

PURCHASE OF SHARES

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
<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested Price
<S> <C> <C> <C>
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 but less
than $2 million None None 1.00%*
$2 million but less
than $5 million None None 0.80%*
$5 million but less
than $50 million None None 0.50%*
$50 million but less
than $100 million None None 0.25%*
$100 million or more None None 0.15%*
</TABLE>
* See "Dealer Concession" below.

Bond Funds
<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested Price
<S> <C> <C> <C>
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% 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 but less
than $2 million None None 1.00%*
$2 million but less
than $5 million None None 0.80%*
$5 million but less
than $50 million None None 0.50%*
$50 million but less
than $100 million None None 0.25%*
$100 million or more None None 0.15%*
</TABLE>
* See "Dealer Concession" below.

Dealer Concession

Dealer concession will be paid to dealers who initiate and are responsible for
purchases of $1 million or more. The dealer concession may be changed from time
to time and any portion of the sales charge which is not paid to a dealer will
be retained by the Distributor. However, the Distributor may offer to pay
dealers up to 100% of the sales charge retained by it. The Distributor, at its
expense, may provide additional promotional incentives to dealers. Such payments
may take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees to attend informational meetings about
the Funds or other special events at recreational type facilities, or items of
material value. 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:

. sales charge waiver;

. quantity discounts and accumulated purchases;

. concurrent purchases;

. signing a 13-month letter of intent;

. using the reinvestment privilege; or

. purchases with proceeds from redemptions of unaffiliated investment company
shares.

Sales Charge Waiver

1. Full-time employees of National Association of Securities Dealers, Inc.
("NASD") member firms and full-time employees of other financial
intermediaries 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 intermediaries affiliated with NASD member firms whose
full-time employees are eligible to purchase Class A Shares at net asset
value;

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 acts 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 Securities, Inc., Deutsche
Bank Trust Company, or any of their 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. Investment advisers or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; and clients of such investment
advisers or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker or agent;
8. Retirement and deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in section 401(a),
403(b), or 457 of the Code and "rabbi trusts,"

9. Qualified separate accounts maintained by an insurance company pursuant to
the laws of any state or territory of the United States;
10. 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;

Quantity Discounts and Accumulated Purchases

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 the shareholder 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%.

Concurrent Purchases

Letter of Intent

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 the shareholder's financial
intermediary of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems the shareholder's 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

Tax Treatment of Reinvestments

Investing in Class B Shares and Class C Shares

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 ("IRS") 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 a 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. (U.S. Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (U.S. 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. (U.S. Eastern time) in order for
shares to be purchased at that day's price. With respect to the Global Bond
Fund, orders must be received and transmitted by the broker to the Fund by the
later of: (a) the close of regular trading on the NYSE (generally 4:00 p.m. U.S.
Eastern time), or (b) the latest close of regular trading on any European
securities exchange on which the Fund's portfolio securities may trade. It is
the financial intermediary's responsibility to transmit orders promptly.

The financial intermediary which maintains investor accounts in Class B Shares
or Class C 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.

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: Investors Bank & Trust, Boston,
MA; ABA Number 0110-0143-8; BNF Account Number 570000307. 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.

Purchasing Shares by Check

SPECIAL PURCHASE FEATURES

Systematic Investment Program

Retirement Plans

Fund shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRAs"). For further details, contact the Funds and consult
a tax adviser.

EXCHANGE PRIVILEGE

Class A Shares

Class B Shares

Class B shareholders may exchange all or some of their shares for Class B Shares
of other Deutsche Funds. 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."

Class C Shares

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.

Requirements for Exchange

Tax Consequences

Making an Exchange

Telephone Instructions

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. (U.S. Eastern time) and must be received by the Fund
before that time for shares to be exchanged the same day. With respect to the
Global Bond Fund, instructions must be received by the Fund by the later of: (a)
the close of regular trading on the NYSE (generally 4:00 p.m. U.S. Eastern
time), or (b) the latest close of regular trading on any European securities
exchange on which the Fund's portfolio securities may trade. This privilege may
be modified or terminated at any time.

REDEMPTION OF SHARES

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. (U.S. Eastern time) and must be transmitted by the broker to a
Fund before 5:00 p.m. (U.S. 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. (U.S. Eastern time) in order for
shares to be redeemed at that day's net asset value. With respect to the Global
Bond Fund, requests must be received by the financial intermediary and
transmitted to the Fund by the later of: (a) the close of regular trading on the
NYSE (generally 4:00 p.m. U.S. Eastern time), or (b) the latest close of regular
trading on any European securities exchange on which the Fund's portfolio
securities may trade. 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 Transfer Agent. 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 an 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.

Redeeming Shares by Mail

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.

SPECIAL REDEMPTION FEATURES

Systematic Withdrawal Program

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 such shareholder's 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 and
Class C Shares.

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

Class B Shares

Class C Shares

Class A Shares, Class B Shares and Class C 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 and
Class C 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 and Class C 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 and Class C 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 Fund shares issued in an exchange
from another Deutsche Fund are redeemed is calculated as if the shareholder had
held the shares from the date on which such shareholder became a shareholder of
the exchanged-from Fund. Moreover, the contingent deferred sales charge will be
eliminated with respect to certain redemptions (see "Elimination of Contingent
Deferred Sales Charge").

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 IRA 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
such shareholder is entitled to such elimination.

ACCOUNT AND SHARE INFORMATION

Certificates and Confirmations

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

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.

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.

NET ASSET VALUE

Each Fund computes its net asset value once daily at 4:00 p.m. (U.S. Eastern
time) on Monday through Friday, except on the holidays listed under "Net Asset
Value" in the Statement of Additional Information. However, the Global Bond Fund
will compute its net asset value at the close of regular trading on the NYSE
(generally 4:00 p.m. U.S. Eastern time) but no earlier than the latest close of
regular trading on any European securities exchange on which the Fund's
portfolio securities may trade.

ORGANIZATION

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 a financial intermediary are deemed
represented at the meeting for purposes of quorum requirements.

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. (U.S. 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. (U.S.
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. (U.S. 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. (U.S. Eastern
time) on the following business day of the Portfolio. In the case of the Global
Bond Portfolio, the above-referenced calculations will be determined as of the
close of regular trading on the NYSE (generally 4:00p.m. U.S. Eastern time) but
no earlier than the latest close of regular trading on any European securities
exchange on which the Portfolio's portfolio securities may trade.

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. Individual shareholders will be subject to
federal income tax on distributions of net capital gains at capital gains rates
if designated as derived from the Fund's capital gains from property held for
more than one year. Dividends and distributions paid by a Fund will not qualify
for the deduction for dividends received by corporations.

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.

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

ADDITIONAL INFORMATION

APPENDIX A

Member States of the European Union
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Ireland,
Luxembourg, Netherlands, Portugal, Sweden, Spain,
United Kingdom
Organization for Economic Cooperation and Development Members

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,
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.

Czech Republic
Prague
Hungary
Budapest
Slovakia
Bratislavia

Poland*
Warsaw
Switzerland
Basel, Geneva, Zurich
Exchanges in Non-European countries**

Argentina
Buenos Aires
Australia
ASX (Sydney, Hobart, Melbourne, Perth)
Brazil
Sao Paulo, Rio de Janiero
Canada
Toronto, Vancouver, Montreal
Chile
Santiago
Hong Kong
Hong Kong Stock Exchange

India***
Mumbai, Calcutta, Delhi, Madras
Indonesia
Jakarta Stock Exchange
Japan
Tokyo, Osaka, Nagoya, Kyoto, Fukuoto, Niigata, Sapporo, Hiroshima
Malaysia
Kuala Lumpur

Mexico
Mexico City
New Zealand
Wellington Christchurch/Invercargill, Auckland
Peru
Lima
Philippines
Manila
Singapore
Singapore Stock Exchange
South Africa
Johannesburg

* European Mid-Cap Fund, Global Bond Fund and European Bond Fund only.
** Not applicable to the European Mid-Cap Fund.
*** Not applicable to the German Equity Fund.

South Korea
Seoul
Taiwan***
Taipei
Thailand
Bangkok
USA
American Stock Exchange (AMEX), Boston, Chicago, Cincinnati, New York, New York
Stock Exchange (NYSE), Philadelphia, San Francisco Pacific Stock Exchange, Los
Angeles Pacific Stock Exchange

Regulated Markets in countries which are not members of 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.)

*European Mid-Cap Fund, Global Bond Fund and European Bond Fund only.
***Not applicable to the German Equity Fund.

Deutsche European Mid-Cap Fund Deutsche German Equity Fund Deutsche Japanese
Equity Fund Deutsche Global Bond Fund Deutsche European Bond Fund Investment
Manager Deutsche Fund Management, Inc. 31 West 52nd Street New York, NY 10019

Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829

Transfer Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Custodian
Investors Bank & Trust Co.
200 Clarendon Street
Boston, MA 02116
GO2179-02 (10/98)

Prospectus dated October 31, 1998

Deutsche Top 50 Europe
Deutsche European Mid-Cap Fund
Deutsche German Equity Fund
Deutsche European Bond Fund

Class A Shares, Class B Shares and Class C Shares

An Open-End
Management
Investment
Company

DEUTSCHE TOP 50 EUROPE

DEUTSCHE EUROPEAN MID-CAP FUND

DEUTSCHE GERMAN EQUITY FUND

DEUTSCHE EUROPEAN BOND FUND

(Class A Shares, Class B Shares and Class C Shares)

5800 Corporate Drive

Pittsburgh, PA 15237-7010

For information call toll-free 888-4-DEUTSCHE (888-433-8872)

This Prospectus relates to the Deutsche Top 50 Europe ("Top 50 Europe"),
Deutsche European Mid-Cap Fund ("European Mid-Cap Fund"), Deutsche German Equity
Fund ("German Equity Fund") (collectively, the "Equity Funds") and the Deutsche
European Bond Fund ("European Bond Fund"). The Equity Funds and the European
Bond Fund are referred to herein individually, as a "Fund" and collectively, as
the "Funds." Each Fund is a non-diversified series of the Deutsche Funds, Inc.,
an open-end management investment company organized as a Maryland corporation
(the "Corporation") (together with the Funds, the "Deutsche Funds"). The
investment objective of Top 50 Europe, 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 the
European Bond Fund 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.

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 ("SEC") in a combined Statement of
Additional Information dated October 31, 1998. This information is incorporated
herein by reference and is available without charge upon written request from
the Funds' transfer agent, Federated Shareholder Services Company, or by calling
toll-free 888-4-DEUTSCHE.

Prospectus dated October 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Expense Summary........................................ 2
Financial Highlights................................... 4

The Funds.............................................. 6
Investment Objective, Policies and Restrictions........ 6
Equity Funds.......................................... 6
European Bond Fund.................................... 7
All Funds............................................. 7
Risk Factors........................................... 10
Equity Investments.................................... 10
Fixed Income Securities............................... 10
Foreign Investments................................... 10
Emerging Markets (Top 50 Europe Portfolio and
Provesta Portfolio Only).............................. 10
Futures, Options and Warrants......................... 11
Local Securities Markets.............................. 11
Geographic Investment Emphasis........................ 11
Management of the Corporation and the Portfolio Trust.. 11
Manager............................................... 11
Adviser............................................... 12
Historical Performance of Corresponding DWS Funds..... 12
Portfolio Management.................................. 14
Administrator......................................... 14
Operations Agent...................................... 14
Administrative Agent.................................. 14
Distributor........................................... 14
Transfer Agent, Custodian and Fund Accountant......... 15
Year 2000 Statement................................... 15
Expenses.............................................. 15
Portfolio Brokerage................................... 16
Investing in the Funds................................. 16
Class A Shares........................................ 17
Class B Shares........................................ 17
Class C Shares........................................ 17
Other Share Differences............................... 17
Purchase of Shares..................................... 17
Investing in Class A Shares........................... 17
Investing in Class B Shares and Class C Shares........ 19
Conversion of Class B Shares.......................... 19
Purchasing Shares Through a Financial Intermediary.... 20
Purchasing Shares by Wire............................. 20
Purchasing Shares by Check............................ 20
Special Purchase Features.............................. 20
Systematic Investment Program......................... 20
Retirement Plans...................................... 20
Exchange Privilege..................................... 20
Class A Shares........................................ 20
Class B Shares........................................ 20
Class C Shares........................................ 20
Requirements for Exchange............................. 20
Tax Consequences...................................... 21
Making an Exchange.................................... 21
Telephone Instructions................................ 21
Redemption of Shares................................... 21
Redeeming Shares Through a Financial Intermediary..... 21
Redeeming Shares by Telephone......................... 21
Redeeming Shares by Mail.............................. 21
Special Redemption Features............................ 22
Systematic Withdrawal Program......................... 22
Contingent Deferred Sales Charge....................... 22
Class A Shares........................................ 22
Class B Shares........................................ 22
Class C Shares........................................ 22
Class A Shares, Class B Shares and Class C Shares..... 22
Elimination of Contingent Deferred Sales Charge....... 22
Account and Share Information.......................... 23
Certificates and Confirmations........................ 23
Accounts with Low Balances............................ 23
Dividends and Distributions............................ 23
Net Asset Value........................................ 23
Organization........................................... 23
Taxes.................................................. 24
Additional Information................................. 25
Appendix A............................................. 25

</TABLE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses of Class A Shares, Class B Shares and Class C Shares of each
Fund, and the allocable operating expenses of their corresponding Portfolios.
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."

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
European
Equity Funds Bond Fund All Funds
Class A Class A Class B Class C
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) 5.50% 4.50% None 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) 0.00%(1) 5.00%(2) 1.00%(3)
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."
(2) In the first year declining to 1.00% in the sixth year and 0% thereafter.

(3) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within one
year of their purchase date. For a more complete description, see "Contingent
Deferred Sales Charge."

Expense Table
Annual Operating Expenses (After Expense Reimbursement)
(As a percentage of average net assets)
<TABLE>
<CAPTION>
Top 50 Equity Funds European
Europe (except Top 50 Europe) Bond Fund
Class B Class B Class B
and and and
Class A Class C Class A Class C Class A Class C
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 0.85% 0.85% 0.75% 0.75%
12b-1 Fees
Service 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Distribution 0.00% 0.75% 0.00% 0.75% 0.00% 0.75%
Other Expenses (after expense reimbursement) 0.35% 0.35% 0.50% 0.50% 0.30% 0.30%
Total Operating Expenses (after expense reimbursement) 1.60% 2.35% 1.60% 2.35% 1.30% 2.05%

</TABLE>

EXPENSE SUMMARY (CONTINUED)

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 Equity Funds European
Europe (except Top 50 Europe) Bond Fund
Class A Class B Class C Class
A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 70 $ 74 $ 34 $ 70 $ 74 $ 34 $ 58 $ 72 $ 31
3 Years $103 $105 $ 73 $103 $105 $ 73 $ 84 $ 97 $ 64
5 Years $137 $148 $126 $137 $148 $126 $113 $133 $110
10 Years $235 $250 $250 $235 $250 $250 $195 $219 $219
An investor would pay the following expenses on
a $1,000 investment, assuming (1) a 5% annual
return and (2) no redemption at the end of each
time period:
1 Year $ 70 $ 24 $ 24 $ 70 $ 24 $ 24 $ 58 $ 21 $ 21
3 Years $103 $ 73 $ 73 $103 $ 73 $ 73 $ 84 $ 64 $ 64
5 Years $137 $126 $126 $137 $126 $126 $113 $110 $110
10 Years $235 $250 $250 $235 $250 $250 $195 $219 $219
</TABLE>

The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in a
Fund 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 fiscal year ending August 31, 1999 and include (i) the
fees paid to the Administrator, Administrative Agent, Operations Agent, Transfer
Agent, Fund Accounting Agent, and Custodian (as each are defined herein); (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
the expenses of each Fund through at least August 31, 1999 to the extent
necessary to maintain such Fund's ratio of total operating expenses to average
annual net assets at the level indicated above. Absent reimbursement of
expenses, estimated "Other Expenses" for the first fiscal year of the Top 50
Europe, European Mid-Cap Fund, German Equity Fund and the European Bond Fund
were 15.28%, 17.76%, 72.51% and 453.22%, respectively, and "Total Operating
Expenses" were 16.53%, 18.86%, 73.61% and 454.22%, respectively, of the Fund's
average daily net assets attributed to Class A Shares, and 17.28%, 19.61%,
74.36% and 454.97%, respectively, of the Fund's average daily net assets
attributed to Class B Shares and Class C 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, investors should note that $1,000 is less than the minimum
investment requirement for each class of each Fund. See "Purchase of Shares."
Because the fees paid under the 12b-1 Plan of the Fund are charged against the
assets of the Fund, long-term shareholders may indirectly pay an amount that is
more than the economic equivalent of the maximum front-end sales charge that
such Fund would be permitted to charge. 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.

FINANCIAL HIGHLIGHTS

Deutsche Funds, Inc.

For the period from Commencement of Operations to August 31, 1998(a)

Selected data for a Class A share of common stock outstanding throughout the
period.

Deutsche Deutsche Deutsche
Deutsche European German European
Top 50 Mid-Cap Equity Bond
Europe Fund Fund Fund
<S> <C> <C> <C> <C>
Net asset value at beginning of period $12.50 $ 12.50 $ 12.50 $ 12.50
Investment operations:
Net investment income 0.02 0.01 0.02 0.19
Net realized and unrealized gain on investments and
foreign currency
allocated from corresponding
Deutsche Portfolio 0.51 1.71 1.94 0.58
Increase from investment operations 0.53 1.72 1.96 0.77
Distributions to Shareholders:
Dividends from net investment income -- -- -- (0.12)
Total distributions -- -- -- (0.12)
Net asset value at end of period $13.03 $ 14.22 $ 14.46 $ 13.15
Total Return (based on net asset value)(c)* 4.24% 13.76% 15.68% 6.17%
Ratios and Supplemental Data:
Net assets, end of period (000's) $1,208 $ 2,402 $ 462 $ 28
Ratios to average net assets:
Expenses(b)** 1.60% 1.60% 1.60% 1.30%
Net investment income (b)** 0.50% 0.23% 0.75% 2.67%
(a) Commencement of operations: 10/2/97 10/17/97 10/17/97 10/17/97
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses to average net assets** 16.53% 18.86% 73.61% 454.22%
Net investment loss to average net assets** (14.43)% (17.03)% (71.26)% (450.25)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value at
commencement of operations, reinvestment of distributions at net asset value
and a sale on the last day of the period, also at net asset value. During the
period, total return would have been lower had certain expenses not been
reimbursed by the Manager. * Not annualized
<TABLE>
<CAPTION>
** Annualized

<S> <C>

</TABLE>

FINANCIAL HIGHLIGHTS (CONTINUED)

Deutsche Funds, Inc.
For the period from Inception Date to August 31, 1998(a)

Selected data for a Class B share of common stock outstanding throughout the
period.

Deutsche Deutsche Deutsche
Deutsche European German European
Top 50 Mid-Cap Equity Bond
Europe Fund Fund Fund
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.50 $ 12.50 $ 12.50 $ 12.50
Investment operations:
Net investment income (loss) (0.01) (0.02) (0.01) 0.08
Net realized and unrealized gain (loss) on investments and foreign
currency
allocated from corresponding
Deutsche Portfolio (0.84) 0.07 0.14 0.35
Increase (decrease) from investment operations (0.85) 0.05 0.13 0.43
Distributions to Shareholders:
Dividends from net investment income -- -- -- (0.11)
Total Distributions -- -- -- (0.11)
Net asset value at end of period $ 11.65 $ 12.55 $ 12.63 $ 12.82
Total Return (based on net asset value)(c)* (6.80)% 0.40% 1.04% 3.44%
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 3,120 $ 4,287 $ 278 $ 85
Ratios to average net assets:
Expenses(b)** 2.35% 2.35% 2.35% 2.05%
Net investment income (loss)(b)** (0.46)% (0.70)% (0.19)% 2.38%
(a) Inception date: 3/30/98 3/30/98 3/16/98 6/25/98
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income (loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses to average net assets** 17.28% 19.61% 74.36% 454.97%
Net investment loss to average net assets** (15.39)% (17.96)% (72.20)% (450.54)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value at
inception date, reinvestment of distributions at net asset value and a sale on
the last day of the period, also at net asset value. During the period, total
return would have been lower had certain expenses not been reimbursed by the
Manager.
* Not annualized
** Annualized

THE FUNDS

Each Fund is a non-diversified, open-end management investment company and is a
series of shares of common stock of the Corporation (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 Top 50 Europe invests all of its investable assets in
the Top 50 Europe Portfolio (US Dollar)("Top 50 Europe Portfolio"); the European
Mid-Cap Fund invests all of its investable assets in the Provesta Portfolio (US
Dollar)("Provesta Portfolio"); the German Equity Fund invests all of its
investable assets in the Investa Portfolio (US Dollar)("Investa Portfolio"); and
the European Bond Fund invests all of its investable assets in the European Bond
Portfolio (US Dollar)("European Bond Portfolio"). The Top 50 Europe Portfolio,
Provesta Portfolio and Investa Portfolio are referred to herein individually, as
an "Equity Portfolio" and collectively, as the "Equity Portfolios." The Equity
Portfolios and the European Bond Portfolio 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").

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 (the "Adviser"). DFM and the Adviser are
indirect subsidiaries of Deutsche Bank AG. Federated Services Company is the
administrator of the Funds (the "Administrator") and the 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 (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 "Directors, Trustees, and Officers" in the Statement of
Additional Information.

INVESTMENT OBJECTIVE, POLICIES

AND RESTRICTIONS

Equity Funds

The investment objective of the Top 50 Europe, 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 Top 50 Europe Portfolio 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"), Poland, Switzerland, Slovakia, Czech Republic,
and Hungary.

The Top 50 Europe 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 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 CEEA, Poland, Switzerland, Slovakia, Czech
Republic, and Hungary.

The Investa Portfolio pursues its (and the German Equity Fund's) investment
objective by investing primarily in the equity securities of German companies.

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, Investa
Portfolio's and Top 50 Europe Portfolio's investment in fixed income securities
(excluding bank deposits and money market instruments) will not exceed 20% of
such 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.

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

The 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 bonds issued by European issuers.

The European Bond Portfolio's investment in equity securities will not exceed
25% of the Portfolio's net assets. For purposes of the foregoing investment
policies, the term "bonds" includes all fixed-income securities.

All Funds
Listed Securities

Unlisted Securities and Notes
Up to a total of 10% of the net assets of each Portfolio may be invested in:

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

Investments in Notes are subject to the Top 50 Europe Portfolio's, Provesta
Portfolio's and the Investa Portfolio's overall 20% 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 rating categories of Moody's
Investors Service, Inc. ("Moody's"), currently Aaa, Aa, A and Baa, or of
Standard & Poor's ("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. Fixed income securities rated Baa by Moody's or BBB
by S&P have speculative characteristics. See Appendix B to the Statement of
Additional Information for a description of these ratings.

Bank Deposits and Money Market Instruments

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.

Options Transactions on Securities

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.

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 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 options, 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.

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 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

The Top 50 Europe Portfolio does not currently intend to engage in foreign
currency transactions as an investment strategy. However, the Top 50 Europe
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

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 total assets, at
the time of such borrowing.

Warrants

Convertible Securities

Short-Term Trading

Investment Restrictions

Fundamental Investment Restrictions

The Top 50 Europe Portfolio will invest at least 65% of its total assets in the
equity securities of issuers located in European countries. 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 European Bond
Portfolio's total assets are invested in bonds issued by European issuers.

No Portfolio may purchase securities or other obligations of 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, provided that the foregoing limitation shall not apply to investments
in securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

Non-Fundamental Investment Restrictions

Each Portfolio is permitted to borrow money although, as an operating policy,
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.

RISK FACTORS

Equity Investments

Fixed Income Securities

Foreign Investments

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. Because the Provesta
Portfolio and the Investa Portfolio do not presently intend to engage in
currency transactions to hedge currency risks, these Portfolios may be more
vulnerable to the aforementioned currency risks. See "Foreign Currency Exchange
Transactions" in the Statement of Additional Information.

Emerging Markets (Top 50 Europe Portfolio and Provesta Portfolio Only)

Futures, Options and Warrants

Local Securities Markets
The German Securities Markets

Equity securities trade on the country's eight regional stock exchanges of which
Frankfurt accounted for approximately 78% of the total volume as of August 31,
1998.

Geographic Investment Emphasis

From time to time, due to investment opportunities perceived by the Manager to
be attractive, a Portfolio or a Fund may invest a relatively larger portion of
its assets in the issuers of securities domiciled, or principally traded, in one
or more individual countries. In the event that such geographic investment
emphasis occurs, the relevant Portfolio or Fund could be subject to greater risk
due to unanticipated, and negative, economic events and/or market action in such
country or countries. Since inception the Provesta Portfolio has had more than a
majority of its assets, and the Top 50 Europe Portfolio has had a substantial
portion of its assets, invested in German securities. This overweighting may be
continued, or be changed, by the Manager in the future based on its perceptions
of market opportunities.

MANAGEMENT OF THE CORPORATION

AND THE PORTFOLIO TRUST

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.

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 such Portfolio, which is computed daily and
paid monthly, equal to 1.00% (Top 50 Europe Portfolio), 0.85% (Provesta
Portfolio and Investa Portfolio) or 0.75% (European Bond Portfolio) of the
average daily net assets of the Portfolio on an annualized basis for the
Portfolio's then-current fiscal year. See also "Expenses."

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 0.75% of the average daily net assets of the
Top 50 Europe Portfolio, 0.60% of the average daily net assets of each of the
Provesta Portfolio and the Investa Portfolio and 0.50% of the average daily net
assets of the European Bond Portfolio on an annualized basis for the Portfolio's
then-current fiscal year.

Historical Performance of Corresponding DWS Funds

Provesta and Investa are German-registered mutual funds and are referred to
herein as the "DWS Funds." Each of their investment policies and restrictions
are the same as those of the corresponding Provesta and Investa Portfolios
except as noted below. The Provesta Portfolio and Investa Portfolio (and
therefore indirectly the corresponding European Mid-Cap Fund and German Equity
Fund)are designed to produce investment results substantially the same as the
DWS Funds, Provesta and Investa, respectively. The Provesta Portfolio and
Investa Portfolio seek to accomplish this by duplicating to the extent practical
the portfolio holdings and transactions of Provesta and Investa. The Adviser
manages the investment operations of each Portfolio with a portfolio manager and
a 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.

Information about the performance of the European Mid-Cap Fund, German Equity
Fund, and the two corresponding DWS Funds--Provesta (corresponding to the
European Mid-Cap Fund) and Investa (corresponding to the German Equity Fund)--is
set forth below. Although each Equity Fund and its corresponding Portfolio have
the same investment objectives, policies and restrictions as their corresponding
DWS Fund, and each 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. The DWS
Funds operate under the German regulatory and tax framework and the Portfolios
operate under the U.S. regulatory and tax framework (each with differing
diversification requirements, specific tax restrictions and investment
limitations). Since the historical performance of the DWS Funds would not have
been materially affected by the differences in the regulation of investment
companies under U.S. federal securities and tax laws and regulations, the
differences in regulation are not expected to result in any material differences
in performance (net of fees) between the DWS Funds and their corresponding
Portfolios going forward. Investors should note that the past performance of the
DWS Funds is not predictive of the future performance of the European Mid-Cap
Fund or the German Equity Fund or their corresponding Portfolios.

The following tables show the total return for the Class A Shares of the
European Mid-Cap Fund and the German Equity Fund, and for securities indices
believed by the Adviser to be suitable for performance comparisons, for the
period from the commencement of operations on October 17, 1997 to August 31,
1998, and the average annualized total return for the Provesta and Investa
Funds, and of securities indices believed by the Adviser to be suitable for
performance comparisons with the Provesta Portfolio, Investa Portfolio and the
corresponding DWS Funds, for the three-, five- and ten-year periods ended August
31, 1998. The information in the table for the one-year period reflects actual
total returns for the first-year of operations of the European Mid-Cap Fund and
the German Equity Fund. One-year information for the corresponding DWS Funds
appears in a note to the table. These figures, which are unaudited, are based on
the actual gross investment performance of the DWS Funds with the adjustments
indicated below. These figures were not adjusted to reflect the expense ratios
of the Funds (described in the expense table under "Expenses") which are higher
than the actual expenses of the DWS Funds (which bear a combined fund management
and expense fee of 0.50% per annum of net assets). Any such adjustment would
reduce the performance shown below.

PROVESTA(1)

(Corresponding to the Provesta Portfolio

and the European Mid-Cap Fund)(6)

Total Return for the Periods Ended August 31, 1998
<TABLE>
<CAPTION>
Historical Performance
European in U.S. Dollars (unaudited) CDAX Index MSCI Europe
Mid-Cap Without With (in U.S. Dollars) (in U.S. Dollars)
Fund(6) Sales Load(2) Sales Load(3) (4) (5)
<S> <C> <C> <C> <C>
10/17/97 to
8/31/98 13.76% 7.48% 14.43% 12.47%
Provesta(1)
Three Years 16.02% 13.96% 16.63% 19.36%
Five Years 17.46% 16.21% 15.44% 15.73%
Ten Years 14.52% 13.90% 14.07% 12.88%
</TABLE>
(1) Net Assets as of 8/31/98 were DM 1,937 million ($1,096 million). Provesta
commenced investment operations in November 1985. The table reflects the
performance of the Provesta for the three-, five-, and ten-year periods ended
8/31/98. The performance of the Provesta for the period from 10/17/97 to
8/31/98, was 13.51% without the sales load, and 7.59% with the sales load.

(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 the Sales Charge."
(3) Adjusted to reflect deduction for the maximum sales charge of 5.50%
applicable to Class A Shares.
(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. "CDAX" is a registered trademark of
Deutsche Bsrse AG.
(5) The Morgan Stanley Capital Market Europe Index ("MSCI Europe") is an
unmanaged, capitalization-weighted securities index which represents 60% of
the market capitalization of 13 European countries.

(6) The table reflects the actual total return of the European Mid-Cap Fund from
the commencement of operations on October 17, 1997.

INVESTA(1)

(Corresponding to the Investa Portfolio

and the German Equity Fund)(6)

Total Return for the Periods Ended August 31, 1998

<TABLE>
<CAPTION>
Historical Performance
German in U.S. Dollars (unaudited) DAX Index MSCI Germany
Equity Without With (in U.S. Dollars) (in U.S. Dollars)
Fund(6) Sales Load(2) Sales Load(3) (4) (5)
<S> <C> <C> <C> <C>
10/17/97 to
8/31/98 15.68% 9.30% 18.32% 18.74%
Investa(1)
Three Years 22.50% 20.33% 21.35% 18.18%
Five Years 18.60% 17.34% 18.53% 16.09%
Ten Years 14.78% 14.17% 15.86% 13.97%
</TABLE>
(1) Assets as of 8/31/98 were DM 4,943 million ($2,798 million). Investa
commenced investment operations in December 1956. The table reflects the
performance of the Investa for the three-, five-, and ten-year periods ended
8/31/98. The performance of the Investa for the period from 10/17/97 to
8/31/98, was 23.06% without the sales load, and 16.64% with the sales load.

(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 the Sales Charge."
(3) Adjusted to reflect deduction for the maximum sales charge of 5.50%
applicable to Class A Shares.
(4) DAX is a total rate of return index consisting of 30 selected German stocks
traded on the Frankfurt Stock Exchange. "DAX" is a registered trademark of
Deutsche Bsrse AG.
(5) The Morgan Stanley Capital Market Germany Index ("MSCI Germany") is an
unmanaged, capitalization-weighted securities index which represents 60% of
the market capitalization of Germany.

(6) The table reflects the actual total return of the German Equity Fund from
the commencement of operations on October 17, 1997.

In calculating the historical performance of the two DWS Funds shown above the
first step was to calculate the historical performance according to a
methodology generally acknowledged in Germany and developed by the BVI
Bundesverband Deutscher Investment--Gesellschaften (Association of German Fund
Companies) ("BVI"). 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
is increased by including 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.

Second, for purposes of calculating the equivalent U.S. dollar returns from the
DM returns yielded by the BVI method, DWS made the following adjustments: (1)the
credit for the German corporate tax credit referred to above was subtracted from
the distributions reinvested since it will not be available to shareholders of
the Funds (but the effect of corporate income taxes incurred by the
corresponding DWS Funds was not eliminated); and (2) 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.

Except as described below in the case of Investa, it is not expected that there
will be any material differences in the securities held by the Provesta
Portfolio and Investa Portfolio and their corresponding DWS Funds and thus the
investment characteristics of each 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. The Investa
Portfolio may not invest in securities issued by Deutsche Bank AG or its
affiliated persons that are engaged in securities-related businesses, although
Investa was and is permitted to invest in such securities. However, the
elimination of Deutsche Bank AG securities from Investa's portfolio during the
periods shown in the table above would not have materially affected Investa's
performance. Consequently, there is no regulatory or tax difference between
either of the two Portfolios and its corresponding DWS Fund that would be
expected to have a material effect on the investment performance of the
Portfolio as compared to its corresponding DWS Fund.

Portfolio Management

Klaus Martini and Elisabeth Weisenhorn are co-senior portfolio managers for the
Top 50 Europe Portfolio. Mr. Martini joined the DWS Group in 1984, where he has
managed European stock funds since 1988. Mr. Martini also serves as senior
portfolio manager for the Top 50 Europa, a German registered mutual fund with
the same investment objective, policies and restrictions as the Top 50 Europe
Portfolio. He is Senior Investment Officer, head of the European equity team,
supervising funds holding assets under management of DM 9.0 billion ($5.0
billion) as of June 30, 1998. Ms. Weisenhorn also serves as 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 13 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 18.4 billion ($10.1
billion) as of June 30, 1998. Mr. Martini and Ms. Weisenhorn are based at DWS
Group's office in Frankfurt, Germany.

Heinz-Wilhelm Fesser is senior portfolio manager for the European Bond
Portfolio. Mr. Fesser also serves as the senior portfolio manager for the Global
Bond Portfolio, an additional series of the Portfolio Trust. 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 23.6
billion ($13.1 billion) as of June 30, 1998.

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, Federated Services Company, among
other things (i) prepares, files and maintains the Funds' governing documents,
registration statements and regulatory documents; (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 Portfolios. In connection
with its responsibilities as Operations Agent, Federated Services Company, among
other things, (i) prepares governing documents, registration statements and
regulatory filings; (ii) performs internal audit examinations; (iii) prepares
expense projections; (iv) prepares materials for 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 and the Administrator.

Administrative Agent

Distributor

Under the Distribution Plan, Class B Shares and Class C 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 and Class
C Shares to finance any activity which is principally intended to result in the
sale of Class B Shares and Class C 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' and Class
C 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.

Under the Service Plan, each Fund pays to DFM for the provision of certain
services to the holders of Class A Shares, Class B Shares and Class C Shares a
fee computed at an annual rate of 0.25% of the average daily net assets of each
such class of shares. The services 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, 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 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 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.

Transfer Agent, Custodian and Fund Accountant

Year 2000 Statement

Like other mutual funds and business organizations worldwide, the Funds' service
providers (among them, the Manager, Adviser, Distributor, Administrator,
Custodian and Transfer Agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Funds and their service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and the Funds' service providers have represented to
the Fund that they believe their systems will be year 2000 compliant when
required. Analysis continues regarding whether the financial impact of
instituting a year 2000 compliant program will have any financial impact on the
Funds' operations.

Expenses

DFM has agreed that it will reimburse each Fund through at least August 31,
1999, 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%,
1.30%, 2.35%, 2.05%, 2.35% and 2.05% of the average annual net assets of Class A
Shares of the Equity Funds, Class A Shares of the European Bond Fund, Class B
Shares of the Equity Funds, Class B Shares of the European Bond Fund, Class C
Shares of the Equity Funds, and Class C Shares of the European Bond Fund,
respectively. There is no assurance that DFM will continue this reimbursement
beyond August 31, 1999.

Expenses of Class A Shares, Class B Shares and Class C Shares

Portfolio Brokerage

Although each Portfolio does not intend to invest for the purpose of seeking
short-term profits, securities in the Portfolios will be sold whenever the
Adviser believes it is appropriate to do so in light of the investment objective
of each Fund and each Portfolio, without regard to the length of time a
particular security may have been held. The estimated annual portfolio turnover
rate for the Top 50 Europe Portfolio, Provesta Portfolio, Investa Portfolio, and
the European Bond Portfolio is generally not expected to exceed 80%, 180%, 80%
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 rate of portfolio turnover of each Portfolio may exceed
that of certain other mutual funds with the same investment objective. 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. See "Taxes."

Deutsche Bank AG or one of its subsidiaries or affiliates ("Deutsche Agent") may
act as one of the agents of the Portfolios in the purchase and sale of portfolio
securities, futures contracts or options on futures contracts when, in the
judgment of the Adviser, that Deutsche Agent will be able to obtain a price and
execution at least as favorable as other qualified brokers. As one of the
primary brokers or futures commission merchants, as applicable. As one of the
primary brokers used by the Portfolios, Deutsche Bank AG or its affiliates
receives brokerage commissions from each Portfolio, and may recieve compensation
for executing futures transactions.

From commencement of operations through August 31, 1998, the Top 50 Europe
Portfolio, Provesta Portfolio, and the Investa Portfolio paid the following
aggregate brokerage commissions, respectively: $39,913, $41,688, and $21,095. No
brokerage commissions were paid by the European Bond Portfolio.

INVESTING IN THE FUNDS

Each Fund offers investors three 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 European Bond Fund at the time
of purchase. 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" and except for shares purchased without a sales charge that are
redeemed within one year of purchase as described under "Contingent Deferred
Sales Charge--Class A Shares"). Certain purchases of Class A Shares are not
subject to a sales charge. See "Purchase of Shares--Investing in Class A
Shares." 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
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
</TABLE>

Class C Shares

Class C Shares are sold without an initial sales charge, but a contingent
deferred sales charge of 1.00% will be charged on assets redeemed within the
first full 12 months following purchase.

Other Share Differences

PURCHASE OF SHARES

Shares of each Fund are sold on days on which the New York Stock Exchange
("NYSE") 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. 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 and may
separately charge a fee for Fund transactions).

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

European Bond Fund

<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested Price
<S> <C> <C> <C>
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% 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 but less
than $2 million None None 1.00%*
$2 million but less
than $5 million None None 0.80%*
$5 million but less
than $50 million None None 0.50%*
$50 million but less
than $100 million None None 0.25%*
$100 million or more None None 0.15%*
</TABLE>
* See "Dealer Concession" below.

Dealer Concession

Dealer concession will be paid to dealers who initiate and are responsible for
purchases of $1 million or more. The dealer concession may be changed from time
to time and any portion of the sales charge which is not paid to a dealer will
be retained by the Distributor. However, the Distributor may offer to pay
dealers up to 100% of the sales charge retained by it. The Distributor, at its
expense, may provide additional promotional incentives to dealers. Such payments
may take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees to attend informational meetings about
the Funds or other special events at recreational type facilities, or items of
material value. 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.

Reducing or Eliminating the Sales Charge
The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:

. sales charge waiver;

. quantity discounts and accumulated purchases;

. concurrent purchases;

. signing a 13-month letter of intent;

. using the reinvestment privilege; or

. purchases with proceeds from redemptions of unaffiliated investment company
shares.

Sales Charge Waiver

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 acts 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 Securities, Inc., Deutsche
Bank Trust Company, or any of their 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;

9. 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

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 the shareholder 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%.

Concurrent Purchases

Letter of Intent

Reinvestment Privilege

Purchases with Proceeds from Redemptions of Unaffiliated Investment Companies

Tax Treatment of Reinvestments

Investing in Class B Shares and Class C Shares

Conversion of Class B Shares

Purchasing Shares Through a Financial Intermediary

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: Investors Bank & Trust, Boston,
MA; ABA Number 0110-0143-8; BNF Account Number 570000307. 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.

Purchasing Shares by Check

SPECIAL PURCHASE FEATURES

Systematic Investment Program

Retirement Plans

Fund shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRAs"). 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. Class A 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. 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."

Class C Shares

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.

Requirements for Exchange

Tax Consequences

Making an Exchange

Telephone Instructions

REDEMPTION OF SHARES

Redeeming Shares Through a Financial Intermediary

Redeeming Shares by Telephone

Redeeming Shares by Mail

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.

SPECIAL REDEMPTION FEATURES

Systematic Withdrawal Program

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 such shareholder's 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 and
Class C Shares.

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

Class B Shares

Class C Shares

Class A Shares, Class B Shares and Class C 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 and
Class C 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 and Class C 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 and Class C 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 Fund shares issued in an exchange
from another Deutsche Fund are redeemed is calculated as if the shareholder had
held the shares from the date on which such shareholder became a shareholder of
the exchanged-from Fund. Moreover, the contingent deferred sales charge will be
eliminated with respect to certain redemptions (see "Elimination of Contingent
Deferred Sales Charge").

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 IRA 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
such shareholder is entitled to such elimination.

ACCOUNT AND SHARE INFORMATION

Certificates and Confirmations

Accounts with Low Balances

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 European Bond Fund. 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.

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.

NET ASSET VALUE

ORGANIZATION

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. Individual shareholders will be subject to
federal income tax on distributions of net capital gains at capital gains rates
if designated as derived from the Fund's capital gains from property held for
more than one year. Dividends and distributions paid by a Fund will not qualify
for the deduction for dividends received by corporations.

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

ADDITIONAL INFORMATION

APPENDIX A

Member States of the European Union

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

Organization for Economic Cooperation and Development Members

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,
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.

Czech Republic
Prague

Hungary
Budapest

Slovakia
Bratislavia

Poland**
Warsaw

Switzerland
Basel, Geneva, Zurich

Exchanges in Non-European countries*

Argentina
Buenos Aires

Australia
ASX (Sydney, Hobart, Melbourne, Perth)

Brazil
Sao Paulo, Rio de Janiero

Canada
Toronto, Vancouver, Montreal

Chile
Santiago

Hong Kong
Hong Kong Stock Exchange

India**

Mumbai, Calcutta, Delhi, Madras

Indonesia
Jakarta Stock Exchange

Japan
Tokyo, Osaka, Nagoya, Kyoto, Fukuoto, Niigata, Sapporo, Hiroshima

Malaysia
Kuala Lumpur

Mexico
Mexico City

New Zealand
Wellington Christchurch/Invercargill, Auckland

Peru
Lima

Philippines
Manila

Singapore
Singapore Stock Exchange

South Africa
Johannesburg

South Korea
Seoul

Taiwan**

Taipei

Thailand
Bangkok

USA
American Stock Exchange (AMEX), Boston, Chicago, Cincinnati, New York, New York
Stock Exchange (NYSE), Philadelphia, San Francisco Pacific Stock Exchange, Los
Angeles Pacific Stock Exchange

Regulated Markets in countries which are not members of 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 Mid-Cap Fund.
** Not applicable to the Deutsche German Equity Fund.

Deutsche Top 50 Europe
Deutsche European Mid-Cap Fund
Deutsche German Equity Fund
Deutsche European Bond Fund

Investment Manager
Deutsche Fund Management, Inc.
31 West 52nd Street
New York, NY 10019

Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829

Transfer Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Custodian
Investors Bank & Trust Co.
200 Clarendon Street
Boston, MA 02116

GO2179-09 (10/98)

prospectus
dated October 31, 1998
Deutsche US Money Market Funds
Class A and Class B Fund and Class Y Fund

An Open-End
Management
Investment
Company

DEUTSCHE US MONEY MARKET FUNDS

5800 Corporate Drive

Pittsburgh, PA 15237-7010

For information call toll-free 888-4-DEUTSCHE (888-433-8872)

The Deutsche US Money Market Fund (the "Class A and Class B Fund") and the
Deutsche Institutional US Money Market Fund (the "Class Y Fund")(collectively,
the "Funds") are series of the Deutsche Funds, Inc., an open-end management
investment company organized as a Maryland corporation (the "Corporation"). The
Class A and Class B Fund offers two classes of shares. Class A Shares are
offered at net asset value; Class B Shares are designed primarily for temporary
investment as part of a special investment program in Class B Shares of other
series of the Corporation (together with the Funds, the "Deutsche Funds"), and
unlike shares of most money market funds, are offered at net asset value, but
with a declining contingent deferred sales charge on redemptions made within six
years.

The investment objective of the Funds is to achieve as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity. Each Fund seeks to maintain a constant net asset value. There can be
no assurance that the investment objective of the Funds will be achieved or that
the net asset value per share will not vary.

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 the US Money Market Portfolio (US Dollar) (the
"Portfolio"), a corresponding diversified open-end management investment
company. The Portfolio is a series of the Deutsche Portfolios (the "Portfolio
Trust") and has the same investment objective as the Funds. The Funds invest in
the Portfolio through the Hub and Spoke/(R)/ master-feeder investment fund
structure. "Hub and Spoke/(R)/" is a registered service mark of Signature
Financial Group, Inc.

The 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 ("SEC") in a Statement of Additional
Information dated October 31, 1998. This information is incorporated herein by
reference and is available without charge from the Funds' transfer agent,
Federated Shareholder Services Company, by calling toll-free 888-4-DEUTSCHE.

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. THERE CAN BE NO ASSURANCE THAT
THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

Prospectus dated October 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Expense Summary........................................ 2

Financial Highlights................................... 4

The Funds.............................................. 5
Investment Objective, Policies and Restrictions........ 5
Loans of Portfolio Securities......................... 6
Reverse Repurchase Agreements......................... 6
Floating and Variable Rate Instruments................ 6
Investment Restrictions............................... 6
Fundamental Investment Restrictions................... 6
Non-Fundamental Investment Restrictions............... 6
Management of the Corporation and the Portfolio Trust.. 7
Manager............................................... 7
Adviser............................................... 7
Administrator......................................... 7
Operations Agent...................................... 8
Administrative Agent.................................. 8
Distributor........................................... 8
Transfer Agent, Custodian and Fund Accountant......... 9

Year 2000 Statement................................... 9

Expenses.............................................. 9

Portfolio Transactions................................ 9

Purchase of Shares..................................... 9
Purchasing Shares Through a Financial Intermediary.... 10
Purchasing Shares by Wire............................. 10
Purchasing Shares by Check............................ 10
Special Purchase Features.............................. 10
Systematic Investment Program......................... 10
Retirement Plans...................................... 10
Conversion of Class B Shares........................... 10
Exchange Privilege..................................... 10
CLASS A SHARES 10
Class B Shares........................................ 10
Class Y Shares........................................ 11
Requirements for Exchange............................. 11
Tax Consequences...................................... 11
Making an Exchange.................................... 11
Telephone Instructions................................ 11
Redemption of Shares................................... 11
Redeeming Shares Through a Financial Intermediary..... 11
Redeeming Shares by Telephone......................... 11
Redeeming Shares by Mail.............................. 11
Special Redemption Features............................ 12
Systematic Withdrawal Program......................... 12
Contingent Deferred Sales Charge....................... 12
Class A Shares........................................ 12
Class B Shares........................................ 12
Class A Shares and Class B Shares..................... 12
Elimination of Contingent Deferred Sales Charge....... 12
Account and Share Information.......................... 12
Certificates and Confirmations........................ 12
Accounts with Low Balances............................ 13
Dividends and Distributions............................ 13
Net Asset Value........................................ 13
Organization........................................... 13
Taxes.................................................. 14
Additional Information................................. 14
Appendix A............................................. 15
</TABLE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses of the Funds and the allocable operating expenses of the
Portfolio. The Directors of the Corporation believe that the aggregate per share
expenses of each Fund and the allocable operating expenses of the 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 the Portfolio, see "Management of the
Corporation and the Portfolio Trust."

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class Y
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None None None
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None None None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) 0.00%(1) 5.00%(2) None
Redemption Fees (as a percentage of amount redeemed, if applicable) None None None
Exchange Fees None None None

</TABLE>
(1) Class A Shares acquired upon the exchange of Class A Shares of another
Deutsche Fund purchased without an initial sales charge either (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."
(2) In the first year declining to 1.00% in the sixth year and 0.00%
thereafter.

Expense Table
Annual Operating Expenses (After Expense Reimbursement)
(As a percentage of average net assets)
<TABLE>
<CAPTION>
Class A Class B Class Y
<S> <C> <C> <C>
Advisory Fees 0.15% 0.15% 0.15%
12b-1 Fees
Service 0.25% 0.25% None
Distribution None 0.75% None
Other Expenses (after expense reimbursement) 0.15% 0.15% 0.05%

Total Operating Expenses (after expense reimbursement) 0.55% 1.30% 0.20%

</TABLE>

EXPENSE SUMMARY(CONTINUED)

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

Class A Class B Class Y
<S> <C> <C> <C>
1 Year $ 6 $ 65 $ 2
3 Years $18 $ 75 $ 6
5 Years $31 $ 95 $11
10 Years $69 $136 $26
</TABLE>
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2)no redemption at the end of each time period:

<TABLE>
<CAPTION>
Class A Class B Class Y
<S> <C> <C> <C>
1 Year $ 6 $ 13 $ 2
3 Years $18 $ 41 $ 6
5 Years $31 $ 71 $11
10 Years $69 $136 $26
</TABLE>

The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in a
Fund 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 fiscal year ending August 31, 1999 and include (i) the
fees paid to the Administrator, Administrative Agent, Operations Agent, Transfer
Agent, Fund Accounting Agent and Custodian (as each are defined below); (ii)
amortization of organizational expenses; and (iii) other usual and customary
expenses of each Fund and the Portfolio. The Manager, Administrator, Operations
Agent, Transfer Agent, Administrative Agent, Fund Accounting Agent and Custodian
have voluntarily agreed to waive a portion of their respective fees and/or
reimburse expenses with respect to the Class Y Fund, for at least the first year
operations, to the extent necessary to maintain such Fund's ratio of total
operating expenses to average annual net assets at the level indicated above.
The Manager has voluntarily agreed to reimburse the expenses of the Class A and
Class B Fund, for at least the first year of operations, to the extent necessary
to maintain the ratio of total operating expenses to average annual net assets
of the Class A Shares and Class B Shares at the respective levels indicated
above. Absent reimbursement of expenses, "Other Expenses" for Class A Shares,
Class B Shares and the Class Y Fund for the Funds' first fiscal year were
43.40%, 0.00% and 0.00%, respectively, and "Total Operating Expenses" were
43.80%, 0.00% and 0.00%, respectively, of the average daily net assets of the
class or Fund. For a more detailed description of contractual fee arrangements,
including waivers and expense reimbursements, see "Management of the Corporation
and the Portfolio Trust" and "Expenses." In connection with the above example,
investors should note that $1,000 is less than the minimum investment
requirement for the Funds. See "Purchase of Shares." Because the fees paid under
the 12b-1 Plan of the Class A and Class B Fund are charged against the assets of
such Fund, long-term shareholders may indirectly pay an amount that is more than
the economic equivalent of the maximum front-end sales charge that such Fund
would be permitted to charge. 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.

FINANCIAL HIGHLIGHTS

Deutsche Funds, Inc.

For the period from Commencement of Operations to August 31, 1998(a)

Selected data for a Class A Share of common stock outstanding throughout the
period.

The following table has been audited by PricewaterhouseCoopers LLP, the Funds'
independent accountants. Their report dated October 16, 1998, on the Funds'
financial statements for the period ended August 31, 1998, and on the following
table for the periods presented, is included in the Funds' Annual Report. This
table should be read in conjunction with the Funds' financial statements and
notes thereto, which is included in the Funds' Annual Report. The Annual Report
is incorporated by reference into and accompanies the Statement of Additional
Information. They may be obtained from the Funds free of charge. Class B Shares
of the Class A and Class B Fund, and the Class Y Fund were not offered to the
public prior to August 31, 1998. <TABLE> <CAPTION>
Deutsche
US
Money Market
Fund
<S> <C> <C>
Net asset value at beginning of period $1.00
Investment operations:
Net investment income 0.02
Distributions to shareholders:
Net investment income (0.02)
Net asset value at end of period $1.00
Total Return (based on net asset value)(c)* 2.46%
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 727
Ratio to average net assets:
Expenses**(b) 0.55%
Net investment income**(b) 5.04%
(a) Commencement of operations: 3/25/98
</TABLE>
(b) Includes the Fund's allocated portion of the corresponding Deutsche
Portfolio's expenses net of expense reimbursements. Had the Manager not
undertaken to reimburse such expenses, the ratios of expenses and net
investment income to average net assets would have been as follows:
<TABLE>
<S> <C>
Expenses to average net assets** 43.80%
Net investment income to average net assets** (38.21)%
</TABLE>
(c) Total Return based on net asset value, excluding the effect of shareholder
transactions charges, assumes a purchase of common stock at net asset value at
commencement of operations, reinvestment of distributions at net asset value
and a sale on the last day of the period, also at net asset value. During the
period, total return would have been lower had certain expenses not been
reimbursed by the Manager. * Not annualized ** Annualized

THE FUNDS

Each Fund is a diversified, open-end management investment company and is a
series of shares of common stock of the Corporation (see "Organization"). The
investment objective of each Fund is to achieve as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity.

Each Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has the same investment objective as
the Funds. The 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 Funds' distributor, Edgewood
Services, Inc. ("Edgewood" or the "Distributor".) The Class A and Class B Fund
requires a minimum initial investment of $5,000. The minimum subsequent
investment for the Class A and Class B Fund is $500. The minimum initial
investment to purchase Class Y Fund shares is $5 million, unless: (a) the
investor has invested at least $5 million in the aggregate among any class of
shares of any Deutsche Fund; or (b) the investor has, in the opinion of the
Manager, adequate intent and availability of funds to reach a future level of
investment of $5 million among any class of shares of the Deutsche Funds. There
is no minimum for subsequent purchases in the Class Y Fund. 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."

Proceeds from the sale of shares of each Fund are invested in the Portfolio,
which then invests its assets in accordance with its investment objective and
policies. Deutsche Bank Securities Investment Management Inc. is the investment
adviser of the Portfolio ("DBSIM" or the "Adviser"). The Manager and the Adviser
are indirect subsidiaries of Deutsche Bank AG. Federated Services Company is the
administrator of the Funds (the "Administrator") and the operations agent of the
Portfolio ("Operations Agent"). IBT Fund Services (Canada) Inc. ("IBT (Canada)")
is the fund accounting agent of the Funds and the Portfolio ("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 Portfolio
("Administrative Agent"). Investors Bank & Trust Company ("IBT") is the
custodian of the Funds and the Portfolio ("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 Portfolio,
respectively. The Directors who are not "interested persons" of the Corporation
as defined in the Investment Company Act of 1940 (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 "Directors, Trustees, and Officers" in the Statement of
Additional Information.

INVESTMENT OBJECTIVE, POLICIES

AND RESTRICTIONS

The investment objective of each Fund is to achieve as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity. The net asset value of each of the Funds' shares is expected to
remain constant at $1.00. However, a contingent deferred sales charge is imposed
under certain circumstances. There can be no assurance that the investment
objective of the Funds will be achieved or that the net asset value per share
will not vary.

Each Fund attempts to achieve its investment objective by investing all its
investable assets in the Portfolio, a series of the Portfolio Trust which has
the same investment objective as the Fund. Since the investment characteristics
and experience of the Funds will correspond directly with those of the
Portfolio, the discussion in this Prospectus focuses on the investments and
investment policies of the Portfolio. The policies employed by the Funds and the
Portfolio in their efforts to achieve this objective are described below.
Additional information about the investment policies of the Funds and the
Portfolio appears in the Statement of Additional Information under "Investment
Objectives and Policies." No Fund represents a complete investment program.

Investments for the Portfolio mature or are deemed to mature within 397 days
from the date of purchase and the average maturity of the investments held by
the Portfolio (on a dollar-weighted basis) is 90 days or less. Currently, the
Portfolio's investment policy is to invest only in money market instruments,
including securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, and bank obligations (such as certificates of deposit,
fixed time deposits and bankers' acceptances), commercial paper, repurchase
agreements, when-issued and delayed delivery securities, bonds issued by U.S.
corporations and obligations of certain supranational organizations and foreign
governments and their agencies and instrumentalities. (See Appendix A for more
information.) The Portfolio may also enter into reverse repurchase agreements.
The Portfolio will not invest more than 5% of its total assets in securities of
a single issuer other than U.S. government securities. All of the assets of the
Portfolio are invested in securities which are rated within the highest rating
category for short-term debt obligations by at least two (unless only rated by
one) nationally recognized statistical rating organizations (e.g., Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's ("S&P")) or, if
unrated, are of comparable quality as determined by or under the direction of
the Portfolio Trust's Board of Trustees.

Although the assets of the Portfolio are invested in high-quality, short-term
securities, the Portfolio is subject to interest rate risk and credit risk which
cause fluctuations in the amount of income accrued on the Portfolio's
investments and therefore in the daily dividend paid by the Funds and, in
extreme cases, could cause the net asset value per share of the Funds to deviate
from $1.00 per share. Interest rate risk refers to the price fluctuation of a
debt security in response to changes in interest rates. In general, short-term
securities have relatively small fluctuations in price in response to general
changes in interest rates. Credit risk refers to the likelihood that an issuer
will default on interest and principal payments. High-quality securities of
short maturities generally have relatively minimal credit risk.

Subject to the restriction on the Funds' and the Portfolio's investments in
securities that are not readily marketable (see "Non-Fundamental Investment
Restrictions"), the Portfolio may purchase restricted securities, including
securities eligible for resale under Rule 144A under the Securities Act of 1933
(the "Securities Act") and commercial paper issued in reliance upon the
exemption from registration in Section 4(2) of the Securities Act. Restricted
securities are securities subject to contractual or legal restrictions on
resale, such as those arising from an issuer's reliance upon certain exemptions
from registration under the Securities Act.

Loans of Portfolio Securities

Loans of portfolio securities up to 30% of the total value of the Portfolio are
permitted and may be entered into for not more than one year. These loans must
be secured continuously by cash or equivalent collateral or by an irrevocable
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned plus accrued income. By lending
securities, the Portfolio's income can be increased by its continuing to receive
income on the loaned securities as well as by the opportunity to receive
interest on the collateral. Any appreciation or depreciation in the market price
of the borrowed securities which occurs during the term of the loan inures to
the Portfolio and its investors.

Reverse Repurchase Agreements

Reverse repurchase agreements may be entered into only with a "primary dealer"
(as designated by the Federal Reserve Bank of New York) in U.S. government
securities. This is an agreement in which the Portfolio agrees to repurchase
securities sold by it at a mutually agreed upon time and price. As such, it is
viewed as the borrowing of money for the Portfolio. Proceeds of borrowings under
reverse repurchase agreements are invested for the Portfolio. This is the
speculative factor known as "leverage." If interest rates rise during the term
of a reverse repurchase agreement utilized for leverage, the value of the
securities to be repurchased for the Portfolio as well as the value of
securities purchased with the proceeds will decline. In these circumstances, the
Portfolio's entering into reverse repurchase agreements may have a negative
impact on the ability to maintain the Funds' net asset value of $1.00 per share.
Proceeds of a reverse repurchase transaction are not invested for a period which
exceeds the duration of the reverse repurchase agreement. A reverse repurchase
agreement is not entered into for the Portfolio if, as a result, more than
one-third of the market value of the Portfolio's total assets, less liabilities
other than the obligations created by reverse repurchase agreements, is engaged
in reverse repurchase agreements. In the event that such agreements exceed, in
the aggregate, one-third of such market value, the amount of the Portfolio's
obligations created by reverse repurchase agreements is reduced within three
days thereafter (not including Sundays and holidays) or such longer period as
the SEC may prescribe. A segregated account with the Custodian is established
and maintained for the Portfolio with liquid assets in an amount at least equal
to the Portfolio's purchase obligations under its reverse repurchase agreements.
Such a segregated account consists of liquid, high grade debt securities marked
to the market daily, with additional liquid assets added when necessary to
insure that at all times the value of such account is equal to the purchase
obligations.

Floating and Variable Rate Instruments

Certain of the obligations that the Portfolio may purchase have a floating or
variable rate of interest. Such obligations bear interest at rates that are not
fixed, but vary with changes in specified market rates or indices, such as the
Prime Rate, and at specified intervals. Certain of such obligations may carry a
demand feature that would permit the holder to tender them back to the issuer at
par value prior to maturity. The Portfolio will limit its purchase of floating
and variable rate obligations to those of the same quality as it otherwise is
allowed to purchase. The Adviser will monitor on an ongoing basis the ability of
an issuer of a demand instrument to pay principal and interest on demand. The
Portfolio's right to obtain payment at par on a demand instrument could be
affected by events occurring between the date the Portfolio elects to demand
payment and the date payment is due that may affect the ability of the issuer of
the instrument to make payment when due, except when such demand instruments
permit same day settlement. To facilitate settlement, these same day demand
instruments may be held in book-entry form at a bank other than the Custodian,
subject to a subcustodian agreement approved by the Portfolio Trust between that
bank and the Custodian.

To the extent that floating and variable rate instruments without demand
features are not readily marketable, they will be subject to the investment
restriction on the Portfolio's investment in securities that are not readily
marketable.

Investment Restrictions

The investment objective of each Fund and the Portfolio, 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 the Fund and the Portfolio. Each Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its investable assets in the Portfolio. References below to the
Portfolio's investment restrictions also include the Funds' investment
restrictions. Any other investment policies of the Portfolio and each Fund
described herein or in the Statement of Additional Information are not
fundamental and may be changed without shareholder approval.

Each Fund will comply with Rule 2a-7 under the 1940 Act, including the
eligibility, diversification, quality and maturity limitations imposed by the
Rule. A more detailed description of Rule 2a-7 is set forth in the Funds'
Statement of Additional Information under "Investment Objective and Policies."

Fundamental Investment Restrictions

Each Fund is classified as "diversified" under the 1940 Act, which means that at
least 75% of its total assets is represented by cash; securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities; and other
securities limited in respect of any one company to an amount no greater than 5%
of the Fund's total assets (other than securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities). As a matter of operating
policy, the foregoing fundamental policy would give the Portfolio the ability to
invest, with respect to 25% of its assets, more than 5% of its assets in any one
issuer only in the event that Rule 2a-7 is amended in the future.

The Portfolio may not purchase securities or other obligations of 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 or guaranteed by the U.S. government or its agencies or
instrumentalities or certificates of deposit, bankers' acceptances or time
deposits.

Non-Fundamental Investment Restrictions

The Portfolio will not purchase more than 10% of the principal amount of all
outstanding debt obligations of any one issuer (other than securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities). In
addition, except for the investment of all of each Fund's assets in the
Portfolio, not more than 10% of the net assets of a Fund or the Portfolio, as
the case may be, may be invested in securities that are subject to legal or
contractual restrictions on resale or in securities which are not readily
marketable, provided that there is no limitation with respect to or arising out
of investment in (a) securities that have legal or contractual restrictions on
resale but have a readily available market or (b) securities that are not
registered under the Securities Act but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the Securities Act.

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 the
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 the Portfolio. The 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 DBSIM as Adviser of the Portfolio.

Manager
The Portfolio Trust has retained the services of DFM as investment manager to
the 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.

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 the 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 the
Portfolio. DFM has delegated this responsibility to the Adviser. DFM retains
overall responsibility, however, for supervision of the investment management
program for the 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 the
Portfolio, DFM receives a fee from the Portfolio, which is computed daily and
may be paid monthly, equal to 0.15% of the average daily net assets of the
Portfolio on an annualized basis for the Portfolio's then-current fiscal year.
DFM has agreed to reimburse certain expenses of the Class A and Class B Fund,
and, together with certain other service providers to the Class Y Fund and the
Portfolio, to waive and/or reimburse expenses of the Class Y Fund, for at least
one year from the respective Fund's commencement of operations. See "Expenses."

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

The Adviser is an SEC-registered investment adviser and an indirect subsidiary
of Deutsche Bank AG, a major German banking institution. The offices of the
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 0.1125% of the average daily net assets of the
Portfolio on an annualized basis for the Portfolio's then-current fiscal year.

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, Federated Services Company, among
other things (i) prepares, files and maintains the Funds' governing documents,
registration statements and regulatory documents; (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.

As Administrator, Federated Services Company receives a fee from each Fund,
which is computed daily and may be paid monthly, at an annual rate, for at least
the Fund's first year of operations, equal to 0.045% of the average daily net
assets of the Fund on an annualized basis for the Fund's then-current fiscal
year. If, after the Funds' first year of operations, the average net assets of
the Portfolio (excluding assets attributable to the Class Y Fund) have not
reached $325 million, the Administrator's fee would be increased to an 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. The Administrator has agreed, together with the Manager and the Adviser
and certain other service providers to the Class Y Fund and the Portfolio, to
waive a portion of their fees and/or reimburse expenses of the Fund under
certain circumstances for at least one year from the Fund's commencement of
investment operations. See "Expenses."

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, Federated Services Company, among
other things (i) prepares governing documents, registration statements and
regulatory filings; (ii) performs internal audit examinations; (iii)prepares
expense projections; (iv) prepares materials for 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 Portfolio, Federated Services Company receives a fee from the
Portfolio, which is computed daily and paid monthly, at an annual rate, for at
least the Portfolio's first year of operations, equal to 0.015% of the average
daily net assets of the Portfolio. If, after the Portfolio's first year of
operations, the average net assets of the Portfolio (excluding assets
attributable to the Class Y Fund) have not reached $325 million, the Operations
Agent's fee would be increased to an annual rate of 0.035% of the average daily
net assets of the Portfolio.

See "Expenses."

Administrative Agent

Under an administration agreement with the Portfolio Trust, IBT (Cayman)
provides certain services to the Portfolio, including (i) filing and maintaining
the governing documents, registration statements and other regulatory filings;
(ii) maintaining a telephone line; (iii) approving annual expense budgets; (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 the investor
register.

Distributor

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 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 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, the Fund makes no
payments to the Distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the Distributor, including amounts expended
by the Distributor in excess of amounts received by it from the 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, the Class A and Class B 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 services 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, 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. Securities laws may require certain
Financial Intermediaries such as depository institutions to register as dealers.

DFM may pay financial intermediaries a shareholder services fee of up to 0.25%
of the amount invested in Class A Shares and Class B 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
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 the Class A and Class B 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 the Funds. IBT, 200 Clarendon Street, Boston, Massachusetts 02116,
acts as the Custodian of the Funds' and the Portfolio's assets. Securities held
for the Portfolio may be held by a sub-custodian bank approved by the Trustees
or Custodian of the Portfolio Trust. IBT (Canada) provides fund accounting
services to the Funds and the Portfolio, including (i) calculation of the daily
net asset value for the Funds and the Portfolio; (ii) monitoring compliance with
investment portfolio restrictions, including all applicable federal securities
and other regulatory requirements; and (iii) monitoring the Funds' and
Portfolio's compliance with the requirements applicable to a regulated
investment company under the Internal Revenue Code (the "Code").

Year 2000 Statement

Like other mutual funds and business organizations worldwide, the Funds' service
providers (among them, the Manager, Adviser, Distributor, Administrator,
Custodian and Transfer Agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Funds and their service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and the Funds' service providers have represented to
the Fund that they believe their systems will be year 2000 compliant when
required. Analysis continues regarding whether the financial impact of
instituting a year 2000 compliant program will have any financial impact on the
Funds' operations.

Expenses

In addition to the fees payable under the various agreements discussed above,
each Fund and the Portfolio are responsible for usual and customary expenses
associated with their 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 the Portfolio, such expenses also include brokerage expenses.

As discussed above, if, after the Portfolio's first year of operations, the
average net assets of the Portfolio have not reached $325 million, Federated
Services Company, as Administrator and Operations Agent to the Funds and the
Portfolio, respectively, may increase the annual rate of its asset-based fees.
See "Administrator" and "Operations Agent." In addition, in such circumstance
IBT and IBT (Canada), as Custodian and Fund Accounting Agent, respectively, to
the Funds and the Portfolio, may increase the asset-based fees charged to the
Portfolio. Such increase by the Custodian and Fund Accounting Agent could add
fees of as much as 0.015% per annum of the average annual assets of the Funds
and the Portfolio.

The Manager, Adviser, Administrator, Operations Agent, Administrative Agent,
Transfer Agent, Fund Accounting Agent and Custodian have voluntarily agreed to
waive a portion of their respective fees and/or reimburse expenses with respect
to the Class Y Fund, for at least the Fund's first year of operations, to the
extent necessary to maintain such Fund's ratio of total operating expenses to
average annual net assets at not more than 0.20%. The Manager has agreed to
reimburse the expenses of the Class A and Class B Fund, for at least the Fund's
first year of operations, to the extent necessary to maintain the ratio of total
operating expenses to average annual net assets of the Class A shares and Class
B shares at 0.55% and 1.30%, respectively. There can be no assurance that the
Manager or the other service providers will continue such fee waivers or
reimbursement beyond one year.

Expenses of Class A Shares and Class B Shares

Holders of Class A Shares and Class B Shares bear their allocable portion of the
Class A and Class B Fund's expenses along with their allocable share of the
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 SEC 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 and Class B Shares; and Directors' fees
incurred as a result of issues related solely to Class A Shares and Class B
Shares.

Portfolio Transactions

Although the Portfolio generally holds investments until maturity and does not
seek profits through short-term trading, it may dispose of any portfolio
security prior to its maturity if it believes such disposition advisable. Money
market securities are generally traded on a net basis and do not normally
involve brokerage commissions or transfer taxes. See "Portfolio Transactions" in
the Statement of Additional Information.

PURCHASE OF SHARES

Shares of the Funds are sold on days on which the New York Stock Exchange
("NYSE") and Federal Reserve Bank are open. Shares of each 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 a Fund, with a minimum initial investment of $5,000
for the Class A and Class B Fund; or $5 million for the Class Y Fund, unless:
(a) the investor has invested at least $5 million in the aggregate among any
class of shares of any Deutsche Fund; or (b) the investor has, in the opinion of
the Manager, adequate intent and availability of funds to reach a future level
of investment of $5 million among any class of shares of Deutsche Funds.
Additional investments in the Class A and Class B Fund can be made for as little
as $500. There is no minimum for subsequent purchases in the Class Y Fund. The
minimum initial investments for retirement plan participants is $1,000 and the
subsequent investment for retirement plan participants is $100. (financial
intermediaries may impose different minimum investment requirements on their
customers and may separately charge a fee for Fund transactions.) Class B Shares
may be purchased, without an initial sales charge but subject to a contingent
deferred sales charge (see "Contingent Deferred Sales Charge"), only upon an
exchange of Class B Shares of another Deutsche Fund.

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.

Purchasing Shares Through a Financial Intermediary

An investor may call a financial intermediary (such as a bank or an investment
dealer, which has a sales agreement with the Distributor) 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 are purchased
at a price equal to their net asset value next determined after receipt of the
purchase order. Purchase orders must be received by the Funds before 3:00 p.m.
(U.S. Eastern time) in order for the purchased shares to be entitled to
dividends declared that day. It is the financial intermediary's responsibility
to transmit orders promptly.

The financial intermediary which maintains investor accounts in Class B Shares
with the Class A and Class B 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").

Purchasing Shares by Wire

Once an account has been established, shares may be purchased by Federal Reserve
wire by calling the Transfer Agent before 3:00 p.m. (U.S. Eastern time). Payment
by federal funds must be received before 4:00 p.m. (U.S. Eastern time) in order
to begin earning dividends that same day. 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: Investors Bank &
Trust, Boston, MA: ABA Number 0110-0143-8; BFN Account Number 570000307; For
Credit to: (Fund Name) (Fund Class); (Fund Number, this number can be found on
the account statement or by contacting the Funds); 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. Questions on wire purchases should be directed to your
account representative at the telephone number listed on your account statement.

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 Funds, Inc., P.O. Box 8612, Boston, MA 02266-8612.
Please include an account number on the check. 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 an account has been opened with the minimum initial investment,
shareholders of Class A Shares 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 the Fund at the net asset value
next determined after an order is received by the Fund. Shareholders should
contact their Financial Intermediary or the Fund directly to participate in this
program.

Retirement Plans

Class A and Class B Fund shares can be purchased as an investment for retirement
plans or Individual Retirement Accounts ("IRAs"). For further details, contact
the Funds and consult a tax adviser.

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 initial purchase date in any
one Deutsche Fund. Until conversion, Class B Shares will have a higher expense
ratio and pay lower dividends than Class A Shares due to the higher 12b-1 fees.

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 plus a sales charge to the
extent required by that Deutsche Fund. Sales charges will not be imposed to the
extent the exchange is made with proceeds from the previous redemption of Class
A Shares of another Deutsche Fund that imposed a sales charge on the initial
purchase. None of the Deutsche Funds imposes any additional fees on exchanges.
However, Class A Shares acquired upon the exchange of Class A Shares of another
Deutsche Fund 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 the original
purchase.

Class B Shares

Class B shareholders may exchange all or some of their shares for Class B Shares
of other Deutsche Funds. 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."

Class Y Shares
Class Y shareholders have no exchange privileges.

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.

Requirements for Exchange

Tax Consequences

An exchange will be treated as a taxable sale for federal income tax purposes
and any gain or loss realized will be subject to the rules applicable to
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 the Class A and
Class B 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 a broker or financial
intermediary by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to: Deutsche Funds, Inc., c/o Federated
Shareholder Services Company, 1099 Hingham Street, Rockland, MA 02370-3317.

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 the
Funds. If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Funds. 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.

REDEMPTION OF SHARES

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 each Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
as described below.

Redeeming Shares Through a Financial Intermediary

Shares of the Funds 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. 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.
Redemption requests must be received by the Fund before 2:00 p.m. (U.S. Eastern
time) in order for redemption proceeds to be disbursed the same day.

Redeeming Shares by Telephone

Shares may be redeemed in any amount by calling a Fund provided the Fund has
received a properly completed authorization form. These forms can be obtained
from the Transfer Agent. 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.
Wire transfer requests received before 2:00 p.m. (U.S. Eastern time) will be
processed the same day, but will not include that day's dividend. Wire transfer
requests received after that time will be processed the following business day,
but will include that day's dividend. The minimum amount for a wire transfer is
$1,000. Proceeds from redeemed shares purchased by check or through an 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.

Redeeming Shares by Mail

Shares may be redeemed in any amount by mailing a written request to: Deutsche
Funds, Inc., c/o Federated Shareholder Services Company, P.O. Box 8612, Boston,
MA 02266-8612. 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.

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 a 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.

The Funds and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Funds may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Funds 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 Class A and Class B Fund
shareholders to receive payments of a predetermined amount 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, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in the Fund. A shareholder may apply for
participation in this program through such shareholder's financial intermediary.

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, but a contingent deferred sales charge of 1% is
imposed on certain redemptions of shares issued in exchange for Class A Shares
of another Deutsche Fund within one year of the original purchase. See "Exchange
Privilege." Any applicable contingent deferred sales charge will be imposed on
the lesser of the net asset value of the shares of the exchanged-from Deutsche
Fund 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 the Class B Shares originally purchased in the
Deutsche Fund from which the shareholder exchanged 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
Class B Shares of the exchanged-from Deutsche Fund, at the time of their
original purchase 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 of the same class
(see "Exchange Privilege"). Any contingent deferred sales charge imposed at the
time the Fund shares issued in an exchange from another Deutsche Fund are
redeemed is calculated as if the shareholder had held the shares from the date
on which such shareholder became a shareholder of the exchanged-from shares.
Moreover, the contingent deferred sales charge will be eliminated with respect
to certain redemptions (see "Elimination of Contingent Deferred Sales Charge").

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 IRA or other retirement plan
to a shareholder who has attained the age of 70/1/U\\2; and (3) involuntary
redemptions by the 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 Directors, employees and sales
representatives of the Corporation, Trustees or employees of the Portfolio
Trust, 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 Directors 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 Funds' 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 such shareholder is entitled
to such elimination.

ACCOUNT AND SHARE INFORMATION

Certificates and Confirmations

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

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.
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.

DIVIDENDS AND DISTRIBUTIONS

All the Funds' net income and short-term capital gains and losses, if any, are
declared as a dividend daily and paid monthly. All shareholders on the record
date are entitled to dividends and 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. The Funds reserve 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 the Funds 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 Funds to
institute backup withholding if the IRS determines a shareholder's TIN is
incorrect. Backup withholding is not an additional tax; amounts withheld may be
credited against the shareholder's U.S. federal income tax liability.

NET ASSET VALUE

The net asset value for shares of each class of the Class A and Class B Fund and
the Class Y Fund is determined by subtracting from the value of each Fund's and
class' total assets (i.e., the value of its investment in the Portfolio and
other assets) the amount of its pro rata share liabilities, including expenses
payable or accrued, and dividing the difference by the number of shares of each
share class or Fund outstanding at the time the determination is made. It is
anticipated that the net asset value per share of each Fund will remain constant
at $1.00. No assurance can be given that this goal can be achieved.

Each Fund computes its net asset value once daily at 3:00 p.m. (U.S. Eastern
time) on Monday through Friday, except on the holidays listed under "Net Asset
Value" in the Statement of Additional Information.

The Portfolio's assets are valued by using the amortized cost method of
valuation. This method involves valuing a security at its cost at the time of
purchase and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. The market value of the securities held by
the Portfolio fluctuates on the basis of the creditworthiness of the issuers of
such securities and on the levels of interest rates generally. While the
amortized cost method provides certainty in valuation, it may result in periods
when the value so determined is higher or lower than the price the Portfolio
would receive if the security were sold. (See "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 5800 Corporate Drive Pittsburgh, PA 15237-7010; its telephone
number is 888-4-DEUTSCHE.

The Articles of Incorporation currently permit the Corporation to issue
17,500,000,000 shares of common stock, par value $0.001 per share, of which
5,000,000,000 shares have been classified as shares of Deutsche US Money Market
Fund and 10,000,000,000 shares have been classified as shares of Deutsche
Institutional US Money Market 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 11 such series and two classes of shares for 10 of the Funds
known as Class A Shares and Class B Shares. Five of the funds also offer Class C
Shares and the Class Y Fund has Class Y Shares.

Each share of a Fund or class shall have equal rights with each other share of
the Fund or class with respect to the assets of the Corporation pertaining to
the 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 each Fund are entitled to one vote for each full share held and
to a fractional vote for fractional shares. Shareholders in each Fund generally
vote in the aggregate and not by class, unless the law expressly requires
otherwise or the Directors determine that the matter to be voted upon affects
only the interests of shareholders of a particular Fund or class of 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, 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.

The Portfolio is a series of the Deutsche Portfolios, a trust organized under
the laws of the State of New York. The Deutsche Portfolios' Declaration of Trust
provides that the Funds and other entities investing in the 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 the Funds nor their
shareholders will be adversely affected by reason of the investment of all of
the assets of the Funds in the Portfolio.

Each investor in the Portfolio, including the Funds, 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. (U.S. Eastern time) on each such business day, the
value of each investor's beneficial interest in the 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. (U.S. 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. (U.S. 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. (U.S. Eastern time) on the
following business day of the Portfolio.

Whenever the Corporation is requested to vote on a matter pertaining to the
Portfolio, the Corporation will vote its shares without a meeting of
shareholders of the Funds if the proposal is one that, if made with respect to
the Funds, would not require the vote of shareholders of the Funds, 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 Funds and, at the meeting of investors in the
Portfolio, the Corporation will cast all of its votes in the same proportion as
the votes of the Funds' 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 the Funds will qualify as a separate "regulated
investment company" under Subchapter M of the Code. As a regulated investment
company, each 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 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, if any) for each taxable year. The Portfolio intends to elect to
be treated as a partnership for U.S. federal income tax purposes. As such, the
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. Although each Fund does not intend to have any long-term
capital gains, distributions of net long-term 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.

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

ADDITIONAL INFORMATION

Each Fund sends to its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports are audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption on 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 the Funds, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the 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 Funds. 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
888-4-DEUTSCHE.

Each Fund may withdraw its investment from the 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.

APPENDIX A

THIS APPENDIX IS INTENDED TO PROVIDE DESCRIPTIONS OF THE SHORT-TERM SECURITIES
THE PORTFOLIO MAY PURCHASE. HOWEVER, OTHER SUCH SECURITIES NOT MENTIONED BELOW
MAY BE PURCHASED FOR THE PORTFOLIO IF THEY MEET THE QUALITY AND MATURITY
GUIDELINES SET FORTH IN THE PORTFOLIO'S INVESTMENT POLICIES.

U.S. Government Securities

Assets of the Portfolio may be invested in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities. These securities,
including those which are guaranteed by federal agencies or instrumentalities,
may or may not be backed by the "full faith and credit" of the United States. In
the case of securities not backed by the full faith and credit of the United
States, it may not be possible to assert a claim against the United States
itself in the event the agency or instrumentality issuing or guaranteeing the
security for ultimate repayment does not meet its commitments. Securities which
are not backed by the full faith and credit of the United States include, but
are not limited to, securities of the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA), the U.S. Postal Service and the Resolution
Funding Corporation (REFCORP), each of which has a limited right to borrow from
the U.S. Treasury to meet its obligations, and securities of the Federal Farm
Credit System, the Federal Home Loan Banks, the Federal Home Loan Mortgage
Corporation (FHLMC) and the Student Loan Marketing Association, the obligations
of each of which may be satisfied only by the individual credit of the issuing
agency. Securities which are backed by the full faith and credit of the United
States include Treasury bills, Treasury notes, Treasury bonds and pass-through
obligations of the Government National Mortgage Association (GNMA), the Farmers
Home Administration and the Export-Import Bank. There is no percentage
limitation with respect to investments in U.S. government securities.

Bank Obligations

Assets of the Portfolio may be invested in U.S. dollar-denominated negotiable
certificates of deposit, fixed time deposits and bankers' acceptances of banks,
savings associations and savings banks organized under the laws of the United
States or any state thereof, including obligations of non-U.S. branches of such
banks, or of non-U.S. banks or their U.S. or non-U.S. branches, provided that in
each case, such bank has more than $500 million in total assets, and has an
outstanding short-term debt issue rated within the highest rating category for
short-term debt obligations by at least two (unless only rated by one)
nationally recognized statistical rating organizations (e.g., Moody's and S&P)
or, if unrated, are of comparable quality as determined by or under the
direction of the Portfolio's Board of Trustees. See "Bond, Note and Commercial
Paper Ratings" in the Statement of Additional Information.

There is no additional percentage limitation with respect to investments in
negotiable certificates of deposit, fixed time deposits and bankers' acceptances
of U.S. branches of U.S. banks and U.S. branches of non-U.S. banks that are
subject to the same regulation as U.S. banks. Since the Portfolio may contain
U.S. dollar-denominated certificates of deposit, fixed time deposits and
bankers' acceptances that are issued by non-U.S. banks and their non-U.S.
branches, the Portfolio may be subject to additional investment risks with
respect to those securities that are different in some respects from obligations
of U.S. issuers, such as currency exchange control regulations, the possibility
of expropriation, seizure or nationalization of non-U.S. deposits, less
liquidity and more volatility in non-U.S. securities markets and the impact of
political, social or diplomatic developments or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on securities held by the Portfolio. If it should become necessary,
greater difficulties might be encountered in invoking legal processes abroad
than would be the case in the United States. Issuers of non-U.S. bank
obligations may be subject to less stringent or different regulations than are
U.S. bank issuers, there may be less publicly available information about a non-
U.S. issuer, and non-U.S. issuers generally are not subject to uniform
accounting and financial reporting standards, practices and requirements
comparable to those applicable to U.S. issuers. Income earned or received by the
Portfolio from sources within countries other than the United States may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may reduce
or eliminate such taxes. All such taxes paid by the Portfolio would reduce its
net income available for distribution to investors (i.e., the Funds and other
investors in the Portfolio); however, the Adviser would consider available
yields, net of any required taxes, in selecting securities of non-U.S. issuers.
While early withdrawals are not contemplated, fixed time deposits are not
readily marketable and may be subject to early withdrawal penalties, which may
vary. Assets of the Portfolio are not invested in obligations of the Manager, or
the Distributor, or in the obligations of the affiliates of any such
organization. Assets of the Portfolio are also not invested in fixed time
deposits with a maturity of over seven calendar days, or in fixed time deposits
with a maturity of from two business days to seven calendar days if more than
10% of the Portfolio's net assets would be invested in such deposits.

Commercial Paper

Assets of the Portfolio may be invested in commercial paper including variable
rate demand master notes issued by U.S. corporations or by non-U.S. corporations
which are direct parents or subsidiaries of U.S. corporations. Master notes are
demand obligations that permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangements between the issuer and a U.S.
commercial bank acting as agent for the payees of such notes. Master notes are
callable on demand, but are not marketable to third parties. Consequently, the
right to redeem such notes depends on the borrower's ability to pay on demand.
At the date of investment, commercial paper must be rated within the highest
rating category for short-term debt obligations by at least two (unless only
rated by one) nationally recognized statistical rating organizations (e.g.,
Moody's and S&P) or, if unrated, are of comparable quality as determined by or
under the direction of the Portfolio's Board of Trustees. Any commercial paper
issued by a non-U.S. corporation must be U.S. dollar-denominated and not subject
to non-U.S. withholding tax at the time of purchase. Aggregate investments in
non-U.S. commercial paper of non-U.S. issuers cannot exceed 10% of the
Portfolio's net assets. Since the Portfolio may contain commercial paper issued
by non-U.S. corporations, it may be subject to additional investment risks with
respect to those securities that are different in some respects from obligations
of U.S. issuers, such as currency exchange control regulations, the possibility
of expropriation, seizure or nationalization of non-U.S. deposits, less
liquidity and more volatility in non-U.S. securities markets and the impact of
political, social or diplomatic developments or the adoption of other foreign
government restrictions which might adversely affect the payment of principal
and interest on securities held by the Portfolio. If it should become necessary,
greater difficulties might be encountered in invoking legal processes abroad
than would be the case in the United States. There may be less publicly
available information about a non-U.S. issuer, and non-U.S. issuers generally
are not subject to uniform accounting and financial reporting standards,
practices and requirements comparable to those applicable to U.S. issuers.

Repurchase Agreements

Repurchase agreements may be entered into for the Portfolio only with a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
government securities. This is an agreement in which the seller (the "Lender")
of a security agrees to repurchase from the Portfolio the security sold at a
mutually agreed upon time and price. As such, it is viewed as the lending of
money to the Lender. The resale price normally is in excess of the purchase
price, reflecting an agreed upon interest rate. The rate is effective for the
period of time assets of the Portfolio are invested in the agreement and is not
related to the coupon rate on the underlying security. The period of these
repurchase agreements is usually short, from overnight to one week, and at no
time are assets of the Portfolio invested in a repurchase agreement with a
maturity of more than one year. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of one year from the
effective date of the repurchase agreement. The Portfolio always receives as
collateral securities which are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. Collateral is marked to the market daily and has
a market value including accrued interest at least equal to 100% of the dollar
amount invested on behalf of the Portfolio in each agreement along with accrued
interest. Payment for such securities is made for the Portfolio only upon
physical delivery or evidence of book-entry transfer to the account of IBT, the
Portfolio's Custodian. If the Lender defaults, the Portfolio might incur a loss
if the value of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the Lender,
realization upon the collateral on behalf of the Portfolio may be delayed or
limited in certain circumstances. A repurchase agreement with more than seven
days to maturity may not be entered into for the Portfolio if, as a result, more
than 10% of the Portfolio's net assets would be invested in such repurchase
agreement together with any other investment for which market quotations are not
readily available.

When-Issued and Delayed Delivery Securities

Securities may be purchased for the Portfolio on a when-issued or delayed
delivery basis. For example, delivery and payment may take place a month or more
after the date of the transaction. The purchase price and the interest rate
payable on the securities are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no interest accrues to the
Portfolio until delivery and payment take place. At the time the commitment to
purchase securities for the Portfolio on a when-issued or delayed delivery basis
is made, the transaction is recorded and thereafter the value of such securities
is reflected each day in determining the Portfolio's net asset value. At the
time of its acquisition, a when-issued security may be valued at less than the
purchase price. Commitments for such when-issued securities are made only when
there is an intention of actually acquiring the securities. To facilitate such
acquisitions, a segregated account with the Custodian is maintained for the
Portfolio with liquid assets in an amount at least equal to such commitments.
Such a segregated account consists of liquid, high grade debt securities marked
to the market daily, with additional liquid assets added when necessary to
insure that at all times the value of such account is equal to the commitments.
On delivery dates for such transactions, such obligations are met from
maturities or sales of the securities held in the segregated account and/or from
cash flow. If the right to acquire a when-issued security is disposed of prior
to its acquisition, the Portfolio could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation. When-
issued commitments for the Portfolio may not be entered into if such commitments
exceed in the aggregate 15% of the market value of the Portfolio's total assets,
less liabilities other than the obligations created by when-issued commitments.

Securities of the World Bank, Other Supranational Organizations and Foreign
Governments

Assets of the Portfolio may also be invested in obligations of the International
Bank of Reconstruction and Development (also known as the World Bank) and
certain other supranational organizations, which are supported by subscribed but
unpaid commitments of member countries. There is no assurance that these
commitments will be undertaken or complied with in the future. The Portfolio
limits its investment in United States dollar-denominated obligations of foreign
governments and their agencies and instrumentalities to the commercial paper and
other short-term notes (or other notes with remaining maturities meeting the
requirements of Rule 2a-7) issued or guaranteed by the governments, or agencies
and instrumentalities thereof, that are members of the OECD (Organisation for
Economic Co-Operation and Development) and those countries whose sovereign
issuances qualify as Eligible Securities.

Other Obligations

Assets of the Portfolio may be invested in bonds, with remaining maturities not
exceeding one year, issued by U.S. corporations which at the date of investment
are rated within the highest rating category for such obligations by at least
two (unless only rated by one) nationally recognized statistical rating
organizations (e.g., Moody's and S&P) or, if unrated, are of comparable quality
as determined by or under the direction of the Portfolio's Board of Trustees.

Deutsche US Money Market Fund
Investment Manager
Deutsche Fund Management, Inc.
31 West 52nd Street
New York, NY 10019

Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829

Transfer Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Custodian
Investors Bank & Trust Co.
200 Clarendon Street
Boston, MA 02116
GO2179-06 (10/98)