BT INVESTMENT FUNDS, 485APOS, 2000-07-17

BT INVESTMENT FUNDS
485APOS, 2000-07-17

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<PAGE>

As filed with the Commission on July 17, 2000
1933 Act File No. 33-07404
1940 Act File No. 811-4760

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Post-Effective Amendment No. 72 X

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 72 X

BT INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)

One South Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices)

(410) 895-3433
(Registrant's Telephone Number)

Daniel O. Hirsch, Esq. Copies to: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, Maryland 21202 787 Seventh Ave
(Name and Address of Agent New York, New York 10019
for Service)

It is proposed that this filing will become effective (check appropriate box):

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On August 31, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] On October 1, 2000, pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Communications Portfolio has also executed this Registration Statement.
<PAGE>

Deutsche Asset Management

Mutual Fund

Prospectus

October 1, 2000

Investment Class

Communications

[Like shares of all mutual funds, 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.]

(Deutsche Bank Group logo)

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Communications - Investment Class

Overview of Communications

00 Goal

00 Core Strategy

00 Investment Policies and Strategies

00 Principal Risks of Investing in the Fund

00 Who Should Consider Investing in the Fund

00 Total Returns, After Fees and Expenses

00 Annual Fund Operating Expenses

A Detailed Look at Communications

00 Objective

00 Strategy

00 Principal Investments

00 Investment Process

00 Risks

00 Management of the Fund

00 Calculating the Fund's Share Price

00 Dividends and Distributions

00 Tax Considerations

00 Buying and Selling Fund Shares

00 Financial Highlights

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OVERVIEW
of Communications - Investment Class

Goal: The Fund seeks to maximize total return.

Core Strategy: The Fund will seek to achieve this objective through a
combination of long-term growth of capital and, to a lesser extent, current
income. The Fund invests primarily in common stocks of companies in the
communications field.

INVESTMENT POLICY AND STRATEGIES

The Fund is a feeder fund that invests all of its assets in a master portfolio
with the same investment objective as the Fund. The Fund, through the master
portfolio, seeks to maximize total return. The Fund seeks this objective through
a combination of long-term growth of capital and, to a lesser extent, current
income. In selecting investments, the Fund's investment adviser and sub-adviser
(the "investment advisers") will choose securities of companies that are engaged
in the research, development, manufacture, or sale of communications services,
technology, equipment, or products. The investment advisers emphasize both
traditional communications companies and those that engage in new information
based applications. The investment advisers believe that investing in a
portfolio of common stocks of companies in the communications field offers an
attractive opportunity for maximizing total return.

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PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

. Your investment in the Fund will vary from day-to-day based on changes in the
prices of the Fund's portfolio securities. The prices of portfolio securities
reflect investor perceptions of the economy, the markets, and the companies
represented in the Fund's portfolio.

. Regulatory or technological change in the communications field may affect the
Fund because it concentrates its investments in communications companies. The
Fund's value may fluctuate more than less concentrated investment portfolios.

. Because the Fund invests in relatively few issuers, the performance of one or
a small number of portfolio holdings can affect overall performance more than
if the Fund were diversified.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking total return over
the long term and you are willing to accept the risks and uncertainties of
investing in the common stocks of companies in the communications field. There
is, of course, no guarantee that the Fund will realize its goal. You should not
consider investing in the Fund if you are pursuing a short-term financial goal,
seeking regular income and stability of principal or cannot tolerate
fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities in the telecommunications
field. Diversifying your investments may improve your long-run investment return
and lower the volatility of your overall investment portfolio.

An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

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TOTAL RETURNS, AFTER FEES AND EXPENSES

Because the Fund is newly offered and has no performance history, the following
bar chart and table show the performance history of Class A shares of the Flag
Investors Communications Fund, Inc. (the "Flag Fund"). Prior to September 30,
2000, the Flag Fund operated as a stand-alone Fund that directly acquired and
managed its own portfolio securities. On September 30, 2000, the Flag Fund's
assets were contributed to the master portfolio, the Communications Portfolio,
into which the Fund will invest all of its assets. In managing the Fund, the
investment adviser employs the same investment objectives, policies and
strategies that were employed in managing the Flag Fund.

The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing year-to-year changes in the
performance of the Flag Fund. The table compares the average annual return of
the Flag Fund with that of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") over one, five and ten years and since the Flag Fund's
inception (January 18, 1984). In both the bar chart and the table, the Flag
Fund's performance is adjusted to reflect an overall expense ratio of the Fund
(1.25%). The S&P 500 Index is a passive measure of stock market returns. It
does not factor in the costs of buying, selling and holding stocks - costs which
are reflected in the Flag Fund's results.

FOOTNOTE: The Standard & Poor's 500 Index is a well-known stock market index
that includes common stocks of 500 companies from several industrial sectors
representing a significant portion of the market value of all stocks publicly
traded in the United States, most of which are traded on the New York Stock
Exchange. Stocks in the S&P 500 Index are weighted according to their market
capitalization (the number of shares outstanding multiplied by the stock's
current price).

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YEAR-BY-YEAR RETURNS

Flag Fund/1/
(each of the last 10 calendar years)

For the period shown in the bar chart, the highest return in any calendar
quarter was ___% (fourth quarter 1998) and its lowest quarterly return was ___%
(third quarter 1999).

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Since Inception
1 Year 5 Years 10 Years (January 18, 1984)/2/
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Flag Fund
----------------------------------------------------------------------------------------------------------
S&P 500 Index
----------------------------------------------------------------------------------------------------------
</TABLE>

----------------
/1/ Flag Fund performance is presented because the Fund has no performance
history. The Flag Fund's performance will differ from the Fund's performance
because each Fund has different shareholder fees and expenses. The Flag Fund is
sold primarily through securities dealers and through financial institutions
that act as shareholder servicing agents. The Flag Fund is sold through a
different prospectus.
/2/ S&P 500 Index performance is calculated from January 31, 1984.

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ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of Communications - Investment
Class.

Expense Example. The example below illustrates the expenses incurred on a
$10,000 investment in the Fund. It assumes that the Fund earned an annual return
of 5% over the periods shown, the Fund's operating expenses remained the same
and you sold your shares at the end of the period.

You may use this hypothetical example to compare the Fund's expense ratio with
other funds./1/ The example does not represent an estimate of future returns or
expenses. Actual costs may be higher or lower.

--------------------
/1/ Information on the annual operating expenses reflects the estimated expenses
for the current fiscal year of both the Fund and the Communications Portfolio,
the master portfolio in which the Fund invests its assets. (A further discussion
of the relationship between the Fund and the master portfolio appears in the
"Organizational Structure" section of this prospectus.)

/2/ The investment adviser and administrator have agreed, for the period from
[October 1, 2000 to April 30, 2001], to waive their fees and reimburse expenses
so that total expenses will not exceed 1.25%.

/3/ For the first year, the expense example takes into account fee waivers and
reimbursements.

/4/ The 2% short-term redemption fee applies to shares redeemed (either by
selling or exchanging into another fund) within 180 days of purchase
(approximately 6 months). The fee is withheld from redemption proceeds and
retained by the Fund.

7
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SHAREHOLDER FEES
(fees paid directly from your investment)

<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases None
-------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None
-------------------------------------------------------------------------------------------------------------------
Maximum Short-Term Redemption Fee (as a percentage of 2.00%/4/
amount redeemed, as applicable)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

ANNUAL FEES AND EXPENSES

<TABLE>
<CAPTION>
--------------------------------------------------------------------
Percentage of Average
Daily Net Assets/1/
--------------------------------------------------------------------
<S> <C>
Management Fees 0.73%
--------------------------------------------------------------------
Distribution and Service (12b-1) Fees None
--------------------------------------------------------------------
Other Fund Operating Expenses 0.67%
--------------------------------------------------------------------
Total Fund Operating Expenses 1.40%
--------------------------------------------------------------------
Less: Fee Waiver or Expense (0.15)%/2/
Reimbursement
--------------------------------------------------------------------
Net Expenses 1.25%
--------------------------------------------------------------------
</TABLE>

EXPENSE EXAMPLE/3/

<TABLE>
<CAPTION>
--------------------------------
1 year 3 years
--------------------------------
<S> <C>
$ $
--------------------------------
</TABLE>

8
<PAGE>

A detailed look
at Communications - Investment Class

OBJECTIVE

The Fund seeks to maximize total return. While we give priority to seeking total
return, we cannot offer any assurance of achieving this objective. The Fund's
objective is not a fundamental policy. We must notify shareholders before we
change it, but we do not require their approval to do so.

STRATEGY

The Fund will seek to achieve its objective through a combination of long-term
growth of capital and, to a lesser extent, current income. The investment
advisers emphasize investment in companies offering products and services that
both support traditional communications and facilitate new information based
applications. The investment advisers believe that worldwide telecommunications
market expansion will create new opportunities for both established and emerging
providers of telecommunications products and services. As a result, we believe
that investing in a portfolio of common stocks of companies in the
communications field offers an attractive opportunity for maximizing total
return.

PRINCIPAL INVESTMENTS

The Fund primarily owns common stocks of companies in the communications field.
The Fund normally focuses on securities of companies that are engaged in the
research, development, manufacture, or sale of communications services,
technology, equipment, or products. It may also invest in convertible securities
rather than investing in a company's common stock.

FOOTNOTE: Convertible securities are bonds or preferred stocks that give
purchasers the right to exchange for a specified number of shares of a company's
common stock at specified prices within a certain period of time. Purchasers
receive regular interest payments until they exercise their exchange right.

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INVESTMENT PROCESS

The investment advisers follow an investment philosophy referred to as "flexible
value". We look for attractive price/value relationships in undervalued stocks
of strong companies with good management. The emphasis is on individual stock
selection, fundamental research, and valuation flexibility, without rigid
constraints.

The investment advisers believe the communications industry offers significant
long-term opportunity for a broad variety of companies to focus on unique
sectors and strategies to create and grow attractive businesses. Beyond
recognizing the potential for profitable business segments within the overall
communications industry, we tend to focus on individual companies.

Factors we assess include:

. Management team

. Market position

. Business strategy

. Catalysts for change

. Attractive valuation

We concentrate investments in those stocks which we believe offer the best
potential return relative to possible risks. We also retain investment positions
for long periods of time as long as the business fundamentals remain favorable
and the valuations do not become excessive. We will sell or reduce holdings if
business fundamentals deteriorate or if the price-to-value relationship becomes
unattractive.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
stock market events. We may invest in money market instruments and other
investment grade income producing securities, investments that would not
ordinarily be consistent with the Fund's objectives. To the extent we adopt
such a position and over the course of its duration, the Fund may not meet its
goal of maximizing total return. We would follow such a strategy only if we
believed the risk of loss in pursuing the Fund's primary investment strategies
outweighed the opportunity for gain.

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FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
that the Fund sells and replaces the value of its securities within a given
period. We expect this Fund to have a low portfolio turnover rate.

RISKS

Below we set forth some of the prominent risks associated with investing in
general and with investing in the telecommunications field.

Primary Risks

Market Risk. Deteriorating market conditions might cause an overall weakness in
the market that reduces the absolute level of stock prices in that market,
including stocks held by the Fund.

Concentration Risk. The Fund concentrates its investments in common stocks of
companies in the communications field. As a result, market price movements,
regulatory or technological changes, or economic conditions affecting companies
in this field will have a significant impact on the Fund's performance.

Diversification Risk. The Fund is non-diversified. This means that it may
invest in securities of a relatively limited number of issuers. Thus, the
performance of one or a small number of portfolio holdings can effect overall
performance more than if the Fund was diversified.

Secondary Risk

Pricing Risk. We value securities in the Fund at their stated market value if
price quotations are available and, if not, by the method that most accurately
reflects their current worth in the judgment of the Board of Trustees. This
procedure implies an unavoidable risk, the risk that our prices are higher or
lower than the prices that the securities might actually command if we sold
them. If we have valued the securities too highly, you may end up paying too
much for Fund

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shares when you buy. If we underestimate their price, you may not receive the
full market value for your Fund shares when you sell.

MANAGEMENT OF THE FUND

Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
the Fund's activities on their behalf.

Investment Adviser. Under the supervision of the Board of Trustees, Investment
Company Capital Corp. ("ICCC"), with headquarters at One South Street,
Baltimore, Maryland 21202, acts as the Fund's investment adviser and Alex. Brown
Investment Management ("ABIM"), with headquarters at One South Street,
Baltimore, Maryland 21202, acts as the Fund's sub-adviser. ICCC is responsible
for supervising and managing all of the Fund's operations, including overseeing
the performance of ABIM. ABIM is responsible for decisions to buy and sell
securities for the Fund, for broker-dealer selection, and for negotiation of
commission rates. Under the investment advisory agreement, the Fund pays the
investment adviser a fee, calculated daily and paid monthly, at the following
annual rates based upon the Portfolio's average daily net assets: 1.00% of the
first $100 million, 0.90% of the next $100 million, 0.85% of the next $100
million, 0.80% of the next $200 million, 0.73% of the next $500 million, 0.68%
of the next $500 million and 0.65% of that portion exceeding $1.5 billion. ICCC
compensates ABIM out of its advisory fee.

ICCC is also the investment adviser to other mutual funds. These funds,
together with the Fund, had approximately $__ billion of net assets as of
[date]. ABIM is a registered investment adviser with approximately $__ billion
under management as of [date].

Portfolio Managers

The following portfolio managers are responsible for the day-to-day management
of the master portfolios:

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Bruce E. Behrens, CFA, Principal of ABIM and Co-manager of the Master
Portfolio.

. Co-manager of Flag Investors Communications Fund, Inc. since inception
(January 18, 1984).

. Joined ABIM in 1981. Prior to that, senior vice president and principal of
Corbyn Associates from 1978 to 1981; vice president at Investment Counselors
of Maryland from 1972 to 1978; and securities analyst at Citibank from 1968 to
1972.

. Member and Former President, Baltimore Securities Analysts Society; and
Member, Financial Analysts Federation.

. 32 years of investment experience.

. BA, Denison University; MBA from University of Michigan.

Liam D. Burke, Vice President of ABIM and Co-manager of the Master Portfolio.

. Co-manager of Flag Investors Communications Fund, Inc. since 1997. Prior to
that, telecommunications analyst for the Flag Fund since 1994.

. Joined ABIM in 1994. Prior to that, telecommunications industry analyst at
Ferris, Baker, Watts, Inc. from 1992 to 1994; managing director of Frey & Co.,
a Baltimore based private investment bank, and eight years in positions that
included operations, regional staff management and national account sales at
AT&T.

. 11 years of investment experience.

. BA, Georgetown University; MBA from The George Washington University

Other Services. Bankers Trust Company provides administrative services -- such
as portfolio accounting, legal services and others -- for the Fund. In addition,
Bankers Trust -- or your service agent -- performs the functions necessary to
establish and maintain your account. In addition to setting up the account and
processing your purchase and sale orders, these functions include:

. keeping accurate, up-to-date records for your individual Fund account;

. implementing any changes you wish to make in your account information;

. processing your requests for cash dividends and distributions from the Fund;

. answering your questions on the Fund's investment performance or
administration;

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<PAGE>

. sending proxy reports and updated prospectus information to you; and

. collecting your executed proxies.

Service agents include brokers, financial advisors or any other bank, dealer or
other institution that has a sub-shareholder servicing agreement with ICCC.
Service agents may charge additional fees to investors only for those services
not otherwise included in the ICCC servicing agreement, such as cash management
or special trust or retirement-investment reporting.

Organizational Structure. The Fund is a "feeder fund" that invests all of its
assets in a "master portfolio," the Communications Portfolio. The Fund and the
master portfolio have the same investment objective. The master portfolio is
advised by ICCC and sub-advised by ABIM. The master portfolio may accept
investments from other feeder funds. The feeders bear the master portfolio's
expenses in proportion to their assets. Each feeder can set its own transaction
minimums, fund-specific expenses and other conditions. This arrangement allows
the Fund's Trustees to withdraw the Fund's assets from the master portfolio if
they believe doing so is in the shareholder's best interests. If the Trustees
withdraw the Fund's assets, they would then consider whether the Fund should
hire its own investment adviser, invest in a different master portfolio, or take
other action.

CALCULATING THE FUND'S SHARE PRICE

We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual
fund shares at the close of regular trading on the New York Stock Exchange every
day the Exchange is open for business.

The formula calls for deducting all of the Fund's liabilities from the total
value of its assets -- the market value of the securities it holds, plus its
cash reserves -- and dividing the result by the number of shares outstanding.

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value

14
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by the method that most accurately reflects their current worth in the judgment
of the Board of Trustees.

The Fund may charge a 2% short-term redemption fee of the value of the shares
redeemed (either by selling or exchanging into another fund) within 180 days
(approximately 6 months) of purchase.

FOOTNOTE: The New York Stock Exchange is open every week, Monday through Friday,
except when the following holidays are celebrated: New Year's Day, Martin Luther
King, Jr. Day (the third Monday in January), Presidents' Day (the third Monday
in February), Good Friday, Memorial Day (the last Monday in May), Independence
Day, Labor Day (the first Monday in September), Thanksgiving Day (the fourth
Thursday in November) and Christmas Day.

PERFORMANCE INFORMATION

The Fund's performance can be used in advertisements that appear in various
publications. It may be compared to the performance of various indices and
investments for which reliable performance data is available. The Fund's
performance may also be compared to average, performance rankings, or other
information prepared by recognized mutual fund statistical services.

DIVIDENDS AND DISTRIBUTIONS

Dividends, if any, are paid quarterly. Capital gains will be distributed at
least annually. We automatically reinvest all dividends and any capital gains,
unless you tell us otherwise.

TAX CONSIDERATIONS

The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based

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on the amount of capital gains distributions and dividends paid out by the Fund.
You owe the taxes whether you receive cash or choose to have distributions and
dividends reinvested. Distributions and dividends usually create the following
tax liability:

Transaction Tax Status
----------- ----------

Income dividends Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, if you sell your Fund shares you may have a capital
gain or loss.

Your sale of shares owned Capital gains or losses
more than one year

Your sale of shares owned Gains treated as ordinary income;
for one year or less losses subject to special rules

The tax considerations for tax deferred accounts or non-taxable entities will be
different.

Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.

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BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By Phone 1-800-730-1313

By Mail Deutsche Asset Management Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By Overnight Mail Deutsche Asset Management Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Our representatives are available to assist you personally Monday through
Friday, 9:00 a.m. to 7:00 p.m., Eastern time each day the New York Stock
Exchange is open for business. You can reach the Service Center's automated
assistance line 24 hours a day, 7 days a week.

Minimum Account Investments

Initial purchase: Minimum amount:

A standard account $2,500
A retirement account $ 500
An automatic investment plan account $1,000

Subsequent Purchase:

A standard account $ 250
A retirement account $ 100
An automatic investment plan account $ 100

Account balance:

Non-retirement account $1,000
Retirement account None

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Shares of the Fund may be purchased without regard to the investment minimums by
employees of Deutsche Bank AG, any of its affiliates or subsidiaries, their
spouses and minor children, and Directors or Trustees of any investment company
advised or administered by Deutsche Bank AG, or any of its affiliates or
subsidiaries, their spouses and minor children. The Fund and its service
providers reserve the right to, from time to time, at their discretion, waive or
reduce the investment minimums.

How to Open Your Fund Account

By Mail: Complete and sign the account application that accompanies this
prospectus. (You may obtain additional applications by calling
the Service Center.) Mail the completed application along with a
check payable to Communications Fund -- _____ to the Service
Center. The addresses are shown under "Contacting the Mutual Fund
Service Center of Deutsche Asset Management".

By Wire: Call the Service Center to set up a wire account.

Please note that your account cannot become activated until we receive a
completed application via mail or fax.

If this is your first investment through a tax deferred retirement plan, such as
an IRA, you will need a special application form. This form is available to from
your service agent, or by calling the Deutsche Assetment Management Service
Center at 1-800-730-1313.

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Two Ways to Buy and Sell Shares in Your Account

MAIL:
Buying: Send your check, payable to the Fund, to the Service Center. The
addresses are shown in this section under "Contacting the Mutual Fund Service
Center of Deutsche Asset Management." Be sure to include the fund number and
your account number (see your account statement) on your check. Please note that
we cannot accept starter checks or third-party checks. If you are investing in
more than one fund, make your check payable to "Deutsche Asset Management Funds"
and include your account number, the names and numbers of the funds you have
selected, and the dollar amount or percentage you would like invested in each
fund.

Selling: To sell by mail send a signed letter to the Service Center with your
name, your fund number and account number, the fund's name, and either the
number of shares you wish to sell or the dollar amount you wish to receive. You
must leave at least $1,000 invested in your account to keep it open (except for
retirement accounts). Unless exchanging into another Deutsche Asset Management
fund, you must submit a written authorization to sell shares in a retirement
account.

WIRE:
Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your service agent must call the Service Center at 1-
800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a trade
confirmation number. Instruct your bank to send payment by wire using the wire
instructions noted below. All wires must be received by 4:00 p.m. Eastern time
the next business day.

Routing No.: 021001033

Attn: Deutsche Asset Management/ Mutual Funds

DDA No.: 00-226-296

FBO: (Account name)
(Account number)

Credit: Communications - Investment Class ([fund number])

Refer to your account statement for the account name, number and fund number.

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Selling: You may sell shares by wire only if your account is authorized to do
so. For your protection, you may not change the destination bank account over
the phone. To sell by wire, contact your service agent or the Service Center at
1-800-730-1313. Inform the Service Center representative of the amount of your
redemption and receive a trade confirmation number. The minimum redemption by
wire is $1,000. We must receive your order by 4:00 p.m. Eastern time to wire
your account the next business day.

Short-Term Redemption Fee

The Fund may charge a 2% short-term redemption fee of the value of the shares
redeemed (either by selling or exchanging into another fund) within 180 days
(approximately 6 months) of purchase. This fee will compensate the Fund for
expenses directly related to redemption of Fund shares, discourage short-term
investments in the Fund and facilitate portfolio management. The short-term
redemption fee is withheld from redemption proceeds and retained by the Fund.

The short-term redemption fee does not apply to:

. exchanges into another class of shares of the Fund;

. shares acquired through reinvestment of dividends and other distributions;

. shares of the Fund in an account which is closed by us because it fails to
meet minimum balance requirements; and

. shares held in an account of certain retirement plans or profit sharing plans,
due to certain economies associated with these accounts.

The fee may apply to shares held through omnibus accounts. The Fund reserves
the right to impose short-term redemption fees on its shares at any time if
warranted by the Fund's future costs of processing redemptions from these
accounts. This fee is not a deferred sales charge and is not a commission. The
fee is paid to the Fund.

The Fund will use the "first-in, first out" method to determine your holding
period. Under this method, the date of redemption or exchange will be compared
with the earliest purchase date of

20
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shares held in your account. If your holding period is less than 180 days, the
short-term redemption fee will be assessed on the current net asset value of
those shares.

Important Information about Buying and Selling Shares

. You may buy and sell shares of a fund through authorized service agents as
well as directly from us. The same terms and conditions apply. Specifically,
once you place your order with a service agent, it is considered received by
the Service Center. It is then your service agent's responsibility to
transmit the order to the Service Center by the next business day. You should
contact your service agent if you have a dispute as to when your order was
placed with the fund. Your service agent may charge a fee for buying and
selling shares for you.

. You may place orders to buy and sell over the phone by calling your service
agent or the Service Center at 1-800-730-1313. If you pay for shares by check
and the check fails to clear, or if you order shares by phone and fail to pay
for them by 4:00 p.m. Eastern time the next business day, we have the right
to cancel your order, hold you liable or charge you or your account for any
losses or fees a fund or its agents have incurred. To sell shares you must
state whether you would like to receive the proceeds by wire or check.

. After we or your service agent receive your order, we buy or sell your shares
at the next price calculated on a day the New York Stock Exchange is open for
business.

. We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. We do not accept starter
or third-party checks.

. The payment of redemption proceeds (including exchanges) for shares of a fund
recently purchased by check may be delayed for up to 15 calendar days while
we wait for your check to clear.

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day and no
later than seven days.

. We reserve the right to close your account on 30 days' notice if it fails to
meet minimum balance requirements for any reason other than a change in
market value.

. If you sell shares by mail or wire, you may be required to obtain a signature
guarantee. Please contact your service agent or the Service Center for more
information.

21
<PAGE>

. We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").

. We do not issue share certificates.

. Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your service agent or the
Service Center for more information.

. During periods of heavy market activity, you may have trouble reaching the
Service Center by telephone. If this occurs, you should make your request by
mail.

. We reserve the right to reject purchases of Fund shares (including exchanges)
for any reason. We will reject the purchases if we conclude that the
purchaser may be investing only for the short-term or to profit from day to
day fluctuations in the Fund's share price.

. We reserve the right to reject the purchases of Fund shares (including
exchanges) or to suspend or postpone redemptions at times when both the New
York Stock Exchange and the Fund's custodian are closed.

. Account Statements and Fund Reports: We or your service agent will furnish
you with a written confirmation of every transaction that affects your
account balance. You will also receive monthly statements reflecting the
balances in your account. We will send you a report every six months on your
fund's overall performance, its current holdings and its investing
strategies.

. Exchange Privilege. You can exchange all or part of your shares for shares of
another Deutsche Asset Management mutual fund up to four times a year (from
the date of your first exchange). When you exchange shares, you are selling
shares in one fund to purchase shares in another. Before buying shares
through an exchange, you should be sure to obtain a copy of that fund's
prospectus and read it carefully. You may complete exchanges over the phone
only if your account is authorized to do so. You will receive a written
confirmation of each transaction from the Service Center or your service
agent.

Please note the following conditions:

. The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.

. You may make the exchange by phone, if your account has the exchange by
phone feature, letter or wire.

. If you are maintaining a taxable account, you may have to pay taxes on the
exchange.

22
<PAGE>

Special Shareholder Services

To help make investing with us as easy as possible, and to help you build your
investment, we offer the following special services. You can obtain further
information about these programs by calling the Service Center at 1-800-730-
1313.

. Systematic Investments: You can make regular investments of $100 or more
automatically from your checking account bi-weekly, monthly, quarterly, or
semi-annually.

. Regular Withdrawals: You can arrange regular monthly, quarterly, semi-annual
and annual sales of shares in your account. The minimum transaction is $100,
and the account must have a balance of at least $10,000 to qualify.

23
<PAGE>

FINANCIAL HIGHLIGHTS

Because the Fund is newly offered and has no performance history, financial
highlights are presented for Class A shares of the Flag Investors Communications
Fund, Inc. (the "Flag Fund"). Prior to September 30, 2000, the Flag Fund
operated as a stand-alone Fund that directly acquired and managed its own
portfolio securities. On September 30, 2000, the Flag Fund's assets were
contributed to the master portfolio, the Communications Portfolio, into which
the Fund will invest all of its assets.

The table below provides a picture of the Flag Fund's financial performance for
the past five years. The information selected reflects financial results for a
single Class A share of the Fund. The total returns in the tables represent the
rate of return that an investor would have earned on an investment in the Flag
Fund, assuming reinvestment of all dividends and distributions. This information
has been audited by _____________________, whose report, along with the Flag
Fund's financial statements, is included in the Flag Fund's annual report. The
annual report of the Flag Fund is available free of charge by calling the
Service Center at 1-800-730-1313.

[Financial Highlights for Flag Fund for semi-annual period ending June 30, 2000
and annual periods ending December 31, 1999, 1998, 1997, 1996 and 1995.]

24
<PAGE>

This page intentionally left blank.

25
<PAGE>

[BACK COVER]

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.

You can find more detailed information about the Fund in the current Statement
of Additional Information, dated October 1, 2000 which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference into this Prospectus. To receive your free copy of the
Statement of Additional Information, the annual or semi-annual report, or if you
have questions about investing in the Fund, write to us at:

Deutsche Asset Management Service Center
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number:
1-800-730-1313

You can find reports and other information about the Fund on the EDGAR Database
on the SEC website (http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by electronic request at
[email protected] or by writing to the Public Reference Section of the SEC,
------------------
Washington, D.C. 20549-0102. Information about each Fund, including its
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the SEC at 202-942-8090.

Communications - Investment Class
BT Investment Funds Cusip #[cusip]
[Product Code]
Distributed by: 811-4760
ICC Distributors, Inc.

26
<PAGE>

Deutsche Asset Management

Mutual Fund

Prospectus

October 1, 2000

Institutional Class

Communications

(Deutsche Bank Group logo)

1
<PAGE>

Communications - Institutional Class

Overview of Communications

00 Goal

00 Core Strategy

00 Investment Policies and Strategies

00 Principal Risks of Investing in the Fund

00 Who Should Consider Investing in the Fund

00 Total Returns, After Fees and Expenses

00 Annual Fund Operating Expenses

A Detailed Look at Communications

00 Objective

00 Strategy

00 Principal Investments

00 Investment Process

00 Risks

00 Management of the Fund

00 Calculating the Fund's Share Price

00 Dividends and Distributions

00 Tax Considerations

00 Buying and Selling Fund Shares

00 Financial Highlights

2
<PAGE>

OVERVIEW
of Communications - Institutional Class

Goal: The Fund seeks to maximize total return.

INVESTMENT POLICY AND STRATEGIES

3
<PAGE>

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

. Because the Fund invests in relatively few issuers, the performance of one or
a small number of portfolio holdings can affect overall performance more than
if the Fund were diversified.

WHO SHOULD CONSIDER INVESTING IN THE FUND

The Fund requires a minimum investment of $250,000. You should consider
investing in the Fund if you are seeking total return over the long term and you
are willing to accept the risks and uncertainties of investing in the common
stocks of companies in the communications field. There is, of course, no
guarantee that the Fund will realize its goal. You should not consider investing
in the Fund if you are pursuing a short-term financial goal, seeking regular
income and stability of principal or cannot tolerate fluctuations in the value
of your investments.

An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

4
<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing year-to-year changes in the
performance of the Flag Fund. The table compares the average annual return of
the Flag Fund with that of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") over one, five and ten years and since the Flag Fund's
inception (January 18, 1984). In both the bar chart and the table, the Flag
Fund's performance is adjusted to reflect an overall expense ratio of the Fund
(1.00%). The S&P 500 Index is a passive measure of stock market returns. It
does not factor in the costs of buying, selling and holding stocks - costs which
are reflected in the Flag Fund's results.

5
<PAGE>

YEAR-BY-YEAR RETURNS

Flag Fund/1/
(each of the last 10 calendar years)

For the period shown in the bar chart, the highest return in any calendar
quarter was ___% (___ quarter 19__) and its lowest quarterly return was ___%
(___ quarter 19__).

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

-------------------
/1/ Flag Fund performance is presented because the Fund has no performance
history. The Flag Fund's performance will differ from the Fund's performance
because each Fund has different shareholder fees and expenses. The Flag Fund is
sold primarily through securities dealers and through financial institutions
that act as shareholder servicing agents. The Flag Fund is sold through a
different prospectus.
/2/ S&P 500 Index performance is calculated from January 31, 1984.

6
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of Communications - Institutional
Class.

------------------
/1/ Information on the annual operating expenses reflects the estimated expenses
for the current fiscal year of both the Fund and the Communications Portfolio,
the master portfolio in which the Fund invests its assets. (A further discussion
of the relationship between the Fund and the master portfolio appears in the
"Organizational Structure" section of this prospectus.)

/3/ For the first year, the expense example takes into account fee waivers and
reimbursements.

7
<PAGE>

SHAREHOLDER FEES
(fees paid directly from your investment)

ANNUAL FEES AND EXPENSES

<TABLE>
<CAPTION>
--------------------------------------------------------------------
Percentage of Average
Daily Net Assets/1/
--------------------------------------------------------------------
<S> <C>
Management Fees 0.73%
--------------------------------------------------------------------
Distribution and Service (12b-1) Fees None
--------------------------------------------------------------------
Other Fund Operating Expenses 0.42%
--------------------------------------------------------------------
Total Fund Operating Expenses 1.15%
--------------------------------------------------------------------
Less: Fee Waiver or Expense (0.15)%/2/
Reimbursement
--------------------------------------------------------------------
Net Expenses 1.00%
--------------------------------------------------------------------
</TABLE>

EXPENSE EXAMPLE/3/

<TABLE>
<CAPTION>
--------------------------------
1 year 3 years
--------------------------------
<S> <C>
$ $
--------------------------------
</TABLE>

8
<PAGE>

A detailed look
at Communications - Institutional Class

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

9
<PAGE>

INVESTMENT PROCESS

Factors we assess include:

. Management team

. Market position

. Business strategy

. Catalysts for change

. Attractive valuation

10
<PAGE>

RISKS

Below we set forth some of the prominent risks associated with investing in
general and with investing in the telecommunications field.

Primary Risks

Market Risk. Deteriorating market conditions might cause an overall weakness in
the market that reduces the absolute level of stock prices in that market,
including stocks held by the Fund.

Secondary Risk

11
<PAGE>

shares when you buy. If we underestimate their price, you may not receive the
full market value for your Fund shares when you sell.

MANAGEMENT OF THE FUND

Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
the Fund's activities on their behalf.

Portfolio Managers

The following portfolio managers are responsible for the day-to-day management
of the master portfolios:

12
<PAGE>

Bruce E. Behrens, CFA, Principal of ABIM and Co-manager of the Master
Portfolio.

. Co-manager of Flag Investors Communications Fund, Inc. since inception
(January 18, 1984).

. Member and Former President, Baltimore Securities Analysts Society; and
Member, Financial Analysts Federation.

. 32 years of investment experience.

. BA, Denison University; MBA from University of Michigan.

Liam D. Burke, Vice President of ABIM and Co-manager of the Master Portfolio.

. Co-manager of Flag Investors Communications Fund, Inc. since 1997. Prior to
that, telecommunications analyst for the Flag Fund since 1994.

. 11 years of investment experience.

. BA, Georgetown University; MBA from The George Washington University

. keeping accurate, up-to-date records for your individual Fund account;

. implementing any changes you wish to make in your account information;

. processing your requests for cash dividends and distributions from the Fund;

. answering your questions on the Fund's investment performance or
administration;

13
<PAGE>

. sending proxy reports and updated prospectus information to you; and

. collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value

14
<PAGE>

by the method that most accurately reflects their current worth in the judgment
of the Board of Trustees.

The Fund may charge a 2% short-term redemption fee of the value of the shares
redeemed (either by selling or exchanging into another fund) within 180 days
(approximately 6 months) of purchase.

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

Dividends, if any, are paid quarterly. Capital gains will be distributed at
least annually. We automatically reinvest all dividends and any capital gains,
unless you tell us otherwise.

TAX CONSIDERATIONS

The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based

15
<PAGE>

Transaction Tax Status
----------- ----------

Income dividends Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, if you sell your Fund shares you may have a capital
gain or loss.

Your sale of shares owned Capital gains or losses
more than one year

Your sale of shares owned Gains treated as ordinary income;
for one year or less losses subject to special rules

16
<PAGE>

The tax considerations for tax deferred accounts or non-taxable entities will be
different.

Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By Phone 1-800-730-1313

By Mail Deutsche Asset Management Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By Overnight Mail Deutsche Asset Management Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

To open an account $250,000

To add to an account $ 25,000

Minimum account balance $ 50,000

Shares of the Fund may be purchased without regard

17
<PAGE>

to the investment minimums by employees of Deutsche Bank AG, any of its
affiliates or subsidiaries, their spouses and minor children, and Directors or
Trustees of any investment company advised or administered by Deutsche Bank AG,
or any of its affiliates or subsidiaries, their spouses and minor children. The
Fund and its service providers reserve the right to, from time to time, at their
discretion, waive or reduce the investment minimums.

How to Open Your Fund Account

By Wire: Call the Service Center to set up a wire account.

Please note that your account cannot become activated until we receive a
completed application via mail or fax.

Two Ways to Buy and Sell Shares in Your Account

18
<PAGE>

account to keep it open (except for retirement accounts). Unless exchanging into
another Deutsche Asset Management fund, you must submit a written authorization
to sell shares in a retirement account.

WIRE:
Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your service agent must call the Service Center at
1-800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a trade
confirmation number. Instruct your bank to send payment by wire using the wire
instructions noted below. All wires must be received by 4:00 p.m. Eastern time
the next business day.

Routing No.: 021001033

Attn: Deutsche Asset Management/ Mutual Funds

DDA No.: 00-226-296

FBO: (Account name)
(Account number)

Credit: Communications - Institutional Class ([fund number])

Refer to your account statement for the account name, number and fund number.

Short-Term Redemption Fee

19
<PAGE>

Fund shares, discourage short-term investments in the Fund and facilitate
portfolio management. The short-term redemption fee is withheld from redemption
proceeds and retained by the Fund.

The short-term redemption fee does not apply to:

. exchanges into another class of shares of the Fund;

. shares acquired through reinvestment of dividends and other distributions;

. shares of the Fund in an account which is closed by us because it fails to
meet minimum balance requirements; and

. shares held in an account of certain retirement plans or profit sharing plans,
due to certain economies associated with these accounts.

The Fund will use the "first-in, first out" method to determine your holding
period. Under this method, the date of redemption or exchange will be compared
with the earliest purchase date of shares held in your account. If your holding
period is less than 180 days, the short-term redemption fee will be assessed on
the current net asset value of those shares.

Important Information about Buying and Selling Shares

. You may buy and sell shares of a fund through authorized service agents as
well as directly from us. The same terms and conditions apply. Specifically,
once you place your order with a service agent, it is considered received by
the Service Center. It is then your service agent's responsibility to transmit
the order to the Service Center by the next business day. You should contact
your service agent if you have a dispute as to when your order was placed with
the fund. Your service agent may charge a fee for buying and selling shares
for you.

20
<PAGE>

business day, we have the right to cancel your order, hold you liable or
charge you or your account for any losses or fees a fund or its agents have
incurred. To sell shares you must state wh ether you would like to receive the
proceeds by wire or check.

. After we or your service agent receive your order, we buy or sell your shares
at the next price calculated on a day the New York Stock Exchange is open for
business.

. We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. We do not accept starter
or third-party checks.

. The payment of redemption proceeds (including exchanges) for shares of a fund
recently purchased by check may be delayed for up to 15 calendar days while we
wait for your check to clear.

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day and no
later than seven days.

. We reserve the right to close your account on 30 days' notice if it fails to
meet minimum balance requirements for any reason other than a change in market
value.

. If you sell shares by mail or wire, you may be required to obtain a signature
guarantee. Please contact your service agent or the Service Center for more
information.

. We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").

. We do not issue share certificates.

. Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your service agent or the
Service Center for more information.

. During periods of heavy market activity, you may have trouble reaching the
Service Center by telephone. If this occurs, you should make your request by
mail.

. We reserve the right to reject purchases of Fund shares (including exchanges)
for any reason. We will reject the purchases if we conclude that the purchaser
may be investing only for the short-term or to profit from day to day
fluctuations in the Fund's share price.

21
<PAGE>

. Account Statements and Fund Reports: We or your service agent will furnish you
with a written confirmation of every transaction that affects your account
balance. You will also receive monthly statements reflecting the balances in
your account. We will send you a report every six months on your fund's
overall performance, its current holdings and its investing strategies.

. Exchange Privilege. You can exchange all or part of your shares for shares of
another Deutsche Asset Management mutual fund up to four times a year (from
the date of your first exchange). When you exchange shares, you are selling
shares in one fund to purchase shares in another. Before buying shares through
an exchange, you should be sure to obtain a copy of that fund's prospectus and
read it carefully. You may complete exchanges over the phone only if your
account is authorized to do so. You will receive a written confirmation of
each transaction from the Service Center or your service agent.

Please note the following conditions:

. The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.

. You may make the exchange by phone, if your account has the exchange by
phone feature, letter or wire.

. If you are maintaining a taxable account, you may have to pay taxes on the
exchange.

22
<PAGE>

FINANCIAL HIGHLIGHTS

[Financial Highlights for Flag Fund for semi-annual period ending June 30, 2000
and annual periods ending December 31, 1999, 1998, 1997, 1996 and 1995.]

23
<PAGE>

This page intentionally left blank.

24
<PAGE>

[BACK COVER]

Deutsche Asset Management Service Center
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number:
1-800-730-1313

Communications - Institutional Class
BT Investment Funds Cusip #[cusip]
[Product Code]
Distributed by: 811-4760
ICC Distributors, Inc.

25
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

October 1, 2000

BT Investment Funds

Communications -- Investment Class
Communications -- Institutional Class

BT Investment Funds (the "Trust") is an open-end management investment company
comprised of several funds. Communications (the "Fund") is a separate series of
the Trust and offers two classes of shares. The Investment Class shares and
Institutional Class shares (individually and collectively referred to as
"shares" as the context may require) of the Fund are described in this Statement
of Additional Information. The Fund seeks to maximize total return.

As described in the Prospectuses, the Trust seeks the investment objective of
the Fund by investing all the investable assets ("Assets") of the Fund in an
open-end management investment company having the same investment objective as
the Fund. This investment company is the Communications Portfolio (the
"Portfolio"), which is a series of Flag Investors Portfolios Trust (the
"Portfolio Trust").

Shares of the Fund are sold by ICC Distributors, Inc. ("ICCD"), the Trust's
Distributor, to private banking, brokerage and institutional clients of Deutsche
Bank AG or any of its affiliates or subsidiaries and to customers of other
organizations ("Service Agents"). Shares of the Fund may also be sold to
employees of Deutsche Bank AG or any of its affiliates or subsidiaries, their
spouses and minor children, and Trustees or Directors of any investment company
advised by Deutsche Bank AG or any of its affiliates or subsidiaries, their
spouses and minor children.

The Fund's Prospectuses dated [October 1, 2000] provide the basic information
investors should know before investing. This Statement of Additional Information
("SAI"), which is not a Prospectus, is intended to provide additional
information regarding the activities and operations of the Trust and should be
read in conjunction with the Fund's Prospectuses. You may request a copy of a
Prospectus or an additional copy of this SAI free of charge by calling Deutsche
Asset Management mutual funds at 1-800-730-1313 or by contacting your Service
Agent. Capitalized terms not otherwise defined in this SAI have the meanings
accorded to them in the Fund's Prospectuses.

INVESTMENT COMPANY CAPITAL CORP. ("ICCC")
Investment Adviser and Administrator to the Portfolio

ALEX. BROWN INVESTMENT MANAGEMENT ("ABIM")
Sub-Adviser to the Portfolio

BANKERS TRUST COMPANY ("Bankers Trust")
Administrator to the Fund

ICC DISTRIBUTORS, INC. ("ICCD")
Distributor

1-800-730-1313
<PAGE>

TABLE OF CONTENTS
<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

Investment Objective

The Fund seeks to maximize total return through a combination of long-term
growth of capital and, to a lesser extent, current income. There can, of course,
be no assurance that the Fund will achieve its investment objective.

Investment Policies

The Fund seeks its investment objective by investing all of its Assets in the
Portfolio. The Trust may withdraw the Fund's investment from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Since the investment characteristics of the
Fund will correspond directly to those of the Portfolio, the following is a
discussion of the various investments of and techniques employed by the
Portfolio.

In seeking its objective, the Portfolio invests primarily in common stock,
securities convertible thereto and debt obligations of companies in the
communications field. For this purpose, companies would be considered to be in
the "communications field" if they were engaged in the research, development,
manufacture or sale of communications services, technology, equipment or
products. Companies would be considered to be "engaged" in the research,
development, manufacture or sale of communications services, technology,
equipment or products if they derived at least 50% of their revenues from such
activities.

The Portfolio's investment adviser (the "Adviser") and sub-adviser (the "Sub-
adviser"), collectively, (the "Advisers"), believe that investing in a portfolio
of securities of companies in the communications field affords an attractive
opportunity for achieving this investment objective. Effective communication
through the transmission of voice, pictures and data is becoming increasingly
important and the communications field now embraces a wide variety of products
and services, such as local and long distance telephone service, wireless
service (e.g., cellular telephone or paging services), video, telecommunications
equipment, media, and information technology. Information technology combines
data processing and telecommunications to support more efficient and economical
business processes and consumer activities. The rapidly improving performance
and declining cost of transmission have helped the global expansion of
information technology. For example, businesses have an increasing need to
connect to remote users such as employees, suppliers and customers. Customers
are increasingly relying on telecommunications-based applications like on-line
banking and shopping to save time and money. Worldwide telecommunications
market expansion will create opportunities for established and emerging
providers of telecommunications products and services. Although new, high
growth technologies are being adopted at an increasing rate, commercial
acceptance still lags the introduction of new products and services.
Traditional communications companies, such as telephone companies, are
positioned to serve the existing and developing needs of their customer base
with a combination of current and new offerings. Evolving user requirements
have also led to the development of separate industry segments, outside the
local telephone and long distance businesses, which enable non-traditional
telecommunications providers a chance to benefit from the growing worldwide
demand for voice, data and video services.
<PAGE>

There can be no assurance that the Portfolio's investment objective will be
achieved. The Portfolio's investment objective may not be changed by the Board
of Trustees without shareholder approval.

Under normal market conditions at least 65% of the Portfolio's total assets will
be invested in common stock, securities convertible thereto and debt obligations
of companies in the communications field, as defined above. Depending on the
circumstances, the Portfolio may temporarily and for defensive purposes invest
up to 100% of its net assets in money market instruments and in other income-
producing securities.

Convertible Securities. The Portfolio may invest in convertible securities. In
general, the market value of a convertible security is at least the higher of
its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). A convertible security tends to increase in market
value when interest rates decline and tends to decrease in value when interest
rates rise. However, the price of a convertible security also is influenced by
the market value of the security's underlying common stock. Thus, the price of a
convertible security tends to increase as the market value of stock declines.
Investments in convertible securities generally entail less risk than investing
in common stock of the same issuer.

Investments in Investment Grade Securities. In general, the Portfolio will
invest in investment grade non-convertible corporate debt obligations that are
rated, at the time of purchase, BBB or higher by Standard and Poor's Ratings
Group ("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's"),
or, if unrated, determined to be of comparable quality by the Portfolio's
Advisers, under criteria approved by the Portfolio's Board of Trustees.
Investment grade securities (securities rated BBB or higher by S&P or Baa or
higher by Moody's) are generally thought to provide the highest credit quality
and the smallest risk of default. Securities rated BBB by S&P or Baa by Moody's
have speculative characteristics. Up to 10% of the Portfolio's total assets
(measured at the time of the investment) may be invested in lower quality non-
covertible corporate debt obligations (securities rated BB or lower by S&P or Ba
or lower by Moody's and unrated securities of comparable quality). Securities
that were investment grade at the time of purchase but are subsequently
downgraded to BB/Ba or lower will be included in the 10% category. In the event
any security owned by the Portfolio is downgraded, the Advisers will review the
situation and take appropriate action, but will not be automatically required to
sell the security. If such a downgrade causes the 10% limit to be exceeded, the
Portfolio will be precluded from investing further in non-convertible corporate
debt obligations that are below investment grade. (See "Investments in Non-
investment Grade Securities" below.)

Below Investment Grade Securities. The Portfolio may purchase non-convertible
corporate debt obligations that carry ratings lower than those assigned to
investment grade bonds by Moody's or S&P, or that are unrated if such bonds, in
the Advisers' judgment, meet the quality criteria established by the Board of
Trustees. These bonds are generally known as "junk bonds." These securities
may trade at substantial discounts from their face values. Accordingly, if the
Portfolio is successful in meeting its objectives, investors may receive a total
return consisting of
<PAGE>

both income and capital gains. Appendix A to this Statement of Additional
Information sets forth a description of the S&P and Moody's rating categories,
which indicate the rating agency's opinion as to the probability of timely
payment of interest and principal. These ratings range in descending order of
quality from AAA to D (though the Portfolio will not purchase securities rated,
at the time of purchase, below C), in the case of S&P, and from Aaa to C, in the
case of Moody's.

Ratings of S&P and Moody's represent their opinions of the quality of bonds and
other debt securities they undertake to rate at the time of issuance. However,
these ratings are not absolute standards of quality and may not reflect changes
in an issuer's creditworthiness. Accordingly, the Advisers do not rely
exclusively on ratings issued by S&P or Moody's in selecting portfolio
securities but supplement such ratings with independent and ongoing review of
credit quality. In addition, the total return the Portfolio may earn from
investments in high-yield securities will be significantly affected not only by
credit quality but also by fluctuations in the markets in which such securities
are traded. Accordingly, selection and supervision by the Advisers of
investments in lower rated securities involves continuous analysis of individual
issuers, general business conditions, activities in the high-yield bond market
and other factors. The analysis of issuers may include, among other things,
historic and current financial conditions, strength of management,
responsiveness to business conditions, credit standing and current and
anticipated results of operations. Analysis of general business conditions and
other factors may include anticipated changes in economic activity in interest
rates, the availability of new investment opportunities and the economic outlook
for specific industries.

Investing in higher yield, lower rated bonds entails substantially greater risk
than investing in investment grade bonds, including not only credit risk, but
potentially greater market volatility and lower liquidity. Yields and market
values of high-yield bonds will fluctuate over time, reflecting not only
changing interest rates but also the bond market's perception of credit quality
and the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated bonds may decline in value due to heightened concern
over credit quality, regardless of prevailing interest rates. In addition,
adverse economic developments could disrupt the high-yield market, affecting
both price and liquidity, and could also affect the ability of issuers to repay
principal and interest, thereby leading to a default rate higher than has been
the case historically. Even under normal conditions, the market for junk bonds
may be less liquid than the market for investment grade corporate bonds. There
are fewer securities dealers in the high-yield market and purchasers of high-
yield bonds are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced market liquidity, the market for
junk bonds may become more volatile and there may be significant disparities in
the prices quoted for high-yield securities by various dealers. Under
conditions of increased volatility and reduced liquidity, it would become more
difficult for the Portfolio to value its portfolio securities accurately because
there might be less reliable objective data available.

Investment in Securities of Foreign Issuers. From time to time, the Portfolio
may invest in American Depositary Receipts ("ADRs"), which are interests in
securities of foreign companies, and up to 10% of the Portfolio's total assets
in debt and equity securities of issuers not publicly traded in the United
States, when the Advisers believe that such investments provide good
opportunities for achieving income and capital gains without undue risk.
<PAGE>

Restricted Securities. The Portfolio may invest in securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, as amended ("Rule
144A Securities") that have been determined to be liquid by the Advisers under
standards approved by the Portfolio's Board of Trustees, and may invest up to
10% of its net assets in Rule 144A Securities that are illiquid (see "Investment
Restrictions"). Rule 144A Securities may become illiquid if qualified
institutional buyers are not interested in acquiring the securities.

Repurchase Agreements. The Portfolio may enter into repurchase agreements with
domestic banks or broker-dealers deemed to be creditworthy by the Advisers. A
repurchase agreement is a short-term investment in which the Portfolio acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, usually not more than seven days from the date
of purchase, thereby determining the yield during the Portfolio's holding
period. The value of underlying securities will be at least equal at all times
to the total amount of the repurchase obligation, including the interest factor.
The Portfolio makes payment for such securities only upon physical delivery or
evidence of book-entry transfer to the account of a custodian or bank acting as
agent. The underlying securities, which in the case of the Portfolio are
securities of the U.S. Government only, may have maturity dates exceeding one
year. The Portfolio does not bear the risk of a decline in value of the
underlying securities unless the seller defaults under its repurchase
obligation. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Portfolio could experience both delays in liquidating
the underlying securities and loss including (a) possible decline in the value
of the underlying security while the Portfolio seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.

Lending of Portfolio Securities. The Portfolio may lend its investment
securities to approved institutional borrowers who need to borrow securities in
order to complete certain transactions, such as covering short sales, avoiding
failures to deliver securities or completing arbitrage operations. By lending
its investment securities, the Portfolio attempts to increase its net investment
income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that might occur during the term of the
loan would belong to the Portfolio. The Portfolio may lend its investment
securities so long as the terms, structure and the aggregate amount of such
loans are not inconsistent with the Investment Company Act of 1940, as amended
(the "1940 Act") or the Rules and Regulations or interpretations of the SEC
thereunder, which currently require that (a) the borrower pledge and maintain
with the Portfolio collateral consisting of liquid, unencumbered assets having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receive reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments), and distributions on the loaned securities and any increase in
their market value. There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans will be made only to borrowers deemed by the
Advisers to be of good standing and when, in the judgment of the Advisers, the
consideration that can be earned from such securities loans justifies the
attendant risk. All relevant facts and circumstances, including the
creditworthiness
<PAGE>

of the borrower, will be considered in making decisions with respect to the
lending of securities, subject to review by the Board of Trustees of the
Portfolio.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass
with the loaned securities, but if a material event will occur affecting an
investment on loan, the loan must be called and the securities voted. Cash
collateral may be invested in a money market fund managed by Bankers Trust (or
its affiliates) and Bankers Trust may serve as the Portfolio's lending agent and
may share in revenue received from securities lending transactions as
compensation for this service.

Covered Call Options. In an attempt to earn additional income, and as a means
of protecting the Portfolio's assets against market declines, the Portfolio may,
to a limited extent, write covered call option contracts on certain of its
securities and purchase call options for the purpose of eliminating outstanding
contracts.

When the Portfolio writes a call option on securities that it owns, it gives the
purchaser of the option the right, but not the obligation, to buy the securities
at the price specified in the option (the "Exercise Price") at any time prior to
the expiration of the option. In the strategy to be employed by the Portfolio,
the Exercise Price, plus the option premium paid by the purchaser, is almost
always greater than the market price of the underlying security at the time the
option is written. If any option is exercised, the Portfolio will realize the
long-term or short-term gain or loss from the sale of the underlying security
and the proceeds of the sale will be increased by the net premium originally
received. By writing a covered option, the Portfolio may forego, in exchange
for the net premium, the opportunity to profit from an increase in value of the
underlying security above the Exercise Price. Thus, options will be written
when the Advisers believe the security should be held for the long term but
expect no appreciation or only moderate appreciation within the option period.
The Portfolio also may write covered options on securities that have a current
value above the original purchase price but which, if then sold, would not
normally qualify for a long-term capital gains treatment. Such activities will
normally take place during periods when market volatility is expected to be
high.

Only call options that are traded on a national securities exchange will be
written. Call options are issued by the Options Clearing Corporation, which
also serves as the clearinghouse for transactions with respect to options. The
price of a call option is paid to the writer without refund on expiration or
exercise, and no portion of the price is retained by The Options Clearing
Corporation or the exchanges. Writers and purchasers of options pay the
transaction costs, which may include commissions charged or incurred in
connection with such option transactions.

The Portfolio may write options contracts on its securities up to 20% of the
value of its net assets at the time such options are written. The Portfolio
will not sell the securities against which options have been written (uncover
the options) until after the option period has expired, the option has been
exercised or a closing purchase has been executed.
<PAGE>

Call options may be purchased by the Portfolio, but only to terminate an
obligation as a writer of a call option. This is accomplished by making a
closing purchase transaction, that is, the purchase of a call option on the same
security with the same Exercise Price and expiration date as specified in the
existing call option. A closing purchase transaction with respect to calls
traded on a national securities exchange has the effect of extinguishing the
obligation of a writer. Although the cost to the Portfolio of such a
transaction may be greater than the net premium received by the Portfolio upon
writing the original option, the Board of Trustees believes that it is
appropriate for the Portfolio to have the ability to make closing purchase
transactions in order to prevent its portfolio securities from being purchased
pursuant to the exercise of a call. The Advisers may also permit the call
option to be exercised. A profit or loss from a closing purchase transaction
will be realized depending on whether the amount paid to purchase a call to
close a position is less or more than the amount received from writing the call.
A profit or loss from an option exercised will be realized depending upon
whether the cost of the stock sold through the exercise, minus the premium
received on the option, is less or more than the proceeds of the exercise.

Special Information Concerning Master-Feeder Fund Structure. Unlike other open-
end management companies (mutual funds) which directly acquire and manage their
own portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its assets in its Portfolio, a separate registered investment
company with the same investment objectives as the Fund. Therefore, an
investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, 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 are not required to sell their shares at the same
public offering price as the Fund due to variations in sale commissions and
other fund-specific operating expenses. Therefore, investors in the Fund should
be aware that these differences might result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
by contacting Deutsche Asset Management at 1-800-730-1313.

The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach.

Small funds investing in the Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro-rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds with large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operation of the Portfolio.
Whenever the Trust is requested to vote in matters pertaining to the Portfolio,
the Trust will, except as permitted by the SEC, hold a meeting of shareholders
of the corresponding Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing
<PAGE>

Fund shareholders not voting will be voted by the Trustees or officers of the
Trust in the same proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its 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). If securities are
distributed, the Fund could incur brokerage, tax and other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are some other means for meeting
redemption requests, such as borrowing.

The Fund may withdraw its investments from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust 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 objectives as the Fund or the retention of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.

Rating Services. The ratings of rating services represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial criterion
for selection of portfolio investments, the Advisers also make their own
evaluation of these securities, subject to review by the Board of Trustees of
the Portfolio. After purchase by the Portfolio, an obligation may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Portfolio. Neither event would require the Portfolio to eliminate the
obligation from its portfolio, but the Advisers will consider such an event in
their determination of whether the Portfolio should continue to hold the
obligation. A description of the ratings is included in the Appendix to this
SAI.

Investment Restrictions

Fundamental Policies. The Fund's investment program is subject to a number of
investment restrictions that reflect self-imposed standards as well as federal
and state regulatory limitations. The following investment restrictions, which
are "fundamental policies" of the Fund and the Portfolio, are in addition to
those described in the Fund's Prospectuses and may not be changed with respect
to the Fund or the Portfolio without the approval of a "majority of the
outstanding voting securities" of the Fund or the Portfolio, as the case may be.
"Majority of the outstanding voting securities" under the 1940 Act, and as used
in this SAI and the Prospectuses, means, with respect to the Fund (or the
Portfolio), the lesser of (i) 67% or more of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio) present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund (or of the total beneficial interests of the Portfolio) are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio). Whenever
the Trust is requested to vote on a fundamental policy of the Portfolio, the
Trust will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by that Fund's shareholders.
<PAGE>

As a matter of fundamental policy, the Portfolio (or Fund) may not (except that
no investment restriction of the Fund shall prevent it from investing all of its
assets in an open-end investment company with substantially the same investment
objective):

1. Invest less than 65% of its total assets in the communications field, except
as described in the Prospectus, provided that: (a) otherwise the Portfolio
(or Fund) will not concentrate more than 25% of its total assets in
securities of issuers in any industry and (b) notwithstanding this limitation
or any other fundamental investment limitation, assets may be invested in the
securities of one or more management investment companies to the extent
permitted by the 1940 Act and the rules and regulations thereunder;

2. Invest in the securities of any single issuer if, as a result, the Portfolio
(or Fund) would hold more than 10% of the outstanding voting securities of
such issuer, except that the Fund's assets may be invested in the securities
of one or more management investment companies to the extent permitted by the
1940 Act and the rules and regulations thereunder;

3. Borrow money, except as a temporary measure for extraordinary or emergency
purposes in an amount not exceeding 10% of the value of the total assets of
the Portfolio (or Fund) at the time of such borrowing;

4. Invest in real estate or mortgages on real estate;

5. Purchase or sell commodities or commodities contracts, provided that the
Portfolio (or Fund) may invest in financial futures and options on such
futures;

6. Act as an underwriter of securities within the meaning of the U.S. federal
securities laws except insofar as it might be deemed to be an underwriter
upon disposition of certain portfolio securities acquired within the
limitation on purchases of restricted securities. This restriction shall not
limit the Fund's ability to invest in securities issued by other registered
investment companies;

7. Issue senior securities; or

8. Make loans, except that the Portfolio (or Fund) may purchase or hold debt
instruments in accordance with its investment objectives and policies, and
may loan portfolio securities and enter into repurchase agreements as
described in this Registration Statement.

Additional Restrictions. The following are non-fundamental policies. In order
to comply with certain statutes and policies, the Portfolio (or the Trust on
behalf of the Fund), will not as a matter of operating policy (except that no
operating policy shall prevent the Fund from investing all of its assets in an
open-end investment company with substantially the same investment objectives):

1. Invest in shares of any other investment company registered under the 1940
Act, except as permitted by federal law; and
<PAGE>

2. Invest more than 10% of the value of its net assets in illiquid securities
(as defined under federal and state securities laws).

The percentage limitations contained in these restrictions apply at the time of
purchase of securities. There will be no violation of any investment
restriction if that restriction is complied with at the time the relevant action
is taken, notwithstanding a later change in the market value of an investment,
in net or total assets or in the change of securities rating of the investment,
or any other later change.

Portfolio Transactions and Brokerage Commissions

ABIM is responsible for decisions to buy and sell securities for the Portfolio,
for the broker-dealer selection and for negotiation of commission rates, subject
to the supervision of ICCC. Purchases and sales of securities on a securities
exchange are effected through broker-dealers who charge a commission for their
services. Brokerage commissions are subject to negotiation between ABIM and the
broker-dealers. ABIM may direct purchase and sale orders to any broker-dealer,
including, to the extent and in the manner permitted by applicable law, its
affiliates and ICCD.

In over-the-counter transactions, orders are placed directly with a principal
market maker and such purchases normally include a mark up over the bid to the
broker-dealer based on the spread between the bid and asked price for the
security. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter. On occasion,
certain money market instruments may be purchased directly from an issuer
without payment of a commission or concession. The Portfolio will not deal with
affiliates of the Advisers in any transaction in which affiliates of the
Advisers act as a principal.

If affiliates of the Advisers are participating in an underwriting or selling
group, the Portfolio may not buy portfolio securities from the group except in
accordance with rules of the SEC. The Portfolio believes that the limitation
will not affect its ability to carry out its present investment objective.

ABIM's primary consideration in effecting securities transactions is to obtain
best price and execution of orders on an overall basis. As described below,
however, ABIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services that are deemed
by ABIM to be beneficial to the Portfolio's investment program. Certain
research services furnished by broker-dealers may be useful to ABIM with clients
other than the Portfolio. Similarly, any research services received by ABIM
through placement of portfolio transactions of other clients may be of value to
ABIM in fulfilling its obligations to the Portfolio. No specific value can be
determined for research and statistical services furnished without cost to ABIM
by a broker-dealer. ABIM is of the opinion that because the material must be
analyzed and reviewed by its staff, its receipt does not tend to reduce
expenses, but may be beneficial in supplementing ABIM's research and analysis.
Therefore, it may tend to benefit the Portfolio by improving ABIM's investment
advice. In over-the-counter transactions, ABIM will not pay any commission or
other remuneration for research services. ABIM's policy is to pay a broker-
dealer higher commissions for particular transactions than might be charged if a
different broker-dealer had been chosen when, in ABIM's opinion, this policy
furthers the overall
<PAGE>

objective of obtaining best price and execution. Subject to periodic review by
the Portfolio's Board of Trustees, ABIM is also authorized to pay broker-dealers
(other than affiliates of the Advisers) higher commissions than another broker
might have charged on brokerage transactions for the Portfolio for brokerage or
research services. The allocation of orders among broker-dealers and the
commission rates paid by the Portfolio will be reviewed periodically by the
Board.

Subject to the above considerations, the Board of Trustees has authorized the
Portfolio to effect portfolio transactions, through affiliates of the Advisers.
At the time of such authorization the Board adopted certain policies and
procedures incorporating the standards of Rule 17e-1 under the 1940 Act which
requires that the commissions paid the affiliates of the Advisers must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
Rule 17e-1 also contains requirements for the review of such transactions by the
Board of Trustees and requires ICCC and ABIM to furnish reports and to maintain
records in connection with such reviews.

ABIM manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Portfolio and one or more of
such other accounts; however, the position of each account in the securities of
the same issuer may vary and the length of time that each account may choose to
hold its investment in such securities may likewise vary. The timing and amount
of purchase by each account will also be determined by its cash position. If
the purchase or sale of securities consistent with the investment policies of
the Portfolio or one or more of these accounts is considered at or about the
same time, transactions in such securities will be allocated among the accounts
in a manner deemed equitable by ABIM. ABIM may combine such transactions, in
accordance with applicable laws and regulations, in order to obtain the best net
price and most favorable execution. Such simultaneous transactions, however,
could adversely affect the ability of the Portfolio to obtain or dispose of the
full amount of a security that it seeks to purchase or sell.

Prior to September 30, 2000, ICCC and ABIM served as adviser and sub-adviser,
respectively, to the Flag Investors Communications Fund, Inc. (the "Flag Fund"),
a stand-alone Fund that directly acquired and managed its own portfolio
securities. On September 30, 2000, the Flag Fund's assets were contributed to
the Portfolio and the Flag Fund was made a feeder fund to the Portfolio.

ABIM directed transactions to broker-dealers and paid related commissions
because of research services in the following amounts on behalf of the Flag
Fund:

<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
----------------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transactions Directed $931,691,059 $244,993,558 $312,672,931
----------------------------------------------------------------------------------------------------
Commissions Paid $ 1,135,899 $ 275,519 $ 406,249
----------------------------------------------------------------------------------------------------
</TABLE>

For the fiscal years ended December 31, 1999 and December 31, 1998, the Flag
Fund paid $7,200 and $4,500, respectively in brokerage commissions to DB Alex.
Brown or its affiliates.
<PAGE>

For the fiscal year ended December 31, 1997, the Flag Fund paid no brokerage
commissions to DB Alex. Brown or its affiliates. The Portfolio is required to
identify any securities of its "regular brokers or dealers" (as such term is
defined in the 1940 Act) that the Portfolio has acquired during its most recent
fiscal year. As of December 31, 1999, the Flag Fund held a 2.00% repurchase
agreement issued by Goldman Sachs & Co. valued at $126,131,000, a 3.25%
repurchase agreement issued by J.P. Morgan securities, Inc. valued at
$126,131,000 and a 2.50% repurchase agreement issued by Morgan Stanley & Co.
valued at $57,303,000. Goldman Sachs & Co., J.P. Morgan Securities, Inc. and
Morgan Stanley & Co. are "regular brokers or dealers" of the Flag Fund.

PERFORMANCE INFORMATION

Standard Performance Information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature, shareholder reports or other communications to
shareholders or prospective shareholders. These performance figures are
calculated in the following manner:

Total Return: The Fund's average annual total return is calculated for certain
-------------
periods by determining the average annual compounded rates of return over those
periods that would cause an investment of $1,000 (made at the maximum public
offering price with all distributions reinvested) to reach the value of that
investment at the end of the periods. The Fund may also calculate total return
figures which represent aggregate performance over a period or year-by-year
performance.

Performance results: Any total return quotation provided for the Fund should
--------------------
not be considered as representative of the performance of the Fund in the future
since the net asset value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of the securities held
in the Portfolio, but also on changes in the current value of such securities
and on changes in the expenses of the Fund and the Portfolio. These factors and
possible differences in the methods used to calculate total return should be
considered when comparing the total return of the Fund to total returns
published for other investment companies or other investment vehicles. Total
return reflects the performance of both principal and income.

Performance information may include the Fund's investment results and/or
comparisons of its investment results to the S&P 500 Index, or various other
unmanaged indices or results of other mutual funds or investment or savings
vehicles. The Fund's investment results as used in such communications will be
calculated on a total rate of return basis in the manner set forth in this SAI.
From time to time, fund rankings may be quoted from various sources, such as
Lipper Analytical Services, Inc., Value Line, and Morningstar, Inc.

The Trust may provide period and average annualized "total return" quotations
for the shares. The shares' "total return" refers to the change in the value of
an investment in the shares over a stated period based on any change in net
asset value per share and including the value of any shares purchased with any
dividends or capital gains distributed during such period. Period total return
may be annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends
<PAGE>

and capital gains distributions are reinvested. Because of the compounding
effect, an annualized total return will be higher than a period total return if
the period is shorter than one year.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund and
changes in the shares' expenses. In addition, during certain periods for which
total return may be provided, the Advisers, shareholder Service Agent,
Administrator, or ICCD, may have voluntarily agreed to waive portions of their
fees on a month-to-month basis. Such waivers will have the effect of increasing
shares' net income (and therefore its total return) during the period such
waivers are in effect.

Because the Fund is newly offered and has no performance history, the following
table shows the performance history of Class A shares of the Flag Fund. Prior
to [September 30, 2000], the Flag Fund operated as a stand-alone Fund that
directly acquired and managed its own portfolio securities. On [September 30,
2000], the Flag Fund's assets were contributed to the master portfolio, the
Communications Portfolio, into which the Fund will invest all of its assets.
In managing the Fund, the Advisers employ the same investment objectives,
policies and strategies that were employed in managing the Flag Fund.

<TABLE>
<CAPTION>
Average Annual Total Returns for the Periods Ended December 31, 1999

1 Year 5 Years 10 Years Since Inception
(January 18, 1984)/1/
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Flag Fund xx.xx% xx.xx% xx.xx% xx.xx%
----------------------------------------------------------------------------------------------------------------
</TABLE>

Comparison of Fund Performance

Comparison of the quoted non-standardized performance of various investments is
valid only if performance is calculated in the same manner. Since there are
different methods of calculating performance, investors should consider the
effect of the methods used to calculate performance when comparing performance
of the Fund with performance quoted with respect to other investment companies
or types of investments.

In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Evaluations of the Fund's
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for the Fund's performance information could
include the following: Asian Wall Street Journal, Barron's, Business Week,
Changing Times, Consumer Digest, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Investor's Daily, Lipper Analytical Services, Inc.'s
Mutual Fund Performance Analysis, Money,

-------------------
/1/ S&P 500 Index performance is calculated from January 31, 1984.
<PAGE>

Morningstar Inc., New York Times, Personal Investing News, Personal Investor,
Success, U.S. News and World Report, ValueLine, Wall Street Journal,
Weisenberger Investment Companies Services, Working Women.

Economic and Market Information

Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by portfolio managers and their views and analysis on how such
developments could affect the Fund. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI").

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

Valuation of Securities

The net asset value ("NAV") per share is calculated once on each Valuation Day
as of the close of regular trading on the NYSE, which is currently 4:00 p.m.,
Eastern time or in the event that the NYSE closes early, at the time of such
early closing (the "Valuation Time"). The NAV per share is computed by dividing
the value of the Fund's assets (i.e., the value of its investment in the
Portfolio and other assets), less all liabilities attributable to the shares, by
the total number of shares outstanding as of the Valuation Time.

The 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 the 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 the 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 the 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.

Market values of portfolio securities are determined as follows:

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

securities with a remaining maturity of less than 60 days are valued by the
amortized cost method.

The value of investments listed on a U.S. securities exchange is based on the
last sale prices on the NYSE generally at 4:00 p.m. (U.S. Eastern time) or, in
the absence of recorded sales, at the average of readily available closing bid-
and-asked prices on such exchange. Securities listed on a foreign exchange
considered by the Advisers to be a primary market for the securities are valued
at the last quoted sale price available before the time when net assets are
valued. Unlisted securities, and securities for which the Advisers determines
the listing exchange is not a primary market, are valued at the average of the
quoted bid-and-asked prices in the over-the-counter market. The value of each
security for which readily available market quotations exist is based on a
decision as to the broadest and most representative market for such security.
For purposes of calculating net asset value, all assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the prevailing market rates available at the time of valuation.

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

Purchase of Shares

The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. Investors
who are customers of Service Agents should contact their Service Agent with
respect to a proposed investment and then follow the procedures adopted by the
Service Agent for making purchases. Shares that are purchased or sold through
omnibus accounts maintained by securities firms may be subject to a service fee
or commission for such transactions.

Purchase orders for shares (including those purchased through a Service Agent)
that are transmitted to the Trust's Transfer Agent (the "Transfer Agent"), prior
to the Valuation Time on any Valuation Day will be effective at that day's
Valuation Time. The Trust and Transfer Agent reserve the right to reject any
purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to Bankers Trust as the Trust's custodian (the "Custodian") purchase
payments by 4:00 p.m. Eastern time the following business day (trade date + 1)
after an order for shares is placed. A shareholder must settle with the Service
Agent for his or her entitlement to an effective purchase or redemption order as
of a particular time. Because Bankers Trust is the Custodian and Transfer Agent
of the Trust, funds may be transferred directly from or to a customer's account
held with Bankers Trust to settle transactions with the Fund without incurring
the additional costs or delays associated with the wiring of federal funds.
<PAGE>

The Trust and Bankers Trust have authorized one or more Service Agents to accept
on the Trust's behalf purchase and redemption orders. Such Service Agents are
authorized to designate other intermediaries to accept purchase and redemption
orders on the Trust's behalf. The Transfer Agent will be deemed to have received
a purchase or redemption order when an authorized Service Agent or, if
applicable, a Service Agent's authorized designee, accepts the order. Customer
orders will be priced at the Fund's NAV next computed after they are accepted by
an authorized Service Agent or the Service Agent's authorized designee.

Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.

The Transfer Agent must receive payment within one business day after an order
for Shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.

The Fund and its service providers reserve the right to, from time to time in
their discretion, waive or reduce the investment minimums.

Redemption of Shares

You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. Redemption
requests should be transmitted by customers in accordance with procedures
established by their Transfer Agent and the shareholder's Service Agent.
Redemption requests for Shares received by the Service Agent and transmitted to
the Transfer Agent prior to the Valuation Time on each Valuation Day will be
effective at that day's Valuation Time and the redemption proceeds normally will
be delivered to the shareholder's account the next day, but in any event within
seven calendar days following receipt of the request.

Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Service Agent does not do so, it may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.

The Fund and Portfolio reserve the right to redeem all of its shares, if the
Fund's and/or Portfolio's Board votes to liquidate and terminate the Fund or
Portfolio.
<PAGE>

Redemptions and Purchases in Kind

The Trust, on behalf of the Fund, and the Portfolio reserve the right, if
conditions exist which make cash payments undesirable, to honor any request for
redemption or repurchase order by making payment in whole or in part in readily
marketable securities chosen by the Portfolio, as the case may be, and valued as
they are for purposes of computing the Fund's or the Portfolio's net asset
value, as the case may be (a redemption in kind). If payment is made to
shareholder in securities, the shareholder may incur transaction expenses in
converting these securities into cash. The Trust, on behalf of the Fund, and
the Portfolio have elected, however, to be governed by Rule 18f-1 under the 1940
Act as a result of which the Fund and the Portfolio are obligated to redeem
shares or beneficial interests, as the case may be, with respect to any one
investor during any 90-day period, solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Fund or the Portfolio, as the case may be,
at the beginning of the period.

The Portfolio has agreed to make a redemption in kind to the Fund whenever the
Fund wishes to make a redemption in kind and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of the
Portfolio and in no case will they receive a security issued by the Portfolio.
The Portfolio has advised the Trust that the Portfolio will not redeem in kind
except in circumstances in which the Fund is permitted to redeem in kind or
unless requested by the Fund.

Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Portfolio determines its net asset
value. At the close of each such business day, the value of each investor's
beneficial interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage, effective for that day, which
represents that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or withdrawals which are to be effected as of the
close of business on that day will then be effected. The investor's percentage
of the aggregate beneficial interests in the Portfolio will then be 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 the close of business on
such day plus or minus, as the case may be, the amount of net additions to or
withdrawals from the investor's investment in the Portfolio effected as of the
close of business on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the close of business on such
day plus or minus, as the case may be, the amount of net additions to or
withdrawals from the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio as the close of business
on the following business day.

The Fund may, at its own option, accept securities in payment for shares. The
securities delivered in payment for shares are valued by the method described
under "Net Asset Value" as of the day the Fund receives the securities. This is
a taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of the Adviser, appropriate
investments for the Fund's corresponding Portfolio. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of the acquiring Fund's corresponding Portfolio; (ii) be acquired by
the applicable Fund for investment and not for resale (other than for resale to
the Fund's Portfolio); (iii) be liquid securities which are not restricted as to
transfer either by law or liquidity of market; and (iv) if stock, have a value
<PAGE>

which is readily ascertainable as evidenced by a listing on a stock exchange,
over-the-counter market or by readily available market quotations from a dealer
in such securities. The Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.

Trading in Foreign Securities

Trading in foreign cities may be completed at times that vary from the closing
of NYSE. In computing the net asset value, the Portfolio values foreign
securities at the latest closing price on the primary exchange on which they are
traded immediately prior to the closing of the NYSE. Similarly, foreign
securities quoted in foreign currencies are translated into U.S. dollars at the
foreign exchange rates.

Occasionally, events that affect values and exchange rates may occur between the
times at which they are determined and the closing of the NYSE. If such events
materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Trustees, although
the actual calculation may be done by others.

MANAGEMENT OF THE TRUST AND THE PORTFOLIO

The affairs of the Trust and the Portfolio Trust are managed under the
supervision of separate Boards of Trustees. By virtue of the responsibilities
assumed by the Administrator, the Trust does not require employees other than
its executive officers. None of the executive officers of the Trust devotes
full time to the affairs of the Trust.

The Boards are composed of persons experienced in financial matters who meet
throughout the year to oversee the activities of the Trust and the Portfolio
Trust. In addition, the Boards review contractual arrangements with companies
that provide services to the Trust and Portfolio Trust and review the Fund and
Portfolio's performance.

Trustees of the Trust

The Trustees and officers of the Trust, their birth dates and their principal
occupations during the past five years are set forth in the next section. Their
titles may have varied during that period.

CHARLES P. BIGGAR (birth date: October 13, 1930) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex/2/; Retired; formerly Vice President, International
Business Machines ("IBM") and President, National Services and the Field
Engineering Divisions of IBM. His address is 12 Hitching Post Lane, Chappaqua,
New York 10514.

S. LELAND DILL (birth date: March 28, 1930) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Retired;

-------------------
/2/ The "Deutsche Asset Management Fund Complex" consists of BT Investment
Funds, BT Institutional Funds, BT Pyramid Mutual Funds, BT Adviser Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, Treasury Money Portfolio, International Equity
Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio and BT Investment Portfolios.
<PAGE>

formerly Partner, KPMG Peat Marwick; Director, Vintners International Company
Inc., Coutts (U.S.A.) International, Coutts Trust Holdings Ltd., Coutts Group
(registered investment companies); Trustee, Phoenix Zweig Series Trust, Phoenix
Euclid Market Neutral Fund (registered investment companies); General Partner,
Pemco (a registered investment company). His address is 5070 North Ocean Drive,
Singer Island, Florida 33404.

MARTIN J. GRUBER (birth date: July 15, 1937) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Nomura Professor of Finance, Leonard N. Stern School of Business, New
York University (since 1964); Trustee, TIAA (registered investment company);
Director, S.G. Cowen Mutual Funds, Japan Equity Fund, Inc., Taiwan Equity Fund,
Inc. (registered investment companies). His address is 229 South Irving Street,
Ridgewood, New Jersey 07450.

RICHARD HALE* (birth date: July 17, 1945) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Managing Director, Deutsche Asset Management; Director, Flag Investors
Funds and ISI Family of Funds (registered investment companies); President,
Morgan Grenfell Investment Trust (registered investment company); Managing
Director, DB Alex. Brown LLC; Director and President, Investment Company Capital
Corp. (registered investment adviser); Executive Vice President, ICCD, each
Fund's principal underwriter, since July 2000; Chartered Financial Analyst. His
address is One South Street, Baltimore, Maryland 21202.

RICHARD J. HERRING (birth date: February 18, 1946) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Jacob Safra Professor of International Banking and
Professor, Finance Department, The Wharton School, University of Pennsylvania
(since 1972). His address is 325 South Roberts Road, Bryn Mawr, Pennsylvania
19010.

BRUCE E. LANGTON (birth date: May 10, 1931) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Retired; formerly Assistant Treasurer of IBM Corporation (until 1986);
Trustee and Member, Investment Operations Committee, Allmerica Financial Mutual
Funds (1992-present); Member, Investment Committee, Unilever U.S. Pension and
Thrift Plans (1989 to present) (a registered investment company); Director, TWA
Pilots Directed Account Plan and 401(k) Plan (1988 to present) (a registered
investment company). His address is 99 Jordan Lane, Stamford, Connecticut
06903.

PHILIP SAUNDERS, JR. (birth date: October 11, 1935) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Principal, Philip Saunders Associates (Economic and
Financial Consulting); former Director, Financial Industry Consulting, Wolf &
Company; President, John Hancock Home Mortgage Corporation; Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is Philip Saunders Associates, 445 Glen Road, Weston,
Massachusetts 02493.

-------------------
* "Interested Person" within the meaning of Section 2(a)(19) of the Act.
<PAGE>

HARRY VAN BENSCHOTEN (birth date: February 18, 1928) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Retired; Corporate Vice President, Newmont Mining
Corporation (prior to 1987); Director, Canada Life Insurance Corporation of New
York (since 1987). His address is 6581 Ridgewood Drive, Naples, Florida 34108.

The Board has an Audit Committee that meets with the Trust's independent
auditors to review the financial statements of the Trust, the adequacy of
internal controls and the accounting procedures and policies of the Trust. Each
member of the Board except Mr. Hale also is a member of the Audit Committee.

Officers of the Trust
[President and CEO]

DANIEL O. HIRSCH (birth date: March 27, 1954) -- Secretary of the Trust;
Secretary, ICCD, the Fund's principal underwriter, since July 2000; Director,
Deutsche Asset Management Americas since 1999; Director, DB Alex. Brown LLC and
Investment Company Capital Corp. since July 1998; Assistant General Counsel,
Office of the General Counsel, United States Securities and Exchange Commission
from 1993 to 1998. His address is One South Street, Baltimore, Maryland 21202.

CHARLES A. RIZZO (birth date: August 5, 1957) Treasurer of the Trust; Director,
Deutsche Asset Management, and Vice President and Department Head, DB Alex.
Brown LLC from 1998 to 1999; Formerly, Senior Manager, PricewaterhouseCoopers
LLP from 1993 to 1998. His address is One South Street, Baltimore, MD 21202.

Messrs. Hirsch and Rizzo also hold similar positions for other investment
companies for which ICCD, or an affiliate serves as the principal underwriter.

No person who is an officer or Trustee of Bankers Trust is an officer or Trustee
of the Trust. No Trustee, officer or employee of ICCD or any of its affiliates
will receive any compensation from the Trust for serving as an officer or
Trustee of the Trust.

Trustee Compensation Table

<TABLE>
<CAPTION>
Total Compensation from
Deutsche Asset
Aggregate Compensation Management Fund
Trustee from Trust* Complex*
--------------------------------------------------------------------------
<S> <C> <C>
Charles P. Biggar $ 3,050 $43,750
--------------------------------------------------------------------------
S. Leland Dill $16,417 $43,750
--------------------------------------------------------------------------
Martin Gruber $ 2,972 $45,000
--------------------------------------------------------------------------
Richard J. Herring $ 2,642 $43,750
--------------------------------------------------------------------------
Kelvin Lancaster $12,617 $18,750
--------------------------------------------------------------------------
Bruce E. Langton $ 2,972 $43,750
--------------------------------------------------------------------------
Philip Saunders, Jr. $16,924 $45,000
--------------------------------------------------------------------------
Harry Van Benschoten $ 3,050 $45,000
--------------------------------------------------------------------------
</TABLE>

* The information provided is for the BT Investment Funds, which is comprised of
14 funds, for the year ended December 31, 1999.
<PAGE>

As of [date], the Trustees and Officers of the Fund and the Trust owned in the
aggregate less than 1% of the shares of the Fund or the Trust (all series taken
together).

Because the Fund is newly offered, no shareholder of record owned 5% or more of
the outstanding voting shares of the Fund as of [date].

Trustees of the Portfolio Trust

The Trustees and officers of the Portfolio Trust, their birth dates and their
principal occupations during the past five years are set forth in the next
section. Their titles may have varied during that period.

TRUMAN T. SEMANS* (birth date: October 27, 1926) -- Chairman and Trustee of the
Portfolio Trust; Vice Chairman, Brown Investment Advisory & Trust Company
(formerly, Alex. Brown Capital Advisory & Trust Company); Director, Investment
Company Capital Corp. (registered investment adviser) and Director and President
of Virginia Hot Springs Inc. (property management). Formerly, Managing Director
and Vice Chairman, Alex. Brown & Sons Incorporated (now DB Alex. Brown LLC) and
Director, ISI Family of Funds (registered investment companies). His address is
Brown Investment Advisory & Trust Company, 19 South Street, Baltimore, Maryland
21202.

RICHARD R. BURT (birth date: February 3, 1947) - Trustee of the Portfolio Trust;
Chairman, IEP Advisors, Inc.; Chairman of the Board, Weirton Steel Corporation;
Member of the Board, Archer Daniels Midland Company (agribusiness operations),
Hollinger International, Inc. (publishing), Homestake Mining (mining and
exploration), HCL Technologies (information technology) and Anchor Technologies
(gaming software and equipment); Director, Mitchell Hutchins family of funds
(registered investment companies); and Member, Textron Corporation International
Advisory Council. Formerly, partner, McKinsey & Company (consulting), 1991-1994;
U.S. Chief Negotiator in Strategic Arms Reduction Talks (START) with former
Soviet Union and U.S. Ambassador to the Federal Republic of Germany, 1985-1991.
His address is IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor,
Washington, DC 20004.

RICHARD HALE* (birth date: July 17, 1945) -- Trustee of the Portfolio Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Managing Director, Deutsche Asset Management; Director,
Flag Investors Funds and ISI Family of Funds (registered investment companies);
President, Morgan Grenfell Investment Trust (registered investment company);
Managing Director, DB Alex. Brown LLC; Director and President, Investment
Company Capital Corp. (registered investment adviser); Executive Vice President,
ICCD, each Fund's principal underwriter, since July 2000; Chartered Financial
Analyst. His address is One South Street, Baltimore, Maryland 21202.

* Messrs. Semans and Hale are Trustees who are "interested persons," as
defined in the 1940 Act.
<PAGE>

JOSEPH R. HARDIMAN (birth date: May 27, 1937) -- Trustee of the Portfolio
Trust; Private Equity Investor and Capital Markets Consultant; Director, Wit
Capital Group (registered broker-dealer), The Nevis Fund (registered investment
company), and ISI Family of Funds (registered investment companies). Formerly,
Director, Circon Corp. (medical instruments), November 1998-January 1999;
President and Chief Executive Officer, The National Association of Securities
Dealers, Inc. and The NASDAQ Stock Market, Inc., 1987-1997; Chief Operating
Officer of Alex. Brown & Sons Incorporated (now DB Alex. Brown LLC), 1985-1987;
General Partner, Alex. Brown & Sons Incorporated (now DB Alex. Brown LLC), 1976-
1985. His address is 8 Bowen Mill Road, Baltimore, Maryland 21212.

LOUIS E. LEVY (birth date: November 16, 1932) - Trustee of the Portfolio Trust;
Director, Kimberly-Clark Corporation (personal consumer products), Household
International (banking and finance) and ISI Family of Funds (registered
investment companies). Formerly, Chairman of the Quality Control Inquiry
Committee, American Institute of Certified Public Accountants, 1992-1998,
Trustee, Merrill Lynch Funds for Institutions, 1991-1993; Adjunct Professor,
Columbia University-Graduate School of Business, 1991-1992; and Partner, KPMG
Peat Marwick, retired 1990. His address is 26 Farmstead Road, Short Hills, New
Jersey 07078.

EUGENE J. MCDONALD (birth date: July 14, 1932) - Trustee of the Portfolio Trust;
President, Duke Management Company (investments); Executive Vice President, Duke
University (education, research and health care); Executive Vice Chairman and
Director, Central Carolina Bank & Trust (banking) and Director, Victory Funds
(registered investment companies). Formerly, Director AMBAC Treasurers Trust
(registered investment company), DP Mann Holdings (insurance) and ISI Family of
Funds (registered investment companies). His address is Duke Management
Company, Erwin Square, Suite 1000, 2200 West Main Street, Durham, North Carolina
27705.

REBECCA W. RIMEL (birth date: April 10, 1951) - Trustee of the Portfolio Trust;
President and Chief Executive Officer, The Pew Charitable Trusts (charitable
foundation); Director and Executive Vice President, The Glenmede Trust Company
(investment trust and wealth management). Formerly, Executive Director, The Pew
Charitable Trusts and Director, ISI Family of Funds (registered investment
companies). Her address is The Pew Charitable Trusts, One Commerce Square, 2005
Market Street, Suite 1700, Philadelphia, Pennsylvania 19103-7017.
<PAGE>

ROBERT H. WADSWORTH (birth date: January 29, 1940) - Trustee of the Portfolio
Trust; President, Investment Company Administration LLC, President, Trustee,
Trust for Investment Managers (registered investment company) and President,
Director, First Fund Distributors, Inc. (registered broker-dealer); Director,
The Germany Fund, Inc., The New Germany Fund Inc., The Central European Equity
Fund, Inc., and Vice President, Professionally Managed Portfolios and Advisors
Series Trust (registered investment companies). Formerly, President, Guinness
Flight Investment Funds, Inc. (registered investment companies); and President,
The Wadsworth Group (registered investment advisor). His address is 4455 E.
Camelback Road, Suite 261 E., Phoenix, Arizona 85018.

Officers of the Portfolio Trust

CARL W. VOGT, Esq. (birth date: April 20, 1936) - President of the Portfolio
Trust; Senior Partner, Fulbright & Jaworski L.L.P. (law); Interim President of
Williams College; Director, Yellow Corporation (trucking), American Science &
Engineering (x-ray detection equipment), and ISI Family of Funds (registered
investment companies). Formerly, Chairman and Member, National Transportation
Safety Board; Director, National Railroad Passenger Corporation (Amtrak); and
Member, Aviation System Capacity Advisory Committee (Federal Aviation
Administration); and Director, Flag Investors Family of Funds (registered
investment companies). His address is 4455 E. Camelback Road, Suite 261 E.,
Phoenix, Arizona 85018.

CHARLES A. RIZZO (birth date: August 5, 1957) - Treasurer of the Portfolio
Trust; Director, Deutsche Asset Management, and Vice President and Department
Head, DB Alex. Brown LLC from 1998 to 1999; Formerly, Senior Manager,
PricewaterhouseCoopers LLP from 1993 to 1998. His address is One South Street,
Baltimore, MD 21202.

AMY M. OLMERT (birth date: May 14, 1963) - Secretary of the Portfolio Trust;
Director, Deutsche Asset Management; and Vice President, BT Alex. Brown
Incorporated (now DB Alex. Brown LLC), 1997-1999. Formerly, Senior Manager,
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP), 1988-1997. Her
address is One South Street, Baltimore, Maryland 21202.

DANIEL O. HIRSCH (birth date: March 27, 1954) - Assistant Secretary of the
Portfolio Trust; Secretary, ICCD, the Fund's principal underwriter, since July
2000; Director, Deutsche Asset Management Americas since 1999; Director, DB
Alex. Brown LLC and Investment Company Capital Corp. since July 1998; Assistant
General Counsel, Office of the General Counsel, United States Securities and
Exchange Commission from 1993 to 1998. His address is One South Street,
Baltimore, Maryland 21202.

Trustees and officers of the Portfolio Trust are also Trustees, Directors or
officers of some or all of the other investment companies managed, administered
or advised by ICCC or its affiliates. There are currently 24 funds in the Flag
Investors Funds and Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. fund
complex (the "Flag Fund Complex"). Mr. Semans serves as Chairman of five funds
and as a Director of 19 other funds in the Flag Fund Complex. Mr. Hale serves
as Chairman of three funds and as Director of 21 funds in the Flag Fund Complex.
Ms. Rimel and
<PAGE>

Messrs. Burt, Hardiman, Levy, McDonald and Wadsworth serve as Directors of each
of the funds in the Flag Fund Complex. Mr. Vogt serves as President of seven of
the funds in the Flag Fund Complex. Mr. Rizzo serves as Treasurer, Ms. Olmert
serves as Secretary, and Mr. Hirsch serves as Assistant Secretary, for each of
the funds in the Flag Fund Complex.

Some of the Trustees of the Portfolio Trust are customers of, and have had
normal brokerage transactions with, DB Alex. Brown or its affiliates in the
ordinary course of business. All such transactions were made on substantially
the same terms as those prevailing at the time for comparable transactions with
unrelated persons. Additional transactions may be expected to take place in the
future.

With the exception of the Portfolio Trust's President, officers of the Portfolio
Trust receive no direct remuneration in such capacity from the Portfolio Trust.
Officers and Trustees of the Portfolio Trust who are officers or Directors of
ICCC or its affiliates may be considered to have received remuneration
indirectly. As compensation for his or her services as Trustee, each Trustee
who is not an "interested person" of the Portfolio Trust (as defined in the 1940
Act) (an "Independent Trustee") and Mr. Vogt, the Portfolio Trust's President,
receives an aggregate annual fee (plus reimbursement for reasonable out-of-
pocket expenses incurred in connection with his or her attendance at board and
committee meetings) from each fund in the Flag Fund Complex for which he or she
serves. In addition, the Chairmen of the Flag Fund Complex's Audit Committee
and Executive Committee receive an annual fee from the Flag Fund Complex.
Payment of such fees and expenses is allocated among all such funds described
above in direct proportion to their relative net assets.

Trustee Compensation Table

<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from
Trustee from Portfolio Trust* Flag Fund Complex**
--------------------------------------------------------------------------------------
<S> <C> <C>
Truman T. Semans
--------------------------------------------------------------------------------------
Richard T. Hale
--------------------------------------------------------------------------------------
Richard R. Burt
--------------------------------------------------------------------------------------
James J. Cunnane
--------------------------------------------------------------------------------------
Joseph R. Hardiman
--------------------------------------------------------------------------------------
Louis E. Levy
--------------------------------------------------------------------------------------
Eugene J. McDonald
--------------------------------------------------------------------------------------
Rebecca W. Rimel
--------------------------------------------------------------------------------------
Carl W. Vogt
--------------------------------------------------------------------------------------
Robert H. Wadsworth
--------------------------------------------------------------------------------------
</TABLE>

* The information provided is for the Portfolio Trust, which is comprised of
____ funds, for the year ended December 31, 1999.

** The information provided is for the Flag Fund Complex, which is comprised of
____ funds, for the year ended December 31, 1999.
<PAGE>

The Flag Fund Complex has adopted a Retirement Plan for Directors who are not
employees of the Portfolio Trust, the Portfolio's Administrator or its
respective affiliates (the "Directors' Retirement Plan") and a Retirement Plan
for a former Director serving as the Portfolio Trust's President (collectively,
the "Retirement Plans"). After completion of six years of service, each
participant in the Retirement Plans will be entitled to receive an annual
retirement benefit equal to a percentage of the fee earned by the participant in
his or her last year of service. Upon retirement, each participant will receive
annually 10% of such fee for each year that he or she served after completion of
the first five years, up to a maximum annual benefit of 50% of the fee earned by
the participant in his or her last year of service. The fee will be paid
quarterly, for life, by each fund for which he or she serves. The Retirement
Plans are unfunded and unvested. The Portfolio Trust currently has two
participants in the Directors' Retirement Plan, a Director who retired effective
December 31, 1994 and another Director who retired effective December 31, 1996,
each of whom qualified for the Retirement Plan by serving thirteen years and
fourteen years, respectively, as Directors in the Flag Fund Complex and who will
be paid a quarterly fee of $4,875 by the Flag Fund Complex for the rest of his
life. Such fees are allocated to each fund in the Flag Fund Complex based upon
the relative net assets of such fund to the Flag Fund Complex. Mr. McDonald has
qualified for, but has not received, benefits.

Set forth in the table below are the estimated annual benefits payable to a
Participant upon retirement assuming various years of service and payment of a
percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of service at
December 31, 1999 are as follows: for Mr. Levy, 5 years; for Mr. McDonald, 7
years; for Ms. Rimel and Mr. Vogt, 4 years; for Mr. Hardiman, 1 year; and for
Mr. Burt and Mr. Wadsworth, 0 years.

<TABLE>
<CAPTION>
Estimated Annual Benefits Payable By Flag
Fund Complex Upon Retirement
-------------------------------------------------------------------------
Years of Service Chairmen of Audit and Executive Committees Other Participants
---------------- ------------------------------------------- ---------------------------
<S> <C> <C>
6 years $ 4,900 $ 3,900

7 years $ 9,800 $ 7,800

8 years $14,700 $11,700

9 years $19,600 $15,600

10 years or more $24,500 $19,500
</TABLE>

Any Trustee and the President of the Portfolio Trust who receive fees from the
Portfolio Trust is permitted to defer 50% to 100% of his or her annual
compensation pursuant to a Deferred Compensation Plan. Messrs. Levy, McDonald,
Vogt, Burt, Wadsworth, and Ms. Rimel have each executed a Deferred Compensation
Agreement. Currently, the deferring Trustees may select from among various
funds in the Flag Fund Complex in which all or part of their deferral
<PAGE>

account shall be deemed to be invested. Distributions from the deferring
Trustees' deferral accounts will be paid in cash, in generally equal quarterly
installments over a period of ten years.

Code of Ethics

The Boards of the Fund and the Portfolio each has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Fund and Portfolio's Code of
Ethics specifies that Access Persons of the Fund and Portfolio who are subject
to Codes of Ethics adopted by their employers may comply with their employer's
Code in lieu of the Fund and Portfolio's Code if such Code has been approved by
the Board. As a result, the Fund and Portfolio's Code permits Fund and
Portfolio personnel to invest in securities for their own accounts, but requires
compliance with pre-clearance requirements, trading "blackout periods" that
prohibit trading by personnel within periods of trading by the Fund or Portfolio
in the same security, and other restrictions which are imposed by the Codes of
Ethics of the adviser and distributor.

The Fund and Portfolio's underwriter and the Portfolio's Advisers each have also
adopted a Code of Ethics. The Codes allow personnel to invest in securities for
their own accounts, but require compliance with the Codes' pre-clearance
requirements and other restrictions, including "blackout periods" and minimum
holding periods, subject to limited exceptions. The Codes prohibit purchases of
securities in initial public offerings and require prior approval for purchases
of securities in private placements.

Investment Advisers

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
assets of the Fund in the Portfolio. The Portfolio has retained the services of
ICCC as investment adviser and ABIM as sub-adviser. ICCC also serves as
investment adviser and ABIM serves as sub-adviser to other funds in the Flag
Fund Complex.

ICCC is an indirect subsidiary of Deutsche Bank AG. ABIM is a limited
partnership affiliated with the Adviser. Buppert, Behrens & Owen, Inc. ("BB&O")
a company organized and owned by three employees of ABIM, owns a 49% limited
partnership interest and a 1% general partnership interest in ABIM. DB Alex.
Brown LLC ("DBAB") owns the remaining 50% general partnership interest. On May
17, 2000, ABIM and BB&O entered into an Agreement and Sale of Partnership
Interests ("Sale Agreement") with DBAB that will result in BB&O holding all
partnership interests in ABIM, effective as of a March 2001 closing date. In
connection with this sale, ABIM also entered into a Trademark Licensing
Agreement (the "License Agreement") with BT Alex. Brown Holdings, Inc. ("BTAB
Holdings") that will permit ABIM to continue to use the "Alex. Brown" name from
the March 2001 closing date until December 31, 2005.

The March 2001 closing date for the Sale Agreement is contingent upon, among
other things, the approval of proposed sub-advisory agreements by the
shareholders of Flag Investors Equity Partners Fund, Inc. ("Equity Partners")
and Flag Investors Value Builder Fund, Inc. ("Value Builder"). The Sale
Agreement also includes a provision prohibiting ABIM, BB&O, and its employees
partners, officers or Trustees from providing investment advisory services to
any other registered investment company pursuing the same investment strategies
as the Portfolio,
<PAGE>

Equity Partners and Value Builder. Consistent with the fiduciary duties that
ICCC owes the Portfolio as its adviser, the Sale Agreement and License Agreement
do not prevent ICCC from suggesting that the Portfolio terminate its
relationship with ABIM, but any such termination must ultimately be recommended
by a majority of the Portfolio's Independent Trustees and approved by the
Portfolio's Board.

Under the Investment Advisory Agreement, ICCC obtains and evaluates economic,
statistical and financial information to formulate and implement investment
policies for the Portfolio. ICCC has delegated this responsibility to ABIM
provided that ICCC continues to supervise the performance of ABIM and report
thereon to the Portfolio's Board of Trustees. Any investment program undertaken
by ICCC or ABIM will at all times be subject to policies and control of the
Portfolio's Board of Trustees. ICCC will provide the Portfolio with office
space for managing its affairs, with the services of required executive
personnel and with certain clerical and bookkeeping services and facilities.
These services are provided by ICCC without reimbursement by the Portfolio for
any costs. Neither ICCC nor ABIM shall be liable to the Portfolio or its
shareholders for any act or omission by ICCC or ABIM or any losses sustained by
the Portfolio or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duty. The services of ICCC
and ABIM to the Portfolio are not exclusive and ICCC and ABIM are free to render
similar services to others.

As compensation for its services, ICCC is entitled to receive a fee from the
Portfolio, calculated daily and paid monthly, at the following annual rates
based upon the Portfolio's average daily net assets: 1.00% of the first $100
million, 0.90% of the next $100 million, 0.85% of the next $100 million, 0.80%
of the next $200 million, 0.73% of the next $500 million, 0.68% of the next $500
million and 0.65% of that portion exceeding $1.5 billion. As compensation for
its services, ABIM is entitled to receive a fee from ICCC, payable from its
advisory fee, calculated daily and paid monthly, at the following annual rates
based upon the Fund's average daily net assets: 0.65% of the first $100
million, 0.60% of the next $100 million, 0.55% of the next $100 million, 0.50%
of the next $200 million, 0.45% of the next $500 million, 0.42% of the next $500
million and 0.40% of that portion in excess of $1.5 billion.

Each of the Investment Advisory Agreement and the Sub-Advisory Agreement has an
initial term of two years and will continue in effect from year to year
thereafter if such continuance is specifically approved at least annually by the
Portfolio's Board of Trustees, including a majority of the Independent Trustees
who have no direct or indirect financial interest in such agreements, by votes
cast in person at a meeting called for such purpose, and by a vote of a majority
of the outstanding Shares (as defined under "Capital Stock"). The Portfolio or
ICCC may terminate the Investment Advisory Agreement on sixty days' written
notice without penalty. The Investment Advisory Agreement will terminate
automatically in the event of assignment (as defined in the 1940 Act). The Sub-
Advisory Agreement has similar termination provisions.

Prior to [September 30, 2000], the Flag Fund operated as a stand-alone Fund that
directly acquired and managed its own portfolio securities. On [September 30,
2000], the Flag Fund's assets were contributed to the Portfolio and the Flag
Fund was made a feeder fund to the Portfolio. Prior to [September 30, 2000],
under a previous investment advisory agreement, ICCC received a fee from the
Flag Fund, calculated daily and paid monthly, at the following
<PAGE>

annual rates based upon the Flag Fund's average daily net assets: 0.85% of the
first $100 million, 0.75% of the next $100 million, 0.70% of the next $100
million, 0.65% of the next $200 million, 0.58% of the next $500 million, 0.53%
of the next $500 million and 0.50% of that portion exceeding $1.5 billion. As
compensation for its services, ABIM received a fee from ICCC, payable from its
advisory fee, calculated daily and paid monthly, at the following annual rates
based upon the Flag Fund's average daily net assets: 0.60% of the first $100
million, 0.55% of the next $100 million, 0.50% of the next $100 million, 0.45%
of the next $200 million, 0.40% of the next $500 million, 0.37% of the next $500
million and 0.35% of that portion in excess of $1.5 billion.

Under the previous investment advisory agreement, advisory fees paid by the Flag
Fund to ICCC and sub-advisory fees paid by ICCC to ABIM for the last three
fiscal years were as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------
Fees Paid to: 1999 1998 1997
---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
ICCC $11,892,502 $5,927,518 $4,172,769
----------------------------------------------------------------------------------------------------
ABIM $ 8,337,261 $4,132,229 $2,944,897
----------------------------------------------------------------------------------------------------
</TABLE>

If the Investment Advisory Agreements had been in effect during these periods,
the fees paid by the Flag Fund to ICCC would have been higher.

Administrator of the Fund

Under its Administration and Services Agreement with the Trust, Bankers Trust
Company (the "Administrator") calculates the net asset value of the Fund and
generally assists the Board of Trustees of the Trust in all aspects of the
administration and operation of the Trust. The Administration and Services
Agreement provides for the Trust to pay the Administrator a fee, computed daily
and paid monthly, equal on an annual basis to 0.35% and 0.10% of the average
daily net assets of the Investment Class and Institutional Class shares,
respectively, of the Fund.

Under the Administration and Services Agreement, Bankers Trust is obligated on a
continuous basis to provide such administrative services as the Board of
Trustees reasonably deems necessary for the proper administration of the Trust.
Bankers Trust will generally assist in all aspects of the Fund's operations;
supply and maintain office facilities (which may be in the Administrator's own
offices), statistical and research data, data processing services, clerical,
accounting, bookkeeping and recordkeeping services (including, without
limitation, the maintenance of such books and records as are required under the
1940 Act and the rules thereunder, except as maintained by other agents),
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring reports and assistance
regarding compliance with the Declaration of Trust, by-laws, investment
objectives and policies and with federal and state securities laws; arrange for
appropriate insurance coverage; calculate net asset values, net income and
realized capital gains or losses; and negotiate arrangements with, and supervise
and coordinate the activities of, agents and others to supply services.
<PAGE>

Administrator of the Portfolio

Under its Administrative Services Agreement with the Portfolio, ICCC will
supervise and manage all aspects of the Portfolio's operations, other than
portfolio management and distribution; provide the Portfolio with such
executive, administrative, clerical and bookkeeping services as are deemed
advisable by the Portfolio's Board of Trustees; provide the Portfolio with, or
obtain for it, adequate office space and all necessary office equipment and
services including telephone service, heat, utilities, stationary, supplies and
similar items for any offices as are deemed advisable by the Portfolio's Board
of Trustees; supervise the operations of the Portfolio's transfer agent and
dividend disbursing agent; provide the Portfolio with such administrative and
clerical services for the maintenance of certain shareholder records as are
deemed advisable by the Portfolio's Board of Trustees; and arrange, but not pay
for, the periodic updating of prospectuses and supplements thereto, proxy
material, tax returns, reports to and filings with the SEC and State Blue Sky
authorities. The Administrative Services Agreement provides that the
Administrator will furnish, at its own expense and without cost to the
Portfolio, the services of one or more officers of the Portfolio to the extent
that such officers may be required by the Portfolio for the proper conduct of
its affairs. The Portfolio assumes and pays all other expenses of the
Portfolio. The Administrative Services Agreement continues in full force and
effect until terminated. The Administrative Services Agreement may be
terminated at any time, on waivable written notice within 60 days and without
penalty, by vote of the Portfolio's Board of Trustees or by ICCC. The agreement
automatically terminates in the event of its assignment.

The Administrative Services Agreement obligates the Administrator to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits in performing the services provided for under the agreement,
but ICCC is not liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Administrator.

Under the Administrative Services Agreement, the Portfolio pays ICCC an annual
fee based on the Portfolio's average daily net assets. This fee is calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly,
at the annual rate of 0.02% of the Portfolio's assets. ICCC may from time to
time voluntarily waive a portion of its administrative services fee.

Custodian, Transfer Agents and Fund Accounting Services

Bankers Trust, 130 Liberty Street, New York, New York 10006, serves as Custodian
for the Trust pursuant to the Administration and Services Agreement. Bankers
Trust also serves as the Portfolio's custodian pursuant to a separate agreement.
As Custodian, Bankers Trust holds the Fund's and Portfolio's assets. Bankers
Trust may be reimbursed by the Fund for its out-of-pocket expenses. Bankers
Trust will comply with the self-custodian provisions of Rule 17f-2 under the
1940 Act. Bankers Trust receives such compensation from the Portfolio for its
services as custodian as may be agreed to from time to time by Bankers Trust and
the Portfolio.

Bankers Trust serves as transfer agent and dividend disbursing agent of the
Trust pursuant to the Administration and Services Agreement. Under its transfer
agency agreement with the Trust, Bankers Trust maintains the shareholder account
records for the Fund, handles certain communications between shareholders and
the Trust and causes to be distributed any dividends
<PAGE>

and distributions payable by the Trust. Investment Company Capital Corp. serves
as transfer and dividend disbursing agent to the Portfolio.

Bankers Trust provides certain accounting services to the Trust pursuant to the
Administration and Services Agreement. ICCC provides certain accounting
services to the Portfolio under a Master Services Agreement between the
Portfolio and ICCC. In addition, the Portfolio reimburses ICCC for certain out-
of-pocket expenses.

Distributor

ICCD is the principal distributor for shares of the Fund. ICCD is a registered
broker/dealer. It is an indirect wholly-owned subsidiary of Deutsche Bank AG
and, therefore, is an affiliate of the Fund's Advisers and Administrator. The
principal business address of ICCD is One South Street, Baltimore, Maryland
21202. Richard T. Hale is a Trustee of the Trust and Portfolio and the
Executive Vice President of ICCD. Daniel O. Hirsch is the Secretary of the
Trust and ICCD and Assistant Secretary of the Portfolio.

Service Agent

Bankers Trust acts as a Service Agent pursuant to its Administration and
Services Agreement with the Trust and receives no additional compensation from
the Fund for such shareholder services. The service fees of any other Service
Agents, including broker-dealers, will be paid by Bankers Trust from its fees.
The services provided by a Service Agent may include establishing and
maintaining shareholder accounts, processing purchase and redemption
transactions, arranging for bank wires, performing shareholder sub-accounting,
answering client inquiries regarding the Trust, assisting clients in changing
dividend options, account designations and addresses, providing periodic
statements showing the client's account balance, transmitting proxy statements,
periodic reports, updated prospectuses and other communications to shareholders
and, with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares through
a broker or agent. Each Service Agent has agreed to transmit to shareholders,
who are its customers, appropriate disclosures of any fees that it may charge
them directly.

Use of Name

The Trust and Bankers Trust have agreed that the Trust may use "BT" as part of
its name for so long as Bankers Trust serves as administrator to the Fund. The
Trust has acknowledged that the term "BT" is used by and is a property right of
certain subsidiaries of Bankers Trust and that those subsidiaries and/or Bankers
Trust may at any time permit others to use that term.

The Trust may be required, on 60 days' notice from Bankers Trust at any time, to
abandon use of the acronym "BT" as part of its name. If this were to occur, the
Trustees would select an
<PAGE>

appropriate new name for the Trust, but there would be no other material effect
on the Trust, its shareholders or activities.

Banking Regulatory Matters

Bankers Trust has been advised by its counsel that in its opinion Bankers Trust
may perform the services for the Portfolio contemplated by the Administration
and Services Agreement and other activities for Fund described in the Prospectus
and this SAI without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. However, counsel has pointed out that future
changes in either federal or state statutes and regulations concerning the
permissible activities of banks or trust companies, as well as future judicial
or administrative decisions or interpretations of present and future statutes
and regulations, might prevent Bankers Trust from continuing to perform those
services for the Fund. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law. If the
circumstances described above should change, the Board of Trustees would review
the relationships with Bankers Trust and consider taking all actions necessary
in the circumstances.

Counsel and Independent Auditors

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust. Morgan, Lewis and Bockius LLP, 1701 Market
Street, Philadelphia, Pennsylvania 19103-2921, serves as Counsel to the
Portfolio. PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore,
Maryland 21201, acts as Independent Auditors of the Trust and the Portfolio.

ORGANIZATION OF THE TRUST

The Trust was organized on July 21, 1986, under the name BT Tax-Free Investment
Trust, and assumed its current name on May 16, 1988. The Trust offers shares of
beneficial interest of separate series, par value $0.001 per share. Trustees of
the Trust established and designated one class of shares of beneficial interest
of the Fund. The Trust reserves the right to add additional series in the
future. The Trust also reserves the right to issue additional classes of shares
of the Fund. No series of shares will have any preference over any other series.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. Shareholders of the Fund are not entitled to vote on
Trust matters that do not affect the Fund. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares.

The shares of the series participate equally in the earnings, dividends and
assets of the particular series. The Trust may create and issue additional
series of shares. The Trust's Declaration of Trust permits the Trustees to
divide or combine the shares into a greater or lesser number of
<PAGE>

shares without thereby changing the proportionate beneficial interest in series.
Each share represents an equal proportionate interest in a series with each
other share. Shares when issued are fully paid and non-assessable, except as set
forth below. Shareholders are entitled to one vote for each share held.

Because the Fund is newly offered, no shareholders of record owned 25% or more
of the voting securities of the Fund as of [October 1, 2000]. Therefore, no
shareholder is deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of its shareholders.

Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees can
elect all Trustees. Shares are transferable but have no preemptive, conversion
or subscription rights. Shareholders generally vote by Fund, except with respect
to the election of Trustees.

The Trust is an entity commonly known as a "Massachusetts business trust."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, a possibility
that the Trust believes is remote. Upon payment of any liability incurred by the
Trust, the shareholder paying the liability will be entitled to reimbursement
from the general assets of the Trust. The Trustees intend to conduct the
operations of the Trust in a manner so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Trust.

The Portfolio, in which all the assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the 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 Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio. In addition, whenever the Trust is requested to vote on matters
pertaining to the fundamental policies of the Portfolio, the Trust will hold a
meeting of the Fund's shareholders and will cast its vote as instructed by the
Fund's shareholders.

Whenever the Trust is requested to vote on a matter pertaining to the Portfolio,
the Trust will vote its shares without a meeting of Fund shareholders if the
proposal, if made with respect to the Fund, would not require the vote of Fund
shareholders as long as such action is permissible under applicable statutory
and regulatory requirements. The Trust will hold a meeting of Fund shareholders
for all other matters requiring a vote, and the Trust will cast all of its votes
at the
<PAGE>

meeting of investors in the Portfolio in the same proportion as the votes of the
Fund shareholders. Other investors with a greater pro rata ownership of the
Portfolio could have effective voting control of the operations of the
Portfolio.

TAXATION
Taxation of the Fund

The Trust intends to qualify annually and to elect the Fund to be treated as a
regulated investment company under the Code.

To qualify as a regulated investment company, the Fund must, among other things:
(a) derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies; (b) diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash and cash items (including receivables), U.S. government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
government securities or the securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net short-
term capital gains in excess of net long-term capital losses) and its net tax-
exempt interest income, if any, each taxable year.

As a regulated investment company, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses), if
any, that it distributes to shareholders. The Fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains. Amounts not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, the Fund
must distribute during each calendar year an amount equal to the sum of:

. at least 98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year;

. at least 98% of its capital gains in excess of its capital losses (adjusted
for certain ordinary losses, as prescribed by the Code) for the one-year
period ending on October 31 of the calendar year; and

. any ordinary income and capital gains for previous years that were not
distributed during those years.

A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November or December with a
record date in such a month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
<PAGE>

year in which the distributions are received. To prevent application of the
excise tax, the Fund intends to make its distributions in accordance with the
calendar year distribution requirement.

Fund shareholders will also receive, if appropriate, various written notices
after the close of the Fund's prior taxable year as to the federal income status
of his dividends and distributions which were received from the Fund during the
Fund's prior taxable year. Shareholders should consult their tax advisers as to
any state and local taxes that may apply to these dividends and distributions.
The dollar amount of dividends excluded from Federal income taxation and the
dollar amount subject to such income taxation, if any, will vary for each
shareholder depending upon the size and duration of each shareholder's
investment in the Fund.

If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.

Taxation of the Portfolio

The Portfolio is not subject to federal income taxation. Instead, the Fund and
other investors investing in the Portfolio must take into account, in computing
their federal income tax liability, their share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether they have received any cash distributions from the Portfolio.

Foreign Securities

Income from investments in foreign securities may be subject to foreign taxes.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries will vary.

If the Fund is liable for foreign taxes, and if more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of stocks or
securities of foreign corporations, the Fund may make an election pursuant to
which certain foreign taxes paid by it would be treated as having been paid
directly by its shareholders. Pursuant to such election, the amount of foreign
taxes paid will be included in the income of the Fund's shareholders, and the
Fund shareholders (except tax-exempt shareholders) may, subject to certain
limitations, claim either a credit or deduction for the taxes. Fund shareholders
will be notified after the close of the Fund's taxable year whether the foreign
taxes paid will "pass through" for that year and, if so, such notification will
designate (a) the shareholder's portion of the foreign taxes paid to each such
country and (b) the portion which represents income derived from sources within
each such country.

The amount of foreign taxes for which a shareholder may claim a credit in any
year generally will be subject to a separate limitation for "passive income,"
which includes, among other items of income, dividends, interest and certain
foreign currency gains. Because capital gains realized by the Fund on the sale
of foreign securities will be treated as U.S. source income, the available
credit of foreign taxes paid with respect to such gains may be restricted by
this limitation.
<PAGE>

Distributions

Dividends paid out of the Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. Distributions of net capital
gains, if any, designated as capital gain dividends are taxable as long-term
capital gains, regardless of how long the shareholder has held the Fund's
shares, and are not eligible for the dividends-received deduction. The Taxpayer
Relief Act of 1997 created additional categories of capital gains taxable at
different rates. The categories of gain and related rates will be passed through
to shareholders in capital gain dividends. Shareholders receiving distributions
in the form of additional shares, rather than cash, generally will have a cost
basis in each such share equal to the net asset value of a share of the Fund on
the reinvestment date. Shareholders will be notified annually as to the U.S.
federal tax status of distributions.

Sale of Shares

Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally will be a capital gain or loss which will be long-term or
short-term, generally depending upon the shareholder's holding period for the
shares. Any loss realized on a sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.

Foreign Withholding Taxes

Income received by the Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries.

Backup Withholding

The Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal income tax liability.

Foreign Shareholders

The tax consequences to a foreign shareholder of an investment in the Fund may
be different from those described in this SAI. Foreign shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
<PAGE>

Other Taxation

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund is liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code.

Fund shareholders may be subject to state and local taxes on the Fund's
distributions. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.

FINANCIAL STATEMENTS

Because the Fund is newly offered, it does not have financial statements. The
financial statements for the Flag Fund for the semi-annual period ended June 30,
2000 and for the fiscal year period ended December 31, 1999 are incorporated
herein by reference to the Flag Fund's Semi-Annual Report dated June 30, 2000
and its Annual Report dated December 31, 1999. Copies of the Flag Fund's
Semi-Annual Report and Annual Report must accompany the delivery of this SAI.

<PAGE>

APPENDIX

CORPORATE BOND RATINGS

Standard & Poor's Bond Ratings

AAA - The highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.

AA - Very strong capacity to pay interest and repay principal and, in the
majority of instances, differs from the higher rated issues only in small
degree.

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

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

BB, B, CCC, CC and C - Regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of speculation and
C the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major risk exposures to adverse conditions.

C - This rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action taken, but payments on this obligation
are being continued.

D - In payment default. The D rating category is used when interest
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.

Moody's Bond Ratings

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

Aa - Judged to be of high quality by all standards. Together with the Aaa
group, comprise what are generally known as high grade bonds. Rated lower than
the Aaa bonds because margins of protection may not be as large as in Aaa
securities or the fluctuation of protective elements may be of greater amplitude
or there may be other elements present that make the long-term risks appear
somewhat larger than in Aaa securities.
<PAGE>

A - Possess many favorable investment attributes and are to be considered as
upper- medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment some time in the future.

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

Ba - Judged to have speculative elements; their future cannot be considered
as well-assured. Often the protection of interest and principal payments may be
very moderate; and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.

B - Generally lack characteristics of the desirable investment. Assurance
of interest and principal payments or maintenance of other terms of the contract
over any long period of time may be small.

Caa - Of poor standing. May be in default or there may be present elements
of danger with respect to principal or interest.

Ca - Represent obligations that are speculative in a high degree. Often in
default or have other marked shortcomings.

C - The lowest rated class of bonds. Can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
<PAGE>

October 1, 2000

Investment Adviser and Administrator of the Portfolio
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, MD 21202

Sub-Adviser of the Portfolio
ALEX. BROWN INVESTMENT MANAGEMENT
One South Street
Baltimore, MD 21202

Administrator of the Fund
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006

Distributor of the Fund
ICC DISTRIBUTORS, INC.

Custodian and Transfer Agent of the Fund
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006

Independent Auditors
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201

Counsel to the Trust
WILLKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, NY 10019

Counsel to the Portfolio
MORGAN LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, PA 19103-2921

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statement of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. Neither the Prospectuses nor this Statement of
Additional Information constitutes an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.

Cusip#:

[Product Code (mm/yy)]
<PAGE>

PART C - OTHER INFORMATION

ITEM 23. Exhibits.

(a) Declaration of Trust dated July 21, 1986; /1/
(i) Supplement dated October 20, 1986 to Declaration of Trust; /1/
(ii) Second Supplement dated May 16, 1988 to Declaration of Trust; /1/
(b) By-Laws; /1/
(c) Incorporated by reference to Exhibit (b) above;
(d) Investment Advisory Contracts; Not applicable
(e) Distribution Agreement dated July 30, 2000; to be filed by amendment
(f) Bonus or Profit Sharing Contracts; Not applicable
(g) Custodian Agreement dated July 1, 1996; /2/
(ii) Cash Services Addendum dated December 18, 1997 to Custodian
Agreement; /4/
(iii) Amendment No. 6 to Exhibit A dated October 1, 2000 of the Custodian
Agreement; to be filed by amendment
(h) Administration and Services Agreement dated October 28, 1992; /8/
(i) Exhibit D dated October 1, 2000 to the Administration and Services
Agreement; to be filed by amendment
(ii) Agreement to Provide Shareholder Services dated June 10, 1998 on
behalf of PreservationPlus Income; /5/
(iii) Shareholder Services Plan dated June 10, 1998 on behalf of
PreservationPlus Income; /5/
(iv) Expense Limitation Agreement dated September 30, 1999 on behalf of
Intermediate Tax Free, Mid Cap and Small Cap; /13/
(v) Expense Limitation Agreement dated October 31, 1999 on behalf of
International Equity, Latin American Equity and Pacific Basin
Equity; /13/
(vi) Expense Limitation Agreement dated March 31, 2000, on behalf of
Lifecycle Long Range, Lifecycle Mid Range, and Lifecycle Short
Range; /15/
(vii) Expense Limitation Agreement dated December 31, 1999 on behalf of
Cash Management, Tax Free Money, NY Tax Free Money, Treasury Money
and Quantitative Equity; /14/
(viii) Expense Limitation Agreement dated September 30, 1999 on behalf of
Preservation Plus Income; /13/
(ix) Expense Limitation Agreement for the period August 31, 2000 through
January 31, 2001 on behalf of Mid Cap; to be filed by amendment
<PAGE>

(x) Expense Limitation Agreement for the period October 1, 2000 through
April 30,2001 on behalf of Communications; to be filed by amendment
(i) Legal Opinion; Not applicable
(j) Consent of Independent Accountants; Not applicable
(k) Omitted Financial Statements; Not applicable
(l) Initial Capital Agreements; Not applicable
(m) Rule 12b-1 Plans; Not applicable
(n) Financial Data Schedule; Not applicable
(o) Rule 18f-3 Plan; /13/
(p) Codes of Ethics for Funds, Adviser and Distributor; /16/

-------------------
/1/ Incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A ("Registration Statement")
as filed with the Securities and Exchange Commission ("Commission") on July
31, 1995.
/2/ Incorporated by reference to Post-Effective Amendment No. 44 to
Registrant's Registration Statement as filed with the Commission on July 1,
1997.
/3/ Incorporated by reference to Post-Effective Amendment No. 46 to
Registrant's Registration Statement as filed with the Commission on January
28, 1998.
/4/ Incorporated by reference to Post-Effective Amendment No. 50 to
Registrant's Registration Statement as filed with the Commission on June
30, 1998.
/5/ Incorporated by reference to Post-Effective Amendment No. 55 to
Registrant's Registration Statement as filed with the Commission on
November 25, 1998.
/6/ Incorporated by reference to Post-Effective Amendment No. 56 to
Registrant's Registration Statement as filed with the Commission on January
28, 1999.
/7/ Incorporated by reference to Post-Effective Amendment No. 57 to
Registrant's Registration Statement as filed with the Commission on
February 8, 1999.
/8/ Incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement as filed with the Commission on
November 8, 1993.
/9/ Incorporated by reference to Post-Effective Amendment No. 60 to
Registrant's Registration Statement as filed with the Commission on March
15, 1999.
/10/ Incorporated by reference to Post-Effective Amendment No. 63 to
Registrant's Registration Statement as filed with the Commission on July
29, 1999.
<PAGE>

/11/ Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement as filed with the Commission on October
22, 1999.
/12/ Incorporated by reference to Post-Effective Amendment to No. 66 to
Registrant's Registration Statement as filed with the Commission on
December 23, 1999.
/13/ Incorporated by reference to Post-Effective Amendment to No. 67 to
Registrant's Registration Statement as filed with the Commission on January
28, 2000.
/14/ Incorporated by reference to Post-Effective Amendment to No. 68 to
Registrant's Registration Statement as filed with the Commission on April
28, 2000.
/15/ Incorporated by reference to Post-Effective Amendment to No. 69 to
Registrant's Registration Statement as filed with the Commission on May 1,
2000.
/16/ Incorporated by reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement as filed with the Commission on June
26, 2000.

ITEM 24. Persons Controlled by or Under Common Control with Registrant.

Not applicable.

ITEM 25. Indemnification.

Incorporated by reference to Post-Effective Amendment No. 38 to Registrant's
Registration Statement as filed with the Commission on April 29, 1996.

ITEM 26. Business and Other Connections of Investment Adviser.

Bankers Trust Company ("Bankers Trust") serves as investment adviser to each
Portfolio except Communications Portfolio. Bankers Trust, a New York banking
corporation, is a wholly owned subsidiary of Deutsche Bank AG. Bankers Trust
conducts a variety of commercial banking and trust activities and is a major
wholesale supplier of financial services to the international institutional
market.

To the knowledge of the Trust, none of the directors or officers of Bankers
Trust, except those set forth below, is engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Deutsche Bank AG and its affiliates or subsidiaries. Set forth
<PAGE>

below are the names and principal businesses of the directors and officers of
Bankers Trust who, to our knowledge as of June 20, 2000, are engaged in any
other business, profession, vocation or employment of a substantial nature.

Josef Ackermann

Member, Board of Managing Directors, Deutsche Bank AG; Chairman of the Board and
Chief Executive Officer, Bankers Trust Corporation; Chairman of the Board and
Chief Executive Officer, Bankers Trust Company; Chairman of the Supervisory
Board, Deutsche Bank Luxembourg, S.A.; Supervisory Board Memberships in: EUREX
Frankfurt AG; EUREX Zurich AG; Linde AG, Stora Enso Oyj and Mannesmann AG;
Director, Deutsche Bank Americas Holding Corp. Address: Deutsche Bank AG,
Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Hans Angermueller

"Of Counsel", Shearman & Sterling; Director, Bankers Trust Corporation;
Director, Bankers Trust Company. Address: Shearman & Sterling, 599 Lexington
Avenue, Suite 1414, New York, New York 10022-6069.

George B. Beitzel

Private Investor; Director, Bankers Trust Corporation; Director, Bankers Trust
Company; Directorships in: Bitstream, Inc.; Computer Task Group, Inc.; and
Staff Leasing Inc. Address: 29 King Street, Chappaqua, New York 10514-3432.

Yves de Balman

Co-Chairman and Co-Chief Executive Officer, DB Alex. Brown LLC; Vice Chairman,
Bankers Trust Corporation; Director, Bankers Trust International, plc; Director,
Aerospatiale Matra; Co-Chairman and Co-Chief Executive Officer, Deutsche Bank
Securities Inc. Address: 130 Liberty Street, New York, New York 10006.

William R. Howell

Chairman Emeritus, J.C. Penney Company, Inc.; Director, Bankers Trust
Corporation; Director, Bankers Trust Company; Director, Exxon Mobil Corporation;
Warner-Lambert Company; Halliburton Company; Williams, Inc.; Central and South
West Corporation. Adddress: 6501 Legacy Drive, Plano, Texas 75054-3698.

Hermann-Josef Lamberti

Executive Vice President, Deutsche Bank AG; Director and Vice Chairman, Bankers
Trust Corporation; Director, Bankers Trust
<PAGE>

Company; Board memberships: Euroclear plc (London); Euroclear sc. (Brussels);
and The Clearinghouse Interbank Payments Co. L.L.C. Supervisory Board
Memberships in: GZS (Frankfurt) and the European Transaction Bank (e.t.b.).
Director, Deutsche Bank Americas Holding Corp. Address: Deutsche Bank AG,
Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Troland S. Link

General Counsel of Deutsche Bank North America; General Counsel, Bankers Trust
Corporation; Managing Director and General Counsel, Bankers Trust Company.
Address: 1301 Sixth Avenue - Fl.8, New York, NY 10019.

Rodney A. McLauchlan

Executive Vice President, Bankers Trust Company; Executive Vice President,
Bankers Trust Corporation. Address: 31 West 52nd Street, Fl.28, New York, NY
10019.

John A. Ross

Chief Executive Officer of the Americas, Deutsche Bank AG; President and
Director, Bankers Trust Corporation; President and Director, Bankers Trust
Company; President, Director and Chief Executive Officer, Taunus Corporation and
DB U.S. Financial Markets Holding Corporation; President and Chief Executive
Officer, Deutsche Bank Americas Holding Corp.; Director, Deutsche Bank
Securities Inc.and DB Alex. Brown LLC. Address: Deutsche Bank, 31 West 52nd
Street, FL. 28, New York, New York 10019.

Ronaldo H. Schmitz

Member of the Group Board, Deutsche Bank AG, Director, Bankers Trust
Corporation; Director, Bankers Trust Company; Non-executive Director,
Bertelsmann AG, Glaxo Wellcome plc, Rohm & Haas Co. and INSEAD - Paris, France;
Director, Deutsche Bank Americas Holding Corp. Address: Deutsche Bank AG,
Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Mayo A. Shattuck III

Co-Chairman and Co-Chief Executive Officer, DB Alex. Brown LLC; Vice Chairman,
Bankers Trust Corporation; Director, Bankers Trust International, plc, Alex.
Brown & Sons Holdings Limited, Alex. Brown & Sons Limited, Alex. Brown Asset
Management, Inc., Alex. Brown Capital Advisory, Incorporated and Investment
Company Capital Corporation; Co-Chairman and Co-Chief Executive Officer,
Deutsche Bank Securities Inc.; Director and President - AB Administrative
Partner, Inc., ABFS I Incorporated, ABS
<PAGE>

Leasing Services Company, ABS MB Ltd., Alex. Brown Financial Corporation, Alex.
Brown Financial Services Incorporated, Alex. Brown Investments Incorporated,
Alex. Brown Management Services Inc. and Alex. Brown Mortgage Capital
Corporation; and Director and Vice President, Alex. Brown & Sons Holdings
Limited; Director, Constellation Holdings; President, South Street Aviation; Co-
Chairman and Co-Chief Executive Officer, Deutsche Bank Securities Inc. Address:
One South Street, Fl.30 Baltimore, MD 21202.

Investment Company Capital Corp. and Alex. Brown Investment Management serve as
investment adviser and sub-adviser to the Communications Portfolio. During the
past two fiscal years, no director or officer of Investment Company Capital
Corp. and no partner of Alex. Brown Investment Management has engaged in any
other business, profession, vocation or employment of a substantial nature other
than that of the business of investment management and, through affiliates,
investment banking.

ITEM 27. Principal Underwriters.

(a) ICC Distributors, Inc., the Distributor for shares of the Registrant, also
acts as principal underwriter for the following open-end investment companies:
BT Advisor Funds, BT Institutional Funds, BT Pyramid Mutual Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity 500
Index Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio, BT
Investment Portfolios, Deutsche Banc Alex. Brown Cash Reserve Fund, Inc., Flag
Investors Communications Fund, Inc., Flag Investors Emerging Growth Fund, Inc.,
the Flag Investors Total Return U.S. Treasury Fund Shares of Total Return U.S.
Treasury Fund, Inc., the Flag Investors Managed Municipal Fund Shares of Managed
Municipal Fund, Inc., Flag Investors Short-Intermediate Income Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors Real Estate Securities Fund,
Inc., Flag Investors Series Funds, Inc., Flag Investors Equity Partners Fund,
Inc., Flag Investors Funds, Inc.(formerly known as Deutsche Funds, Inc.), Flag
Investors Portfolios Trust (formerly known as Deutsche Portfolios), Morgan
Grenfell Investment Trust, DP Trust, The Glenmede Funds, Inc. and The Glenmede
Portfolios.

(b) The principal business address for the following persons is Two Portland
Square, Portland, Maine 04101.
<PAGE>

<TABLE>
<CAPTION>
Name and Positions and Positions and
Principal Business Offices with Offices with
Address Distributor Registrant
<S> <C> <C>
John A. Keffer President None
Ronald H. Hirsch Treasurer None
Nanette K. Chern Chief Compliance Officer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Frederick Skillin Assistant Treasurer None
Marc D. Keffer Assistant Secretary None
</TABLE>

ITEM 28. Location of Accounts and Records.

BT Investment Funds: Deutsche Asset Management
(Registrant) One South Street
Baltimore, MD 21202

Investment Company Capital One South Street
Corp. (Adviser) Baltimore, MD 21230

Alex. Brown Investment One South Street
Management (Sub-adviser) Baltimore, MD 21230

Bankers Trust Company: 130 Liberty Street
(Custodian New York, NY 10006
and Administrator)

DST (sub-transfer agent): 210 West 10th Street
Kansas City, MO 64105.

ICC Distributors, Inc.: Two Portland Square
(Distributor) Portland, ME 04101

ITEM 29. Management Services.

Not Applicable

ITEM 30. Undertakings.

Not Applicable
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant, BT INVESTMENT
FUNDS, has duly caused this Post-Effective Amendment No. 72 to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Baltimore and the State of Maryland on this 14th day of July, 2000.

BT INVESTMENT FUNDS

By: /s/ Daniel O. Hirsch
--------------------
Daniel O. Hirsch, Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Daniel O. Hirsch Secretary July 14, 2000
-------------------- (Attorney in Fact
Daniel O. Hirsch For the Persons Listed Below)

/s/ JOHN Y. KEFFER* President and
--------------------------- Chief Executive Officer
John Y. Keffer

/s/ CHARLES A. RIZZO* Treasurer (Principal
--------------------------- Financial and Accounting Officer)
Charles A. Rizzo

/s/ CHARLES P. BIGGAR* Trustee
---------------------------
Charles P. Biggar

/s/ S. LELAND DILL* Trustee
---------------------------
S. Leland Dill

/s/ MARTIN J. GRUBER* Trustee
---------------------------
Martin J. Gruber

/s/ RICHARD T. HALE* Trustee
---------------------------
Richard T. Hale

/s/ RICHARD J. HERRING* Trustee
---------------------------
Richard J. Herring

/s/ BRUCE T. LANGTON* Trustee
---------------------------
Bruce T. Langton

/s/ PHILIP SAUNDERS, JR.* Trustee
---------------------------
Philip Saunders, Jr.

/s/ HARRY VAN BENSCHOTEN* Trustee
---------------------------
Harry Van Benschoten

* By Power of Attorney. Incorporated by reference to Post-Effective Amendment
No. 64 of BT Investment Funds as filed with the Commission on October 22, 1999.
<PAGE>

SIGNATURES

COMMUNICATIONS PORTFOLIO has duly caused this Post-Effective Amendment No. 72
to the Registration Statement on Form N-1A of BT Investment Funds to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Baltimore and the State of Maryland on the 14th day of July, 2000.

COMMUNICATIONS PORTFOLIO

By: /s/ Carl W. Vogt, Esq.
-------------------------
Carl W. Vogt, Esq.
President

This Post-Effective Amendment No. 72 to the Registration Statement of BT
Investment Funds has been signed below by the following persons in the
capacities indicated with respect to COMMUNICATIONS PORTFOLIO.

NAME TITLE

By: /s/ TRUMAN T. SEMANS* Chairman and
----------------------- Director
Truman T. Semans

/s/ RICHARD R. BURT* Director
---------------------------
Richard R. Burt

/s/ RICHARD T. HALE* Director
---------------------------
Richard T. Hale

/s/ JOSEPH R. HARDIMAN* Director
---------------------------
Joseph R. Hardiman

/s/ LOUIS E. LEVY* Director
---------------------------
Louis E. Levy

/s/ EUGENE J. McDONALD* Director
---------------------------
Eugene J. McDonald

/s/ REBECCA W. RIMEL* Director
---------------------------
Rebecca W. Rimel

/s/ ROBERT H. WADSWORTH* Director
---------------------------
Robert H. Wadsworth

/s/ CARL W. VOGT, ESQ.
--------------------------- President
Carl W. Vogt, Esq.

/s/ CHARLES A. RIZZO
--------------------------- Chief Financial and
Charles A. Rizzo Accounting Officer

*By: /s/ Daniel O. Hirsch
----------------------
Daniel O. Hirsch
Attorney-in-Fact

* By Power of Attorney - filed herewith.