DEUTSCHE ASSET MANAGEMENT, 485APOS, 1999-12-23

DEUTSCHE ASSET MANAGEMENT
485APOS, 1999-12-23

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<PAGE>

File Nos. 33-68704
811-8006

As filed with the Securities and Exchange Commission on December 23, 1999

Form N-1A

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. [22]

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/

AMENDMENT NO. [24]
(Check appropriate box or boxes)

MORGAN GRENFELL INVESTMENT TRUST
(Exact name of registrant as specified in charter)

One South Street
Baltimore, Maryland 21202
(Address of principal executive office) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 230-2600

Richard T. Hale
Morgan Grenfell Investment Trust
One South Street
Baltimore, Maryland 21202
(Name and address of agent for service)

Copies of communications to:
Christopher P. Harvey, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109

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

X on February 28, 2000 pursuant to paragraph (a)(1) of Rule 485
-----

<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

International Select Equity

European Equity

International Small Cap Equity

Emerging Markets Equity

FOOTNOTE: 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]
<PAGE>

Table of Contents

International Select Equity
European Equity
International Small Cap Equity
Emerging Markets Equity

Information Concerning All of the Funds

Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

International equity funds - Institutional Class Page - 2 -
<PAGE>

INTERNATIONAL SELECT EQUITY - Institutional Class

Overview of International Select Equity

Goal
Core Strategy
Investment Policies and Strategies
Principal Risks of Investing in the Fund
Who Should Consider Investing in the Fund
Total Returns, After Fees and Expenses
Annual Fund Operating Expenses

A Detailed Look at International Select Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International equity funds - Institutional Class Page - 3 -
<PAGE>

International Select Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies in developed countries located outside the
United States.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in a focused
list of approximately 30 to 40 international stocks offering, in the Investment
Adviser's opinion, the greatest upside potential on a 12 month view. The Fund
seeks companies with above average earnings growth, below average
price-to-earnings ratios, leading or dominant positions in their particular
market and high quality management.

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

Beyond the risks common to all stock investing, an investment in the Fund could
also lose money or underperform alternative investments as a result of risks in
the foreign countries in which the Fund invests. For example:

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

International equity funds - Institutional Class Page - 4 -
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o since the Fund may focus its investments in Japan and the United Kingdom,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the International Select Equity Fund if you are
seeking capital appreciation. There is, of course, no guarantee that the Fund
will realize its goal. Moreover, you should be willing to accept significantly
greater short-term fluctuation in the value of your investment than you would
typically experience investing in bond or money-market funds.

You should not consider investing in the International Select Equity Fund if you
are pursuing a short-term financial goal, if you seek regular income or if you
cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in U.S. securities alone. Diversifying your investments may
lower the volatility of your overall investment portfolio.

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

International equity funds - Institutional Class Page - 5 -
<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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on May 15, 1995 (its inception
date). The table compares the average annual return of the Fund's Institutional
Class shares with that of the Morgan Stanley Capital International (MSCI) EAFE
Index over the last one year and since inception. Bear in mind that the Index is
a passive measure of combined national stock market returns. It does not factor
in the costs of buying, selling and holding stock -- costs which are reflected
in the Fund's results.

FOOTNOTE: The MSCI EAFE Index of major markets in Europe, Australia and the Far
East is a widely accepted benchmark of international stock performance. It is a
model, not an actual portfolio. It tracks stocks in Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

------------------------------------------------------
1996 1997 1998 1999
---- ---- ---- ----
------------------------------------------------------
______% ______% ______% ________%
------------------------------------------------------

Since inception, the Fund's highest return in any calendar quarter was _______%
(___ quarter 19__) and its lowest quarterly return was _______%. (___ quarter
past 19__). Past performance offers no indication of how the Fund will perform
in the future.

International equity funds - Institutional Class Page - 6 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year 3 years (5/15/95)(1)
- --------------------------------------------------------------------------------
International Select Equity Fund --
Institutional Class shares _____% _____% _____%
- --------------------------------------------------------------------------------
EAFE Index _____% _____%
================================================================================
1 The EAFE Index average is calculated from _______, 1995.

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 Institutional Class shares of the
International Select Equity Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses ____%
Total Fund Operating Expenses ____%
Less: Fee Waivers or Expense Reimbursement (____%)(1)
----------
Net Expenses 1.25%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in Institutional Class shares of the Fund. The
numbers assume 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.

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

International equity funds - Institutional Class Page - 7 -
<PAGE>

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 1.25%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International equity funds - Institutional Class Page - 8 -
<PAGE>

International Select Equity

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, the Fund
invests at least 65% of its total assets in stocks and other securities with
equity characteristics of companies in developed countries located outside the
United States.

The Fund invests for capital appreciation, not income. Any dividend and interest
income is incidental to the pursuit of its objective. While we seek capital
appreciation, 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 invests for the long term. We seek to identify a focused list of
approximately 30 to 40 companies outside the United States that offer, in our
opinion, the greatest upside potential on a 12 month view. In evaluating stocks,
we look for above average earnings growth, below average price-to-earnings
ratios, leading or dominant positions in their particular markets and high
quality management.

PRINCIPAL INVESTMENTS

Almost all of the companies in which the Fund invests are located in the
developed countries that make up the MSCI EAFE Index. The Fund may invest more
than 25% of its assets in securities of companies located in each of Japan and
the United Kingdom. The Fund typically invests in approximately 30 to 40
companies.

The Fund invests primarily in stocks and other securities with equity
characteristics. The Fund may also invest up to 35% of its assets in cash
equivalents, investment grade fixed income securities and stocks and other
equity securities of U.S. issuers.

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International equity funds - Institutional Class Page - 9 -
<PAGE>

The Fund may also invest a portion of its assets in companies based in the
emerging markets of Latin America, the Middle East, Europe, Asia and Africa if
the Investment Adviser believes that their return potential more than
compensates for the extra risks associated with these markets.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. We use a
"bottom-up" approach to picking stocks. This approach focuses on individual
stock selection rather than country selection. The portfolio management team
uses an active process which emphasizes fundamental country research through
financial analysis and company visits. The team also uses a risk-controlled
asset allocation process to add value at the regional level.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund has had a high portfolio turnover rate. High turnover can
increase the Fund's transaction costs, thereby lowering its returns. It may also
increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with
international investing, as well as investing in general. Although we attempt
both to assess the likelihood that these risks may actually occur and to limit
them, we cannot guarantee that we will succeed.

Primary Risks

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market, including stocks held by the Fund.

International equity funds - Institutional Class Page - 10 -
<PAGE>

countries in which the Fund invests, they may in the future. We analyze
countries and regions to try to anticipate these risks.

Foreign Stock Market Risk. From time to time, foreign capital markets have
exhibited more volatility than those in the United States. Trading stocks on
some foreign exchanges is inherently more difficult than trading in the United
States for several reasons including:

o Liquidity Risk. Stocks that trade infrequently or in low volumes can be
more difficult or more costly to buy, or to sell, than more liquid or
active stocks. This liquidity risk is a factor of the trading volume of a
particular stock, as well as the size and liquidity of the entire local
market. On the whole, foreign exchanges are smaller and less liquid than
the U.S. market. Relatively small transactions in some instances can have
a disproportionately large effect on the price and supply of shares. In
certain situations, it may become virtually impossible to sell a stock in
an orderly fashion at a price that approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign securities denominated in
foreign currencies. This creates the possibility that changes in foreign
exchange rates will affect the U.S. dollar value of foreign securities or
the U.S. dollar amount of income or gain received on these securities. We
may, but need not, seek to minimize this risk by actively managing the
currency exposure of the Fund, which entails hedging from time to time.

FOOTNOTE: Currency management may be used in an attempt to offset investment
risks ("hedging") and, where possible, to add to investment returns. Currency
management activities include the use of forward contracts and may include the
use of other instruments. There is no guarantee that these currency management
activities will be employed or that they work, and their use could cause lower
returns or even losses to the Fund.

International equity funds - Institutional Class Page - 11 -
<PAGE>

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Japan or the United Kingdom, or a particular
region, market swings in such a targeted country or region will be likely to
have a greater effect on Fund performance than they would in a more
geographically diversified equity fund.

Secondary Risks

Pricing Risk. When price quotations for particular securities are not readily
available, we determine their value by the method that most accurately reflects
their current worth in the judgement of the Board of Trustees. This procedure
implies an unavoidable risk that our prices are higher or lower than the prices
that the securities might actually command if we were to sell them. If we value
these securities too highly when you buy shares of the Fund, you may end up
paying too much for your Fund shares. If we underestimate their price when you
sell, you may not receive the full market value for your Fund shares.

Emerging Market Risk. To the extent that the Fund invests in emerging markets,
it may face higher political, information, and stock market risks. In addition,
profound social changes and business practices that depart from norms in
developed countries' economies have hindered the orderly growth of emerging
economies and their stock markets in the past. High levels of debt tend to make
emerging economies heavily reliant on foreign capital and vulnerable to capital
flight.

Small Company Risk. To the extent that the Fund invests in small capitalization
companies, it will be more susceptible to share price fluctuations, since small
company stocks tend to experience steeper fluctuations in price -- down as well
as up -- than the stocks of larger companies. A shortage of reliable
information, the same information gap that creates opportunity in small company
investing, can also pose added risk. Industrywide reversals may have a greater
impact on small companies, since they lack a large company's financial
resources. Small company managers typically have less experience coping with
adversity or capitalizing on opportunity than their counterparts at larger
companies. Finally, small company stocks are typically less liquid than large
company stocks. Particularly when they are performing poorly, a small company's
shares may be more difficult to sell.

International equity funds - Institutional Class Page - 12 -
<PAGE>

Exposure Risk. There is risk associated with certain investments (such as
derivatives) or practices (such as short selling) that may increase the amount
of money the Fund could gain or lose on an investment. This exposure risk could
magnify losses generated by a derivative or practice used for hedging purposes.
Such losses might be partially or completely offset by gains on the hedged
investment. However, while hedging can reduce or eliminate losses, it may not
always be successful and it can also reduce or eliminate gains.

To the extent that a derivative or practice is not used as a hedge or the hedge
is unsuccessful, the Fund is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the derivative's
original cost. For example, potential losses from writing uncovered call options
and from speculative short sales are unlimited. In addition, there is a risk
that a counterparty will fail to honor a contract's terms resulting in a loss
for the Fund.

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options on futures contracts. If the Fund
invests in futures contracts and options on futures contracts for non-hedging
purposes, the margin and premiums required to make those investments will not
exceed 5% of the Fund's net asset value after taking into account unrealized
profits and losses on the contracts. Futures contracts and options on futures
contracts used for non-hedging purposes involve greater risks than stock
investments.

Euro Risk. On January 1, 1999, eleven countries of the European Economic and
Monetary Union (EMU) began implementing a plan to replace their national
currencies with a new currency, the euro. Full conversion to the euro is slated
to occur by July 1, 2002.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

o These and other factors could increase volatility in financial markets
worldwide and could adversely affect the value of securities held by the
Fund.

International equity funds - Institutional Class Page - 13 -
<PAGE>

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 could place up to 100% of the Fund's assets in U.S. or
foreign-government money-market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may not meet
its goal of capital appreciation.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Institutional Class shares of the Fund for the past five fiscal periods. The
information selected reflects financial results for a single Institutional Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Institutional Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

International equity funds - Institutional Class Page - 14 -
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the year ended October 31, For the period
------------------------------ --------------
- ---------------------------------------------------------------------------------------------------- ended October
1999 1998 1997 1996 -------------
---- ---- ---- ---- 31, 1995(1)
-----------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
(Loss) on Investment, Option,
Foreign Currency, Forward Foreign
Currency and Foreign Futures
Contracts
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ----------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s
omitted)
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

1 The Fund's inception was May 15, 1995.
2 Annualized.

International equity funds - Institutional Class Page - 15 -
<PAGE>

EUROPEAN EQUITY (formerly the Morgan Grenfell European Equity Growth Fund) -
Institutional Class

Overview of European Equity

A Detailed Look at European Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International equity funds - Institutional Class Page - 16 -
<PAGE>

European Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies located in European countries.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in
companies located in European countries. We look for investments that may not be
appropriately priced by the market. In selecting investments, we attempt to
identify investment trends or major social developments that are likely to have
a positive impact on a company's technologies, products and services.

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

Beyond the risks common to all stock investing, an investment in the Fund could
also lose money, or underperform alternative investments as a result of risks in
the foreign countries in which the Fund invests. For example:

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

International equity funds - Institutional Class Page - 17 -
<PAGE>

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment itself to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the European Equity Fund if you are seeking
capital appreciation. There is, of course, no guarantee that the Fund will
realize its goal. Moreover, you should be willing to accept significantly
greater short-term fluctuation in the value of your investment than you would
typically experience investing in bond or money market funds.

You should not consider investing in the European Equity Fund if you are
pursuing a short-term financial goal, if you seek regular income or if you
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 not available to someone
who invests in U.S. securities alone. Diversifying your investments may improve
your long-run investment return and lower the volatility of your overall
investment portfolio.

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

International equity funds - Institutional Class Page - 18 -
<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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on September 3, 1996 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Morgan Stanley Capital International
(MSCI) Europe Index over the last one year and since inception. Bear in mind
that the Index is a passive measure of combined national stock market returns.
It does not factor in the costs of buying, selling and holding stock -- costs
which are reflected in the Fund's results.

FOOTNOTE: The MSCI Europe Index of major markets in Europe is a widely accepted
benchmark of international stock performance. It is a model, not an actual
portfolio. It tracks stocks in Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden, Switzerland and the
United Kingdom.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

-----------------------------------------
1997 1998 1999(1)
---- ---- -------
-----------------------------------------
______% ______% ________%
-----------------------------------------

Since inception, the Fund's highest return in any calendar quarter was _______%
(____ quarter 19__) and its lowest quarterly return was _______% (___ quarter
19__). Past performance offers no indication of how the Fund will perform in the
future.

International equity funds - Institutional Class Page - 19 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since Inception
1 year (9/3/96)(2)
- --------------------------------------------------------------------------------
European Equity Fund - Institutional Class shares
================================================================================
MSCI Europe Index _____% _____%
================================================================================
1 Effective December __, 1999, Deutsche Asset Management, Inc. replaced Deutsche
Asset Management Investment Services Limited as the investment adviser to the
Fund.
2 The MSCI Europe Index average is calculated from _______, 1996.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Percentage of Average
Daily Net Assets
----------------

Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursements (___)(1)
Net Expenses 1.25%

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

International equity funds - Institutional Class Page - 20 -
<PAGE>

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.1 Your actual investment return and costs may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001 to waive
its fees and reimburse expenses so that total expenses will not exceed 1.25%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International equity funds - Institutional Class Page - 21 -
<PAGE>

European Equity

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, it invests at
least 65% of its total assets in stock and other securities with equity
characteristics of companies located in European countries.

STRATEGY

The Fund invests for the long term. We employ a strategy of growth at a
reasonable price -- combining what we believe to be the best of "value" and
"growth" investment approaches. This core philosophy involves attempting to
identify both undervalued stocks and catalysts that will function to realize the
inherent value of these companies. We seek to identify companies that combine
strong potential for earnings growth with reasonable investment value. Such
companies typically exhibit increasing rates of profitability and cash flow, yet
their share prices compare favorably to other stocks in a given market and to
their peers.

We may invest in various instruments commonly known as "derivatives" to increase
or decrease the Fund's exposure to a securities market or index. In particular,
the Fund may use futures, options and forward currency transactions. We may use
derivatives in circumstances when we believe they offer an economical means of
gaining exposure to a particular securities market or index. We may also invest
in derivatives to attempt to reduce the Fund's exposure or to keep cash on hand
to meet shareholder redemptions or other needs while maintaining exposure to the
market.

International equity funds - Institutional Class Page - 22 -
<PAGE>

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

FOOTNOTE: Forward currency transactions involve the purchase or sale of a
foreign currency at an exchange rate established currently, but with payment and
delivery at a specified future time. Forward currency transactions may be used
in an attempt to hedge against losses, or, where possible, to add to investment
returns.

PRINCIPAL INVESTMENTS

The Fund will generally invest in the developed countries of Europe but may also
invest a portion of its assets in companies based in the emerging markets of
Eastern and Central Europe as well as countries on the periphery of and
surrounding Europe if we believe that their return potential more than
compensates for the extra risks associated with these markets. The Fund invests
primarily in stocks and other securities with equity characteristics.

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. Our process brings
an added dimension to this fundamental research. It draws on the insight of
experts from a range of financial disciplines -- regional stock market
specialists, global industry specialists, economists and quantitative analysts.
They challenge, refine and amplify each other's ideas. Their close collaboration
is a critical element of our investment process. We utilize a team approach to
investing and believe strongly in fundamental analysis as a starting point to
valuing a company.

Our analysis of trends and possible breaks with traditional patterns allows for
the identification of investments which may not be appropriately priced by the
market because changes in legislation, technological developments, industry
rationalization or other structural shifts have created potential opportunities
which the market has not yet discovered. Emphasis is placed on visiting
companies and conducting in-depth research of industries and regions. This
involves identifying investment trends or major social developments that are
likely to have a significant positive impact on certain technologies, products
and services.

International equity funds - Institutional Class Page - 23 -
<PAGE>

In choosing stocks and other equity securities, we consider a number of factors,
including:

o stock price relative to the company's rate of earnings growth;

o valuation relative to other European companies and market averages;

o valuation relative to global peers;

o merger and acquisition trends; and

o trends related to the impact of the introduction of the new European
currency, the "euro," on the finance, marketing and distribution
strategies of European companies.

Although the Fund intends to diversify its investments across different
countries, the Fund may invest a significant part of its assets in a single
country. The Fund may invest in companies of any size, although most of its
investments will generally be in large and mid-capitalization companies.

FOOTNOTE: Market capitalization is determined by the market price of a company's
issued and outstanding common stock and is calculated by multiplying the number
of shares a company has outstanding by the current market price of the company's
shares. Generally, large capitalization companies have a market capitalization
greater than $5 billion and mid-capitalization companies have a market
capitalization between $1 billion and $5 billion.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Historically, the Fund has had a low portfolio turnover rate.

RISKS

Below we have set forth some of the prominent risks associated with
international investing, along with those of investing in general. Although we
attempt both to assess the likelihood that these risks may actually occur and to
limit them, we cannot guarantee that we will succeed.

Primary Risks

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
process of the entire market, including stocks held by the Fund.

International equity funds - Institutional Class Page - 24 -
<PAGE>

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value. The Fund may
underperform relative to its stated benchmark, due to our securities choices and
choices in asset allocation. The Fund seeks to limit this risk with a strict
evaluation process. Before it takes a position in a stock, the Fund's investment
team typically establishes a target sell price at which point they will
reevaluate the company's situation to determine whether the deterioration in
performance mirrors a fundamental deterioration in the business, or whether, in
our view, the reversal is merely temporary.

Political Risk. Some foreign governments have limited the outflow of profits to
investors abroad, and extended diplomatic disputes to include trade and
financial relations, and imposed high taxes on corporate profits. While these
political risks have not occurred recently in the major countries in which the
Fund invests, they may in the future. We analyze countries and regions to try to
anticipate these risks.

Information Risk. Financial reporting standards for companies based in foreign
markets differ from those in the United States and may present an incomplete or
misleading picture of a foreign company compared to U.S. standards. Since the
"numbers" themselves sometimes mean different things, we devote much of our
research efforts to understanding and assessing the impact of these differences
upon a company's financial conditions and prospects.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established as in the U.S.

International equity funds - Institutional Class Page - 25 -
<PAGE>

o Currency Risk. The Fund invests in foreign securities denominated in
foreign currencies. This creates the possibility that changes in foreign
exchange rates will affect the U.S. dollar value of foreign securities or
the U.S. dollar amount of income or gain received on these securities. We
may seek to minimize this risk by actively managing the currency exposure
of the Fund, which entails hedging or cross-hedging from time to time. Our
specialist currency team will manage the Fund's currency exposure in an
attempt to add value and control risk by insulating the Fund against
adverse currency movements.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in a particular region, market swings in such a
targeted country or region will be likely to have a greater effect on Fund
performance than they would in a more geographically diversified equity fund.

Emerging Markets Risk. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information and stock
market risks. In addition,

International equity funds - Institutional Class Page - 26 -
<PAGE>

profound social change and business practices that depart from developed
countries' norms have hindered the orderly growth of emerging economies and
their stock markets in the past. High levels of debt have tended to make
emerging economies heavily reliant on foreign capital and vulnerable to capital
flight.

Secondary Risks

Small Company Risk. To the extent that the Fund invests in small capitalization
companies, it will be more susceptible to share price fluctuations, since small
company stocks tend to experience steeper fluctuations in price -- down as well
as up -- than the stocks of larger companies. A shortage of reliable
information, the same information gap that creates opportunity in small company
investing, can also pose added risk. Industrywide reversals may have a greater
impact on small companies, since they lack a large company's financial
resources. Finally, small company stocks are typically less liquid than large
company stocks. Particularly when they are performing poorly, a small company's
shares may be more difficult to sell.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

International equity funds - Institutional Class Page - 27 -
<PAGE>

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

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 could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent that we might
adopt such a position, and over the course of its duration, the Fund may not
meet its goal of capital appreciation.

PORTFOLIO MANAGERS

The following portfolio managers have been responsible for the day-to-day
management of the Fund's investments since December 23, 1999:

Michael Levy, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund.

o Joined Bankers Trust in 1993.

o Bankers Trust's international equity strategist, overseeing the design and
implementation of the firm's proprietary stock selection process.

o 29 years of business experience, 18 of them as an investment professional.

o Degrees in mathematics and geophysics from the University of Michigan.

Caroline Altmann, Director of Deutsche Asset Management, Inc. and Co-Portfolio
Manager of the Fund.

o Joined Bankers Trust in 1999.

o Financial services analyst with an emphasis on Europe and Japan.

o 14 years of investment industry experience.

o MBA from Columbia University.

International equity funds - Institutional Class Page - 28 -
<PAGE>

Clare Brody, CFA, Vice President of Deutsche Asset Management, Inc. and
Co-Portfolio Manager of the Fund.

o Joined Bankers Trust in 1993.

o 9 years of investment industry experience.

o Portfolio manager with a primary focus on Global Telecommunication
Services and Equipment and Pulp and Paper Analyst.

Matthias Knerr, CFA, Assistant Vice President of Deutsche Asset Management, Inc.
and Co-Portfolio Manager of the Fund.

o Joined Bankers Trust in 1995.

o 5 years of investment industry experience.

o Global engineering, construction, utility and automotive analyst.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Institutional Class shares of the Fund for the past four fiscal periods. The
information selected reflects financial results for a single Institutional Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Institutional Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

International equity funds - Institutional Class Page - 29 -
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the period
For the year ended October 31, --------------
------------------------------ ended
- ----------------------------------------------------------------------------------------------- -----
1999 1998 1997 October 31, 1996(1)
---- ---- ---- -------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- -------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign
Futures Contracts
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- -------------------------------------------------------------------------------------------------------------------
Total Distributions
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- -------------------------------------------------------------------------------------------------------------------
Total Investment Return
- -------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
DAMIS
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

1 The Fund's inception was September 3, 1996.
2 Annualized.

International equity funds - Institutional Class Page - 30 -
<PAGE>

INTERNATIONAL SMALL CAP EQUITY - Institutional Class

Overview of International Small Cap Equity

A Detailed Look at International Small Cap Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International equity funds - Institutional Class Page - 31 -
<PAGE>

International Small Cap Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of small capitalization companies located in countries
outside the United States.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in equity
securities of small capitalization companies located in countries outside the
United States. The Fund may invest more than 25% of its assets in securities of
small cap companies located in each of Japan and the United Kingdom. The Fund
seeks companies with above average earnings growth, below average
price-to-earnings ratios, leading or dominant positions in their particular
markets and high quality management.

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:

o stocks that the Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested;

o small company stock returns could trail stock market returns generally
because of risks specific to small company investing: greater share-price
volatility and fewer buyers for shares in periods of economic or stock
market stress; or

o derivatives used for gaining market exposure may magnify losses,
derivatives used for hedging may reduce gains or may not fully offset
losses in the underlying positions or counterparties may fail to honor a
contract's terms.

International equity funds - Institutional Class Page - 32 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Japan and the United Kingdom,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decline in value
relative to the U.S. dollar, which could affect the value of the
investment itself to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the International Small Cap Equity Fund if you
are seeking capital appreciation. Moreover, you should be willing to accept
significantly greater short-term fluctuation in the value of your investment
than you would typically experience investing in bond or money-market funds.

You should not consider investing in the International Small Cap Equity Fund if
you are pursuing a short-term financial goal, if you seek regular income or if
you cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not otherwise available
to someone who invests in U.S. securities alone, or to investors in large- or
medium-sized company stocks.

International equity funds - Institutional Class Page - 33 -
<PAGE>

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on January 3, 1994 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Salomon Extended Market Index over
the last one year, five years and since inception. Bear in mind that the Index
is a passive measure of combined national stock market returns. It does not
factor in the costs of buying, selling and holding stock--costs which are
reflected in the Fund's results.

FOOTNOTE: The Salomon World Extended Market Index comprises the
small-capitalization equities of each country in the Salomon Broad Market Index.
The index contains approximately 3,000 issues in more than 20 countries, is
calculated gross of withholding taxes and is capitalization weighted.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
______% ______% ______% ______% ______% ________%
- --------------------------------------------------------------------------------

Since inception, the Fund's highest return in any calendar quarter was _______%
(_____ quarter 19___) and its lowest quarterly return was _______% (_____
quarter 19___). Past performance offers no indication of how the Fund will
perform in the future.

International equity funds - Institutional Class Page - 34 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year 5 years (1/3/94)(1)
- --------------------------------------------------------------------------------
International Small Cap Equity Fund -
Institutional Class shares _____% _____% _____%
================================================================================
Salomon Extended Market Index ____% _____% _____%
================================================================================
1 The Salomon Extended Market Index average is calculated from _______, 1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Institutional Class shares of the International
Small Cap Equity Fund.

Percentage of Average
Daily Net Assets
----------------
Management Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Expenses __%
Total Fund Operating Expenses __%
Less: Fee Waivers or Expense Reimbursements ( %)(1)
---------
Net Expenses 1.25%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in Institutional Class shares of 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.

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.(1) Your actual investment returns and costs may be higher or lower.

International equity funds - Institutional Class Page - 35 -
<PAGE>

International equity funds - Institutional Class Page - 36 -
<PAGE>

International Small Cap Equity

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, the Fund
invests at least 65% of its total assets in stocks and other securities with
equity characteristics of small capitalization companies located in countries
outside the United States.

FOOTNOTE: We define small capitalization companies as, at the time of purchase,
(i) companies ranked according to market capitalization in the bottom 25% of
issuers listed on a stock exchange, (ii) companies listed on a secondary market
and (iii) companies whose securities are not listed on a stock exchange or
traded in a secondary market.

The Fund invests for growth, not income. Any dividend and interest income is
incidental to the pursuit of its objective. While we seek capital appreciation,
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 invests for the long term. In evaluating stocks, we look for companies
with above average earnings growth, below average price-to-earnings ratios,
leading or dominant positions in their particular markets and high quality
management.

We may use various instruments commonly known as "derivatives" to increase or
decrease the Fund's exposure to a securities market or index. In particular, the
Fund may use futures and options and forward currency transactions. We may use
derivatives in circumstances when we believe they offer an economical means of
gaining exposure to a particular securities market or index. We may also invest
in derivatives to attempt to reduce the Fund's exposure or to keep cash on hand
to meet shareholder redemptions or other needs while maintaining exposure to the
market.

International equity funds - Institutional Class Page - 37 -
<PAGE>

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

PRINCIPAL INVESTMENTS

Almost all of the companies in which the Fund invests are small capitalization
companies located in countries outside the United States. The Fund may invest
more than 25% of its assets in securities of small cap companies located in each
of Japan and the United Kingdom.

This small capitalization focus offers a large opportunity. Small companies
remain under-researched both in the United States and to an even greater extent
abroad, so they may offer fertile ground for finding substantially undervalued
stocks. Moreover, the Fund offers an opportunity to invest in companies that are
often unnoticed by the "large-cap" mutual funds.

The Fund may also invest a portion of its assets in companies based in the
emerging markets of Latin America, the Middle East, Europe, Asia and Africa if
we believe that their return potential more than compensates for the extra risks
associated with these markets.

The Fund invests primarily in stocks and other securities with equity
characteristics. The Fund may also invest up to 35% of its assets in cash
equivalents, investment grade fixed income securities and equity securities of
large and mid-capitalization companies located outside the U.S. and companies of
any size located in the U.S.

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

INVESTMENT PROCESS

International equity funds - Institutional Class Page - 38 -
<PAGE>

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund had a high portfolio turnover rate. Historically, the Fund
has not had and we do not expect that it will continue to have a high portfolio
turnover rate. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with small
company investing and investing outside the United States, as well as investing
in general. Although we attempt both to assess the likelihood that these risks
may actually occur and to limit them, we cannot guarantee that we will succeed.

Primary Risks

Small Company Risk. Because the Fund invests in small capitalization companies,
it will be more susceptible to share price fluctuations, since small company
stocks tend to experience steeper fluctuations in price -- down as well as up --
than the stocks of larger companies. A shortage of reliable information, the
same information gap that creates opportunity in small company investing, can
also pose added risk. Industrywide reversals may have a greater impact on small
companies, since they lack a large company's financial resources. Small company
managers typically have less experience coping with adversity or capitalizing on
opportunity

International equity funds - Institutional Class Page - 39 -
<PAGE>

than their counterparts at larger companies. Finally, small company stocks are
typically less liquid than large company stocks. Particularly when they are
performing poorly, a small company's shares may be more difficult to sell.

Political Risk. Some foreign governments have limited the outflow of profits to
investors abroad, extended diplomatic disputes to include trade and financial
relations, and imposed high taxes on corporate profits. While these political
risks have not occurred recently in the major countries in which the Fund
invests, they may in the future. We analyze countries and regions to try to
anticipate these risks.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

International equity funds - Institutional Class Page - 40 -
<PAGE>

securities. We may, but need not, seek to minimize this risk by actively
managing the currency exposure of the Fund, which entails hedging from
time to time.

Secondary Risks

Emerging Markets Risk. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information and stock
market risks. In addition, profound social changes and business practices that
depart from developed countries' economies norms have hindered the orderly
growth of emerging economies and their stock markets in the past. High levels of
debt tend to make emerging economies heavily reliant on foreign capital and

International equity funds - Institutional Class Page - 41 -
<PAGE>

vulnerable to capital flight. For all these reasons, the Fund has carefully
limited and balanced its commitment to these markets.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

International equity funds - Institutional Class Page - 42 -
<PAGE>

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 could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may have to
forego its goal of capital appreciation.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Institutional Class shares of the Fund for the past five years. The information
selected reflects financial results for a single Institutional Class share of
the Fund. The total returns in the table represent the rate of return that an
investor would have earned on an investment in the Institutional Class shares of
the Fund, assuming reinvestment of all dividends and distributions. This
information has been audited by __________________________, whose report, along
with the Fund's financial statements, is included in the Fund's annual report.
The annual report is available free of charge by calling the Fund at
1-800-550-6426.

International equity funds - Institutional Class Page - 43 -
<PAGE>

International equity funds - Institutional Class Page - 44 -
<PAGE>

EMERGING MARKETS EQUITY - Institutional Class

Overview of Emerging Markets Equity

A Detailed Look at Emerging Markets Equity

Objective
The Case for Emerging Markets
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International equity funds - Institutional Class Page - 45 -
<PAGE>

Emerging Markets Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies located in countries with emerging
securities markets.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in equity
securities of companies located in countries with emerging securities markets.
The Fund may invest more than 25% of its assets in securities of Mexican and
Brazilian companies. The Fund seeks undervalued stocks with fast-growing
earnings and superior near-to-intermediate term performance potential.

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:

o stocks that our Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested; or

Beyond the risks common to all stock investing, an investment in the Fund could
also lose money or underperform alternative investments as a result of risks in
the emerging markets in which the Fund invests. For example:

o economies in countries with emerging securities markets are more volatile
than those of developed countries and are subject to sudden reversals;

International equity funds - Institutional Class Page - 46 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in emerging markets, particularly
those of Mexico and Brazil, it could be particularly susceptible to the
effects of political and economic developments in these markets;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Emerging Markets Equity Fund if you are
seeking capital appreciation. There is, of course, no guarantee that the Fund
will realize its goal. You should be aware that extreme fluctuations in
short-term investment values have often accompanied this capital appreciation.

You should not consider investing in the Emerging Markets Equity Fund if you are
pursuing a short-term financial goal, if you seek regular income or if you
cannot tolerate significant fluctuations in the value of your investments.
Diversifying your investments may lower the volatility of your overall
investment portfolio.

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart

International equity funds - Institutional Class Page - 47 -
<PAGE>

shows the actual return of the Fund's Institutional Class shares for each full
calendar year since it began selling Institutional Class shares to the public on
February 1, 1994 (its inception date). The table compares the average annual
return of the Fund's Institutional Class shares with that of the Morgan Stanley
Capital International (MSCI) Emerging Markets Free Index over the last one and
five years, and since inception. The Index is a passive measure of combined
stock market returns. It does not factor in the costs of buying, selling and
holding securities, costs which are reflected in the Fund's results.

FOOTNOTE: The (MSCI) Emerging Markets Free Index is a widely accepted benchmark
of international stock performance. It is a model, not an actual portfolio. It
tracks stocks in Argentina, Brazil (Free), Chile, China (Free), Colombia, Czech
Republic, Greece, Hungary, India, Indonesia (Free), Israel, Jordan, Korea,
Mexico (Free), Pakistan, Peru, Philippines (Free), Poland, Russia, South Africa,
Sri Lanka, Taiwan (@50%), Thailand (Free), Turkey, Venezuela.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

--------------------------------------------------------------------
1995 1996 1997 1998 1999
--------------------------------------------------------------------
% % % % %
--------------------------------------------------------------------

Since inception, the Fund's highest return in any calendar quarter was _______%
(_____ quarter 19__) and its lowest quarterly return was _______% (_____ quarter
19__). Past performance offers no indication of how the Fund will perform in the
future.

International equity funds - Institutional Class Page - 48 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 Year 5 Years (2/1/94)
- --------------------------------------------------------------------------------
Emerging Markets Equity Fund - Institutional
Class shares ____% ____% ____%
================================================================================
MSCI Emerging Markets Free Index ____% ____% ____%
================================================================================
1 MSCI Emerging Markets Free Index average is calculated from ________/94.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Institutional Class shares of the Emerging
Markets Equity Fund.

Percentage of Average
Daily Net Assets
---------------------
Management Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses __%
Total Fund Operating Expenses __%
Less: Fee Waivers or Expense Reimbursement (__%)(1)
---------
Net Expenses 1.25%

Expense Example. This example illustrates the expenses you would have incurred
on a $10,000 investment in Institutional Class shares of the Fund. The numbers
assume 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.

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.(1)

International equity funds - Institutional Class Page - 49 -
<PAGE>

Your actual investment returns and costs may be higher or lower.

International equity funds - Institutional Class Page - 50 -
<PAGE>

Emerging Markets Equity

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, the Fund
invests at least 65% of its total assets in the stocks and other securities with
equity characteristics of growth-oriented companies located in countries with
emerging securities markets.

The Fund invests for capital appreciation, not income; any dividend or interest
income is incidental to the pursuit of its objective. While we seek capital
appreciation, 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.

THE CASE FOR EMERGING MARKETS

Emerging markets offer the potential for long-term growth. An emerging market is
commonly defined as one that has experienced comparatively little
industrialization. The world's two most populous nations -- China and India --
are emerging markets, and they alone account for almost 40% of the world's
population. To the extent that consumers in these markets improve their
standards of living and their governments promote capitalism through
deregulation and privatization, companies serving these markets stand to gain
substantially through increased sales and profits. Thus, while emerging markets
are considerably more volatile than developed markets, the Investment Adviser's
experience should provide it with a critical advantage in investing in these
markets.

STRATEGY

The Fund invests for the long term. We seek to identify emerging market
companies that are undervalued. Such companies typically exhibit fast-growing
earnings and superior near-to-intermediate term performance potential. These
companies are often more established companies with a proven managerial
expertise, high earnings visibility and strong track records. We further
consider the relationship between these and other quantitative factors.
Together, these indicators

International equity funds - Institutional Class Page - 51 -
<PAGE>

of growth and value may identify companies with improving prospects before the
market in general has taken notice.

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

PRINCIPAL INVESTMENTS

Almost all of the companies in which the Fund invests are growth-oriented
companies located in countries with emerging securities markets. The Fund
invests in companies across the full geographic spectrum of emerging markets:
Asia, Latin America, Eastern Europe, the Mediterranean basin and Africa and may
invest more than 25% of its assets in securities of Mexican and Brazilian
companies.

The Fund invests primarily in stocks and other securities with equity
characteristics. The Fund may also invest up to 35% of its assets in cash
equivalents, investment grade fixed income securities and equity and equity
related securities traded in developed markets (including the U.S.).

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International equity funds - Institutional Class Page - 52 -
<PAGE>

INVESTMENT PROCESS

RISKS

Below we have set forth some of the prominent risks associated with emerging
markets investing, as well as investing in general. Although we attempt both to
assess the likelihood that these risks may actually occur and to limit them, we
cannot guarantee that we will succeed.

Primary Risks

Emerging Market Risk. Emerging market investing entails heightened risks
compared to those posed in developed market investing. We outline the heightened
risks related to foreign investing below. Profound social changes and business
practices that depart from developed countries' economies norms have hindered
the orderly growth of emerging economies and their stock markets in the past.
High levels of debt tend to make emerging economies heavily reliant on foreign
capital and vulnerable to capital flight.

Political Risk. Profound social changes and business practices that depart from
developed stock

International equity funds - Institutional Class Page - 53 -
<PAGE>

market norms have hindered the growth of national stock markets in the past.
High levels of debt have tended to make them overly reliant on foreign capital
investment and vulnerable to capital flight. Governments have limited foreign
investors' access to capital markets and restricted the flow of profits
overseas. They have resorted to high taxes, expropriation and nationalization.
In many countries, particularly in Eastern Europe and Asia, stock exchanges have
operated largely without regulation and in the absence of laws or precedents
protecting the rights of private ownership and foreign investors. All these
threats remain a part of emerging-market investing today. The Fund seeks to
avoid these to the extent possible through intensive, ongoing economic and
political research.

Information Risk. Emerging market accounting, auditing, and financial reporting
and disclosure standards tend to be far less stringent than those of developed
markets. And the risks of investors acting on incomplete, inaccurate or
deliberately misleading information are correspondingly greater. Compounding the
problem, local investment research often lacks the sophistication to spot
potential pitfalls.

Foreign Stock Market Risk. From time to time, foreign capital markets, and
particularly those in emerging markets, have exhibited more volatility than
those in the United States. Trading stocks on some foreign exchanges is
inherently more difficult than trading in the United States for several reasons
including:

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

International equity funds - Institutional Class Page - 54 -
<PAGE>

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Mexico or Brazil, or a particular region, market
swings in such a targeted country or region will be likely to have a greater
effect on Fund performance than they would in a more geographically diversified
equity fund.

International equity funds - Institutional Class Page - 55 -
<PAGE>

Secondary Risks

FOOTNOTE: Futures contracts and options on futures contracts are used as a low
cost method of gaining exposure to a particular securities market without
investing directly in those securities.

International equity funds - Institutional Class Page - 56 -
<PAGE>

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

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 could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may have to
forego its goal of long-term capital growth.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
For the year ended October 31,
------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
</TABLE>

International equity funds - Institutional Class Page - 57 -
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
(Loss) on Investment, Option,
Foreign Currency, Forward Foreign
Currency and Foreign Futures
Contracts
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s
omitted)
- ------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by DAMIS
- ------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

International equity funds - Institutional Class Page - 58 -
<PAGE>

Information
Concerning All Funds

MANAGEMENT OF THE FUNDS

Board of Trustees. A Board of Trustees supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

Investment Advisers. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DAMIS) with headquarters at 20
Finsbury Circus, London, England, acts as investment adviser for each Fund,
other than the European Equity Fund. Deutsche Asset Management, Inc. (DAMI) with
headquarters at 885 Third Avenue, New York, New York, acts as the investment
adviser for the European Equity Fund. The investment adviser for each Fund makes
the Fund's investment decisions and assumes responsibility for the securities
the Fund owns. Each Fund's investment adviser buys and sells securities for the
Fund and conducts the research that leads to these purchase and sale decisions.
Each Fund's investment adviser is also responsible for selecting brokers and
dealers and for negotiating brokerage commissions and dealer charges.

The Funds paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

International Select Equity Fund _________%
European Equity Fund(1) _________%
International Small Cap Fund _________%
Emerging Markets Equity Fund _________%
1 DAMIS was the Fund's investment adviser until December __, 1999.

DAMIS and DAMI provide a full range of international investment advisory
services to institutional clients, and as of October 31, 1999, managed
approximately $___ billion and $ ___________, respectively, in assets.

DAMIS and DAMI are each indirect wholly owned subsidiaries of Deutsche Bank AG.

International equity funds - Institutional Class Page - 59 -
<PAGE>

Deutsche Bank AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual fund,
retail and commercial banking, investment banking and insurance.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. DAMI [and its affiliates] provide administrative services --
such as portfolio accounting, legal services and others -- for the Funds. In
addition, DAMI -- or your broker or financial advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

Brokers and financial advisors may charge additional fees to investors for those
services not otherwise included in the brokers or financial advisors servicing
agreement, such as cash management or special trust or retirement-investment
reporting.

CALCULATING THE FUND'S SHARE PRICE

We calculate the daily price of each 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.

FOOTNOTE: The 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), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the fourth Thursday in
November) and Christmas Day.

International equity funds - Institutional Class Page - 60 -
<PAGE>

The formula calls for deducting all of the liabilities of a Fund's class of
shares 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
of that class outstanding. Prices for securities that trade on foreign exchanges
can change significantly on days when the New York Stock Exchange is closed and
you cannot buy or sell Fund shares. Such price changes in the securities a Fund
owns may ultimately affect the price of Fund shares when the New York Stock
Exchange re-opens.

Each Fund uses a forward pricing procedure. Therefore, the price at which you
buy or sell shares is based on the next calculation of the NAV after the order
is received by the Fund or our broker, provided that your broker or financial
advisor forwards your order to the Fund in a timely manner.

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

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 indexes and investments for which reliable performance data is
available. The Fund's performance may also be compared to averages, performance
rankings, or other information prepared by recognized mutual fund statistical
services.

DIVIDENDS AND DISTRIBUTIONS

If a Fund earns net investment income or recognizes net capital gains, its
policy is to distribute to shareholders substantially all of that taxable income
and capital gain on an annual basis. We utomatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

International equity funds - Institutional Class Page - 61 -
<PAGE>

TAX CONSIDERATIONS

A Fund does not ordinarily pay any U.S. federal income tax. If you are a taxable
shareholder, you and other shareholders pay taxes on the income or capital gains
earned and distributed by the Fund. Your taxes will vary from year to year,
based 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 have the following
tax character:

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term capital
gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

International equity funds - Institutional Class Page - 62 -
<PAGE>

BUYING AND SELLING FUND SHARES

Contacting the Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Minimum Account Investments

To open an account $250,000
To add to an account $25,000
Minimum account balance $50,000

Each Fund and its service providers reserve the right to, from time to time, at
their discretion, waive or reduce the investment minimums. Shares of a Fund may
be offered to directors and trustees, of any mutual fund advised or administered
by Deutsche Asset Management, Inc. or its affiliates, or employees of Deutsche
Bank AG, their spouses and minor children, without regard to the minimum
investment requirements.

International equity funds - Institutional Class Page - 63 -
<PAGE>

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 the Deutsche Asset Management Fund you have selected to
the Service Center. The addresses are shown under "Contacting the
Deutsche Asset Management Funds."

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

MAIL:

Buying: Send your check, payable to the Deutsche Asset Management Fund you have
selected, to the Service Center. The addresses are shown in this section under
"Contacting the Deutsche Asset Management Funds." 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 the "Deutsche
Asset Management Funds" and include your account number and the names and
numbers of the funds you have selected.

Selling: 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. If you are selling shares
of a Fund, you must leave at least $50,000 worth of shares in your account to
keep it open. 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 financial advisor must call the Deutsche Asset
Management Adviser line at

International equity funds - Institutional Class Page - 64 -
<PAGE>

1-800-949-9940 to notify us in advance of a wire transfer purchase. Inform the
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.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

See your account statement for the account name and number.

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 financial advisor or the Service Center
at 1-800-407-7301. Inform the 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.

Important Information About Buying and Selling Shares

o After receiving 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.

o 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.

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

International equity funds - Institutional Class Page - 65 -
<PAGE>

o You may place orders to buy and sell over the phone by calling your
financial advisor or the Deutsche Asset Management Adviser line at
1-800-949-9940. 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 the Fund or its agents have incurred. Unless you request a wire, we
will send you a check.

o You may buy and sell shares of a Fund through authorized brokers and
financial advisors as well as from Deutsche Asset Management Funds
directly. The same terms and conditions apply. Specifically, once you
place your order with a broker or financial advisor, it is considered
received by the Service Center. It is then your broker or financial
advisor's responsibility to transmit the order to the Service Center by
the next business day. You should contact your broker or financial advisor
if you have a dispute as to when your order was placed with the Fund.

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

o 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. We also reserve the right to reject any purchase order.

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

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

o 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.

International equity funds - Institutional Class Page - 66 -
<PAGE>

another. Before buying shares through an exchange, you should be sure to get a
copy of that fund's prospectus and read it carefully. You may order exchanges
over the phone only if your account is authorized to do so.

Please note the following conditions:

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

o The right to restrict exchanges if we receive or anticipate simultaneous
orders that could force the Fund to deviate from its investment objective.
Such orders might occur in connection with so-called market timing
strategies, in anticipation of or during periods of extreme market
movements.

International equity funds - Institutional Class Page - 67 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Additional information about each Fund's investments and performance 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 each Fund in the current Statement
of Additional Information, dated February 28, 2000, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference. 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 a Fund, write to us at:

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [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
1-202-942-8090.

International Funds Combined CUSIP
Product Code

International equity funds - Institutional Class Page - 68 -
<PAGE>

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

International equity funds - Institutional Class Page - 69 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

International Select Equity

European Equity

International Small Cap Equity

Emerging Markets Equity

[Deutsche Bank Group logo]
<PAGE>

Table of Contents

International Select Equity
European Equity
International Small Cap Equity
Emerging Markets Equity

Information Concerning All of the Funds

Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

International equity funds - Investment Class Page - 2 -
<PAGE>

INTERNATIONAL SELECT EQUITY - Investment Class
Overview of International Select Equity

A Detailed Look at International Select Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International equity funds - Investment Class Page - 3 -
<PAGE>

International Select Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies in developed countries located outside the
United States.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

International equity funds - Investment Class Page - 4 -
<PAGE>

o since the Fund may focus its investments in Japan and the United Kingdom,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

International equity funds - Investment Class Page - 5 -
<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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on May 15, 1995. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Morgan Stanley Capital International (MSCI) EAFE Index
over the last one year and since inception. Bear in mind that the Index is a
passive measure of combined national stock market returns. It does not factor in
the costs of buying, selling and holding stock -- costs which are reflected in
the Fund's results.

Year-by-Year Returns
Institutional Class shares1
(each full calendar year since inception)

[bar chart]

------------------------------------------------------
1996 1997 1998 1999
------------------------------------------------------
______% ______% ______% ________%
------------------------------------------------------

International equity funds - Investment Class Page - 6 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year 3 years (5/15/95)(2)
- --------------------------------------------------------------------------------
International Select Equity Fund --
Institutional Class shares _____% _____% _____%
- --------------------------------------------------------------------------------
EAFE Index _____% _____%
================================================================================

1 Institutional Class performance is presented because Investment Class shares,
which recently commenced operations, have limited performance history.
Institutional Class shares have substantially identical characteristics to those
of the Investment Class shares offered by this prospectus, except that for
Institutional Class shares, the minimum initial investment amount is lower and
the net expenses per share (after reimbursement) is higher. Institutional Class
shares are offered under a separate prospectus, which is available upon request.
2 The EAFE Index average is calculated from _______, 1995.

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 Investment Class shares of the
International Select Equity Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses ____%
Total Fund Operating Expenses ____%
Less: Fee Waivers or Expense Reimbursement (____%)(1)
----------
Net Expenses 1.50%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in Investment Class shares of the Fund. The
numbers assume 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.

International equity funds - Investment Class Page - 7 -
<PAGE>

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 1.50%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International equity funds - Investment Class Page - 8 -
<PAGE>

International Select Equity

A detailed look

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International equity funds - Investment Class Page - 9 -
<PAGE>

INVESTMENT PROCESS

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
High turnover can increase the Fund's transaction costs, thereby lowering its
returns. It may also increase your tax liability.

RISKS

Primary Risks

International equity funds - Investment Class Page - 10 -
<PAGE>

countries in which the Fund invests, they may in the future. We analyze
countries and regions to try to anticipate these risks.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

International equity funds - Investment Class Page - 11 -
<PAGE>

Secondary Risks

International equity funds - Investment Class Page - 12 -
<PAGE>

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

o These and other factors could increase volatility in financial markets
worldwide and could adversely affect the value of securities held by the
Fund.

International equity funds - Investment Class Page - 13 -
<PAGE>

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell International Select Equity Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

International equity funds - Investment Class Page - 14 -
<PAGE>

EUROPEAN EQUITY (formerly the Morgan Grenfell European Equity Growth Fund)
- Investment Class

Overview of European Equity

A Detailed Look at European Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International equity funds - Investment Class Page - 15 -
<PAGE>

European Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies located in European countries.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

International equity funds - Investment Class Page - 16 -
<PAGE>

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment itself to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

International equity funds - Investment Class Page - 17 -
<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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on September 3, 1996.
The table compares the average annual return of the Fund's Institutional Class
shares with that of the Morgan Stanley Capital International (MSCI) Europe Index
over the last one year and since inception. Bear in mind that the Index is a
passive measure of combined national stock market returns. It does not factor in
the costs of buying, selling and holding stock -- costs which are reflected in
the Fund's results.

Year-by-Year Returns
Institutional Class shares1
(each full calendar year since inception)

[bar chart]

-----------------------------------------
1997 1998 1999(2)
-----------------------------------------
______% ______% ________%
-----------------------------------------

International equity funds - Investment Class Page - 18 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)

Since Inception
1 year (9/3/96)(3)
- --------------------------------------------------------------------------------
European Equity Fund - Institutional Class shares
================================================================================
MSCI Europe Index _____% _____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares,
which recently commenced operations, have limited performance history.
Institutional Class shares have substantially identical characteristics to those
of the Investment Class shares offered by this prospectus, except that for
Institutional Class shares, the minimum initial investment amount is lower and
the net expenses per share (after reimbursement) is higher. Institutional Class
shares are offered under a separate prospectus, which is available upon request.
2 Effective December __, 1999, Deutsche Asset Management, Inc. replaced Deutsche
Asset Management Investment Services Limited as the investment adviser to the
Fund.
3 The MSCI Europe Index average is calculated from _______, 1996.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Percentage of
Average Daily Net
Assets
------

Management Fees 0.70%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursements (___)(1)
--------
Net Expenses 1.50%

International equity funds - Investment Class Page - 19 -
<PAGE>

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

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual investment return and costs may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001 to waive
its fees and reimburse expenses so that total expenses will not exceed 1.50%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International equity funds - Investment Class Page - 20 -
<PAGE>

European Equity

A detailed look

OBJECTIVE

STRATEGY

International equity funds - Investment Class Page - 21 -
<PAGE>

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

PRINCIPAL INVESTMENTS

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

INVESTMENT PROCESS

International equity funds - Investment Class Page - 22 -
<PAGE>

In choosing stocks and other equity securities, we consider a number of factors,
including:

o stock price relative to the company's rate of earnings growth;

o valuation relative to other European companies and market averages;

o valuation relative to global peers;

o merger and acquisition trends; and

o trends related to the impact of the introduction of the new European
currency, the "euro," on the finance, marketing and distribution
strategies of European companies.

RISKS

Primary Risks

International equity funds - Investment Class Page - 23 -
<PAGE>

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established as in the U.S.

International equity funds - Investment Class Page - 24 -
<PAGE>

o Currency Risk. The Fund invests in foreign securities denominated in
foreign currencies. This creates the possibility that changes in foreign
exchange rates will affect the U.S. dollar value of foreign securities or
the U.S. dollar amount of income or gain received on these securities. We
may seek to minimize this risk by actively managing the currency exposure
of the Fund, which entails hedging or cross-hedging from time to time. Our
specialist currency team will manage the Fund's currency exposure in an
attempt to add value and control risk by insulating the Fund against
adverse currency movements.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in a particular region, market swings in such a
targeted country or region will be likely to have a greater effect on Fund
performance than they would in a more geographically diversified equity fund.

Emerging Markets Risk. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information and stock
market risks. In addition,

International equity funds - Investment Class Page - 25 -
<PAGE>

Secondary Risks

Small Company Risk. To the extent that the Fund invests in small capitalization
companies, it will be more susceptible to share price fluctuations, since small
company stocks tend to experience steeper fluctuations in price -- down as well
as up -- than the stocks of larger companies. A shortage of reliable
information, the same information gap that creates opportunity in small company
investing, can also pose added risk. Industrywide reversals may have a greater
impact on small companies, since they lack a large company's financial
resources. Finally, small company stocks are typically less liquid than large
company stocks. Particularly when they are performing poorly, a small company's
shares may be more difficult to sell.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

International equity funds - Investment Class Page - 26 -
<PAGE>

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

The following portfolio managers have been responsible for the day-to-day
management of the Fund's investments since December 23, 1999:

Michael Levy, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund.

o Joined Bankers Trust in 1993.

o Bankers Trust's international equity strategist, overseeing the design and
implementation of the firm's proprietary stock selection process.

o 29 years of business experience, 18 of them as an investment professional.

o Degrees in mathematics and geophysics from the University of Michigan.

Caroline Altmann, Director of Deutsche Asset Management, Inc. and Co-Portfolio
Manager of the Fund.

o Joined Bankers Trust in 1999.

o Financial services analyst with an emphasis on Europe and Japan.

o 14 years of investment industry experience.

o MBA from Columbia University.

International equity funds - Investment Class Page - 27 -
<PAGE>

Clare Brody, CFA, Vice President of Deutsche Asset Management, Inc. and
Co-Portfolio Manager of the Fund.

o Joined Bankers Trust in 1993.

o 9 years of investment industry experience.

o Portfolio manager with a primary focus on Global Telecommunication
Services and Equipment and Pulp and Paper Analyst.

Matthias Knerr, CFA, Assistant Vice President of Deutsche Asset Management, Inc.
and Co-Portfolio Manager of the Fund.

o Joined Bankers Trust in 1995.

o 5 years of investment industry experience.

o Global engineering, construction, utility and automotive analyst.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell European Equity Fund because investment
class shares of this fund had not commenced operations on or prior to October
31, 1999.

International equity funds - Investment Class Page - 28 -
<PAGE>

INTERNATIONAL SMALL CAP EQUITY - Investment Class

Overview of International Small Cap Equity

A Detailed Look at International Small Cap Equity

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International equity funds - Investment Class Page - 29 -
<PAGE>

International Small Cap Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of small capitalization companies located in countries
outside the United States.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested;

International equity funds - Investment Class Page - 30 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Japan and the United Kingdom,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decline in value
relative to the U.S. dollar, which could affect the value of the
investment itself to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

International equity funds - Investment Class Page - 31 -
<PAGE>

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

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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on January 3, 1994. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Salomon Extended Market Index over the last one year,
five years and since inception. Bear in mind that the Index is a passive measure
of combined national stock market returns. It does not factor in the costs of
buying, selling and holding stock--costs which are reflected in the Fund's
results.

Footnote: The Salomon World Extended Market Index comprises the
small-capitalization equities of each country in the Salomon Broad Market Index.
The index contains approximately 3,000 issues in more than 20 countries, is
calculated gross of withholding taxes and is capitalization weighted.

Year-by-Year Returns
Institutional Class shares(1)
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
______% ______% ______% ______% ______% ________%
- --------------------------------------------------------------------------------

International equity funds - Investment Class Page - 32 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)
Since
Inception
1 year 5 years (1/3/94)(2)
- --------------------------------------------------------------------------------
International Small Cap Equity Fund - Investment
Class shares _____% _____% _____%
================================================================================
Salomon Extended Market Index _____% _____% _____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 The Salomon Extended Market Index average is calculated from _______, 1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Investment Class shares of the International
Small Cap Equity Fund.
Percentage of Average
Daily Net Assets
----------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses __%
Total Fund Operating Expenses __%
Less: Fee Waivers or Expense Reimbursements (__%)(1)
---------
Net Expenses 1.50%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in Investment Class shares of 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.

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.(1)

International equity funds - Investment Class Page - 33 -
<PAGE>

Your actual investment returns and costs may be higher or lower.

International equity funds - Investment Class Page - 34 -
<PAGE>

International Small Cap Equity

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, the Fund
invests at least 65% of its total assets in stocks and other securities with
equity characteristics of small capitalization companies located in countries
outside the United States.

STRATEGY

International equity funds - Investment Class Page - 35 -
<PAGE>

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

PRINCIPAL INVESTMENTS

The Fund invests primarily in stocks and other securities with equity
characteristics. The Fund may also invest up to 35% of its assets in cash
equivalents, investment grade fixed income securities and equity securities of
large and mid-capitalization companies located outside the U.S. and companies of
any size located in the U.S.

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International equity funds - Investment Class Page - 36 -
<PAGE>

INVESTMENT PROCESS

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund had a high portfolio turnover rate. Historically, the Fund
has not had and we do not expect that it will continue to have a high portfolio
turnover rate. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Primary Risks

International equity funds - Investment Class Page - 37 -
<PAGE>

on small companies, since they lack a large company's financial resources. Small
company managers typically have less experience coping with adversity or
capitalizing on opportunity than their counterparts at larger companies.
Finally, small company stocks are typically less liquid than large company
stocks. Particularly when they are performing poorly, a small company's shares
may be more difficult to sell.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign securities denominated in
foreign currencies. This creates the possibility that changes in foreign
exchange rates will affect the U.S. dollar

International equity funds - Investment Class Page - 38 -
<PAGE>

value of foreign securities or the U.S. dollar amount of income or gain
received on these securities. We may, but need not, seek to minimize this
risk by actively managing the currency exposure of the Fund, which entails
hedging from time to time.

Secondary Risks

International equity funds - Investment Class Page - 39 -
<PAGE>

past. High levels of debt tend to make emerging economies heavily reliant on
foreign capital and vulnerable to capital flight. For all these reasons, the
Fund has carefully limited and balanced its commitment to these markets.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

International equity funds - Investment Class Page - 40 -
<PAGE>

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 could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may have to
forego its goal of capital appreciation.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell International Small Cap Equity Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

International equity funds - Investment Class Page - 41 -
<PAGE>

EMERGING MARKETS EQUITY - Investment Class

Overview of Emerging Markets Equity

A Detailed Look at Emerging Markets Equity

Objective
The Case for Emerging Markets
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International equity funds - Investment Class Page - 42 -
<PAGE>

Emerging Markets Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies located in countries with emerging
securities markets.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that our Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested; or

o economies in countries with emerging securities markets are more volatile
than those of developed countries and are subject to sudden reversals;

International equity funds - Investment Class Page - 43 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. Because

International equity funds - Investment Class Page - 44 -
<PAGE>

Investment Class shares are a newly offered class of shares with limited
performance history, the following bar chart and table show the performance
history of the Fund's Institutional Class shares, which have been in existence
since the Fund's inception on February 1, 1994. The table compares the average
annual return of the Fund's Institutional Class shares with that of the Morgan
Stanley Capital International (MSCI) Emerging Markets Free Index over the last
one and five years, and since inception. The Index is a passive measure of
combined stock market returns. It does not factor in the costs of buying,
selling and holding securities, costs which are reflected in the Fund's results.

Year-by-Year Returns
Institutional Class shares1
(each full calendar year since inception)

[bar chart]

International equity funds - Investment Class Page - 45 -
<PAGE>

Average Annual Returns
(as of December 31, 1999)
Since
Inception
1 Year 5 Years (2/1/94)(2)
- --------------------------------------------------------------------------------
Emerging Markets Equity Fund - Institutional
Class shares ____% ____% ____%
================================================================================
MSCI Emerging Markets Free Index ____% ____% ____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 MSCI Emerging Markets Free Index average is calculated from ________/94.

ANNUAL FUND OPERATING EXPENSES

(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Investment Class shares of the Emerging Markets
Equity Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses __%
Total Fund Operating Expenses __%
Less: Fee Waivers or Expense Reimbursement (__%)(1)
--------
Net Expenses 1.50%

Expense Example. This example illustrates the expenses you would have incurred
on a $10,000 investment in Investment Class shares of the Fund. The numbers
assume 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.

1 year(2) 3 years(3) 5 years(3) 10 years(3)

International equity funds - Investment Class Page - 46 -
<PAGE>

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.(1) Your actual investment returns and costs may be higher or lower.

International equity funds - Investment Class Page - 47 -
<PAGE>

Emerging Markets Equity

A detailed look

OBJECTIVE

THE CASE FOR EMERGING MARKETS

STRATEGY

International equity funds - Investment Class Page - 48 -
<PAGE>

of growth and value may identify companies with improving prospects before the
market in general has taken notice.

FOOTNOTE: Futures and options on futures contracts may be used as low-cost
methods for gaining exposure to a particular securities market without investing
directly in those securities.

PRINCIPAL INVESTMENTS

The Fund invests primarily in stocks and other securities with equity
characteristics. The Fund may also invest up to 35% of its assets in cash
equivalents, investment grade fixed income securities and equity and equity
related securities traded in developed markets (including the U.S.).

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International equity funds - Investment Class Page - 49 -
<PAGE>

INVESTMENT PROCESS

RISKS

Primary Risks

Political Risk. Profound social changes and business practices that depart from
developed stock

International equity funds - Investment Class Page - 50 -
<PAGE>

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

International equity funds - Investment Class Page - 51 -
<PAGE>

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Mexico or Brazil, or a particular region, market
swings in such a targeted country or region will be likely to have a greater
effect on Fund performance than they would in a more geographically diversified
equity fund.

Secondary Risks

Small Company Risk. To the extent that the Fund invests in small capitalization
companies, it will be more susceptible to share price fluctuations, since small
company stocks tend to

International equity funds - Investment Class Page - 52 -
<PAGE>

experience steeper fluctuations in price -- down as well as up -- than the
stocks of larger companies. A shortage of reliable information, the same
information gap that creates opportunity in small company investing, can also
pose added risk. Industrywide reversals may have a greater impact on small
companies, since they lack a large company's financial resources. Small company
managers typically have less experience coping with adversity or capitalizing on
opportunity than their counterparts at larger companies. Finally, small company
stocks are typically less liquid than large company stocks. Particularly when
they are performing poorly, a small company's shares may be more difficult to
sell.

FOOTNOTE: Futures contracts and options on futures contracts are used as a low
cost method of gaining exposure to a particular securities market without
investing directly in those securities.

International equity funds - Investment Class Page - 53 -
<PAGE>

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

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 could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may have to
forego its goal of long-term capital growth.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell International Select Equity Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

Information
Concerning All Funds

MANAGEMENT OF THE FUNDS

Board of Trustees. A Board of Trustees supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

International equity funds - Investment Class Page - 54 -
<PAGE>

The Funds paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

DAMIS and DAMI are each indirect wholly owned subsidiaries of Deutsche Bank AG.
Deutsche Bank AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual fund,
retail and commercial banking, investment banking and insurance.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. DAMI and its affiliates provide administrative services -- such
as portfolio

International equity funds - Investment Class Page - 55 -
<PAGE>

accounting, legal services and others -- for the Funds. In addition, DAMI -- or
your broker or financial advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

International equity funds - Investment Class Page - 56 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

If a Fund earns net investment income or recognizes net capital gains, its
policy is to distribute to shareholders substantially all of that taxable income
and capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income

International equity funds - Investment Class Page - 57 -
<PAGE>

Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

You may only purchase Investment Class shares of a Fund if you have a
shareholder account set up with a service organization such as a financial
planner, investment adviser, broker-dealer or other institution.

Service Plan

Each Fund has adopted a service plan for its Investment Class shares. Under the
plan, each Fund pays service fees at an aggregate annual rate of up to 0.25% of
the Fund's average daily net assets for its Investment Class shares. The fees
are compensation to service organizations for providing personal services and/or
account maintenance services to their customers.

Important Information About Buying and Selling Shares

In order to make an initial investment in Investment Class shares of a
Fund, you must first establish an account with your service organization.
Each Fund has authorized service organizations to accept purchase and
redemption orders on behalf of the Fund.

International equity funds - Investment Class Page - 58 -
<PAGE>

You may be subject to minimums established by your service organization
for the purchase of shares.

Payment for share purchases should be made directly to your service
organization. Once you place your order with your service organization, it
is considered received by the Deutsche Asset Management Funds. It is then
your service organization's responsibility to transmit the order to the
Deutsche Asset Management Funds by the next business day. You should
contact your service organization if you have a dispute as to when your
order was placed with the Fund.

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

When you sell shares, we mail a check for the proceeds from the sale of
your shares directly to your service organization normally the next
business day but always within seven days. Once we have sent the
redemption proceeds, we do not assume any further responsibility for the
service organization or for other intermediaries. If a problem arises, you
should contact your service organization directly.

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Exchange Privilege

International equity funds - Investment Class Page - 59 -
<PAGE>

buying shares through an exchange, you should be sure to get a copy of
that fund's prospectus and read it carefully. If you are maintaining a
taxable account, you may be subject to taxes on the exchange.

International equity funds - Investment Class Page - 60 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsch Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

International Funds Combined CUSIP
Product Code

Distributed by:

International equity funds - Investment Class Page - 61 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

International equity funds - Investment Class Page - 62 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

Core Global Fixed Income

Global Fixed Income

International Fixed Income

[Deutsche Bank Group logo]
<PAGE>

Table of Contents

Core Global Fixed Income
Global Fixed Income
International Fixed Income

Information Concerning All of the Funds

Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

International Fixed Income Funds -- Institutional Class Page -2-
<PAGE>

CORE GLOBAL FIXED INCOME - Institutional Class
Overview of Core Global Fixed Income

A Detailed Look at Core Global Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International Fixed Income Funds -- Institutional Class Page -3-
<PAGE>

Core Global Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income, and to a
lesser extent, opportunities for growth of capital consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers throughout the world.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in investment
grade fixed income securities of issuers located throughout the world. The Fund
may invest more than 25% of its assets in securities denominated in the euro, as
well as in the securities of issuers located in each of Japan, the United States
and the United Kingdom. In managing the Fund, we use a "top-down" approach to
picking securities. This approach focuses on country selection and currency
management as well as individual security selection. The portfolio management
team considers macro-economic factors such as inflation, interest rates,
monetary and fiscal policies, taxation and political climate. The portfolio
management team intends to maintain a portfolio duration of +/- 1 1/2 years
around the Fund's benchmark index.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

International Fixed Income Funds -- Institutional Class Page -4-
<PAGE>

o derivatives used by the Fund to gain market exposure may magnify losses,
or, when used for hedging, may reduce gains or may not fully offset losses
in underlying positions, or counterparties may fail to honor the terms of
a derivative contract; or

o since the Fund is non-diversified and may invest a greater percentage of
its assets in a particular issuer, the Fund may be more susceptible to
developments affecting any single issuer of portfolio securities.

Beyond the risks common to all investing, an investment in the Fund could also
lose money or underperform alternative investments as a result of risks in the
foreign countries in which the Fund invests. For example:

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Europe and in Japan, the
United States and the United Kingdom, it could be particularly susceptible
to the effects of political and economic developments in this region and
these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Core Global Fixed Income Fund if you are
seeking current income higher than money market mutual funds over most time
periods. There is, of course, no guarantee that the Fund will realize its goal.
Moreover, you should be willing to accept the risks of investing in the fixed
income market, including credit risk and interest rate risk.

You should not consider investing in the Core Global Fixed Income Fund if you
are pursuing a short-term financial goal, if you are seeking capital
appreciation or if you cannot tolerate fluctuations in the value of your
investments.

International Fixed Income Funds -- Institutional Class Page -5-
<PAGE>

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
international fixed income investments. Diversifying your investments may lower
the volatility of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on May 4, 1998 (its inception
date). The table compares the average annual return of the Fund's Institutional
Class shares with that of the Salomon World Government Bond Index over the last
one year and since inception. Bear in mind that the Index is a passive measure
of combined national fixed income market returns. It does not factor in the
costs of buying, selling and holding fixed income securities -- costs which are
reflected in the Fund's results.

FOOTNOTE: The Salomon World Government Bond Index is an unmanaged foreign
securities index representing major government bond markets and is a widely
accepted benchmark of international government fixed income performance. It is a
model, not an actual portfolio.

International Fixed Income Funds -- Institutional Class Page -6-
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

---------------
1999
----
---------------
________%
---------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (5/4/98)(1)
- --------------------------------------------------------------------------------
Core Global Fixed Income Fund -- Institutional Class
shares _____% _____%
- --------------------------------------------------------------------------------
Salomon World Government Bond Index _____% _____%
================================================================================
1 The Salomon World Government Bond Index average is calculated from _______,
1998.

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 Institutional Class shares of the Core
Global Fixed Income Fund.

International Fixed Income Funds -- Institutional Class Page -7-
<PAGE>

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses 0.__%
Total Fund Operating Expenses 0.__%
Less: Fee Waivers or Expense Reimbursement (0. %)(1)
-----
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 0.55%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International Fixed Income Funds -- Institutional Class Page -8-
<PAGE>

Core Global Fixed Income

A detailed look

OBJECTIVE

The Fund seeks total return, with an emphasis on current income and, to a lesser
extent, opportunities for growth of capital consistent with reasonable
investment risk. Under normal circumstances, the Fund invests at least 65% of
its total assets in the fixed income securities of issuers located throughout
the world. While we seek 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

In managing the Fund, we use a "top-down" approach to picking securities. This
approach focuses on country selection and currency management as well as
individual security selection. The currency portion of the Fund's position in
fixed income securities is generally designed to enhance returns during periods
of relative U.S. dollar weakness and to protect returns during periods of
relative U.S. dollar strength. The team may take a position in a country's
currency, without owning securities within the market.

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of
+/- 1 1/2 years around the Fund's benchmark index.

FOOTNOTE: Duration measures the sensitivity of bond prices to changes in
interest rates. The longer the duration of a bond, the longer it will take to
repay the principal and interest obligations and the more sensitive it is to
changes in interest rates.

PRINCIPAL INVESTMENTS

The Fund invests in investment grade fixed income securities of issuers located
throughout the world. The Fund's fixed income securities include government
securities, corporate fixed income securities and obligations to repay borrowed
money within a certain time with or without

International Fixed Income Funds -- Institutional Class Page -9-
<PAGE>

interest. The Fund invests primarily in investment grade securities that, at the
time of purchase, are either rated in one of the three highest categories by a
major independent rating agency, or in unrated securities that the Investment
Adviser considers of comparable quality. The Fund may also invest in investment
grade fixed income securities rated in the fourth highest category. In the event
that a security is downgraded, we will determine whether to hold or sell such
security, provided that the Fund will not hold more than 5% of its net assets in
securities that are rated below investment grade.

FOOTNOTE: Investment grade fixed income securities are rated by a national
ratings organization within one of the top four categories, or if unrated,
judged by the adviser to be of comparable credit quality.

We may use various instruments commonly known as "derivatives" to control
volatility and achieve desired currency weightings in a cost-effective manner.
We may also use derivatives to increase or decrease the Fund's exposure to a
securities market or index. In particular, the Fund may use forward currency
transactions and currency options. We may use derivatives in circumstances when
we believe they offer an economical means of gaining exposure to a particular
securities market or index. We may also invest in derivatives to attempt to
reduce the Fund's exposure or to keep cash on hand to meet shareholder
redemptions or other needs while maintaining exposure to the market.

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents.

INVESTMENT PROCESS

International Fixed Income Funds -- Institutional Class Page -10-
<PAGE>

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach, which may
include short-term trading, could cause the Fund's portfolio turnover rate to
the above average. High turnover can increase the Fund's transaction costs,
thereby lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with fixed income
investing and global investing, as well as investing in general. Although we
attempt both to assess the likelihood that these risks may actually occur and to
limit them, we cannot guarantee that we will succeed.

Primary Risks

Interest Rate Risk. Interest rate risk is the risk that fixed income securities
will decline in value because of changes in interest rates. Generally,
investments subject to interest rate risk will decrease in value when interest
rates rise and increase in value when interest rates decline.

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuers may not be able to make timely payments on the
interest and principal on the bonds they have issued. Fixed income securities
rated in the fourth highest category have speculative characteristics. These
securities involve a greater risk of loss than higher quality securities and are
more sensitive to changes in the issuer's capacity to pay.

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities.

International Fixed Income Funds -- Institutional Class Page -11-
<PAGE>

Thus, prepayment may reduce the Fund's income. It may also create a capital
gains tax liability because bond issuers usually pay a premium for the right to
pay off bonds early.

Foreign Market Risk. From time to time, foreign capital markets have exhibited
more volatility than those in the United States. Trading fixed income securities
on some foreign exchanges is inherently more difficult than trading in the
United States for several reasons including:

o Liquidity Risk. Fixed income securities that trade infrequently or in low
volumes can be more difficult or more costly to buy, or to sell, than more
liquid or active securities. This liquidity risk is a factor of the
trading volume of a particular security, as well as the size and liquidity
of the entire local market. On the whole, foreign exchanges are smaller
and less liquid than the U.S. market. Relatively small transactions in
some instances can have a disproportionately large effect on the price and
supply of shares. In certain situations, it may become virtually
impossible to sell a security in an orderly fashion at a price that
approaches our estimate of its value.

International Fixed Income Funds -- Institutional Class Page -12-
<PAGE>

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in securities
denominated in foreign currencies. This creates the possibility that
changes in foreign exchange rates will affect the U.S. dollar value of
foreign securities or the U.S. dollar amount of income or gain received on
these investments. Additionally, a change in economic policy may cause a
greater fluctuation in a country's currency than in bonds denominated in
that currency. We may, but need not, seek to minimize this risk by
actively managing the currency exposure of the Fund, which entails hedging
from time to time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan, the United States or the
United Kingdom, market swings in such a targeted country or region will be
likely to have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Market Risk. Deteriorating market conditions might cause an overall weakness in
the market that reduces the absolute level of securities prices in that market.
Developments in a particular class of bonds or the stock market could also
adversely affect the Fund by reducing the relative attractiveness of bonds as an
investment. Investment grade debt securities similar to those held in the Fund
have experienced a moderate level of short-term price fluctuation.

Security Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value. The Fund may
underperform relative to its stated benchmark due to our securities choices and
choices in asset allocation.

Derivative Risk. Even a small investment in derivative contracts can have a big
impact on the Fund's market, currency and interest rate exposure. Therefore,
using derivatives can

International Fixed Income Funds -- Institutional Class Page -13-
<PAGE>

disproportionately increase losses and reduce opportunities for gains when
securities prices, currency rates or interest rates are changing. Counterparties
to OTC derivative contracts present the same types of default risk as issuers of
fixed income securities. Derivatives can also make the Fund less liquid and
harder to value, especially in declining markets. Derivative risks include:

o Leverage risks. Because of borrowing or investments in derivative
contracts, the Fund may suffer disproportionately heavy losses relative to
the amount of its investment. Leverage can magnify the impact of poor
asset allocation or investment decisions.

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Non-diversification Risk. The Fund is non-diversified. Compared with other
funds, the Fund may invest a greater percentage of its assets in a particular
issuer. This will cause the Fund to be more susceptible to developments
affecting any single issuer of portfolio securities.

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

International Fixed Income Funds -- Institutional Class Page -14-
<PAGE>

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in U.S. or
foreign-government money-market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may not meet
its goal of total return.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Institutional Class shares of the Fund for the past two fiscal periods. The
information selected reflects financial results for a single Institutional Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Institutional Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

International Fixed Income Funds -- Institutional Class Page -15-
<PAGE>

- --------------------------------------------------------------------------------
For the year ended For the period ended
------------------ --------------------
October 31, 1999 October 31, 1998(1)
------------------ --------------------
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain
(Loss) on Investment, Option,
Foreign Currency, Forward Foreign
Currency and Foreign Futures
Contracts
- --------------------------------------------------------------------------------
Total from Investment Operations
- --------------------------------------------------------------------------------
Distributions to Shareholders
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s
omitted)
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS
- --------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- --------------------------------------------------------------------------------

1 The Fund's inception was May 4, 1998.

2 Annualized.

International Fixed Income Funds -- Institutional Class Page -16-
<PAGE>

GLOBAL FIXED INCOME - Institutional Class

Overview of Global Fixed Income

A Detailed Look at Global Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International Fixed Income Funds -- Institutional Class Page -17-
<PAGE>

Global Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income and, to a
lesser extent, opportunities for capital growth consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers located throughout the world.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in
issuers located throughout the world. The Fund may invest more than 25% of its
assets in securities denominated in the euro, as well as in the securities of
issuers located in each of Japan, the United States and the United Kingdom. In
managing the Fund, we use a "top-down" approach to picking securities. This
approach focuses on country selection and currency management as well as
individual security selection. The portfolio management team considers
macro-economic factors such as inflation, interest rates, monetary and fiscal
policies, taxation and political climate. The portfolio management team intends
to maintain a portfolio duration of +/- 1 1/2 years around the Fund's benchmark
index.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest. This risk is greater for the Fund since
it generally holds more below investment grade securities (high yield/high
risk securities) than a typical fixed income fund;

International Fixed Income Funds -- Institutional Class Page -18-
<PAGE>

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

o the fixed income market could perform poorly in one or more of the
countries in which the Fund has invested;

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Core Global Fixed Income Fund if you are
seeking to earn current income higher than money market mutual funds over most
time periods. There is, of course, no guarantee that the Fund will realize its
goal. Moreover, you should be willing to

International Fixed Income Funds -- Institutional Class Page -19-
<PAGE>

accept the risks of investing in the fixed income market, including credit risk
and interest rate risk.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on January 4, 1994 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Salomon World Government Bond Index
over the last one year, five years and since inception. Bear in mind that the
Index is a passive measure of world government bond market returns. It does not
factor in the costs of buying, selling and holding fixed income securities --
costs which are reflected in the Fund's results.

International Fixed Income Funds -- Institutional Class Page -20-
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
______% ______% ______% ______% ______%
- --------------------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year 5 years (1/4/94)(1)
- --------------------------------------------------------------------------------
Global Fixed Income Fund - Institutional
Class shares _____% _____% _____%
================================================================================
Salomon World Government Bond Index _____% _____% _____%
================================================================================

1 The Salomon World Government Bond Index average is calculated from _______,
1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and estimated
expenses that you may pay if you buy and hold Institutional Class shares of the
Global Fixed Income Fund.

International Fixed Income Funds -- Institutional Class Page -21-
<PAGE>

Percentage of Average
Daily Net Assets
---------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Expenses 0.__%
Total Fund Operating Expenses 0.__%
Less: Fee Waivers or Expense Reimbursements (0. %)(1)
-----
Net Expenses 0.60%

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual investment return and costs may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001 to waive its fees and reimburse expenses so that total
expenses will not exceed 0.60%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International Fixed Income Funds -- Institutional Class Page -22-
<PAGE>

Global Fixed Income

A detailed look

OBJECTIVE

The Fund seeks total return, with an emphasis on current income and, to a lesser
extent, opportunities for growth of capital consistent with reasonable
investment risk. Under normal circumstances, it invests at least 65% of its
total assets in the fixed income securities of issuers located throughout the
world. While we seek 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

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of
+/- 1 1/2 years around the Fund's benchmark index.

Footnote: Duration measures the sensitivity of bond prices to changes in
interest rates. The longer the duration of a bond, the longer it will take to
repay the principal and interest obligations and the more sensitive it is to
changes in interest rates.

PRINCIPAL INVESTMENTS

The Fund invests in investment grade fixed income securities of issuers located
throughout the world. The Fund's fixed income securities include government
securities, corporate fixed income

International Fixed Income Funds -- Institutional Class Page -23-
<PAGE>

securities and obligations to repay borrowed money within a certain time with or
without interest. The Fund invests primarily in investment grade securities
that, at the time of purchase, are either rated in one of the three highest
categories by a major independent rating agency, or in unrated securities that
the Investment Adviser considers of comparable quality. The Fund may also invest
in investment grade fixed income securities rated in the fourth highest
category. The Fund may also invest up to 15% of its total assets in fixed income
securities rated below investment grade, including the securities of issuers in
emerging securities markets.

The Fund may invest more than 25% of its total assets in securities denominated
in the euro, as well as in the securities of issuers located in each of Japan,
the United States and the United Kingdom. The Fund may also invest a portion of
its assets in companies based in the emerging markets of Latin America, the
Middle East, Europe, Asia and Africa if the Investment Adviser believes that
their return potential more than compensates for the extra risks associated with
these markets.

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents.

INVESTMENT PROCESS

International Fixed Income Funds -- Institutional Class Page -24-
<PAGE>

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach, which may
include short-term trading, could cause the Fund's portfolio turnover rate to be
above average. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with fixed income
and global investing, along with those of investing in genera1. Although we
attempt both to assess the likelihood that these risks may actually occur and to
limit them, we cannot guarantee that we will succeed.

Primary Risks

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuers may not be able to make timely payments on the
interest and principal on the bonds they have issued. Fixed income securities
rated in the fourth highest category have speculative characteristics. These
securities and below investment grade securities (high yield/high risk
securities) involve a greater risk of

International Fixed Income Funds -- Institutional Class Page -25-
<PAGE>

loss than higher quality securities and are more sensitive to changes in the
issuer's capacity to pay.

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities. Thus, prepayment may reduce the Fund's
income. It may also create a capital gains tax liability because bond issuers
usually pay a premium for the right to pay off bonds early.

Political Risk. Some foreign governments have limited the outflow of profits to
investor's abroad, and extended diplomatic disputes to include trade and
financial relations, and imposed high taxes on corporate profits. While these
political risks have not occurred recently in the major countries in which the
Fund invests, they may in the future. We analyze countries and regions to try to
anticipate these risks.

Foreign Market Risk. From time to time, foreign capital markets have exhibited
more volatility than those in the United States. Trading securities on some
foreign exchanges is inherently more difficult than trading in the United States
for several reasons including:

o Liquidity Risk. Securities that trade infrequently or in low volumes can
be more difficult or more costly to buy, or to sell, than more liquid or
active securities. This liquidity risk is a factor of the trading volume
of a particular security, as well as the size and liquidity of the entire
local market. On the whole, foreign exchanges are smaller and less liquid
than the U.S. market. Relatively small transactions in some instances can
have a disproportionately large effect on the price and supply of shares.
In certain situations, it may become virtually

International Fixed Income Funds -- Institutional Class Page -26-
<PAGE>

impossible to sell a security in an orderly fashion at a price that
approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in securities
denominated in foreign currencies. This creates the possibility that
changes in foreign exchange rates will affect the U.S. dollar value of
foreign investments or the U.S. dollar amount of income or gain received
on these investments. Additionally, a change in economic policy may cause
a greater fluctuation in a country's currency than in bonds denominated in
that currency. We may, but need not, seek to minimize this risk by
actively managing the currency exposure of the Fund, which entails hedging
from time to time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan, the United States or the
United Kingdom, market swings in such a targeted country or region will be
likely to have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Security Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value. The Fund may
underperform relative to its stated benchmark, due to our securities choices and
choices in asset allocation.

International Fixed Income Funds -- Institutional Class Page -27-
<PAGE>

Derivative Risk. Even a small investment in derivative contracts can have a big
impact on the Fund's market, currency and interest rate exposure. Therefore,
using derivatives can disproportionately increase losses and reduce
opportunities for gains when securities prices, currency rates or interest rates
are changing. Counterparties to OTC derivative contracts present the same types
of default risk as issuers of fixed income securities. Derivatives can also make
the Fund less liquid and harder to value, especially in declining markets.
Derivative risks include:

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Secondary Risks

Emerging Markets Risk. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information and market
risks. In addition, profound social change and business practices that depart
from developed countries' economies norms have hindered the orderly growth of
emerging economies and their markets in the past. High levels of debt have
tended to make emerging economies heavily reliant on foreign capital and
vulnerable to capital flight. For all these reasons, the Fund carefully limits
and balances its commitment to these markets.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the

International Fixed Income Funds -- Institutional Class Page -28-
<PAGE>

risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in U.S. or foreign
government money market investments, or other short-term bonds that offer
comparable safety, if the situation warranted. To the extent that we might adopt
such a position, and over the course of its duration, the Fund may not meet its
goal of total return.

PORTFOLIO MANAGER

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

International Fixed Income Funds -- Institutional Class Page -29-
<PAGE>

1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
Per Share Operating Performance:
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investment,
Option, Foreign Currency,
Forward Foreign Currency and
Foreign Futures Contracts
- --------------------------------------------------------------------------------
Total from Investment Operations
- --------------------------------------------------------------------------------
Distributions to Shareholders
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of Period
(000s omitted)
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due to
Absorption of Expenses by
DAMIS
- --------------------------------------------------------------------------------
Portfolio Turnover Rate
- --------------------------------------------------------------------------------

International Fixed Income Funds -- Institutional Class Page -30-
<PAGE>

INTERNATIONAL FIXED INCOME- Institutional Class

Overview of International Fixed Income

A Detailed Look at International Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International Fixed Income Funds -- Institutional Class Page -31-
<PAGE>

International Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income and, to a
lesser extent, opportunities for capital growth consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers located in countries other than the United States.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in
issuers located in countries other than the United States. The Fund may invest
more than 25% of its assets in securities denominated in the euro, as well as in
the securities of issuers located in each of Japan and the United Kingdom. In
managing the Fund, we use a "top-down" approach to picking securities. This
approach focuses on country selection and currency management as well as
individual security selection. The portfolio management team considers
macro-economic factors such as inflation, interest rates, monetary and fiscal
policies, taxation and political climate. The portfolio management team intends
to maintain a portfolio duration of +/- 1 1/2 years around the Fund's benchmark
index.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

International Fixed Income Funds -- Institutional Class Page -32-
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Europe and in Japan and the
United Kingdom, it could be particularly susceptible to the effects of
political and economic developments in this region and these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the International Fixed Income Fund if you are
seeking to earn current income higher than money market mutual funds over most
time periods. There is, of course, no guarantee that the Fund will realize its
goal. Moreover, you should be willing to accept the risks of investing in the
fixed income market, including credit risk and interest rate risk.

You should not consider investing in the International Fixed Income Fund if you
are pursuing a short-term financial goal, if you are seeking capital
appreciation or if you cannot tolerate fluctuations in the value of your
investments.

International Fixed Income Funds -- Institutional Class Page -33-
<PAGE>

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on March 15, 1994 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Salomon World Government Bond
(non-U.S.) Index over the last one year, five years and since inception. Bear in
mind that the Index is a passive measure of government bond market returns. It
does not factor in the costs of buying, selling and holding fixed income
securities -- costs which are reflected in the Fund's results.

FOOTNOTE: The Salomon World Government Bond (non-U.S.) Index is an unmanaged
foreign securities index representing major government bond markets other than
the United States and is a widely accepted benchmark of international government
fixed income performance. It is a model, not an actual portfolio.

International Fixed Income Funds -- Institutional Class Page -34-
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

Average Annual Returns
(as of December 31, 1999)
Since Inception
1 year 5 years (3/15/94)(1)
- --------------------------------------------------------------------------------
International Fixed Income Fund --
Institutional Class shares _____% _____% _____%
================================================================================
Salomon World Government Bond
(non-U.S.) Index _____% _____% _____%
================================================================================
1 The Salomon World Government Bond (non-U.S.) Index average is calculated from
_______, 1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Institutional Class shares of the International
Fixed Income Fund.

International Fixed Income Funds -- Institutional Class Page -35-
<PAGE>

Percentage of Average
Daily Net Assets
---------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Expenses __.__%
Total Fund Operating Expenses __.__%
Less: Fee Waivers or Expense Reimbursements (__.__%)(1)
------
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.(1) Your actual investment returns and costs may be higher or lower.

International Fixed Income Funds -- Institutional Class Page -36-
<PAGE>

International Fixed Income Fund

A detailed look

OBJECTIVE

The Fund seeks total return, with an emphasis on current income and, to a lesser
extent, opportunities for growth of capital consistent with reasonable
investment risk. Under normal circumstances, it invests at least 65% of its
total assets in the fixed income securities of foreign issuers. While we seek
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

In managing the Fund, we use a "top-down" approach to picking securities. This
approach focuses on country selection and currency management as well as
individual security selection.

The currency portion of the Fund's position in fixed income securities is
generally designed to enhance returns during periods of relative U.S. dollar
weakness and to protect returns during periods of relative U.S. dollar strength.
The team may take a position in a country's currency, without owning securities
within the market.

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of
+/- 1 1/2 years around the Fund's benchmark index.

International Fixed Income Funds -- Institutional Class Page -37-
<PAGE>

PRINCIPAL INVESTMENTS

The Fund invests in investment grade fixed income securities of issuers located
throughout the world other than the United States. The Fund's fixed income
securities include government securities, corporate fixed income securities and
obligations to repay borrowed money within a certain time with or without
interest. The Fund's invests primarily in investment grade fixed income
securities rated in one of the three highest categories by a major independent
rating agency or in unrated securities the Investment Adviser considers of
comparable quality. In the event that a security is downgraded, we will
determine whether to hold or sell such security, provided that the Fund will not
hold more than 5% of its net assets in securities that are rated below
investment grade.

The Fund may invest more than 25% of its total assets in securities denominated
in the euro, as well as in the securities of issuers located in each of Japan
and the United Kingdom.

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents and in U.S. fixed income securities.

International Fixed Income Funds -- Institutional Class Page -38-
<PAGE>

INVESTMENT PROCESS

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach, which may
include short-term trading, could cause the Fund's portfolio turnover rate to be
above average. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with fixed income
investing and investing outside the United States, as well as investing in
general. Although we attempt both to assess the likelihood that these risks may
actually occur and to limit them, we cannot guarantee that we will succeed.

Primary Risks

Interest Rate Risk. Interest rate risk is the risk that fixed-income securities
will decline in value because of changes in interest rates. Generally,
investments subject to interest rate risk will decrease in value when interest
rates rise and increase in value when interest rates decline.

International Fixed Income Funds -- Institutional Class Page -39-
<PAGE>

involve a greater risk of loss than higher quality securities and are more
sensitive to changes in the issuer's capacity to pay.

International Fixed Income Funds -- Institutional Class Page -40-
<PAGE>

impossible to sell a security in an orderly fashion at a price that
approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in securities
denominated in foreign currencies. This creates the possibility that
changes in foreign exchange rates will affect the U.S. dollar value of
foreign investments or the U.S. dollar amount of income or gain received
on these investments. Additionally, a change in economic policy may cause
a greater fluctuation in a country's currency than in bonds denominated in
that currency. We may, but need not, seek to minimize this risk by
actively managing the currency exposure of the Fund, which entails hedging
from time to time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan or the United Kingdom,
market swings in such a targeted country or region will be likely to have a
greater effect on Fund performance than they would in a more geographically
diversified fixed income fund.

International Fixed Income Funds -- Institutional Class Page -41-
<PAGE>

currency rates or interest rates are changing. Counterparties to OTC derivative
contracts present the same types of default risk as issuers of fixed income
securities. Derivatives can also make the Fund less liquid and harder to value,
especially in declining markets. Derivative risks include:

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

International Fixed Income Funds -- Institutional Class Page -42-
<PAGE>

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in U.S. or foreign
government money market investments, or other short-term bonds that offer
comparable safety, if the situation warranted. To the extent we might adopt such
a position and over the course of its duration, the Fund may have to forego its
goal of total return.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

International Fixed Income Funds -- Institutional Class Page -43-
<PAGE>

- --------------------------------------------------------------------------------
For the year ended October 31,
------------------------------
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
Per Share Operating
Performance:
- --------------------------------------------------------------------------------
Net Asset Value, Beginning
of Period
- --------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investment, Option,
Foreign Currency,
Forward Foreign Currency
and Foreign Futures
Contracts
- --------------------------------------------------------------------------------
Total from Investment
Operations
- --------------------------------------------------------------------------------
Distributions to
Shareholders
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and
Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of
Period (000s omitted)
- --------------------------------------------------------------------------------
Ratios to Average Net
Assets:
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio
Due to Absorption of
Expenses by DAMIS
- --------------------------------------------------------------------------------
Portfolio Turnover
Rate
- --------------------------------------------------------------------------------

International Fixed Income Funds -- Institutional Class Page -44-
<PAGE>

Information
Concerning All Funds

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DAMIS) with headquarters at 20
Finsbury Circus, London, England, acts as investment adviser for each Fund.
DAMIS makes each Fund's investment decisions and assumes responsibility for the
securities the Fund owns. DAMIS buys and sells securities for each Fund and
conducts the research that leads to these purchase and sale decisions. DAMIS is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges.

The Funds paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Core Global Fixed Income Fund _________%
Global Fixed Income Fund _________%
International Fixed Income Fund _________%

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

DAMIS is an indirect wholly-owned subsidiary of Deutsche Bank AG, an
international commercial and investment banking group. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual fund, retail and commercial
banking, investment banking and insurance.

International Fixed Income Funds -- Institutional Class Page -45-
<PAGE>

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. Deutsche Asset Management, Inc. ("DAMI"), an affiliate of DAMI
provides administrative services -- such as portfolio accounting, legal services
and others -- for the Funds. In addition, DAMI -- or your broker or financial
advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

International Fixed Income Funds -- Institutional Class Page -46-
<PAGE>

foreign exchanges can change significantly on days when the New York Stock
Exchange is closed and you cannot buy or sell Fund shares. Such price changes in
the securities a Fund owns may ultimately affect the price of Fund shares when
the New York Stock Exchange re-opens.

DIVIDENDS AND DISTRIBUTIONS

If a Fund earns net investment income or recognizes net capital gains, its
policy is to distribute to shareholders all or substantially all of that income
and capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

International Fixed Income Funds -- Institutional Class Page -47-
<PAGE>

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year your Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than Generally, long-term
one year capital gains or losses

Your sale of shares owned for one
year or less Generally, short-term capital
gains or losses, 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.

International Fixed Income Funds -- Institutional Class Page -48-
<PAGE>

BUYING AND SELLING FUND SHARES

Contacting the Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-550-6426

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-550-6426

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Minimum Account Investments

To open an account $250,000

To add to an account $25,000

Minimum account balance $50,000

How to Open Your Fund Account

International Fixed Income Funds -- Institutional Class Page -49-
<PAGE>

Management Fund you have selected to the Service Center. The
addresses are shown under "Contacting the Deutsche Asset Management
Funds".

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

MAIL:

Buying: Send your check, payable to the Deutsche Asset Management Fund you have
selected, to the Service Center. The addresses are shown in this section under
"Contacting the Deutsche Asset Management Funds." 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 and the names and numbers of
the funds you have selected.

WIRE:

Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your financial advisor must call the Deutsche Asset
Management Adviser line at 1-800-949-9940 to notify us in advance of a wire
transfer purchase. Inform the 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.

International Fixed Income Funds -- Institutional Class Page -50-
<PAGE>

Routing No.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

See your account statement for the account name and number.

Important Information About Buying and Selling Shares

o After receiving 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.

o 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.

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

International Fixed Income Funds -- Institutional Class Page -51-
<PAGE>

o You may buy and sell shares of a Fund through authorized brokers and
financial advisors as well as from the Deutsche Asset Management Funds
directly. The same terms and conditions apply. Specifically, once you
place your order with a broker or financial advisor, it is considered
received by the Service Center. It is then your broker or financial
advisor's responsibility to transmit the order to the Service Center by
the next business day. You should contact your broker or financial advisor
if you have a dispute as to when your order was placed with the Fund.

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

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

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

o 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.

Exchange Privilege. You can exchange all or part of your shares for the same
class of shares of another Deutsche Asset Management 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 get a copy of that fund's prospectus
and read it carefully. You may order exchanges over the phone only if your
account is authorized to do so.

Please note the following conditions:

International Fixed Income Funds -- Institutional Class Page -52-
<PAGE>

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

International Fixed Income Funds -- Institutional Class Page -53-
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

International Funds Combined CUSIP
Product Code

Distributed by:

International Fixed Income Funds -- Institutional Class Page -54-
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

International Fixed Income Funds -- Institutional Class Page -55-
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

Core Global Fixed Income

Global Fixed Income

International Fixed Income

[Deutsche Bank Group logo]
<PAGE>

Table of Contents

Core Global Fixed Income
Global Fixed Income
International Fixed Income

Information Concerning All of the Funds

Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

International Fixed Income Funds - Investment Class Page - 2 -
<PAGE>

CORE GLOBAL FIXED INCOME - Investment Class

Overview of Core Global Fixed Income

A Detailed Look at Core Global Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

International Fixed Income Funds - Investment Class Page - 3 -
<PAGE>

Core Global Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income, and to a
lesser extent, opportunities for growth of capital consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers throughout the world.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in investment
grade fixed income securities of issuers located throughout the world. The Fund
may invest more than 25% of its assets in securities denominated in the euro, as
well as in the issuers of companies located in each of Japan, the United States
and the United Kingdom. In managing the Fund, we use a "top-down" approach to
picking securities. This approach focuses on country selection and currency
management as well as individual security selection. The portfolio management
team considers macro-economic factors such as inflation, interest rates,
monetary and fiscal policies, taxation and political climate. The portfolio
management team intends to maintain a portfolio duration of +/- 1 1/2 years
around the Fund's benchmark index.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

International Fixed Income Funds - Investment Class Page - 4 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

International Fixed Income Funds - Investment Class Page - 5 -
<PAGE>

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

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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on May 4, 1998. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Salomon World Government Bond Index over the last one
year and since inception. Bear in mind that the Index is a passive measure of
combined national fixed income market returns. It does not factor in the costs
of buying, selling and holding fixed income securities -- costs which are
reflected in the Fund's results.

International Fixed Income Funds - Investment Class Page - 6 -
<PAGE>

Year-by-Year Returns
Institutional Class shares(1)
(each full calendar year since inception)

[bar chart]

---------------
1999
---------------
________%
---------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (5/4/98)(2)
- --------------------------------------------------------------------------------
Core Global Fixed Income Fund -- Institutional Class
shares _____% _____%
- --------------------------------------------------------------------------------
Salomon World Government Bond Index _____% _____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 The Salomon World Government Bond Index average is calculated from _______,
1998.

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 Investment Class shares of the Core Global
Fixed Income Fund.

Percentage of Average

International Fixed Income Funds - Investment Class Page - 7 -
<PAGE>

Daily Net Assets
---------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses ____%
Total Fund Operating Expenses ____%
Less: Fee Waivers or Expense Reimbursement (____%)(1)
----------
Net Expenses 0.80%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.1 Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 0.80%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International Fixed Income Funds - Investment Class Page - 8 -
<PAGE>

Core Global Fixed Income

A detailed look

OBJECTIVE

STRATEGY

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of +/- 1
1/2 years around the Fund's benchmark index.

PRINCIPAL INVESTMENTS

International Fixed Income Funds - Investment Class Page - 9 -
<PAGE>

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents.

INVESTMENT PROCESS

International Fixed Income Funds - Investment Class Page - 10 -
<PAGE>

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach, which may
include short-term trading, could cause the Fund's portfolio turnover rate to be
above average. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Primary Risks

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities.

International Fixed Income Funds - Investment Class Page - 11 -
<PAGE>

Thus, prepayment may reduce the Fund's income. It may also create a capital
gains tax liability because bond issuers usually pay a premium for the right to
pay off bonds early.

International Fixed Income Funds - Investment Class Page - 12 -
<PAGE>

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan, the United States or the
United Kingdom, market swings in such a targeted country or region will be
likely to have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Derivative Risk. Even a small investment in derivative contracts can have a big
impact on the Fund's market, currency and interest rate exposure. Therefore,
using derivatives can

International Fixed Income Funds - Investment Class Page - 13 -
<PAGE>

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

International Fixed Income Funds - Investment Class Page - 14 -
<PAGE>

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell Core Global Fixed Income Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

International Fixed Income Funds - Investment Class Page - 15 -
<PAGE>

GLOBAL FIXED INCOME - Investment Class

Overview of Global Fixed Income

A Detailed Look at Global Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International Fixed Income Funds - Investment Class Page - 16 -
<PAGE>

Global Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income and, to a
lesser extent, opportunities for capital growth consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers located throughout the world.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

International Fixed Income Funds - Investment Class Page - 17 -
<PAGE>

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

o the fixed income market could perform poorly in one or more of the
countries in which the Fund has invested;

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

International Fixed Income Funds - Investment Class Page - 18 -
<PAGE>

accept the risks of investing in the fixed income market, including credit risk
and interest rate risk.

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

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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on January 4, 1994. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Salomon World Government Bond Index over the last one
year, five years and since inception. Bear in mind that the Index is a passive
measure of world government bond market returns. It does not factor in the costs
of buying, selling and holding fixed income securities -- costs which are
reflected in the Fund's results.

International Fixed Income Funds - Investment Class Page - 19 -
<PAGE>

Year-by-Year Returns
Institutional Class shares(1)
(each full calendar year since inception)

[bar chart]

-------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
-------------------------------------------------------------------
______% ______% ______% ______% ________%
-------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year 5 years (1/4/94)(2)
- --------------------------------------------------------------------------------
Global Fixed Income Fund - Institutional
Class shares _____% _____% _____%
================================================================================
Salomon World Government Bond Index _____% _____% _____%
================================================================================

1 Institutional Class performance is presented because Investment Class shares
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 The Salomon World Government Bond Index average is calculated from _______,
1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and estimated
expenses that you may pay if you buy and hold Investment Class shares of the
Global Fixed Income Fund.

Percentage of Average
Daily Net Assets
----------------

International Fixed Income Funds - Investment Class Page - 20 -
<PAGE>

Management Fees 0.50%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses ____%
Total Fund Operating Expenses ____%
Less: Fee Waivers or Expense Reimbursements (____%)(1)
----------
Net Expenses 0.85%

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual investment return and costs may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001 to waive its fees and reimburse expenses so that total
expenses will not exceed 0.85%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International Fixed Income Funds - Investment Class Page - 21 -
<PAGE>

Global Fixed Income

A detailed look

OBJECTIVE

The Fund seeks total return, with an emphasis on current income and, to a lesser
extent, opportunities for growth of capital consistent with reasonable
investment risk. Under normal circumstances, it invests at least 65% of its
total assets in the fixed income securities of issuers located throughout the
world. While we seek 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

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of
+/- 1 1/2 years around the Fund's benchmark index.

PRINCIPAL INVESTMENTS

The Fund invests in investment grade fixed income securities of issuers located
throughout the world. The Fund's fixed income

International Fixed Income Funds - Investment Class Page - 22 -
<PAGE>

securities include government securities, corporate fixed income securities and
obligations to repay borrowed money within a certain time with or without
interest. The Fund invests primarily in investment grade securities that, at the
time of purchase, are either rated in one of the three highest categories by a
major independent rating agency, or in unrated securities that the Investment
Adviser considers of comparable quality. The Fund may also invest in investment
grade fixed income securities rated in the fourth highest category. The Fund may
also invest up to 15% of its total assets in fixed income securities rated below
investment grade, including the securities of issuers in emerging securities
markets.

The Fund may invest more than 25% of its total assets in securities denominated
in the euro, as well as in the securities of issuers allocated in each of Japan,
the United States and the United Kingdom. The Fund may also invest a portion of
its assets in companies based in the emerging markets of Latin America, the
Middle East, Europe, Asia and Africa if the Investment Adviser believes that
their return potential more than compensates for the extra risks associated with
these markets.

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents.

INVESTMENT PROCESS

International Fixed Income Funds - Investment Class Page - 23 -
<PAGE>

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach, which may
include short-term trading, could cause the Fund's portfolio turnover rate to be
above average. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with fixed income
and global investing, along with those of investing in general. Although we
attempt both to assess the likelihood that these risks may actually occur and to
limit them, we cannot guarantee that we will succeed.

Primary Risks

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuers may not be able to make timely payments on the
interest and principal on the bonds they have issued. Fixed income securities
rated in the fourth highest category have speculative characteristics. These
securities and below investment grade securities (high yield/high risk
securities) involve a greater risk of

International Fixed Income Funds - Investment Class Page - 24 -
<PAGE>

loss than higher quality securities and are more sensitive to changes in the
issuer's capacity to pay.

International Fixed Income Funds - Investment Class Page - 25 -
<PAGE>

impossible to sell a security in an orderly fashion at a price that
approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in securities
denominated in foreign currencies. This creates the possibility that
changes in foreign exchange rates will affect the U.S. dollar value of
foreign investments or the U.S. dollar amount of income or gain received
on these investments. Additionally, a change in economic policy may cause
a greater fluctuation in a country's currency than in bonds denominated in
that currency. We may, but need not, seek to minimize this risk by
actively managing the currency exposure of the Fund, which entails hedging
from time to time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan, the United States or the
United Kingdom, market swings in such a targeted country or region will be
likely to have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Security Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value. The Fund may
underperform relative to its stated benchmark, due to our securities choices and
choices in asset allocation.

International Fixed Income Funds - Investment Class Page - 26 -
<PAGE>

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the

International Fixed Income Funds - Investment Class Page - 27 -
<PAGE>

risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in U.S. or foreign
government money market investments, or other short-term bonds that offer
comparable safety, if the situation warranted. To the extent that we might adopt
such a position, and over the course of its duration, the Fund may not meet its
goal of total return.

PORTFOLIO MANAGER

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell Global Fixed Income Fund because Investment
Class shares of this fund had not commenced operations on or prior to October
31, 1999.

International Fixed Income Funds - Investment Class Page - 28 -
<PAGE>

INTERNATIONAL FIXED INCOME- Investment Class

Overview of International Fixed Income

A Detailed Look at International Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

International Fixed Income Funds - Investment Class Page - 29 -
<PAGE>

International Fixed Income

OVERVIEW

Goal: The Fund seeks total return, with an emphasis on current income and, to a
lesser extent, opportunities for capital growth consistent with reasonable
investment risk.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities of issuers located in countries other than the United States.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

International Fixed Income Funds - Investment Class Page - 30 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

International Fixed Income Funds - Investment Class Page - 31 -
<PAGE>

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

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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on March 15, 1994. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Salomon World Government Bond (non-U.S.) Index over the
last one year, five years and since inception. Bear in mind that the Index is a
passive measure of government bond market returns. It does not factor in the
costs of buying, selling and holding fixed income securities -- costs which are
reflected in the Fund's results.

International Fixed Income Funds - Investment Class Page - 32 -
<PAGE>

Year-by-Year Returns
Institutional Class shares(1)
(each full calendar year since inception)

[bar chart]

Average Annual Returns
(as of December 31, 1999)
Since Inception
1 year 5 years (3/15/94)(2)
- --------------------------------------------------------------------------------
International Fixed Income Fund -
Institutional Class shares _____% _____% _____%
================================================================================
Salomon World Government Bond
(non-U.S.) Index ____% _____% _____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 The Salomon World Government Bond (non-U.S.) Index average is calculated from
_______, 1994.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Investment Class shares of the International
Fixed Income Fund.

International Fixed Income Funds - Investment Class Page - 33 -
<PAGE>

Percentage of Average
Daily Net Assets
----------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses _____%
Total Fund Operating Expenses _____%
Less: Fee Waivers or Expense Reimbursements _____%
Net Expenses 0.80%

1 year(2) 3 years(3) 5 years(3) 10 years(3)

$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense ratio with
other funds.1 Your actual investment returns and costs may be higher or lower.

International Fixed Income Funds - Investment Class Page - 34 -
<PAGE>

International Fixed Income Fund

A detailed look

OBJECTIVE

The Fund seeks total return, with an emphasis on current income and, to a lesser
extent, opportunities for growth of capital consistent with reasonable
investment risk. Under normal circumstances, it invests at least 65% of its
total assets in the fixed income securities of foreign issuers. While we seek
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

In managing the Fund, we use a "top-down" approach to picking securities. This
approach focuses on country selection and currency management as well as
individual security selection.

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of
+/- 1 1/2 years around the Fund's benchmark index.

International Fixed Income Funds - Investment Class Page - 35 -
<PAGE>

PRINCIPAL INVESTMENTS

The Fund may invest more than 25% of its total assets in securities denominated
in the euro, as well as in the securities of issuers located in each of Japan
and the United Kingdom.

The Fund may also invest up to 35% of its total assets in domestic and foreign
cash equivalents and in U.S. fixed income securities.

International Fixed Income Funds - Investment Class Page - 36 -
<PAGE>

INVESTMENT PROCESS

o inflation,

o interest rates,

o monetary and fiscal policies,

o taxation and

o political climate.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Like most global fixed income funds, the Fund's management approach which may
include short-term trading could cause the Fund's portfolio turnover rate to be
above average. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.

RISKS

Primary Risks

International Fixed Income Funds - Investment Class Page - 37 -
<PAGE>

involve a greater risk of loss than higher quality securities and are more
sensitive to changes in the issuer's capacity to pay.

International Fixed Income Funds - Investment Class Page - 38 -
<PAGE>

impossible to sell a security in an orderly fashion at a price that
approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in securities
denominated in foreign currencies. This creates the possibility that
changes in foreign exchange rates will affect the U.S. dollar value of
foreign investments or the U.S. dollar amount of income or gain received
on these investments. Additionally, a change in economic policy may cause
a greater fluctuation in a country's currency than in bonds denominated in
that currency. We may, but need not, seek to minimize this risk by
actively managing the currency exposure of the Fund, which entails hedging
from time to time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Europe and in Japan or the United Kingdom,
market swings in such a targeted country or region will be likely to have a
greater effect on Fund performance than they would in a more geographically
diversified fixed income fund.

International Fixed Income Funds - Investment Class Page - 39 -
<PAGE>

o Correlation risks. Changes in the value of derivative contracts or other
hedging instruments may not match or fully offset changes in the value of
the hedged portfolio securities.

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the

International Fixed Income Funds - Investment Class Page - 40 -
<PAGE>

risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in U.S. or foreign
government money market investments, or other short-term bonds that offer
comparable safety, if the situation warranted. To the extent we might adopt such
a position and over the course of its duration, the Fund may have to forego its
goal of total return.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell International Fixed Income Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

International Fixed Income Funds - Investment Class Page - 41 -
<PAGE>

Information
Concerning All Funds
MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

The Funds paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Core Global Fixed Income Fund _________%
Global Fixed Income Fund _________%
International Fixed Income Fund _________%

DAMIS provides a full range of international investment advisory services to
Investment clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

International Fixed Income Funds - Investment Class Page - 42 -
<PAGE>

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

International Fixed Income Funds - Investment Class Page - 43 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

International Fixed Income Funds - Investment Class Page - 44 -
<PAGE>

have distributions and dividends reinvested. Distributions and dividends usually
have the following tax character:

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year your Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses, 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.

International Fixed Income Funds - Investment Class Page - 45 -
<PAGE>

BUYING AND SELLING FUND SHARES

Service Plan

Important Information About Buying and Selling Shares

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

International Fixed Income Funds - Investment Class Page - 46 -
<PAGE>

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Exchange Privilege

You can exchange all or part of your shares for the same class of shares of
another Deutsche Asset Management 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 get a copy of that fund's prospectus and read it
carefully. If you are maintaining a taxable account, you may be subject to taxes
on the exchange.

International Fixed Income Funds - Investment Class Page - 47 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

International Funds Combined CUSIP
Product Code

Distributed by:

International Fixed Income Funds - Investment Class Page - 48 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

International Fixed Income Funds - Investment Class Page - 49 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

Fixed Income

Short-Term Fixed Income

Municipal Bond

Short-Term Municipal Bond

High Yield Bond

[Deutsche Bank Group logo]

Fixed Income Funds -- Institutional Class shares Page - 1 -
<PAGE>

Table of Contents

Fixed Income
Short-Term Fixed Income
Municipal Bond
Short-Term Municipal Bond
High Yield Bond

Information Concerning All of the Funds

Additional Investment Information
Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

Fixed Income Funds -- Institutional Class shares Page - 2 -
<PAGE>

FIXED INCOME- Institutional Class

Overview of Fixed Income

A Detailed Look at Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income Funds -- Institutional Class shares Page - 3 -
<PAGE>

Fixed Income

OVERVIEW

Goal: The Fund seeks a high level of income consistent with the preservation of
capital.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities.

INVESTMENT POLICIES AND STRATEGIES

The Fund invests, under normal circumstances, at least 80% of its assets in a
wide-range of fixed income securities, including U.S. government bonds,
corporate bonds and debentures and mortgage-backed and asset-backed securities.
In selecting investments, we focus on identifying securities and sectors which
we believe are undervalued relative to the market rather than relying on
interest rate forecasts.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
and

o interest rates could increase, causing the prices of the Fund's fixed
income securities, which have effective maturities which are longer than a
typical intermediate-term fund, to decline, thereby reducing the value of
the Fund's portfolio.

Fixed Income Funds -- Institutional Class shares Page - 4 -
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fixed Income Fund if you are seeking to
earn current income higher than money market mutual funds over most time
periods. There is, of course, no guarantee that the Fund will realize its goal.
Moreover, you should be willing to accept the risks of investing in the fixed
income market, including credit risk and interest rate risk.

You should not consider investing in the Fixed Income Fund if you are pursuing a
short-term financial goal, if you are seeking capital appreciation or if you
cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
fixed income investments. Diversifying your investments may lower the volatility
of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on September 18, 1992 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Lehman Brothers Aggregate Bond Index
over the last one and five years and since its inception. Bear in mind that the
Index is a model, not an actual portfolio. An index is a group of securities
whose overall performance is used as a standard to measure investment
performance. It does not factor in the costs of buying, selling and holding
stock -- costs which are reflected in the Fund's results.

FOOTNOTE: The Lehman Brothers Aggregate Bond Index is one of the most widely
accepted benchmarks of bond market total return. It includes more than 6,000
taxable securities divided into four classes: U.S. Treasury and agency
securities, corporate bonds, bonds issued outside the United States but payable
in U.S. dollars, and

Fixed Income Funds -- Institutional Class shares Page - 5 -
<PAGE>

mortgage-backed securities. All of the bonds on the Index have maturities of one
year or more at the time of their issue.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
____% ____% ____% ____% ____% ____% ____%
- --------------------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)
Past
1 year 5 years Since Inception
(9/18/92)(1)
- --------------------------------------------------------------------------------
Fixed Income Fund -- Institutional Class
shares _____% _____% _____%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index _____% _____% _____%
================================================================================
1 The Lehman Brothers Aggregate Bond Index average is calculated from _______,
1992.

Fixed Income Funds -- Institutional Class shares Page - 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 Institutional Class shares of the Fixed
Income Fund.

Percentage of Average
Daily Net Assets
---------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursement ___%(1)
----
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 0.55%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Fixed Income Funds -- Institutional Class shares Page - 7 -
<PAGE>

Fixed Income

A detailed look

OBJECTIVE

The Fund seeks a high level of income consistent with the preservation of
capital. Under normal circumstances, the Fund invests at least 80% of its assets
in intermediate-term U.S. treasury, corporate, mortgage-backed and asset-backed,
taxable, municipal and tax-exempt municipal bonds.

The Fund invests for current income, not capital appreciation. While we seek
current income, 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

In managing the Fund, we generally use a "bottom-up" approach. We focus on the
securities and sectors we believe are undervalued relative to the market, rather
than relying on interest rate forecasts.

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
five to ten years. The Fund's average portfolio maturity may be shortened by
certain of the Fund's securities which have floating or variable interest rates
or include put features which provide the Fund the right to sell the security at
face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

The Fund invests primarily in high grade fixed income securities. The Fund may
invest up to 15% of its assets in investment grade fixed income securities rated
within the fourth highest

Fixed Income Funds -- Institutional Class shares Page - 8 -
<PAGE>

rating category. Fixed income investments include bonds, notes (including
structured notes), mortgage-related securities, asset-backed securities,
convertible securities, eurodollar and Yankee dollar instruments, preferred
stocks and money market instruments. Fixed income securities may be issued by
U.S. and foreign corporations or entities; U.S. and foreign banks; the U.S.
government, its agencies, authorities, instrumentalities or sponsored
enterprises; state and municipal governments; supranational organizations; and
foreign governments and their subdivisions. These securities may have all types
of interest rate payment and reset terms, including fixed rate, adjustable rate,
zero coupon, contingent, deferred, payment in-kind and auction rate features.

The Fund may invest up to 25% of its total assets in U.S. dollar-denominated
securities of foreign issuers. The Fund may hold up to 20% of its total assets
in cash or money market instruments in order to maintain liquidity, or in the
event we determine that securities meeting the Fund's investment objective are
not otherwise readily available for purchase. The Fund may use mortgage dollar
rolls to finance the purchase of additional investments.

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

If a security receives different ratings, the Fund will treat the security as
being rated in the highest rating category. The Fund may choose not to sell
securities that are downgraded after their purchase below the Fund's minimum
acceptable credit rating. The Fund's credit standards also apply to
counterparties of OTC derivative contracts.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

Fixed Income Funds -- Institutional Class shares Page - 9 -
<PAGE>

o assign a relative value, based on credit worthiness, cash flow and price,
to each bond;

o determine the intrinsic value of each issue by examining credit,
structure, option value and liquidity risks. We look to exploit any
inefficiencies between intrinsic value and market trading price;

o use credit analysis to determine the issue's ability to fulfill its
contracts; and

o subordinate sector weightings to individual bonds that may add
above-market value.

FOOTNOTE: Portfolio Turnover: The annual portfolio turnover rate measures the
frequency that the Fund sells and replaces the value of its securities in a
given period. Historically, this Fund has had a high portfolio turnover rate.
High turnover can increase the Fund's transaction costs, thereby lowering its
returns.

RISKS

Below we have set forth some of the prominent risks associated with investing in
fixed income securities, as well as investing in general. Although we attempt
both to assess the likelihood that these risks may actually occur and to limit
them, we cannot guarantee that we will succeed.

Primary Risks

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may

Fixed Income Funds -- Institutional Class shares Page - 10 -
<PAGE>

prepay principal earlier than scheduled, forcing the Fund to reinvest in lower
yielding securities. Thus, prepayment may reduce the Fund's income. There is a
greater risk that the Fund will lose money due to prepayment risk because the
Fund invests in mortgage-related securities.

Extension Risk. As interest rates increase, slower than expected principal
payments may extend the average life of fixed income securities. This will have
the effect of locking in a below-market interest rate, increase the security's
duration and reduce the value of the security. There is a greater risk that the
Fund will lose money due to extension risk because the Fund invests in
mortgage-related securities.

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Secondary Risks

Foreign Investing. The risks of investing in foreign securities are generally
higher than investing in domestic securities. A foreign government could
expropriate or nationalize assets, impose withholding or other taxes on
dividend, interest or other payments and prohibit transactions in the country's
currency. In many foreign countries, securities markets are less liquid, more
volatile and subject to less government regulation than U.S. securities markets.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities held by
or to be bought for the Fund. These changes may be caused by changing
interest rates, security prices or currency exchange rates.

Fixed Income Funds -- Institutional Class shares Page - 11 -
<PAGE>

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

FOOTNOTE: A derivative contract will obligate or entitle the Fund to deliver or
receive an asset or a cash payment that is based on the change in value of a
designated security, index or currency. Examples of derivative contracts are
futures contracts, options, forward contracts, swaps, caps, collars and floors.

Even a small investment in derivative contracts can have a big impact on the
Fund's market, currency and interest rate exposure. Therefore, using derivatives
can disproportionately increase losses and reduce opportunities for gains when
securities prices, currency rates or interest rates are changing. Counterparties
to OTC derivative contracts present the same types of default risk as issuers of
fixed income securities. Derivatives can also make the Fund less liquid and
harder to value, especially in declining markets.

Leverage risks. Because of borrowing or investments in derivative contracts, the
Fund may suffer disproportionately heavy losses relative to the amount of its
investment. Leverage can magnify the impact of poor asset allocation or
investment decisions.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

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

Fixed Income Funds -- Institutional Class shares Page - 12 -
<PAGE>

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
bond market events. We could place up to 100% of the Fund's assets in U.S
money-market investments, or other short-term bonds that offer comparable
safety, if the situation warranted. To the extent we might adopt such a position
and over the course of its duration, the Fund may not meet its investment
objective.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

Fixed Income Funds -- Institutional Class shares Page - 13 -
<PAGE>

- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and
Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of
Period (000s omitted)
- --------------------------------------------------------------------------------
Ratios to Average Net
Assets:
- --------------------------------------------------------------------------------
Net Investment
Income
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Decrease Reflected
in Above Expense
Ratio Due to
Absorption of
Expenses by DAMI
- --------------------------------------------------------------------------------
Portfolio Turnover
Rate
- --------------------------------------------------------------------------------

Fixed Income Funds -- Institutional Class shares Page - 14 -
<PAGE>

SHORT-TERM FIXED INCOME- Institutional Class

Overview of Short-Term Fixed Income

A Detailed Look at Short-Term Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

Fixed Income Funds -- Institutional Class shares Page - 15 -
<PAGE>

Short-Term Fixed Income

OVERVIEW

Goal: The Fund seeks a high level of income consistent with the preservation of
capital.

Core Strategy: The Fund invests primarily in investment grade short-term fixed
income securities.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in
short-term U.S. Treasury, corporate, mortgage-backed and asset-backed, taxable
municipal and tax-exempt municipal bonds. We look for securities and sectors of
the short-term fixed income marketplace that are undervalued relative to the
market rather than rely on interest rate forecasting to select securities for
investment.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest; and

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Short-Term Fixed Income Fund if you are
seeking to earn current income higher than money market mutual funds over most
time periods but are looking for less volatility in the value of your investment
than the Fixed Income Fund may provide.

Fixed Income Funds -- Institutional Class shares Page - 16 -
<PAGE>

You should not consider investing in the Short-Term Fixed Income Fund if you are
pursuing a short-term financial goal, if you are seeking capital appreciation or
if you cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
short-term fixed income investments. Diversifying your investments may improve
your long-run investment return and lower the volatility of your overall
investment portfolio.

An investment in the Short-Term Fixed Income Fund is not a deposit of any bank,
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on March 31, 1995 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Merrill Lynch 6-Month Treasury Bill
Index over the last one year and since its inception. Bear in mind that the
Index is a model, not an actual portfolio. An index is a group of securities
whose overall performance is used to measure investment performance.

FOOTNOTE: The Merrill Lynch 6-Month Treasury Bill Index [Please provide
description]

Fixed Income Funds -- Institutional Class shares Page - 17 -
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1996 1997 1998 1999
---- ---- ---- ----
- --------------------------------------------------------------------------------
______% ______% ______% ______%
- --------------------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since Inception
1 year (3/13/95)(1)
- --------------------------------------------------------------------------------
Short-Term Fixed Income Fund - Institutional Class
shares
================================================================================
Merrill Lynch 6-Month Treasury Bill Index _____% _____%
================================================================================
1 The Merrill Lynch 6-Month Treasury Bill Index average is calculated from
_______, 1995.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and estimated
expenses that you may pay if you buy and hold Institutional Class shares of the
Short-Term Fixed Income Fund.

Fixed Income Funds -- Institutional Class shares Page - 18 -
<PAGE>

Percentage of Average
Daily Net Assets
---------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursements %(1)
----
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$--- $--- $--- $---

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Fixed Income Funds -- Institutional Class shares Page - 19 -
<PAGE>

Short-Term Fixed Income

A detailed look

OBJECTIVE

The Fund seeks a high level of income consistent with the preservation of
capital. Under normal circumstances, it invests at least 80% of its total assets
in short-term U.S. Treasury, corporate, mortgage-backed and asset-backed,
taxable municipal and tax-exempt municipal bonds.

STRATEGY

In managing the fund, we generally use a "bottom-up" approach. We focus on the
securities and sectors we believe are undervalued relative to the market, rather
than relying on interest rate forecasts.

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
no longer than three years. The Fund's average portfolio maturity may be
shortened by certain of the Fund's securities which have floating or variable
interest rates or include put features which provide the Fund the right to sell
the security at face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

Fixed Income Funds -- Institutional Class shares Page - 20 -
<PAGE>

PRINCIPAL INVESTMENTS

The Fund invests primarily in high grade fixed income securities. The Fund may
invest up to 15% of its assets in investment grade fixed income securities rated
within the fourth highest rating category. Fixed income investments include
bonds, notes (including structured notes), mortgage-related securities,
asset-backed securities, convertible securities, eurodollar and Yankee dollar
instruments, preferred stocks and money market instruments. Fixed income
securities may be issued by U.S. and foreign corporations or entities; U.S. and
foreign banks; the U.S. government, its agencies, authorities, instrumentalities
or sponsored enterprises; state and municipal governments; supranational
organizations; and foreign governments and their subdivisions. These securities
may have all types of interest rate payment and reset terms, including fixed
rate, adjustable rate, zero coupon, contingent, deferred, payment in-kind and
auction rate features.

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

Fixed Income Funds -- Institutional Class shares Page - 21 -
<PAGE>

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o assign a relative value, based on credit worthiness, cash flow and price,
to each bond;

o we determine the intrinsic value of each issue by examining credit,
structure, option value and liquidity risks. We look to exploit any
inefficiencies between intrinsic value and market trading price;

o we use credit analysis to determine the issue's ability to fulfill its
contracts; and

o we subordinate sector weightings to individual bonds that may add
above-market value.

FOOTNOTE: Portfolio Turnover: The annual portfolio turnover rate measures the
frequency that the Fund sells and replaces the value of its securities in a
given period. [Historically, this Fund has had a high portfolio turnover rate.
High turnover can increase the Fund's transaction costs, thereby lowering its
returns].

RISKS

Below we have set forth some of the prominent risks associated with investing in
fixed income securities, along with those of investing in general. Although we
attempt both to assess the likelihood that these risks may actually occur and to
limit them, we cannot guarantee that we will succeed.

Primary Risks

Fixed Income Funds -- Institutional Class shares Page - 22 -
<PAGE>

securities rated in the fourth highest category have speculative
characteristics. These securities involve a greater risk of loss than higher
quality securities and are more sensitive to changes in the issuer's capacity to
pay.

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities. Thus, prepayment may reduce the Fund's
income. There is a greater risk that the Fund will lose money due to prepayment
risk because the Fund invests in mortgage-related securities.

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

Fixed Income Funds -- Institutional Class shares Page - 23 -
<PAGE>

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income Funds -- Institutional Class shares Page - 24 -
<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.

PORTFOLIO MANAGER

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

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

For the period
--------------
ended
For the year ended October 31, -----
------------------------------ October 31,
- ---------------------------------------------------------------- -----------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
Per Share Operating
Performance:
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period
- --------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Total from Investment
Operations
- --------------------------------------------------------------------------------
Distributions to Shareholders
- --------------------------------------------------------------------------------

Fixed Income Funds -- Institutional Class shares Page - 25 -
<PAGE>

- --------------------------------------------------------------------------------
For the period
--------------
ended
For the year ended October 31, -----
------------------------------ October 31,
- ---------------------------------------------------------------- -----------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------
Net Realized Gains
- -------------------------------------------------------------------------------
Net Realized and Unrealized
- -------------------------------------------------------------------------------
Gain (Loss) on Investment
- -------------------------------------------------------------------------------
Total Distributions
- -------------------------------------------------------------------------------
Net Asset Value, End of Period
- -------------------------------------------------------------------------------
Total Investment Return
- -------------------------------------------------------------------------------
Supplemental Data and Ratios:
- -------------------------------------------------------------------------------
Net Assets, End of Period
(000s omitted)
- -------------------------------------------------------------------------------
Ratios to Average Net
Assets:
- -------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------
Expenses, Including
Expenses of the
International Equity
Portfolio
- -------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by DAMI
- -------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- -------------------------------------------------------------------------------
1 The Fund's inception was March 3, 1995.
2 Annualized.

Fixed Income Funds -- Institutional Class shares Page - 26 -
<PAGE>

MUNICIPAL BOND - Institutional Class

Overview of International Municipal Bond

A Detailed Look at Municipal Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

Fixed Income Funds -- Institutional Class shares Page - 27 -
<PAGE>

Municipal Bond

OVERVIEW

Goal: The Fund seeks a high level of income exempt from regular federal income
tax, consistent with the preservation of capital.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities that pay interest exempt from federal income tax.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in
investment grade municipal securities. Municipal securities are debt securities
issued by states and certain other municipal issuers, political subdivisions,
agencies and public authorities that pay interest which are exempt from federal
income tax. We focus on individual security selection rather than relying on
interest rate forecasting.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio.

Fixed Income Funds -- Institutional Class shares Page - 28 -
<PAGE>

o a greater-than-anticipated percentage of the Fund's investments could
produce taxable income, resulting in a lower tax-adjusted return; and

o unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Municipal Bond Fund if you are in a high
federal tax bracket and are seeking income that is exempt from federal income
tax. There is, of course, no guarantee that the Fund will realize its goal of
providing a high level of income exempt from regular federal income tax.

You should not consider investing in the Municipal Bond Fund if you are pursuing
a short-term financial goal, if you seek capital appreciation or if you cannot
tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
municipal securities.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on December 13, 1991 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Lehman Brothers 5 Year G.O Index
over the last one and five years and since its inception. Bear in mind that the
Index is a model, not an actual portfolio. An index is a group of securities
whose overall performance is used to measure investment performance.

FOOTNOTE: The Lehman Brothers 5-Year G.O. Index [Insert description of index.]

Year-by-Year Returns

Fixed Income Funds -- Institutional Class shares Page - 29 -
<PAGE>

Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
___% ___% ___% ___% ___% ___% ___% ___%
- --------------------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)
Since
Inception
1 year 5 years (12/31/91)(1)
- --------------------------------------------------------------------------------
Municipal Bond Fund - Institutional Class
shares _____% _____% _____%
================================================================================
Lehman 5 Year G.O Index _____% _____% _____%
================================================================================
1 The Lehman 5 Year G.O. Index average is calculated from _______, 1991.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Institutional Class shares of the Municipal Bond
Fund.

Fixed Income Funds -- Institutional Class shares Page - 30 -
<PAGE>

Percentage of
Average Daily Net
Assets
--------------------
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursements %(1)
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
--------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Fixed Income Funds -- Institutional Class shares Page - 31 -
<PAGE>

Municipal Bond

A detailed look

OBJECTIVE

The Fund seeks a high level of income exempt from regular federal income tax,
consistent with the preservation of capital. The Fund invests primarily in
investment grade municipal securities. Municipal securities are debt securities
issued by states and certain other municipal issuers, political subdivisions,
agencies and public authorities that pay interest which is exempt from federal
income tax.

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

In managing this fund, we generally use a "bottom-up" approach. We focus on the
securities and sectors we believe are undervalued relative to the market, rather
than rely on interest rate forecasting.

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
five to ten years. The Fund's average portfolio maturity may be shortened by
certain of the Fund's securities which have floating or variable interest rates
or include put features which provide the fund the right to sell the security at
face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

Under normal conditions, the Fund invests at least 80% of net assets in
municipal securities which pay interest exempt from federal income tax and at
least 65% of total assets in municipal

Fixed Income Funds -- Institutional Class shares Page - 32 -
<PAGE>

bonds. There is no restriction on the percentage of assets that may be invested
in obligations the interest on which is a preference item for purposes of the
federal alternative minimum tax. The Fund may invest 25% or more of its total
assets in private activity and industrial development bonds if the interest paid
on them is exempt from regular federal income tax. The payment of principal and
interest on a private activity or industrial development bond is generally
dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property financed as
security for such payment.

The Fund invests primarily in high grade bonds. The Fund may invest up to 15% of
its assets in investment grade bonds that are rated in the fourth highest
category. Up to 20% of the fund's total assets may be invested in certain
taxable securities in order to maintain liquidity. The Fund may use mortgage
dollar rolls to finance the purchase of additional investments. The Fund may
also purchase securities on a when-issued basis.

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical
rating organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to
be of comparable quality to rated investment grade securities.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o Assign a relative value, based on creditworthiness, cash flow and
price, to each bond.

Fixed Income Funds -- Institutional Class shares Page - 33 -
<PAGE>

o Use credit analysis to determine the issuer's ability to fulfill its
contracts.

o Compare each bond with a U.S. Treasury instrument to develop a
theoretical intrinsic value.

o Look to exploit any inefficiencies between intrinsic value and
market trading price.

o Subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Below we have set forth some of the prominent risks associated with investing in
municipal securities, as well as investing in general. Although we attempt both
to assess the likelihood that these risks may actually occur and to limit them,
we cannot guarantee that we will succeed.

Primary Risks

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Fixed Income Funds -- Institutional Class shares Page - 34 -
<PAGE>

Tax Liability Risk. Distributions by the Fund that are derived from income from
taxable securities held by the Fund will generally be taxable to shareholders as
ordinary income. There is a risk that a greater percentage of the Fund's
investments will produce taxable income, resulting in a lower tax-adjusted
return. New federal or state legislation could adversely affect the tax-exempt
status of securities held by the Fund, resulting in higher tax liability for
shareholders. In addition, distribution of the Fund's income and gains will
generally be subject to state taxation.

Secondary Risks

When-Issued and Delayed Delivery Securities Risk. The Fund may purchase or sell
a security at a future date for a predetermined price. The market value of the
securities may change before delivery.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security market prices or currency exchange
rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

Fixed Income Funds -- Institutional Class shares Page - 35 -
<PAGE>

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income Funds -- Institutional Class shares Page - 36 -
<PAGE>

term bonds that offer comparable safety, if the situation warranted. To the
extent we might adopt such a position and over the course of its duration, the
Fund may not meet its investment objective.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
For the year ended October 31,
------------------------------
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------
Per Share Operating
Performance:
- --------------------------------------------------------------------------------
Net Asset Value, Beginning
of Period
- --------------------------------------------------------------------------------
Income From Investment
Operations
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investment
- --------------------------------------------------------------------------------
Total from Investment
Operations
- --------------------------------------------------------------------------------
Distributions to
Shareholders
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and
Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of
Period (000s omitted)
- --------------------------------------------------------------------------------

Fixed Income Funds -- Institutional Class shares Page - 37 -
<PAGE>

Fixed Income Funds -- Institutional Class shares Page - 38 -
<PAGE>

Short-term municipal bond - Institutional Class

Overview of Short-Term Municipal Bond

A Detailed Look at Short-Term Municipal Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income Funds -- Institutional Class shares Page - 39 -
<PAGE>

Short-Term Municipal Bond

OVERVIEW

Goal: The Fund seeks a high level of income exempt from regular federal income
tax, consistent with the preservation of capital.

Core Strategy: The Fund invests primarily in investment grade short-term fixed
income securities that pay interest exempt from federal income tax.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in primarily in
short-term municipal securities. Municipal securities are debt securities issued
by states and certain other municipal issuers, political subdivisions, agencies
and public authorities that pay interest which is exempt from federal income
tax. We focus on individual security selection rather than rely on interest rate
forecasting.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

o interest rates could increase, causing the prices of the Fund's fixed
income securities, which have effective maturities which are longer than a
typical short-term fund, to decline, thereby reducing the value of the
Fund's portfolio;

Fixed Income Funds -- Institutional Class shares Page - 40 -
<PAGE>

o a greater-than-anticipated percentage of the Fund's investments could
produce taxable income, resulting in a lower tax-adjusted return; and

o unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Short-Term Municipal Bond Fund if you are
in a high federal tax bracket and are seeking income that is exempt from federal
income tax. You are also seeking less volatility in the value of your investment
than an investment in the Municipal Bond Fund. There is, of course, no guarantee
that the Fund will realize its goal of providing a high level of income exempt
from regular federal income tax.

You should not consider investing in the Short-Term Municipal Bond Fund if you
are pursuing a short-term financial goal, if you seek capital appreciation or if
you cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
municipal securities.

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since it began selling
Institutional Class shares to the public on March 6, 1995 (its inception date).
The table compares the average annual return of the Fund's Institutional Class
shares with that of the IBC Financial All Tax-Free Average Index over the last
one year and since inception. The Index is a passive measure of combined stock
market returns. It does not factor in the costs of buying, selling and holding
securities, costs which are reflected in the Fund's results.

FOOTNOTE: The IBC Financial All Tax-Free Average Index is [Please provide
description].

Fixed Income Funds -- Institutional Class shares Page - 41 -
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

- --------------------------------------------------------------------------------
1996 1997 1998 1999
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 Year (3/6/95)(1)
- --------------------------------------------------------------------------------
Short-Term Municipal Bond - Institutional Class shares ____% ____%
================================================================================
IBC Financial All Tax-Free Average ____% ____%
================================================================================
1 IBC Financial All Tax-Free Average is calculated from __________, 1995.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Institutional Class shares of the Short-Term
Municipal Bond Fund.

Fixed Income Funds -- Institutional Class shares Page - 42 -
<PAGE>

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement (%)(1)
----
Net Expenses 0.55%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
--------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Fixed Income Funds -- Institutional Class shares Page - 43 -
<PAGE>

Short-Term Municipal Bond

A detailed look

OBJECTIVE

The Fund seeks a high level of income exempt from regular federal income tax,
consistent with the preservation of capital. The Fund invests primarily in
short-term investment grade municipal securities. Municipal securities are debt
securities issued by states and certain other municipal issuers, political
subdivisions, agencies and public authorities that pay interest which is exempt
from federal income tax.

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

In managing the Fund, we generally use a "bottom-up" approach. We focus on the
securities and sectors we believe are undervalued relative to the market, rather
than rely on interest rate forecasting.

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
no longer than three years. The Fund's average portfolio maturity may be
shortened by certain of the Fund's securities which have floating or variable
interest rates or include put features which provide the fund the right to sell
the security at face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

Under normal conditions, the Fund invests at least 80% of net assets in
municipal securities which pay interest exempt from federal income tax and at
least 65% of total assets in municipal

Fixed Income Funds -- Institutional Class shares Page - 44 -
<PAGE>

bonds. There is no restriction on the percentage of assets that may be invested
in obligations the interest on which is a preference item for purposes of the
federal alternative minimum tax. The Fund may invest 25% or more of its total
assets in private activity and industrial development bonds if the interest paid
on them is exempt from regular federal income tax. The Fund invests primarily in
high grade bonds. The Fund may invest up to 15% of its assets in investment
grade bonds that are rated in the fourth highest category. Up to 20% of the
fund's total assets may be invested in certain taxable securities in order to
maintain liquidity. The Fund may use mortgage dollar rolls to finance the
purchase of additional investments. The Fund may also purchase securities on a
when-issued basis.

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical
rating organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to
be of comparable quality to rated investment grade securities.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o Assign a relative value, based on creditworthiness, cash flow and
price, to each bond.

o Use credit analysis to determine the issuer's ability to fulfill its
contracts.

o Compare bond with a U.S. Treasury instrument to develop a
theoretical intrinsic value.

Fixed Income Funds -- Institutional Class shares Page - 45 -
<PAGE>

o Look to exploit any inefficiencies between intrinsic value and
market trading price.

o Subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Below we have set forth some of the prominent risks associated with investing in
municipal securities, as well as investing in genera. Although we attempt both
to assess the likelihood that these risks may actually occur and to limit them,
we cannot guarantee that we will succeed.

Primary Risks

Fixed Income Funds -- Institutional Class shares Page - 46 -
<PAGE>

taxation.

Secondary Risks

Private Activity and Industrial Development Bond Risks. The payment of principal
and interest on these bonds is generally dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property financed as security for such payment. When-Issued
and Delayed Delivery Securities Risk. The Fund may purchase or sell a security
at a future date for a predetermined price. The market value of the securities
may change before delivery.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Fixed Income Funds -- Institutional Class shares Page - 47 -
<PAGE>

contracts are futures contracts, options, forward contracts, swaps, caps,
collars and floors.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income Funds -- Institutional Class shares Page - 48 -
<PAGE>

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
For the period
--------------
ended
-----
For the year ended October 31, October 31,
- ------------------------------------------------------------------- -----------
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
- ------------------------------------------------------------------------------------
Net Asset Value, Beginning
of Period
- ------------------------------------------------------------------------------------
Income From Investment
Operations
- ------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investment
- ------------------------------------------------------------------------------------
Total from Investment
Operations
- ------------------------------------------------------------------------------------
Distributions to
Shareholders
- ------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------
Net Realized Gains
- ------------------------------------------------------------------------------------
Total Distributions
- ------------------------------------------------------------------------------------
Net Asset Value, End of
Period
- ------------------------------------------------------------------------------------
Total Investment Return
- ------------------------------------------------------------------------------------
Supplemental Data and
Ratios:
- ------------------------------------------------------------------------------------
Net Assets, End of
Period (000s omitted)
- -----------------------------------------------------------------------------------
Ratios to Average Net
Assets:
- -----------------------------------------------------------------------------------
Net Investment Income
- -----------------------------------------------------------------------------------
Expenses, Including
Expenses of the
- -----------------------------------------------------------------------------------
</TABLE>

Fixed Income Funds -- Institutional Class shares Page - 49 -
<PAGE>

1 The Fund's inception was March 6, 1995.
2 Annualized.

Fixed Income Funds -- Institutional Class shares Page - 50 -
<PAGE>

HIGH YIELD BOND - Institutional Class

Overview of High Yield Bond

A Detailed Look at High Yield Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income Funds -- Institutional Class shares Page - 51 -
<PAGE>

High Yield Bond

OVERVIEW

Goal: The Fund seeks high current income and, as a secondary objective, capital
appreciation.

Core Strategy: The Fund invests primarily in U.S. dollar-denominated high yield
bonds of domestic and foreign issuers.

INVESTMENT POLICIES AND STRATEGIES

The Fund invests all of its assets in a master portfolio with the same
investment objective of the Fund. The Fund, through the master portfolio, seeks
to achieve that objective by investing in a diversified portfolio of high yield
fixed income securities with a dollar weighted effective average portfolio
maturity of seven to ten years.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline. This risk is
higher for below investment grade bonds;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest. This risk is higher for below investment
grade bonds;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
and

o interest rates could increase, causing the prices of the Fund's fixed
income securities to decline, thereby reducing the value of the Fund's
portfolio.

Fixed Income Funds -- Institutional Class shares Page - 52 -
<PAGE>

o The lower rated debt securities in which the Fund invests are considered
highly speculative and subject to greater volatility and risk of loss than
investment grade securities, particularly in deteriorating economic
periods.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the High Yield Bond Fund if you are seeking to
earn current income higher than investment grade bond funds provide over most
time periods. Moreover, you should be willing to accept significantly greater
short-term fluctuation in the value of your investment than you would typically
experience investing in investment grade bond or money-market funds.

You should not consider investing in the High Yield Bond Fund if you are
pursuing a short-term financial goal, if you seek capital appreciation or if you
cannot tolerate fluctuations in the value of your investments. The Fund by
itself does not constitute a balanced investment program. It can, however,
afford you exposure to investment opportunities not available to someone who
invests in investment grade fixed income securities alone. Diversifying your
investments may lower the volatility of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on March 16, 1998 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the CS First Boston High Yield Index
over the last one year and since its inception. Bear in mind that the Index is a
passive measure of combined national and international high yield bond market
returns. It does not factor in the costs of buying, selling and holding bonds --
costs which are reflected in the Fund's results.

Fixed Income Funds -- Institutional Class shares Page - 53 -
<PAGE>

FOOTNOTE: The CS First Boston High Yield Index is an unmanaged, trader priced
portfolio constructed to mirror the high yield debt market.

Fixed Income Funds -- Institutional Class shares Page - 54 -
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

---------------
1999
---------------
_____%
---------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (3/16/98)(1)
- --------------------------------------------------------------------------------
High Yield Bond Fund -- Institutional Class shares _____% _____%
- --------------------------------------------------------------------------------
CS First Boston High Yield Index _____% _____%
================================================================================
1 The CS First Boston High Yield Index average is calculated from _______, 1998.

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 Institutional Class shares of the High
Yield Bond Fund.

Fixed Income Funds -- Institutional Class shares Page - 55 -
<PAGE>

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement (%)(1)
Net Expenses 0.65%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
------ ------- ------- --------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 0.65%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Fixed Income Funds -- Institutional Class shares Page - 56 -
<PAGE>

High Yield Bond

A detailed look

OBJECTIVE

The Fund seeks high current income and, as a secondary objective, capital
appreciation. The Fund invests primarily in U.S. dollar denominated high yield
bonds of domestic and foreign issuers.

While we seek current income and, to a lesser extent, capital appreciation, 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

In managing the Fund, we generally use both a "top-down" and "bottom-up"
approach to picking securities. This approach focuses on neutral yield curve
distribution, careful cash flow and total return analysis, and broad
diversification among countries, sectors, industries and individual issuers in
an effort to provide higher income and manage risk. We use an active process
which emphasizes relative value in a global environment, managing on a total
return basis, and using intensive research to identify stable to improving
credit situations that may provide yield compensation for the risk of investing
in below investment grade bonds (junk-bonds).

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
seven to ten years. The Fund's average portfolio maturity may be shortened by
certain of the Fund's securities which have floating or variable interest rates
or include put features which provide the fund the right to sell the security at
face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

Fixed Income Funds -- Institutional Class shares Page - 57 -
<PAGE>

PRINCIPAL INVESTMENTS

Under normal conditions, the Fund invests at least 65% of its total assets in
U.S. dollar-denominated, and up to 10% in non-U.S. dollar-denominated, domestic
and foreign below investment grade fixed income securities (junk-bonds). Fixed
income investments include bonds, notes (including structured notes),
mortgage-related securities, asset-backed securities, convertible securities,
eurodollar and Yankee dollar instruments, preferred stocks and money market
instruments. Fixed income securities may be issued by U.S. and foreign
corporations or entities; U.S. and foreign banks; the U.S. government, its
agencies, authorities, instrumentalities or sponsored enterprises; state and
municipal governments; supranational organizations; and foreign governments and
their subdivisions. These securities may have all types of interest rate payment
and reset terms, including fixed rate, adjustable rate, zero coupon, contingent,
deferred, payment in-kind and auction rate features. The Fund's investments in
these securities may be of any credit quality and may include securities not
paying interest currently, and securities in default.

The Fund may invest up to 35% of its total assets in cash or money market
instruments in order to maintain liquidity, or in the event that the portfolio
manager determines that securities meeting the Fund's investment objectives are
not otherwise readily available for purchase. Money market securities include
commercial paper, certificates of deposit, banker's acceptances, repurchase
agreements and other short-term debt securities. The Fund may use mortgage
dollar rolls to finance the purchase of additional investments. The Fund may
also purchase securities on a when-issued basis and engage in short-sales.

FOOTNOTE: Fixed income securities are rated below investment grade if they are
rated below the top four long-term rating categories of a nationally recognized
statistical rating organization or, if unrated, are determined to be of
equivalent quality by the Investment Adviser. These securities may be in default
and are considered speculative.

INVESTMENT PROCESS

The investment process involves a top-down and bottom-up approach, first
focusing on sector allocations and then using relative value and fundamental
analysis to select the best securities within each sector. To select securities
for investment, we:

Fixed Income Funds -- Institutional Class shares Page - 58 -
<PAGE>

o analyze economic conditions for improving or undervalued sectors and
industries.

o use independent credit research and on-site management visits to
evaluate individual issues' debt service, growth rate, and both
downside and upgrade potential.

o assess new issues versus secondary market opportunities.

o seek issues within attractive industry sectors and with strong
long-term fundamentals and improving credits.

RISKS

Primary Risks

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuers may not be able to make timely payments on the
interest and principal on the bonds they have issued. Fixed income securities
rated below the fourth highest category have speculative characteristics. These
securities involve a greater risk of loss than investment grade securities and
are more sensitive to changes in the issuer's capacity to pay;

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Pricing Risk. The market for below investment grade debt securities may be
thinner and less

Fixed Income Funds -- Institutional Class shares Page - 59 -
<PAGE>

active than that for higher rated debt securities, which can adversely affect
the prices at which the below investment grade securities are sold. If market
quotations are not available, below investment grade debt securities will be
valued in accordance with procedures established by the Board of Trustees.
Judgment plays a greater role in valuing high yield corporate debt securities
than is the case for securities for which more external sources for quotations
and last sale information is available. Adverse publicity and changing investor
perception may affect the availability of outside pricing services to value
lower-rated debt securities and the Fund's ability to dispose of these
securities. Since the risk of default is higher for lower-rated securities, the
Investment Adviser's research and credit analysis are an especially important
part of managing securities of this type.

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

Fixed Income Funds -- Institutional Class shares Page - 60 -
<PAGE>

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Portfolio Managers

The following portfolio managers are responsible for the day-to-day management
of the master portfolio's investments:

Fixed Income Funds -- Institutional Class shares Page - 61 -
<PAGE>

o Curtis Barrows, has been the portfolio manager for the Fund since its
inception. Mr. Barrows specializes in the U.S. high yield bond market.
Prior to joining Deutsche Asset Management, Inc. in March 1998, he was the
portfolio manager of the Phoenix High-Yield Fund at Phoenix Duff & Phelps
for 13 years.

o Andrew Cestone, has assisted Mr. Barrows in managing the Fund since its
inception and became a co-portfolio manager of the Fund in 1999. Mr.
Cestone specializes in the U.S. high yield bond market. Prior to joining
Deutsche Asset Management, Inc. in March 1998, he was an investment
analyst with Phoenix Investment Partners. Prior to joining Phoenix
Investment Partners, Mr. Cestone was a Credit Officer for Fleet Bank in
the asset based lending group.

Organizational Structure

The High Yield Bond Fund is a "feeder fund" that invests all of its assets in a
"master portfolio," the High Yield Bond Portfolio. The Fund and its Master
Portfolio have the same investment objective. The Master Portfolio is advised by
Deutsche Asset Management, Inc.

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.

Fixed Income Funds -- Institutional Class shares Page - 62 -
<PAGE>

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
For the period
--------------
For the year ended ended October 31,
------------------ -----------------
October 31, 1999, 1998(1)
----------------- ----
- --------------------------------------------------------------------------------
Per Share Operating Performance:
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- --------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain
(Loss) on Investment, Option,
Foreign Currency, Forward Foreign
Currency and Foreign Futures
Contracts
- --------------------------------------------------------------------------------
Total from Investment Operations
- --------------------------------------------------------------------------------
Distributions to Shareholders
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------
Net Asset Value, End of Period
- --------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------
Supplemental Data and Ratios:
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s
omitted)
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------
Expenses, Including Expenses
of the International Equity
Portfolio
- --------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by DAMI
- --------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- --------------------------------------------------------------------------------
1 The Fund's inception was May 15, 1998.
2 Annualized.

Fixed Income Funds -- Institutional Class shares Page - 63 -
<PAGE>

Information
Concerning All Funds

MANAGEMENT OF THE FUNDS

Board of Trustees. A Board of Trustees supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management, Inc. (DAMI) with headquarters at 885 Third Avenue, New York,
New York, acts as the investment adviser for each Fund. The investment adviser
makes the Fund's investment decisions and assumes responsibility for the
securities the Fund owns. The Fund's investment adviser buys and sells
securities for the Fund and conducts the research that leads to these purchase
and sale decisions. The Fund's investment adviser is also responsible for
selecting brokers and dealers and for negotiating brokerage commissions and
dealer charges.

The Funds paid the following fees to DAMI for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Fixed Income Fund _________%
Short-Term Fixed Income Fund _________%
Municipal Bond Fund _________%
Short-Term Municipal Bond Fund _________%
High Yield Bond Fund _________%

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

DAMI is an indirect wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank
AG is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual fund, retail and
commercial banking, investment banking and insurance.

Fixed Income Funds -- Institutional Class shares Page - 64 -
<PAGE>

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. DAMI and its affiliates provide administrative services -- such
as portfolio accounting, legal services and others -- for the Funds. In
addition, DAMI -- or your broker or financial advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

Fixed Income Funds -- Institutional Class shares Page - 65 -
<PAGE>

the result by the number of shares of that class outstanding. Prices for
securities that trade on foreign exchanges can change significantly on days when
the New York Stock Exchange is closed and you cannot buy or sell Fund shares.
Such price changes in the securities a Fund owns may ultimately affect the price
of Fund shares when the New York Stock Exchange re-opens.

DIVIDENDS AND DISTRIBUTIONS

If a Fund earns investment income or recognizes taxable net capital gains, its
policy is to distribute to shareholders substantially all of that taxable income
and capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

A Fund does not ordinarily pay any U.S. federal income tax. If you are a taxable
shareholder, you and other shareholders pay taxes on the income or capital gains
earned and distributed by a Fund, except for "exempt-interest dividends" from
Municipal Bond Fund and Short-Term Municipal Bond Fund. Your taxes will vary
from year to year, based on the amount of capital

Fixed Income Funds -- Institutional Class shares Page - 66 -
<PAGE>

gains distributions and dividends paid out by your Fund. You owe the taxes
whether you receive cash or choose to have distributions and dividends
reinvested. Distributions and dividends usually have the following tax
character.

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

Income dividends (except exempt-interest dividends) Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Municipal Bond Fund and Short-Term Municipal Bond Fund intend to distribute the
tax-exempt interest they earn as exempt-interest dividends, which are excluded
from gross income for federal income tax purposes but may be subject to
alternative minimum tax and state and local income tax. Their distributions from
other sources, if any, would be taxable as described above.

Every year your Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

Fixed Income Funds -- Institutional Class shares Page - 67 -
<PAGE>

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

Your sale of shares owned more than one year Generally, long-term capital
gains or losses;

Your sale of shares owned for
one year or less Generally, short-term
capital gains or losses;
losses subject to special
rules.

The tax considerations for tax deferred accounts or non-taxable entities are
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 Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

Fixed Income Funds -- Institutional Class shares Page - 68 -
<PAGE>

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Minimum Account Investments

To open an account $250,000

To add to an account $25,000

Minimum account balance $50,000

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

MAIL:

Fixed Income Funds -- Institutional Class shares Page - 69 -
<PAGE>

Asset Management Funds" and include your account number and the names and
numbers of the funds you have selected.

WIRE:

Routing No.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

See your account statement for the account name and number.

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,

Fixed Income Funds -- Institutional Class shares Page - 70 -
<PAGE>

contact your financial advisor or the Service Center at 1-800-407-7301. Inform
the 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.

Important Information About Buying and Selling Shares

o After receiving 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.

o 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.

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

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

Fixed Income Funds -- Institutional Class shares Page - 71 -
<PAGE>

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

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

o 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.

Please note the following conditions:

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

Fixed Income Funds -- Institutional Class shares Page - 72 -
<PAGE>

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

Fixed Income Funds -- Institutional Class shares Page - 73 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

Domestic Fixed Funds Combined CUSIP
Product Code

Fixed Income Funds -- Institutional Class shares Page - 74 -
<PAGE>

Distributed by:

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Fixed Income Funds -- Institutional Class shares Page - 75 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

Fixed Income

Short-Term Fixed Income

Municipal Bond

Short-Term Municipal Bond

High Yield Bond

[Deutsche Bank Group logo]

Fixed Income funds - Investment Class shares Page - 1 -
<PAGE>

Table of Contents

Fixed Income
Short-Term Fixed Income
Municipal Bond
Short-Term Municipal Bond
High Yield Bond

Information Concerning All of the Funds

Additional Investment Information
Management of the Funds
Calculating a Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

Fixed Income funds - Investment Class shares Page - 2 -
<PAGE>

FIXED INCOME- Investment Class

Overview of Fixed Income

A Detailed Look at Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income funds - Investment Class shares Page - 3 -
<PAGE>

Fixed Income

OVERVIEW

Goal: The Fund seeks a high level of income consistent with the preservation of
capital.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
and

Fixed Income funds - Investment Class shares Page - 4 -
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on February 11, 1998. The table compares
the average annual return of the Fund's Investment Class shares with that of the
Lehman Brothers Aggregate Bond Index over the last one year and since the
inception of the class. Bear in mind that the Index is a model, not an actual
portfolio. An index is a group of securities whose overall performance is used
as a standard to measure investment performance. It does not factor in the costs
of buying, selling and holding stock -- costs which are reflected in the Fund's
results.

Fixed Income funds - Investment Class shares Page - 5 -
<PAGE>

mortgage-backed securities. All of the bonds on the Index have maturities of one
year or more at the time of their issue.

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

--------------
1999
--------------
____%
--------------

Average Annual Returns
(as of December 31, 1999)

Past Since Inception
1 year 5 years (2/11/98)(1)
- --------------------------------------------------------------------------------
Fixed Income Fund -- Investment Class shares _____% _____% _____%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index _____% _____% _____%
================================================================================
1 The Lehman Brothers Aggregate Bond Index average is calculated from _______,
1992.

Fixed Income funds - Investment Class shares Page - 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 Investment Class shares of the Fixed Income
Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursement ___%(1)
Net Expenses 0.80%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 0.80%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Fixed Income funds - Investment Class shares Page - 7 -
<PAGE>

Fixed Income

A detailed look

OBJECTIVE

STRATEGY

Portfolio Maturity

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

The Fund invests primarily in high grade fixed income securities. The Fund may
invest up to 15% of its assets in investment grade fixed income securities rated
within the fourth highest

Fixed Income funds - Investment Class shares Page - 8 -
<PAGE>

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

Fixed Income funds - Investment Class shares Page - 9 -
<PAGE>

o assign a relative value, based on credit worthiness, cash flow and price,
to each bond;

o determine the intrinsic value of each issue by examining credit,
structure, option value and liquidity risks. We look to exploit any
inefficiencies between intrinsic value and market trading price;

o use credit analysis to determine the issue's ability to fulfill its
contracts; and

o subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Primary Risks

Fixed Income funds - Investment Class shares Page - 10 -
<PAGE>

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities. Thus, prepayment may reduce the Fund's
income. There is a greater risk that the Fund will lose money due to prepayment
risk because the Fund invests in mortgage-related securities.

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Secondary Risks

Fixed Income funds - Investment Class shares Page - 11 -
<PAGE>

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

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

Fixed Income funds - Investment Class shares Page - 12 -
<PAGE>

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

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Investment Class shares of the Fund for the past two fiscal periods. The
information selected reflects financial results for a single Investment Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Investment Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

Fixed Income funds - Investment Class shares Page - 13 -
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the year For the period
------------ --------------
ended ended
----- -----
- -------------------------------------------------------------------------------------------------------------------
1999 1998(1)
---- -------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- -------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- -------------------------------------------------------------------------------------------------------------------
Total Distributions
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- -------------------------------------------------------------------------------------------------------------------
Total Investment Return
- -------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -------------------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by DAMI
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

1 The inception of Investment Class shares of the Fund was February 11, 1998.
2 Annualized.

Fixed Income funds - Investment Class shares Page - 14 -
<PAGE>

SHORT-TERM FIXED INCOME- Investment Class

Overview of Short-Term Fixed Income

A Detailed Look at Short-Term Fixed Income

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

Fixed Income funds - Investment Class shares Page - 15 -
<PAGE>

Short-Term Fixed Income

OVERVIEW

Goal: The Fund seeks a high level of income consistent with the preservation of
capital.

Core Strategy: The Fund invests primarily in investment grade short-term fixed
income securities.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest; and

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Short-Term Fixed Income Fund if you are
seeking to earn current income higher than money market mutual funds over most
time periods but are looking

Fixed Income funds - Investment Class shares Page - 16 -
<PAGE>

for less volatility in the value of your investment than the Fixed Income Fund
may provide.

An investment in the Short-Term Fixed Income Fund is not a deposit of any bank,
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

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 changes in the Fund's
performance year to year. Because Investment Class shares are a newly offered
class of shares with limited performance history, the following bar chart and
table show the performance history of the Fund's Institutional Class shares,
which have been in existence since the Fund's inception on March 31, 1995. The
table compares the average annual return of the Fund's Institutional Class
shares with that of the Merrill Lynch 6-Month Treasury Bill Index over the last
one year and since its inception. Bear in mind that the Index is a model, not an
actual portfolio. An index is a group of securities whose overall performance is
used to measure investment performance.

FOOTNOTE: The Merrill Lynch 6-Month Treasury Bill Index [Please provide
description]

Fixed Income funds - Investment Class shares Page - 17 -
<PAGE>

Year-by-Year Returns
Institutional Class shares(1)
(each full calendar year since inception)

[bar chart]

Average Annual Returns
(as of December 31, 1999)

Since Inception
1 year (3/13/95)(2)
- --------------------------------------------------------------------------------
Short-Term Fixed Income Fund - Institutional Class
shares
================================================================================
Merrill Lynch 6-Month Treasury Bill Index _____% _____%
================================================================================
1 Institutional Class performance is presented because Investment Class shares,
have no performance history. Institutional Class shares have substantially
identical characteristics to those of the Investment Class shares offered by
this prospectus, except that for Institutional Class shares, the minimum initial
investment amount is lower and the net expenses per share (after reimbursement)
is higher. Institutional Class shares are offered under a separate prospectus,
which is available upon request.
2 The Merrill Lynch 6-Month Treasury Bill Index average is calculated from
_______, 1995.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and estimated
expenses that you may pay if you buy and hold Investment Class shares of the
Short-Term Fixed Income Fund. ["Other Fund Operating Expenses" are based on
estimates from the prior fiscal year.]

Fixed Income funds - Investment Class shares Page - 18 -
<PAGE>

Percentage of Average
Daily Net Assets
---------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses ___%
Total Fund Operating Expenses ___%
Less: Fee Waivers or Expense Reimbursements %(1)
-----
Net Expenses 0.80%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Fixed Income funds - Investment Class shares Page - 19 -
<PAGE>

Short-Term Fixed Income

A detailed look

OBJECTIVE

STRATEGY

Portfolio Maturity

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

Fixed Income funds - Investment Class shares Page - 20 -
<PAGE>

PRINCIPAL INVESTMENTS

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

Fixed Income funds - Investment Class shares Page - 21 -
<PAGE>

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o assign a relative value, based on credit worthiness, cash flow and price,
to each bond;

o we use credit analysis to determine the issue's ability to fulfill its
contracts; and

o we subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Primary Risks

Fixed Income funds - Investment Class shares Page - 22 -
<PAGE>

Prepayment Risk. As interest rates decline, the issuers of securities held by
the Fund may prepay principal earlier than scheduled, forcing the Fund to
reinvest in lower yielding securities. Thus, prepayment may reduce the Fund's
income. There is a greater risk that the Fund will lose money due to prepayment
risk because the Fund invests in mortgage-related securities.

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

Fixed Income funds - Investment Class shares Page - 23 -
<PAGE>

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income funds - Investment Class shares Page - 24 -
<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.

PORTFOLIO MANAGER

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

No data is shown for Morgan Grenfell Short-Term Fixed Income Fund because
Investment Class shares of this fund had not commenced operations on or prior to
October 31, 1999.

Fixed Income funds - Investment Class shares Page - 25 -
<PAGE>

MUNICIPAL BOND - Investment Class

Overview of International Municipal Bond

A Detailed Look at Municipal Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Manager
Financial Highlights

Fixed Income funds - Investment Class shares Page - 26 -
<PAGE>

Municipal Bond

OVERVIEW

Goal: The Fund seeks a high level of income exempt from regular federal income
tax, consistent with the preservation of capital.

Core Strategy: The Fund invests primarily in investment grade fixed income
securities that pay interest exempt from federal income tax.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio.

Fixed Income funds - Investment Class shares Page - 27 -
<PAGE>

o a greater-than-anticipated percentage of the Fund's investments could
produce taxable income, resulting in a lower tax-adjusted return; and

o unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
municipal securities.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on July 30, 1997. The table compares the
average annual return of the Fund's Investment Class shares with that of the
Lehman Brothers 5 Year G.O Index over the last one year and since inception of
the Investment Class shares. Bear in mind that the Index is a model, not an
actual portfolio. An index is a group of securities whose overall performance is
used to measure investment performance.

FOOTNOTE: The Lehman Brothers 5-Year G.O. Index [Insert description of index.]

Fixed Income funds - Investment Class shares Page - 28 -
<PAGE>

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

---------------------
1998 1999
---- ----
---------------------
___% ___%
---------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (7/30/97)(1)
- --------------------------------------------------------------------------------
Municipal Bond Fund - Investment Class shares _____% _____%
================================================================================
Lehman 5 Year G.O Index _____% _____%
================================================================================
1 The Lehman 5 Year G.O. Index average is calculated from _______, 1997.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Investment Class shares of the Municipal Bond
Fund.

Fixed Income funds - Investment Class shares Page - 29 -
<PAGE>

Percentage of Average
Daily Net Assets
---------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursements %(1)
Net Expenses 0.79%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 0.79%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Fixed Income funds - Investment Class shares Page - 30 -
<PAGE>

Municipal Bond

A detailed look

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

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
five to ten years. The Fund's average portfolio maturity may be shortened by
certain of the Fund's securities which have floating or variable interest rates
or include put features which provide the fund the right to sell the security at
face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

Under normal conditions, the Fund invests at least 80% of net assets in
municipal securities which pay interest exempt from federal income tax and at
least 65% of total assets in municipal

Fixed Income funds - Investment Class shares Page - 31 -
<PAGE>

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o Assign a relative value, based on creditworthiness, cash flow and price,
to each bond.

Fixed Income funds - Investment Class shares Page - 32 -
<PAGE>

o Use credit analysis to determine the issuer's ability to fulfill its
contracts.

o Compare each bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value.

o Look to exploit any inefficiencies between intrinsic value and market
trading price.

o Subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Primary Risks

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Fixed Income funds - Investment Class shares Page - 33 -
<PAGE>

Secondary Risks

When-Issued and Delayed Delivery Securities Risk. The Fund may purchase or sell
a security at a future date for a predetermined price. The market value of the
securities may change before delivery.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities held by
or to be bought for the Fund. These changes may be caused by changing
interest rates, security market prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

Fixed Income funds - Investment Class shares Page - 34 -
<PAGE>

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income funds - Investment Class shares Page - 35 -
<PAGE>

term bonds that offer comparable safety, if the situation warranted. To the
extent we might adopt such a position and over the course of its duration, the
Fund may not meet its investment objective.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Investment Class shares of the Fund for the past three fiscal periods. The
information selected reflects financial results for a single Investment Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Investment Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the year ended For the period
------------------ --------------
ended
-----
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997(1)
---- ---- -------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ----------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

Fixed Income funds - Investment Class shares Page - 36 -
<PAGE>

1 The inception of Investment Class shares of the Fund was July 30, 1997.
2 Annualized.

Fixed Income funds - Investment Class shares Page - 37 -
<PAGE>

Short-term municipal bond - Investment Class

Overview of Short-Term Municipal Bond

A Detailed Look at Short-Term Municipal Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income funds - Investment Class shares Page - 38 -
<PAGE>

Short-Term Municipal Bond

OVERVIEW

Goal: The Fund seeks a high level of income exempt from regular federal income
tax, consistent with the preservation of capital.

Core Strategy: The Fund invests primarily in investment grade short-term fixed
income securities that pay interest exempt from federal income tax.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;

Fixed Income funds - Investment Class shares Page - 39 -
<PAGE>

o a greater-than-anticipated percentage of the Fund's investments could
produce taxable income, resulting in a lower tax-adjusted return; and

o unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

The Fund by itself does not constitute a balanced investment program. It can,
however, provide a complementary investment for investors seeking exposure to
municipal securities.

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since it began selling
Investment Class shares to the public on December 3, 1997. The table compares
the average annual return of the Fund's Investment Class shares with that of the
IBC Financial All Tax-Free Average Index over the last one year and since
inception of Investment Class shares of the Fund. The Index is a passive measure
of combined stock market returns. It does not factor in the costs of buying,
selling and holding securities, costs which are reflected in the Fund's results.

Fixed Income funds - Investment Class shares Page - 40 -
<PAGE>

FOOTNOTE: The IBC Financial All Tax-Free Average Index is [Please provide
description].

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

--------------------------------
1998 1999
--------------------------------
% %
--------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 Year (12/3/97)(1)
- --------------------------------------------------------------------------------
Short-Term Municipal Bond - Investment Class shares ____% ____%
================================================================================
IBC Financial All Tax-Free Average ____% ____%
================================================================================
1 IBC Financial All Tax-Free Average is calculated from __________, 1997.

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold Investment Class shares of the Short-Term
Municipal Bond Fund.

Fixed Income funds - Investment Class shares Page - 41 -
<PAGE>

Percentage of Average
Daily Net Assets
----------------------

Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement (%)(1)
---------
Net Expenses 0.80%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- ------- -------- -------- ---------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Fixed Income funds - Investment Class shares Page - 42 -
<PAGE>

Short-Term Municipal Bond

A detailed look

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

In managing the Fund, we generally use a "bottom-up" approach. We focus on the
securities and sectors we believe are undervalued relative to the market, rather
than rely on interest rate forecasting.

Portfolio Maturity

We intend to maintain a dollar weighted effective average portfolio maturity of
no longer than three years. The Fund's average portfolio maturity may be
shortened by certain of the Fund's securities which have floating or variable
interest rates or include put features which provide the fund the right to sell
the security at face value prior to maturity.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

PRINCIPAL INVESTMENTS

Under normal conditions, the Fund invests at least 80% of net assets in
municipal securities which pay interest exempt from federal income tax and at
least 65% of total assets in municipal

Fixed Income funds - Investment Class shares Page - 43 -
<PAGE>

bonds. There is no restriction on the percentage of assets that may be invested
in obligations the interest on which is a preference item for purposes of the
federal alternative minimum tax. The Fund may invest 25% or more of its total
assets in private activity and industrial development bonds if the interest paid
on them is exempt from regular federal income tax. The Fund invests primarily in
high grade bonds. The Fund may invest up to 15% of its assets in investment
grade bonds that are rated in the fourth highest category. Up to 20% of the
fund's total assets may be invested in certain taxable securities in order to
maintain liquidity. The Fund may use mortgage dollar rolls to finance the
purchase of additional investments. The Fund may also purchase securities on a
when-issued basis.

FOOTNOTE: Fixed income securities are high grade or investment grade if:

o They are rated in one of the top three or top four, respectively,
long-term rating categories of a nationally recognized statistical rating
organization.

o They have received a comparable short-term or other rating.

o They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

o Assign a relative value, based on creditworthiness, cash flow and price,
to each bond.

o Use credit analysis to determine the issuer's ability to fulfill its
contracts.

o Compare bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value.

Fixed Income funds - Investment Class shares Page - 44 -
<PAGE>

o Look to exploit any inefficiencies between intrinsic value and market
trading price.

o Subordinate sector weightings to individual bonds that may add
above-market value.

RISKS

Primary Risks

Fixed Income funds - Investment Class shares Page - 45 -
<PAGE>

taxation.

Secondary Risks

When-Issued and Delayed Delivery Securities Risk. The Fund may purchase or sell
a security at a future date for a predetermined price. The market value of the
securities may change before delivery.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Fixed Income funds - Investment Class shares Page - 46 -
<PAGE>

contracts are futures contracts, options, forward contracts, swaps, caps,
collars and floors.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Fixed Income funds - Investment Class shares Page - 47 -
<PAGE>

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
For the year ended For the period ended
------------------ --------------------
- ---------------------------------------------------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ---------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ---------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ---------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ---------------------------------------------------------------------------------------------------------------------
Expenses, Including Expenses of the International
Equity Portfolio
- ---------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMI
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Inception of Investment Class shares of the Fund was December 3, 1997.

Fixed Income funds - Investment Class shares Page - 48 -
<PAGE>

2 Annualized.

Fixed Income funds - Investment Class shares Page - 49 -
<PAGE>

HIGH YIELD BOND - Investment Class

Overview of High Yield Bond

A Detailed Look at High Yield Bond

Objective
Strategy
Principal Investments
Investment Process
Risks
Portfolio Managers
Financial Highlights

Fixed Income funds - Investment Class shares Page - 50 -
<PAGE>

High Yield Bond

OVERVIEW

Goal: The Fund seeks high current income and, as a secondary objective, capital
appreciation.

Core Strategy: The Fund invests primarily in U.S. dollar-denominated high yield
bonds of domestic and foreign issuers.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline. This risk is
higher for below investment grade bonds;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest. This risk is higher for below investment
grade bonds;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
and

o interest rates could increase, causing the prices of the Fund's fixed
income securities to decline, thereby reducing the value of the Fund's
portfolio.

The lower rated debt securities in which the Fund invests are considered highly
speculative and subject to greater volatility and risk of loss than investment
grade securities, particularly in deteriorating economic periods.

Fixed Income funds - Investment Class shares Page - 51 -
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on September 15, 1998. The table compares
the average annual return of the Fund's Investment Class shares with that of the
CS First Boston High Yield Index over the last one year and since its inception.
Bear in mind that the Index is a passive measure of combined national and
international high yield bond market returns. It does not factor in the costs of
buying, selling and holding bonds -- costs which are reflected in the Fund's
results.

FOOTNOTE: The CS First Boston High Yield Index is an unmanaged, trader priced
portfolio constructed to mirror the high yield debt market.

Fixed Income funds - Investment Class shares Page - 52 -
<PAGE>

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

---------------
1999
----
---------------
________%
---------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (9/15/98)(1)
- --------------------------------------------------------------------------------
High Yield Bond Fund -- Investment Class shares _____% _____%
- --------------------------------------------------------------------------------
CS First Boston High Yield Index _____% _____%
================================================================================
1 The CS First Boston High Yield Index average is calculated from _______, 1998.

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 Investment Class shares of the High Yield
Bond Fund.

Fixed Income funds - Investment Class shares Page - 53 -
<PAGE>

Percentage of Average
Daily Net Assets
----------------------

Management Fees 0.50%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement (%)1
Net Expenses 0.90%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 0.90%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Fixed Income funds - Investment Class shares Page - 54 -
<PAGE>

High Yield Bond

A detailed look

OBJECTIVE

The Fund seeks high current income and, as a secondary objective, capital
appreciation. The Fund invests primarily in U.S. dollar denominated high yield
bonds of domestic and foreign issuers.

STRATEGY

Portfolio Maturity

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

Fixed Income funds - Investment Class shares Page - 55 -
<PAGE>

PRINCIPAL INVESTMENTS

INVESTMENT PROCESS

Fixed Income funds - Investment Class shares Page - 56 -
<PAGE>

o analyze economic conditions for improving or undervalued sectors and
industries.

o use independent credit research and on-site management visits to evaluate
individual issues' debt service, growth rate, and both downside and
upgrade potential.

o assess new issues versus secondary market opportunities.

o seek issues within attractive industry sectors and with strong long-term
fundamentals and improving credits.

RISKS

Primary Risks

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuers may not be able to make timely payments on the
interest and principal on the bonds they have issued. Fixed income securities
rated below the fourth highest category have speculative characteristics. These
securities involve a greater risk of loss than investment grade securities and
are more sensitive to changes in the issuer's capacity to pay;

Maturity Risk. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.

Pricing Risk. The market for below investment grade debt securities may be
thinner and less

Fixed Income funds - Investment Class shares Page - 57 -
<PAGE>

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o As a substitute for purchasing or selling securities or foreign
currencies.

Fixed Income funds - Investment Class shares Page - 58 -
<PAGE>

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Portfolio Managers

The following portfolio managers are responsible for the day-to-day management
of the master portfolio's investments:

Fixed Income funds - Investment Class shares Page - 59 -
<PAGE>

Organizational Structure

Fixed Income funds - Investment Class shares Page - 60 -
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the year ended For the period ended
------------------ --------------------
October 31, 1999, October 31, 1998(1)
----------------- -------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Performance:
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency, Forward
Foreign Currency and Foreign Futures Contracts
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ----------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------
Expenses, Including Expenses of the
International Equity Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by DAMI
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

1 The Fund's inception was September 15, 1998.
2 Annualized.

Fixed Income funds - Investment Class shares Page - 61 -
<PAGE>

Information
Concerning All Funds

MANAGEMENT OF THE FUNDS

Board of Trustees. A Board of Trustees supervises for each Fund all of the
Fund's activities on behalf of the Fund's shareholders.

The Funds paid the following fees to DAMI for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Fixed Income Fund _________%
Short-Term Fixed Income Fund _________%
Municipal Bond Fund _________%
Short-Term Municipal Bond Fund _________%
High Yield Bond Fund _________%

DAMI provides a full range of international investment advisory services to
Investment clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Fixed Income funds - Investment Class shares Page - 62 -
<PAGE>

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

Fixed Income funds - Investment Class shares Page - 63 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

If a Fund earns investment income or recognizes taxable net capital gains, its
policy is to distribute to shareholders substantially all of that taxable income
or capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

A Fund does not ordinarily pay any U.S. federal income tax. If you are a taxable
shareholder, you and other shareholders pay taxes on the income or capital gains
earned and distributed by a Fund, except for "exempt-interest dividends" from
Municipal Bond Fund and Short-Term Municipal Bond Fund. Your taxes will vary
from year to year, based on the amount of capital

Fixed Income funds - Investment Class shares Page - 64 -
<PAGE>

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

Income dividends (except exempt-interest dividends) Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Long-term capital gains

Every year your Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

Fixed Income funds - Investment Class shares Page - 65 -
<PAGE>

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

Your sale of shares owned more than one year Generally, long-term capital
gains or losses;

Your sale of shares owned for one year or less Generally, short-term
capital gains or losses;
losses subject to special
rules.

The tax considerations for tax deferred accounts or non-taxable entities are
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

Service Plan

Important Information About Buying and Selling Shares

Fixed Income funds - Investment Class shares Page - 66 -
<PAGE>

You may be subject to minimums established by your service organization
for the purchase of shares.

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Fixed Income funds - Investment Class shares Page - 67 -
<PAGE>

Exchange Privilege

You can exchange all or part of your shares for the same class of shares of
another [Deutsche] 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 get a copy of that fund's prospectus and read it carefully. If you
are maintaining a taxable account, you may be subject to taxes on the exchange.

Fixed Income funds - Investment Class shares Page - 68 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-404-7301.

Domestic Fixed Funds Combined CUSIP
Product Code

Fixed Income funds - Investment Class shares Page - 69 -
<PAGE>

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Fixed Income funds - Investment Class shares Page - 70 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

Smaller Companies

[Deutsche Bank Group logo]
<PAGE>

SMALLER COMPANIES - Institutional Class

Overview of Smaller Companies

A Detailed Look at Smaller Companies

Objective
Strategy
Principal Investments
Investment Process
Risks
Management of the Fund
Calculating the Fund's Share Price
Performance Information
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares
Financial Highlights

Smaller Companies Fund - Institutional Class Page - 2 -
<PAGE>

Smaller Companies

OVERVIEW

Goal: The Fund seeks capital appreciation, with current income as a secondary
objective.

Core Strategy: The Fund invests primarily in the stocks and other equity
securities of U.S. small capitalization companies.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in the equity
and equity related securities of U.S. small capitalization companies. In
managing the Fund, we use a "bottom-up" approach to picking securities. This
approach focuses on individual stock selection rather than industry selection.
The portfolio management team uses an active process which combines financial
analyses with company visits to evaluate management and strategies.

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the U.S. stock market could perform poorly.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Smaller Companies Fund if you are seeking
capital appreciation. There is, of course, no guarantee that the Fund will
realize its goal. Moreover, you should be willing to accept significantly
greater short-term fluctuation in the value of your investment than you would
typically experience investing in bond or money-market funds.

Smaller Companies Fund - Institutional Class Page - 3 -
<PAGE>

You should not consider investing in the Smaller Companies Fund if you are
pursuing a short-term financial goal, if you seek regular income or if you
cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in fixed income securities alone, or to investors in large-
and medium-capitalization stocks. Diversifying your investments may lower the
volatility of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on June 30, 1995 (its inception
date). The table compares the average annual return of the Fund's Institutional
Class shares with that of the S&P Small Cap 600 Index over the last one year and
since inception. Bear in mind that the Index is a passive measure of U.S. small
capitalization equity market returns. It does not factor in the costs of buying,
selling and holding equity securities -- costs which are reflected in the Fund's
results.

FOOTNOTE: The S&P Small Cap 600 Index is an unmanaged domestic equity securities
index consisting of 600 domestic stocks chosen for market size, liquidity,
(bid-asked spread, ownership, share turnover and number of no trade days) and
industry group representation. It is a market-value weighted index (stock price
times the number of shares outstanding), with each stock's weight in the Index
proportionate to its market value. The Index is a widely accepted benchmark of
U.S. small capitalization equity market performance. It is a model, not an
actual portfolio.

Smaller Companies Fund - Institutional Class Page - 4 -
<PAGE>

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

------------------------------------------------------
1996 1997 1998 1999
------------------------------------------------------
________% ________% ________% ________%
------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (6/30/95)(1)
- --------------------------------------------------------------------------------
Smaller Companies Fund -- Institutional Class shares _____% _____%
- --------------------------------------------------------------------------------
S&P 600 Index _____% _____%
================================================================================
1 The S&P 600 Index average is calculated from _______, 1995.

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 Institutional Class shares of the Smaller
Companies Fund.

Smaller Companies Fund - Institutional Class Page - 5 -
<PAGE>

Percentage of Average
Daily Net Assets
------------------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( )%(1)
--------
Net Expenses 1.25%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.1 Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 1.25%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Smaller Companies Fund - Institutional Class Page - 6 -
<PAGE>

Smaller Companies Fund

A detailed look

OBJECTIVE

The Fund seeks capital appreciation, with current income as a secondary
objective. Under normal circumstances, the Fund invests at least 65% of its
total assets in equity securities of U.S. small capitalization companies. While
we seek capital appreciation, 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

We focus on individual security rather than industry selection. The team uses an
active process which combines financial analysis with company visits to evaluate
management and strategies.

PRINCIPAL INVESTMENTS

The Fund invests in equity securities of U.S. smaller capitalization companies.

FOOTNOTE: The Investment Adviser defines the small capitalization equity
securities universe as the bottom 20% of the total domestic equity market
capitalization, (at the time of investment), using a minimum market
capitalization of $10 million.

The Fund may also invest up to 35% of its assets in investment grade fixed
income securities, securities of medium and large capitalization companies and
in cash.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. We use a
"bottom-up" approach to picking securities. This approach focuses on individual
stock selection rather than industry selection. The team uses an active process
which emphasizes fundamental country research through financial analysis with
company visits to evaluate management and strategies.

o The team focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

Smaller Companies Fund - Institutional Class Page - 7 -
<PAGE>

o The team emphasizes individual selection of smaller stocks across all
economic sectors, early in their growth cycles and with the potential to
be the blue chips of the future.

o The team generally seeks companies with a leading or dominant position in
their niche markets, a high rate of return on invested capital and the
ability to finance a major part of future growth from internal sources.

o The team screens the bottom 20% of the total domestic equity market
capitalization for smaller cap companies with growth and profitability.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund has had a high portfolio turnover rate. Historically, the
Fund has not had and we do not expect that it will continue to have a high
portfolio turnover rate. High turnover can increase the Fund's transaction
costs, thereby lowering its returns. It may also increase your tax liability.

RISKS

Below we have set forth some of the prominent risks associated with equity
investing, as well as investing in general. Although we attempt both to assess
the likelihood that these risks may actually occur and to limit them, we cannot
guarantee that we will succeed.

Primary Risks

Small Company Risk. The Fund's investments in small capitalization companies
will be more susceptible to share price fluctuations since small company stocks
tend to experience steeper fluctuations in price -- down as well as up -- than
the stocks of larger companies. A shortage of reliable information, the same
information gap that creates opportunity in small company investing, can also
pose added risk. Industrywide reversals may have a greater impact on small
companies, since they lack a large company's financial resources. Small
capitalization companies may have limited product lines and markets. They may
also have shorter operating histories and more volatile businesses. Small
company managers typically have less experience coping with adversity or
capitalizing on opportunity than their counterparts at larger companies.
Finally, small company stocks are typically less liquid than large company
stocks. Particularly when they are performing poorly, a small company's shares
may be more difficult to sell.

Smaller Companies Fund - Institutional Class Page - 8 -
<PAGE>

Market Risk. Although individual stocks can outperform the U.S. stock market,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market, including stocks held by the Fund.

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the Fund's
fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated market
developments.

Even a small investment in derivative contracts can have a big impact on the
Fund's market,

Smaller Companies Fund - Institutional Class Page - 9 -
<PAGE>

currency and interest rate exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
securities prices, currency rates or interest rates are changing. Counterparties
to OTC derivative contracts present the same types of default risk as issuers of
fixed income securities. Derivatives can also make the Fund less liquid and
harder to value, especially in declining markets.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in money-market
investments, or other short-term bonds that offer comparable safety, if the
situation warranted. To the extent we might adopt such a position and over the
course of its duration, the Fund may not meet its goal of capital appreciation.

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Inc. (DAMI) with headquarters at 885 Third Avenue,
New York, New York, acts as investment adviser for the Fund. DAMI makes the
Fund's investment decisions and assumes responsibility for the securities the
Fund owns. DAMI buys and sells securities for the Fund and conducts the research
that leads to these purchase and sale decisions. DAMI is also responsible for
selecting brokers and dealers and for negotiating brokerage commissions and
dealer charges.

The Fund paid the following fees to DAMI for investment advisory services in the
last fiscal

Smaller Companies Fund - Institutional Class Page - 10 -
<PAGE>

year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------
Smaller Companies Fund _________%

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

DAMI is an indirect whollyowned subsidiary of Deutsche Bank AG, an international
commercial and investment banking group. Deutsche Bank AG is a major global
banking institution that is engaged in a wide range of financial services,
including investment management, mutual fund, retail and commercial banking,
investment banking and insurance.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. Deutsche Asset Management, Inc. (DAMI) provides administrative
services -- such as portfolio accounting, legal services and others -- for the
Fund. In addition, DAMI -- or your broker or financial advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

Smaller Companies Fund - Institutional Class Page - 11 -
<PAGE>

Portfolio Managers. A committee of portfolio managers and analysts employed by
the Investment Adviser is responsible for the day-to-day management of the Fund.

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 liabilities of the Fund's class of
shares 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
of that class outstanding. Prices for securities that trade on foreign exchanges
can change significantly on days when the New York Stock Exchange is closed and
you cannot buy or sell Fund shares. Such price changes in the securities the
Fund owns may ultimately affect the price of Fund shares when the New York Stock
Exchange re-opens.

The Fund uses a forward pricing procedure. Therefore, the price at which you buy
or sell shares is based on the next calculation of the NAV after the order is
received by the Fund or our broker, provided that your broker or financial
advisor forwards your order to the Fund in a timely manner.

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

Smaller Companies Fund - Institutional Class Page - 12 -
<PAGE>

be compared to averages, performance rankings, or other information prepared by
recognized mutual fund statistical services.

DIVIDENDS AND DISTRIBUTIONS

If the Fund earns net investment income or recognizes net capital gains, its
policy is to distribute to shareholders all or substantially all of that income
and capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

The Fund does not ordinarily pay any U.S. federal income tax. If you are a
taxable shareholder, you and other shareholders pay taxes on the income or
capital gains earned and distributed by the Fund. Your taxes will vary from year
to year, based 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 have
the following tax character:

Transaction Tax Status
- ----------- ----------
Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

Transaction Tax Status
- ----------- ----------
Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term gains
treated as ordinary income;
losses subject to special rules.

Smaller Companies Fund - Institutional Class Page - 13 -
<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 Deutsche Asset Management Funds

MUTUAL FUNDS SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Smaller Companies Fund - Institutional Class Page - 14 -
<PAGE>

Minimum Account Investments

To open an account $250,000

To add to an account $25,000

Minimum account balance $50,000

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

MAIL:

Selling: 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

Smaller Companies Fund - Institutional Class Page - 15 -
<PAGE>

amount you wish to receive. If you are selling shares of a Fund, you must leave
at least $50,000 worth of shares in your account to keep it open. Unless
exchanging into another Deutsche Asset Management Fund, you must submit a
written authorization to sell shares in a retirement account.

WIRE:

Routing No.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

See your account statement for the account name and number.

Important Information About Buying and Selling Shares

Smaller Companies Fund - Institutional Class Page - 16 -
<PAGE>

o After receiving 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.

o 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.

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

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

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

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

Smaller Companies Fund - Institutional Class Page - 17 -
<PAGE>

o 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.

Please note the following conditions:

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

FINANCIAL HIGHLIGHTS

The table below provides a picture of the financial performance of the
Institutional Class shares

Smaller Companies Fund - Institutional Class Page - 18 -
<PAGE>

of the Fund for the past five fiscal periods. The
information selected reflects financial results for a single Institutional Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Institutional Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

Smaller Companies Fund - Institutional Class Page - 19 -
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
For the year ended October 31,
------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995(1)
---- ---- ---- ---- -------
- ------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign
Futures Contracts
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
DAMI
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate2
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1 The Fund's inception date was June 30, 1995.

2 Annualized.

Smaller Companies Fund - Institutional Class Page - 20 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Additional information about the Fund's investments and performance 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 February 28, 2000, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference. 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 a Fund, write to us at:

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Smaller Companies Fund CUSIP
Product Code

Distributed by:

Smaller Companies Fund - Institutional Class Page - 21 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Smaller Companies Fund - Institutional Class Page - 22 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

Smaller Companies

[Deutsche Bank Group logo]
<PAGE>

SMALLER COMPANIES - Investment Class

Overview of Smaller Companies

A Detailed Look at Smaller Companies

Smaller Companies Fund - Investment Class Page - 2 -
<PAGE>

Smaller Companies

OVERVIEW

Goal: The Fund seeks capital appreciation, with current income as a secondary
objective.

Core Strategy: The Fund invests primarily in the stocks and other equity
securities of U.S. small capitalization companies.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the U.S. stock market could perform poorly.

WHO SHOULD CONSIDER INVESTING IN THE FUND

Smaller Companies Fund - Investment Class Page - 3 -
<PAGE>

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on July 11, 1997. The table compares the
average annual return of the Fund's Investment Class shares with that of the S&P
Small Cap 600 Index over the last one year and since inception. Bear in mind
that the Index is a passive measure of U.S. small capitalization equity market
returns. It does not factor in the costs of buying, selling and holding equity
securities -- costs which are reflected in the Fund's results.

Smaller Companies Fund - Investment Class Page - 4 -
<PAGE>

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

----------------------------
1998 1999
----------------------------
________% ________%
----------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (7/11/97)(1)
- --------------------------------------------------------------------------------
Smaller Companies Fund -- Investment Class shares _____% _____%
- --------------------------------------------------------------------------------
S&P 600 Index _____% _____%
================================================================================
1 The S&P 600 Index average is calculated from _______, 1997.

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 Investment Class shares of the Smaller
Companies Fund.

Smaller Companies Fund - Investment Class Page - 5 -
<PAGE>

Percentage of Average
Daily Net Assets
------------------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( )%(1)
--------
Net Expenses 1.50%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.1 Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 1.50%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Smaller Companies Fund - Investment Class Page - 6 -
<PAGE>

Smaller Companies Fund

A detailed look

OBJECTIVE

STRATEGY

We focus on individual security rather than industry selection. The team uses an
active process which combines financial analysis with company visits to evaluate
management and strategies.

PRINCIPAL INVESTMENTS

The Fund invests in equity securities of U.S. smaller capitalization companies.

The Fund may also invest up to 35% of its assets in investment grade fixed
income securities, securities of medium and large capitalization companies and
in cash.

INVESTMENT PROCESS

o The team focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

Smaller Companies Fund - Investment Class Page - 7 -
<PAGE>

o The team emphasizes individual selection of smaller stocks across all
economic sectors, early in their growth cycles and with the potential to
be the blue chips of the future.

o The team screens the bottom 20% of the total domestic equity market
capitalization for smaller cap companies with growth and profitability.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund has had a high portfolio turnover rate. Historically, the
Fund has not had and we do not expect that it will continue to have a high
portfolio turnover rate. High turnover can increase the Fund's transaction
costs, thereby lowering its returns. It may also increase your tax liability.

RISKS

Primary Risks

Smaller Companies Fund - Investment Class Page - 8 -
<PAGE>

Secondary Risks

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Even a small investment in derivative contracts can have a big impact on the
Fund's market,

Smaller Companies Fund - Investment Class Page - 9 -
<PAGE>

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in money-market
investments, or other short-term bonds that offer comparable safety, if the
situation warranted. To the extent we might adopt such a position and over the
course of its duration, the Fund may not meet its goal of capital appreciation.

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

The Fund paid the following fees to DAMI for investment advisory services in the
last fiscal

Smaller Companies Fund - Investment Class Page - 10 -
<PAGE>

year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Smaller Companies Fund _________%

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

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

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

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

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

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

o collecting your executed proxies.

Smaller Companies Fund - Investment Class Page - 11 -
<PAGE>

Portfolio Managers. A committee of portfolio managers and analysts employed by
the Investment Adviser is responsible for the day-to-day management of the Fund.

CALCULATING THE FUND'S SHARE PRICE

Smaller Companies Fund - Investment Class Page - 12 -
<PAGE>

be compared to averages, performance rankings, or other information prepared by
recognized mutual fund statistical services.

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

Smaller Companies Fund - Investment Class Page - 13 -
<PAGE>

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Service Plan

Important Information About Buying and Selling Shares

Payment for share purchases should be made directly to your service
organization. Once you place your order with your service organization, it
is considered received by the

Smaller Companies Fund - Investment Class Page - 14 -
<PAGE>

Deutsche Asset Management Funds. It is then your service organization's
responsibility to transmit the order to the Deutsche Asset Management
Funds by the next business day. You should contact your service
organization if you have a dispute as to when your order was placed with
the Fund.

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Exchange Privilege

o You can exchange all or part of your shares for the same class of shares
of another Deutsche Asset Management 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 get a copy of that
fund's prospectus and read it carefully. If you are maintaining a taxable
account, you may be subject to taxes on the exchange.

FINANCIAL HIGHLIGHTS

Smaller Companies Fund - Investment Class Page - 15 -
<PAGE>

The table below provides a picture of the financial performance of the
Investment Class shares of the Fund for the three five fiscal periods. The
information selected reflects financial results for a single Investment Class
share of the Fund. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Investment Class
shares of the Fund, assuming reinvestment of all dividends and distributions.
This information has been audited by __________________________, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual report is available free of charge by calling the Fund at
1-800-550-6426.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
For the period
ended
For the year ended 1997(1)
------------------ -------
- -----------------------------------------------------------------------------------------------------------------------
1999 1998
---- ----
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- -----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -----------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment,
Option, Foreign Currency, Forward Foreign Currency and
Foreign Futures Contracts
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- -----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -----------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- -----------------------------------------------------------------------------------------------------------------------
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- -----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income
- -----------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMI
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Inception date for Investment class shares of the Fund was July 11, 1997.

2 Annualized.

Smaller Companies Fund - Investment Class Page - 16 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Smaller Companies Fund CUSIP
Product Code

Distributed by:

Smaller Companies Fund - Investment Class Page - 17 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Smaller Companies Fund - Investment Class Page - 18 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

Micro Cap

[Deutsche Bank Group logo]

Micro Cap Fund - Institutional Class Page - 1 -
<PAGE>

MICRO CAP - Institutional Class

Overview of Micro Cap

A Detailed Look at Micro Cap

Micro Cap Fund - Institutional Class Page - 2 -
<PAGE>

Micro Cap

OVERVIEW

Goal: The Fund seeks capital appreciation.

Core Strategy: The Fund invests primarily in the stocks and other equity
securities of U.S. micro capitalization growth-oriented companies.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in the stocks
and other equity securities of U.S. micro capitalization growth-oriented
companies. In managing the Fund, we use a "bottom-up" approach to picking
securities. This approach focuses on individual stock selection rather than
industry selection. The portfolio management team uses an active process which
combines financial analysis with company visits to evaluate management and
strategies. The Fund may invest up to 25% of its total assets in foreign micro
capitalization companies.

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:

o micro capitalization company stock returns could trail stock market
returns generally because of risks specific to small company investing:
greater share-price volatility and fewer buyers for shares in periods of
economic or stock market stress;

o stocks that the Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in the U.S. or in one or more of the
countries in which the Fund has invested;

o prices of foreign stocks held by the Fund could go down because of
unfavorable changes in foreign currency exchange rates, foreign government
actions, political instability or the more limited availability of
accurate information about foreign companies; or

Micro Cap Fund - Institutional Class Page - 3 -
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Micro Cap Fund if you are seeking capital
appreciation. There is, of course, no guarantee that the Fund will realize its
goal. Moreover, you should be willing to accept significantly greater short-term
fluctuation in the value of your investment than you would typically experience
investing in bond or money-market funds.

You should not consider investing in the Micro Cap Fund if you are pursuing a
short-term financial goal, if you seek regular income or if you cannot tolerate
fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in fixed income securities alone, or invests in large- or
medium-sized company stocks. Diversifying your investments may lower the
volatility of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on December 18, 1996 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the Russell 2000 Index over the last one
year and since inception. Bear in mind that the Index is a passive measure of
U.S. equity market returns. It does not factor in the costs of buying, selling
and holding equity securities -- costs which are reflected in the Fund's

Micro Cap Fund - Institutional Class Page - 4 -
<PAGE>

results.

FOOTNOTE: The Russell 2000 Index is an unmanaged domestic equity securities
index representing the performance of the 2,000 smallest companies of the
Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000
largest US companies based on total market capitalization. The Russell 3000
represents approximately 98% of the investable US equity market. The Russell
2000 Index is a widely accepted benchmark of U.S. small capitalization company
performance. It is a model, not an actual portfolio.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

-----------------------------------------
1997 1998 1999
---- ---- ----
-----------------------------------------
________% ________% ________%
-----------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (12/18/96)(1)
- --------------------------------------------------------------------------------
Micro Cap Fund -- Institutional Class shares _____% _____%
- --------------------------------------------------------------------------------
Russell 2000 Index _____% _____%
================================================================================
1 The Russell 2000 Index average is calculated from _______, 1996.

Micro Cap Fund - Institutional Class Page - 5 -
<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 Institutional Class shares of the Micro Cap
Fund.

Percentage of Average
Daily Net Assets
----------------------

Management Fees 1.50%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( %)(1)
------------
Net Expenses 1.49%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 1.49%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Micro Cap Fund - Institutional Class Page - 6 -
<PAGE>

Micro Cap

A detailed look

OBJECTIVE

The Fund seeks capital appreciation. Under normal circumstances, the Fund
invests at least 65% of its total assets in the common stocks of U.S. micro
capitalization companies and securities convertible into such stocks. While we
seek capital appreciation, 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 invests primarily in equity securities of U.S. micro capitalization
growth-oriented companies. We focus on individual security selection rather than
industry selection. The team uses an active process which combines financial
analysis with company visits to evaluate management and strategies.

PRINCIPAL INVESTMENTS

The Fund invests in the common stocks of U.S. micro capitalization companies and
securities convertible into such stocks. The Fund may also invest up to 25% of
its total assets in the securities of foreign companies that would be considered
in the bottom 5% in terms of market capitalization in the U.S. equity market.

FOOTNOTE: The Investment Adviser defines the micro capitalization equity
universe as the bottom 5% of the total domestic equity market capitalization,
(at the time of investment), using a minimum market capitalization of $10
million.

FOOTNOTE: Convertible securities are corporate securities (usually preferred
stock or bonds) that are exchangeable for a set number of shares of common stock
at a preset price.

We may use various instruments commonly known as "derivatives," and, to the
extent that the fund invests in foreign securities, it may enter into forward
currency exchange contracts and buy and sell currency options to hedge against
currency exchange rate fluctuations.

Micro Cap Fund - Institutional Class Page - 7 -
<PAGE>

The Fund may also invest up to 35% of its assets in high quality debt
instruments and money market instruments with remaining maturities of one year
or less, including repurchase agreements. The Fund may also invest up to 5% of
its net assets in non-convertible bonds and preferred stocks that are considered
of high quality.

INVESTMENT PROCESS

o The team focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

o The team emphasizes individual selection of smaller stocks across all
economic sectors, early in their growth cycles and with the potential to
be the blue chips of the future.

o The team screens the bottom 5% of the total domestic equity market
capitalization for micro cap companies with growth and profitability.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund has had a high portfolio turnover rate. Historically, the
Fund has not had and we do not expect that it will continue to have a high
portfolio turnover rate. High turnover can increase the Fund's transaction
costs, thereby lowering its returns. It may also increase your tax liability.

Micro Cap Fund - Institutional Class Page - 8 -
<PAGE>

RISKS

Primary Risks

Micro Capitalization Company Risk. The Fund's investments in micro
capitalization companies will be more susceptible to share price fluctuations
since micro capitalization company stocks tend to experience steeper
fluctuations in price -- down as well as up -- than the stocks of larger
companies. A shortage of reliable information, the same information gap that
creates opportunity in micro company investing, can also pose added risk.
Industrywide reversals may have a greater impact on micro capitalization
companies, since they lack a large company's financial resources. Micro
capitalization companies may have limited product lines and markets. They may
also have shorter operating histories and more volatile businesses. Micro
capitalization company managers typically have less experience coping with
adversity or capitalizing on opportunity than their counterparts at larger
companies. Finally, micro capitalization company stocks are typically less
liquid than large company stocks. Particularly when they are performing poorly,
a micro capitalization company's shares may be more difficult to sell.

Market Risk. Although individual stocks can outperform the U.S. or their local
stock markets, deteriorating U.S. stock market conditions might cause an overall
weakness in the stock prices of the entire market, including stocks held by the
Fund.

Micro Cap Fund - Institutional Class Page - 9 -
<PAGE>

transactions in the country's currency. In many foreign countries, securities
markets are less liquid, more volatile and subject to less government regulation
than U.S. securities markets.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Micro Cap Fund - Institutional Class Page - 10 -
<PAGE>

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in money-market
investments, or other short-term bonds that offer comparable safety, if the
situation warranted. To the extent we might adopt such a position and over the
course of its duration, the Fund may not meet its goal of capital appreciation.

MANAGEMENT OF THE FUND

Micro Cap Fund - Institutional Class Page - 11 -
<PAGE>

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

The Fund paid the following fees to DAMI for investment advisory services in the
last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------
Micro Cap Fund _________%

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

DAMI is an indirect wholly-owned subsidiary of Deutsche Bank AG, an
international commercial and investment banking group. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual fund, retail and commercial
banking, investment banking and insurance.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Micro Cap Fund - Institutional Class Page - 12 -
<PAGE>

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

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

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

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

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

o collecting your executed proxies.

Portfolio Managers. A committee of portfolio managers and analysts employed by
the Investment Adviser is responsible for the day-to-day management of the Fund.

CALCULATING THE FUND'S SHARE PRICE

Micro Cap Fund - Institutional Class Page - 13 -
<PAGE>

Micro Cap Fund - Institutional Class Page - 14 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

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

Income dividends Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Micro Cap Fund - Institutional Class Page - 15 -
<PAGE>

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Contacting the Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Minimum Account Investments

To open an account $250,000

To add to an account $25,000

Minimum account balance $50,000

Micro Cap Fund - Institutional Class Page - 16 -
<PAGE>

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

MAIL:

Buying: Send your check, payable to the Deutsche Asset Management Fund you have
selected, to the Service Center. The addresses are shown in this section under
"Contacting Deutsche Asset Management Funds." 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 and the names and numbers of the funds
you have selected.

Selling: 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. If you are selling shares
of Fund, you must leave at least $50,000 worth of shares in your account to keep
it open. Unless exchanging into another Deutsche Asset Management Fund, you must
submit a written authorization to sell shares in a retirement account.

Micro Cap Fund - Institutional Class Page - 17 -
<PAGE>

WIRE:

Routing No.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

See your account statement for the account name and number.

Important Information About Buying and Selling Shares

o After receiving 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.

Micro Cap Fund - Institutional Class Page - 18 -
<PAGE>

o 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.

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

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

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

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

Micro Cap Fund - Institutional Class Page - 19 -
<PAGE>

o 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.

Please note the following conditions:

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

Micro Cap Fund - Institutional Class Page - 20 -
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
For the year ended October 31,
------------------------------ For the period ended
- ---------------------------------------------------------------------------------------------- --------------------
1999 1998 1997 1996 October 31, 1995
---- ---- ---- ---- ----------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign
Futures Contracts
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
DAMI
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Micro Cap Fund - Institutional Class Page - 21 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Micro Cap Fund CUSIP
Product Code

Micro Cap Fund - Institutional Class Page - 22 -
<PAGE>

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Micro Cap Fund - Institutional Class Page - 23 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

Micro Cap

[Deutsche Bank Group logo]
<PAGE>

MICRO CAP - Investment Class

Overview of Micro Cap

A Detailed Look at Micro Cap

Micro Cap Fund - Investment Class Page - 2 -
<PAGE>

Micro Cap

OVERVIEW

Goal: The Fund seeks capital appreciation.

Core Strategy: The Fund invests primarily in the stocks and other equity
securities of U.S. micro capitalization growth-oriented companies.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly;

o the stock market could perform poorly in the U.S. or in one or more of the
countries in which the Fund has invested;

Micro Cap Fund - Investment Class Page - 3 -
<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in fixed income securities alone, or invests in large- or
medium-sized company stocks. Diversifying your investments may lower the
volatility of your overall investment portfolio.

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

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 changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on August 21, 1997. The table compares the
average annual return of the Fund's Investment Class shares with that of the
Russell 2000 Index over the last one year and since inception. Bear in mind that
the Index is a passive measure of U.S. equity market returns. It does not factor
in the costs of buying, selling and holding equity securities -- costs which are
reflected in the Fund's results.

Micro Cap Fund - Investment Class Page - 4 -
<PAGE>

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

-----------------------------------------
1997 1998 1999
-----------------------------------------
________% ________% ________%
-----------------------------------------

Average Annual Returns
(as of December 31, 1999)

Since
Inception
1 year (8/21/97)(1)
- --------------------------------------------------------------------------------
Micro Cap Fund -- Investment Class shares _____% _____%
- --------------------------------------------------------------------------------
Russell 2000 Index _____% _____%
================================================================================
1 The Russell 2000 Index average is calculated from _______, 1997.

Micro Cap Fund - Investment Class Page - 5 -
<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 Investment Class shares of the Micro Cap
Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 1.50%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( %)(1)
---------
Net Expenses 1.74%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management, Inc. has agreed until February 28, 2001, to waive
its fees and reimburse expenses so that total expenses will not exceed 1.74%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Micro Cap Fund - Investment Class Page - 6 -
<PAGE>

Micro Cap

A detailed look

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

FOOTNOTE: Convertible securities are corporate securities (usually preferred
stock or bonds) that are exchangeable for a set number of shares of common stock
at a preset price.

Micro Cap Fund - Investment Class Page - 7 -
<PAGE>

INVESTMENT PROCESS

o The team focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

o The team emphasizes individual selection of smaller stocks across all
economic sectors, early in their growth cycles and with the potential to
be the blue chips of the future.

o The team screens the bottom 5% of the total domestic equity market
capitalization for micro cap companies with growth and profitability.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the frequency
with which the Fund sells and replaces its securities within a given period.
Recently, the Fund has had a high portfolio turnover rate. Historically, the
Fund has not had and we do not expect that it will continue to have a high
portfolio turnover rate. High turnover can increase the Fund's transaction
costs, thereby lowering its returns. It may also increase your tax liability.

Micro Cap Fund - Investment Class Page - 8 -
<PAGE>

RISKS

Primary Risks

Micro Cap Fund - Investment Class Page - 9 -
<PAGE>

transactions in the country's currency. In many foreign countries, securities
markets are less liquid, more volatile and subject to less government regulation
than U.S. securities markets.

Derivative Risks. The Fund may, but is not required to, use derivative contracts
for any of the following purposes:

o To hedge against adverse changes in the market value of securities
held by or to be bought for the Fund. These changes may be caused by
changing interest rates, security prices or currency exchange rates.

o As a substitute for purchasing or selling securities or foreign
currencies.

o To shorten or lengthen the effective maturity or duration of the
Fund's fixed income portfolio.

o In non-hedging situations, to attempt to profit from anticipated
market developments.

Correlation risks. Changes in the value of derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the hedged
portfolio securities.

Micro Cap Fund - Investment Class Page - 10 -
<PAGE>

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in money-market
investments, or other short-term bonds that offer comparable safety, if the
situation warranted. To the extent we might adopt such a position and over the
course of its duration, the Fund may not meet its goal of capital appreciation.

MANAGEMENT OF THE FUND

Micro Cap Fund - Investment Class Page - 11 -
<PAGE>

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

The Fund paid the following fees to DAMI for investment advisory services in the
last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Micro Cap Fund _________%

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Micro Cap Fund - Investment Class Page - 12 -
<PAGE>

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

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

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

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

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

o collecting your executed proxies.

Portfolio Managers. A committee of portfolio managers and analysts employed by
the Investment Adviser is responsible for the day-to-day management of the Fund.

CALCULATING THE FUND'S SHARE PRICE

Micro Cap Fund - Investment Class Page - 13 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income

Micro Cap Fund - Investment Class Page - 14 -
<PAGE>

Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Service Plan

Important Information About Buying and Selling Shares

In order to make an initial investment in Investment Class shares of a
Fund, you must

Micro Cap Fund - Investment Class Page - 15 -
<PAGE>

first establish an account with your service organization. Each Fund has
authorized service organizations to accept purchase and redemption orders
on behalf of the Fund. You may be subject to minimums established by your
service organization for the purchase of shares.

Payment for share purchases should be made directly to your service
organization. Once you place your order with your service organization, it
is considered received by the Deutsche Asset Management funds. It is then
your service organization's responsibility to transmit the order to the
Deutsche Asset Management Funds by the next business day. You should
contact your service organization if you have a dispute as to when your
order was placed with the Fund.

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Micro Cap Fund - Investment Class Page - 16 -
<PAGE>

Exchange Privilege

o You can exchange all or part of your shares for the same class of 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 get a copy of that
fund's prospectus and read it carefully. If you are maintaining a taxable
account, you may be subject to taxes on the exchange.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the period ended
--------------------
For the year ended 1997(1)
------------------ -------
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998
---- ----
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ----------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ----------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment, Option,
Foreign Currency, Forward Foreign Currency and Foreign Futures
Contracts
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ----------------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Micro Cap Fund - Investment Class Page - 17 -
<PAGE>

2 Annualized.

Micro Cap Fund - Investment Class Page - 18 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Micro Cap Fund CUSIP
Product Code

Distributed by:

Micro Cap Fund - Investment Class Page - 19 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Micro Cap Fund - Investment Class Page - 20 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Institutional Class

Emerging Markets Debt

[Deutsche Bank Group logo]
<PAGE>

EMERGING MARKETS DEBT - Institutional Class

Overview of Emerging Markets Debt

A Detailed Look at Emerging Markets Debt

Emerging Markets Debt Fund - Institutional Class Page - 2 -
<PAGE>

Emerging Markets Debt

OVERVIEW

Goal: The Fund seeks total return.

Core Strategy: The Fund invests primarily in fixed income securities of issuers
in countries with new or emerging securities markets.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its investment objective by investing in the high
yield/high risk fixed income securities of issuers located in countries with new
or emerging securities markets. The Fund may invest more than 25% of its total
assets in securities of companies located in each of Argentina, Brazil and
Mexico. In managing the Fund, we pick securities by using a combination of
country selection and individual security selection.

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
or

Emerging Markets Debt Fund - Institutional Class Page - 3 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Argentina, Brazil and Mexico,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Emerging Markets Debt Fund if you are
seeking current income higher than money market mutual funds over most time
periods. There is, of course, no guarantee that the Fund will realize its goal.
Moreover, you should be willing to accept the risks of investing in the fixed
income market, including credit risk and interest rate risk.

You should not consider investing in the Emerging Markets Debt Fund if you are
pursuing a short-term financial goal, if you are seeking capital appreciation or
if you cannot tolerate fluctuations in the value of your investments.

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

Emerging Markets Debt Fund - Institutional Class Page - 4 -
<PAGE>

The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Institutional Class shares for each full calendar year since the Fund began
selling Institutional Class shares to the public on August 4, 1994 (its
inception date). The table compares the average annual return of the Fund's
Institutional Class shares with that of the JP Morgan Emerging Markets Bond Plus
Index over the last one year, five years and since inception. Bear in mind that
the Index is a passive measure of emerging debt market returns. It does not
factor in the costs of buying, selling and holding fixed income securities --
costs which are reflected in the Fund's results.

FOOTNOTE: The JP Morgan Emerging Markets Bond Plus Index is an unmanaged foreign
securities index representing external currency-denominated debt markets of the
emerging markets and is a widely accepted benchmark of emerging debt market
performance. It is a model, not an actual portfolio. The Index includes U.S.
dollar- and other external currency-denominated Brady bonds, loans, Eurobonds
and local market instruments. It tracks instruments issued in Argentina, Brazil,
Bulgaria, Ecuador, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines,
Poland, Russia and Venezuela.

Year-by-Year Returns
Institutional Class shares
(each full calendar year since inception)

[bar chart]

-------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
-------------------------------------------------------------------
________% ________% ________% ________% ________%
-------------------------------------------------------------------

Average Annual Returns
(as of December 31, 1999)

Emerging Markets Debt Fund - Institutional Class Page - 5 -
<PAGE>

Since
Inception
1 year 5 years (8/4/94)(1)
- --------------------------------------------------------------------------------
Emerging Markets Debt Fund -- Institutional
Class shares _____% _____% _____%
- --------------------------------------------------------------------------------
JP Morgan Emerging Markets Bond Plus Index _____% _____% _____%
================================================================================
1 The JP Morgan Emerging Markets Bond Plus Index average is calculated from
_______, 1994.

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 Institutional Class shares of the Emerging
Markets Debt Fund.

Percentage of Average
Daily Net Assets
----------------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( %)(1)
---------
Net Expenses 1.00%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Emerging Markets Debt Fund - Institutional Class Page - 6 -
<PAGE>

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 1.00%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

Emerging Markets Debt Fund - Institutional Class Page - 7 -
<PAGE>

Emerging Markets Debt Fund

A detailed look

OBJECTIVE

The Fund seeks total return. Under normal circumstances, the Fund invests at
least 65% of its total assets in the high yield/high risk fixed income
securities of issuers located in countries with new or emerging securities
markets. While we seek 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

In managing the Fund, the portfolio management team uses an approach that
combines country selection with individual security selection.

Countries are selected according to macro-economic factors such as inflation,
interest rates, monetary and fiscal policies and the political climate.
Short-term factors such as market sentiment, capital flows and new issues are
also evaluated.

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of +/- 1
year around the Fund's benchmark index.

PRINCIPAL INVESTMENTS

The Fund invests in high yield/high risk fixed income securities of issuers
located in countries with new or emerging securities markets. The Fund invests
primarily in sovereign debt and, to a limited extent, in corporate debt. The
Fund's fixed income securities include performing and non-performing loans,
Eurobonds, Brady Bonds (dollar denominated securities used to refinance foreign
government bank loans) and other fixed income securities of foreign

Emerging Markets Debt Fund - Institutional Class Page - 8 -
<PAGE>

governments and their agencies as well as some corporate debt instruments. The
Fund may invest in fixed income securities of any credit quality, including
securities not paying interest currently, zero coupon bonds, pay-in-kind
securities and securities in default. The loans and debt instruments in which
the Fund may invest may be denominated in a major currency or in a local
currency.

FOOTNOTE: High yield/high risk fixed income securities are lower quality
securities rated by a national ratings organization below its top four long-term
categories, or if unrated, judged by the Investment Adviser to be of comparable
credit quality.

The Fund may invest more than 25% of its total assets in the securities of
companies located in each of Argentina, Brazil and Mexico.

The Fund may invest up to 35% its total assets in domestic and foreign cash
equivalents and U.S. fixed income securities.

INVESTMENT PROCESS

In managing the Fund, we use an approach that combines country selection with
individual security selection. The portfolio management team considers macro-
economic factors such as:

o inflation,

o interest rates,

o monetary and fiscal policies, and

o political climate.

The portfolio management team also considers short-term factors such as:

o market sentiment,

o capital flows, and

o new issue programs.

Emerging Markets Debt Fund - Institutional Class Page - 9 -
<PAGE>

RISKS

Below we have set forth some of the prominent risks associated with fixed income
investing and emerging markets investing, as well as investing in general.
Although we attempt both to assess the likelihood that these risks may actually
occur and to limit them, we cannot guarantee that we will succeed.

Primary Risks

High Yield/High Risk Security Risk. Lower quality securities are speculative and
have only an adequate capacity to pay principal and interest. These securities
have a high risk of default, tend to be less liquid and may be more difficult to
value. The issuers of lower quality securities may be highly leveraged and have
difficulty servicing their debt, especially during prolonged economic recessions
or period of rising interest rates. The prices of lower quality securities are
volatile and may go down due to market perceptions of deteriorating issuer
creditworthiness or economic conditions. The general risks of investing in fixed
income securities as described below are greater when investing in high
yield/high risks securities.

Credit Risk. An investor purchasing bonds faces the risk that the
creditworthiness of the issuer may decline, causing the value of its bonds to
decline. In addition, the issuer may not be able to make timely payments on the
interest and principal on the bonds they have issued. The Fund's investment in
fixed income securities rated in the fourth highest category have speculative
characteristics. These securities involve a greater risk of loss than higher
quality securities and are more sensitive to changes in the issuer's capacity to
pay.

Emerging Markets Debt Fund - Institutional Class Page - 10 -
<PAGE>

Emerging Market Risk. Because the Fund invests in emerging markets, it may face
higher political, information, and market risks. In addition, profound social
changes and business practices that depart from norms in developed countries'
economies have hindered the orderly growth of emerging economies and their
securities markets in the past. High levels of debt tend to make emerging
economies heavily reliant on foreign capital and vulnerable to capital flight.
For all these reasons, the Fund limits its exposure to these markets.

Emerging Markets Debt Fund - Institutional Class Page - 11 -
<PAGE>

become virtually impossible to sell a security in an orderly fashion at a
price that approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges
less stringently, and the rights of shareholders may not be as
firmly established, as in the U.S.

o Currency Risk. The Fund invests in foreign currencies and in
securities denominated in foreign currencies. This creates the
possibility that changes in foreign exchange rates will affect the
U.S. dollar value of foreign securities or the U.S. dollar amount of
income or gain received on these investments. Additionally, a change
in economic policy may cause a greater fluctuation in a country's
currency than in bonds denominated in that currency. We may, but
need not, seek to minimize this risk by actively managing the
currency exposure of the Fund, which entails hedging from time to
time.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Argentina, Brazil and Mexico, or a particular
region, market swings in such a targeted country or region will be likely to
have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Emerging Markets Debt Fund - Institutional Class Page - 12 -
<PAGE>

Secondary Risks

Derivative Risk. Each Fund may use derivatives. Derivatives are financial
instruments whose value derives from another security or an index. Futures,
options and foreign currency forward contracts are types of derivatives.
Derivatives used for hedging may not fully offset the underlying positions.
Derivatives used for risk management may not have the intended effects and may
result in losses or missed opportunities. Derivatives that involve leverage may
magnify losses. In addition, there is a risk that a counterparty will fail to
honor a contract's terms resulting in a loss for the Fund.

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

Emerging Markets Debt Fund - Institutional Class Page - 13 -
<PAGE>

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DAMIS) with headquarters at 20
Finsbury Circus, London, England, acts as investment adviser for the Fund. DAMIS
makes the Fund's investment decisions and assumes responsibility for the
securities the Fund owns. DAMIS buys and sells securities for the Fund and
conducts the research that leads to these purchase and sale decisions. DAMIS is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges.

Emerging Markets Debt Fund - Institutional Class Page - 14 -
<PAGE>

The Fund paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Emerging Markets Debt Fund _________%

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

Other Services. Deutsche Asset Management, Inc. (DAMI), an affiliate of DAMIS,
provides administrative services -- such as portfolio accounting, legal services
and others -- for the Fund. In addition, DAMI -- or your broker or financial
advisor -- 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:

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

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

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

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

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

o collecting your executed proxies.

Brokers and financial advisors may charge additional fees to investors for those
services not otherwise included in the brokers or financial advisors servicing
agreement, such as cash

Emerging Markets Debt Fund - Institutional Class Page - 15 -
<PAGE>

management or special trust or retirement-investment reporting.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

CALCULATING THE FUND'S SHARE PRICE

Emerging Markets Debt Fund - Institutional Class Page - 16 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

The Fund does not ordinarily pay any U.S. federal income taxes. If you are a
taxable shareholder, you and other shareholders pay taxes on the income or
capital gains earned and distributed by the Fund. Your taxes will vary from year
to year, based 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 have
the following tax character:

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including redemption or exchange) of Fund
shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term capital
gains or losses

Emerging Markets Debt Fund - Institutional Class Page - 17 -
<PAGE>

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Contacting the Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Emerging Markets Debt Fund - Institutional Class Page - 18 -
<PAGE>

Minimum Account Investments

To open an account $250,000
To add to an account $25,000
Minimum account balance $50,000

The Fund and its service providers reserve the right to, from time to time, at
their discretion, waive or reduce the investment minimums. Shares of a Fund may
be offered to directors and trustees, of any mutual fund advised or administered
by Deutsche Asset Management, Inc. or its affiliates, or employees of Deutsche
Bank AG, their spouses and minor children, without regard to the minimum
investment requirements.

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

MAIL:

Buying: Send your check, payable to the Deutsche Asset Management Fund you have
selected, to the Service Center. The addresses are shown in this section under
"Contacting the Deutsche Asset Management Funds." 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 and the names and numbers of
the funds you have selected.

Selling: 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

Emerging Markets Debt Fund - Institutional Class Page - 19 -
<PAGE>

WIRE:

Routing No.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
Emerging Markets Debt Fund - xxx

See your account statement for the account name and number.

Important Information About Buying and Selling Shares

After receiving 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.

Emerging Markets Debt Fund - Institutional Class Page - 20 -
<PAGE>

o 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.

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

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

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

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

o 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.

Emerging Markets Debt Fund - Institutional Class Page - 21 -
<PAGE>

Please note the following conditions:

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

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

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

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

FINANCIAL HIGHLIGHTS

Emerging Markets Debt Fund - Institutional Class Page - 22 -
<PAGE>

an investor would have earned on an investment in the Institutional Class shares
of the Fund, assuming reinvestment of all dividends and distributions. This
information has been audited by __________________________, whose report, along
with the Fund's financial statements, is included in the Fund's annual report.
The annual report is available free of charge by calling the Fund at
1-800-550-6426.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
For the year ended October 31,
------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- ------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign
Futures Contracts
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
DAMIS
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Emerging Markets Debt Fund - Institutional Class Page - 23 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Emerging Markets Debt Fund CUSIP
Product Code

Distributed by:

Emerging Markets Debt Fund - Institutional Class Page - 24 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Emerging Markets Debt Fund - Institutional Class Page - 25 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Investment Class

Emerging Markets Debt

[Deutsche Bank Group logo]
<PAGE>

EMERGING MARKETS DEBT - Investment Class

Overview of Emerging Markets Debt

A Detailed Look at Emerging Markets Debt

Emerging Markets Debt Fund - Investment Class Page - 2 -
<PAGE>

Emerging Markets Debt

OVERVIEW

Goal: The Fund seeks total return.

Core Strategy: The Fund invests primarily in fixed income securities of issuers
in countries with new or emerging securities markets.

INVESTMENT POLICIES AND STRATEGIES

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:

o an issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline;

o the issuer of a security owned by the Fund could default on its obligation
to pay principal and/or interest;

o interest rates could increase, causing the prices of fixed income
securities to decline, thereby reducing the value of the Fund's portfolio;
or

Emerging Markets Debt Fund - Investment Class Page - 3 -
<PAGE>

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

o since the Fund may focus its investments in Argentina, Brazil and Mexico,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

Emerging Markets Debt Fund - Investment Class Page - 4 -
<PAGE>

The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the actual return of the Fund's
Investment Class shares for each full calendar year since the Fund began selling
Investment Class shares to the public on October 22, 1997. The table compares
the average annual return of the Fund's Investment Class shares with that of the
JP Morgan Emerging Markets Bond Plus Index over the last one year and since
inception of Investment Class shares of the Fund. Bear in mind that the Index is
a passive measure of emerging debt market returns. It does not factor in the
costs of buying, selling and holding fixed income securities -- costs which are
reflected in the Fund's results.

Year-by-Year Returns
Investment Class shares
(each full calendar year since inception)

[bar chart]

----------------------------
1998 1999
---- ----
----------------------------
________% ________%
----------------------------

Average Annual Returns
(as of December 31, 1999)

Emerging Markets Debt Fund - Investment Class Page - 5 -
<PAGE>

Since
Inception
1 year (10/22/97)(1)
- ------------------------------------------------------------------------
Emerging Markets Debt Fund -- Investment
Class shares _____% _____%
- ------------------------------------------------------------------------
JP Morgan Emerging Markets Bond Plus Index _____% _____%
========================================================================
1 The JP Morgan Emerging Markets Bond Plus Index average is calculated from
_______, 1997.

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 Investment Class shares of the Emerging
Markets Debt Fund.

Percentage of Average
Daily Net Assets
------------------------

Management Fees 1.00%
Distribution and Service (12b-1) Fees 0.25%
Other Fund Operating Expenses %
Total Fund Operating Expenses %
Less: Fee Waivers or Expense Reimbursement ( %)(1)
---------
Net Expenses 1.00%

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs and investment returns may be higher or lower.

Emerging Markets Debt Fund - Investment Class Page - 6 -
<PAGE>

Emerging Markets Debt Fund - Investment Class Page - 7 -
<PAGE>

Emerging Markets Debt Fund

A detailed look

OBJECTIVE

STRATEGY

In managing the Fund, the portfolio management team uses an approach that
combines country selection with individual security selection.

Portfolio Duration

The portfolio management team intends to maintain a portfolio duration of +/- 1
year around the Fund's benchmark index.

PRINCIPAL INVESTMENTS

Emerging Markets Debt Fund - Investment Class Page - 8 -
<PAGE>

The Fund may invest more than 25% of its total assets in the securities of
companies located in each of Argentina, Brazil and Mexico.

The Fund may invest up to 35% its total assets in domestic and foreign cash
equivalents and U.S. fixed income securities.

INVESTMENT PROCESS

In managing the Fund, we use an approach that combines country selection with
individual security selection. The portfolio management team considers macro-
economic factors such as:

o inflation,

o interest rates,

o monetary and fiscal policies, and

o political climate.

The portfolio management team also considers short-term factors such as:

o market sentiment,

o capital flows, and

o new issue programs.

Emerging Markets Debt Fund - Investment Class Page - 9 -
<PAGE>

RISKS

Primary Risks

Emerging Markets Debt Fund - Investment Class Page - 10 -
<PAGE>

Emerging Markets Debt Fund - Investment Class Page - 11 -
<PAGE>

become virtually impossible to sell a security in an orderly fashion at a
price that approaches our estimate of its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. To the extent the Fund
concentrates its investments in Argentina, Brazil and Mexico, or a particular
region, market swings in such a targeted country or region will be likely to
have a greater effect on Fund performance than they would in a more
geographically diversified fixed income fund.

Emerging Markets Debt Fund - Investment Class Page - 12 -
<PAGE>

Secondary Risks

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

Emerging Markets Debt Fund - Investment Class Page - 13 -
<PAGE>

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DAMIS) with headquarters at 20
Finsbury Circus, London, England, acts as investment adviser for the Fund. DAMIS
makes the Fund's investment decisions and assumes responsibility for the
securities the Fund owns. DAMIS buys and sells securities for the Fund and
conducts the research that leads to these purchase and sale decisions. DAMIS is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges.

The Fund paid the following fees to DAMIS for investment advisory services in
the last fiscal year:

Percentage of Average
Fund Daily Net Assets
- ---- ----------------

Emerging Markets Debt Fund _________%

Emerging Markets Debt Fund - Investment Class Page - 14 -
<PAGE>

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion in assets.

Organizational Structure. Each Fund is a series of an open-end investment
company organized as a Delaware business trust.

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

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

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

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

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

o collecting your executed proxies.

PORTFOLIO MANAGERS

A committee of portfolio managers and analysts employed by the Investment
Adviser is responsible for the day-to-day management of the Fund.

CALCULATING THE FUND'S SHARE PRICE

Emerging Markets Debt Fund - Investment Class Page - 15 -
<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Emerging Markets Debt Fund - Investment Class Page - 16 -
<PAGE>

TAX CONSIDERATIONS

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including redemption or exchange) of Fund
shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Emerging Markets Debt Fund - Investment Class Page - 17 -
<PAGE>

Service Plan

Important Information About Buying and Selling Shares

We do not issue share certificates.

There is no sales charge for buying or selling Investment Class shares of
the Fund. However, your service organization may charge you transaction
fees for buying or selling shares.

When you sell shares, we mail a check for the proceeds from the sale of
your shares directly to your service organization normally the next
business day but always within

Emerging Markets Debt Fund - Investment Class Page - 18 -
<PAGE>

seven days. Once we have sent the redemption proceeds, we do not assume
any further responsibility for the service organization or for other
intermediaries. If a problem arises, you should contact your service
organization directly.

We reserve the right to reject any purchase order.

Selling shares may require additional documentation. Please contact your
service organization 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").

Exchange Privilege

o You can exchange all or part of your shares for the same class of shares
of another [Deutsche] 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 get a copy of that fund's prospectus and
read it carefully. If you are maintaining a taxable account, you may be
subject to taxes on the exchange.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
For the year ended For the period
------------------ --------------
ended
-----
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

Emerging Markets Debt Fund - Investment Class Page - 19 -
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997(1)
---- ---- -------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period
- --------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
- --------------------------------------------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investment, Option,
Foreign Currency, Forward Foreign Currency and Foreign Futures
Contracts
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Operations
- --------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
- --------------------------------------------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------------------------------------------
Net Realized Gains
- --------------------------------------------------------------------------------------------------------------------
Total Distributions
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
- --------------------------------------------------------------------------------------------------------------------
Total Investment Return
- --------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
- --------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------------------------
Net Investment Income
- --------------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMIS
- --------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(2)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Inception of Investment Class shares of the Fund was October 22, 1997.

2 Annualized.

Emerging Markets Debt Fund - Investment Class Page - 20 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

Emerging Markets Debt Fund CUSIP
Product Code

Distributed by:

Emerging Markets Debt Fund - Investment Class Page - 21 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

Emerging Markets Debt Fund - Investment Class Page - 22 -
<PAGE>

Deutsche Asset Management

Mutual Fund Prospectus

February 28, 2000

Premier Class

International Select Equity

[Deutsche Bank Group logo]
<PAGE>

INTERNATIONAL SELECT EQUITY- Premier Class

Overview of International Select Equity

A Detailed Look at International Select Equity

International Select Equity Fund -- Premier Class Page - 2 -
<PAGE>

International Select Equity

OVERVIEW

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies in developed countries located outside the
United States.

INVESTMENT POLICIES AND STRATEGIES

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:

o stocks that the Investment Adviser has selected could perform poorly; or

o the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

o adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing their
full value;

International Select Equity Fund -- Premier Class Page - 3 -
<PAGE>

o since the Fund may focus its investments in Japan and the United Kingdom,
it could be particularly susceptible to the effects of political and
economic developments in these countries;

o foreign accounting and financial reporting standards differ from those in
the U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o the currency of a country in which the Fund invests may decrease in value
relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

International Select Equity Fund -- Premier Class Page - 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 changes in the Fund's
performance year to year. Because Premier Class shares are a newly offered class
of shares with limited performance history, the following bar chart and table
show the performance history of the Fund's Institutional Class shares, which
have been in existence since the Fund's inception on May 15, 1995. The bar chart
shows the actual return of the Fund's Institutional Class shares for each full
calendar year since the Fund's inception. The table compares the average annual
return of the Fund's Institutional Class shares with that of the Morgan Stanley
Capital International (MSCI) EAFE Index over the last calendar year and since
inception. Bear in mind that the Index is a passive measure of combined national
stock market returns. It does not factor in the costs of buying, selling and
holding stock -- costs which are reflected in the Fund's results.

Year-by-Year Returns
Institutional Class shares*
(each full calendar year since inception)

[bar chart]

------------------------------------------------------
1996 1997 1998 1999
---- ---- ---- ----
------------------------------------------------------
______% ______% ______% ______%
------------------------------------------------------

Average Annual Returns

International Select Equity Fund -- Premier Class Page - 5 -
<PAGE>

(as of December 31, 1999)

Since
Inception
1 year (5/15/95)(1)
- --------------------------------------------------------------------------------
International Select Equity Fund -- Institutional Class
shares* _____% _____%
- --------------------------------------------------------------------------------
EAFE Index _____% _____%
================================================================================
1 The EAFE Index average is calculated from _______, 1995.

FOOTNOTE: [ * Institutional Class performance is presented because Premier Class
shares, which recently commenced operations, have limited performance history.
Institutional Class shares have substantially identical characteristics to those
of the Premier Class shares offered by this prospectus, except that for
Institutional Class shares, the minimum initial investment amount is lower and
the net expenses per share (after reimbursement) is higher. Institutional Class
shares are offered under a separate prospectus, which is available upon
request.]

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 Premier Class shares of the International
Select Equity Fund.

Percentage of Average
Daily Net Assets
------------------------

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in Premier Class shares of the Fund. The
numbers assume that the Fund earned an annual return of 5% over the periods
shown, the Fund's operating expenses remained

International Select Equity Fund -- Premier Class Page - 6 -
<PAGE>

the same and you sold your shares at the end of the period.

1 year(2) 3 years(3) 5 years(3) 10 years(3)
- --------- ---------- ---------- -----------
$___ $___ $___ $___

You may use this hypothetical example to compare the Fund's expense history with
other funds.1 Your actual costs and investment returns may be higher or lower.

1 Deutsche Asset Management Investment Services Limited has agreed until
February 28, 2001, to waive its fees and reimburse expenses so that total
expenses will not exceed 0.90%.
2 Assuming current expenses after fee waivers and reimbursements in effect until
February 28, 2001.
3 Assuming current expenses without fee waiver or reimbursement after February
28, 2001.

International Select Equity Fund -- Premier Class Page - 7 -
<PAGE>

International Select Equity

A detailed look

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

FOOTNOTE: Equity securities and other securities with equity characteristics
include common stock, preferred stock, warrants, purchased call options and
other rights to acquire stock.

International Select Equity Fund -- Premier Class Page - 8 -
<PAGE>

INVESTMENT PROCESS

RISKS

Primary Risks

International Select Equity Fund -- Premier Class Page - 9 -
<PAGE>

countries in which the Fund invests, they may in the future. We analyze
countries and regions to try to anticipate these risks.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly
established, as in the U.S.

International Select Equity Fund -- Premier Class Page - 10 -
<PAGE>

Secondary Risks

International Select Equity Fund -- Premier Class Page - 11 -
<PAGE>

Although it is impossible to predict the impact of the conversion to the euro on
the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;

o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and

o unpredictable effects on trade and commerce generally.

International Select Equity Fund -- Premier Class Page - 12 -
<PAGE>

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

International Select Equity Fund -- Premier Class Page - 13 -
<PAGE>

MANAGEMENT OF THE FUND

Board of Trustees. A Board of Trustees supervises all of the Fund's activities
on behalf of the Fund's shareholders.

Investment Adviser. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DAMIS) with headquarters at 20
Finsbury Circus, London, England, acts as the Fund's investment adviser. DAMIS
makes the Fund's investment decisions [and assumes responsibility for the
securities the Fund owns.] DAMIS buys and sells securities for the Fund and
conducts the research that leads to these purchase and sale decisions. DAMIS is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges. The Fund paid fees to DAMIS for investment
advisory services in the last fiscal year equal to ____% of its average daily
net assets.

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $___
billion and $ ___________, respectively, in assets.

DAMIS is an indirect wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank
AG is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual fund, retail and
commercial banking, investment banking and insurance.

Portfolio Managers. A committee of portfolio managers and analysts employed by
the Investment Adviser is responsible for the day-to-day management of the Fund.

Organizational Structure. The Fund is a series of an open-end investment company
organized as a Delaware business trust.

Other Services. Deutsche Asset Management, Inc. (DAMI), an affiliate of DAMIS,
with headquarters at 885 Third Avenue, New York, New York, and its affiliates
provides administrative services -- such as portfolio accounting, legal services
and others -- for the Fund. In addition, DAMI -- or your broker or financial
advisor -- performs the functions necessary to

International Select Equity Fund -- Premier Class Page - 14 -
<PAGE>

establish and maintain your account. In addition to setting up the account and
processing your purchase and sale orders, these functions include:

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

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

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

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

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

o collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

International Select Equity Fund -- Premier Class Page - 15 -
<PAGE>

owns may ultimately affect the price of Fund shares when the New York Stock
Exchange re-opens.

DIVIDENDS AND DISTRIBUTIONS

If the Fund earns net investment income or recognizes net capital gains, its
policy is to distribute to shareholders substantially all of that taxable income
or capital gain on an annual basis. We automatically reinvest all dividends and
any capital gains, unless you tell us otherwise.

TAX CONSIDERATIONS

International Select Equity Fund -- Premier Class Page - 16 -
<PAGE>

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

Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Long-term capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, the sale (including a redemption or exchange) of
Fund shares is a taxable transaction for you.

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

Your sale of shares owned more than one year Generally, long-term
capital gains or losses

Your sale of shares owned for one year or less Generally, short-term capital
gains or losses; 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.

BUYING AND SELLING FUND SHARES

Contacting the Deutsche Asset Management Funds

MUTUAL FUND SERVICE CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

International Select Equity Fund -- Premier Class Page - 17 -
<PAGE>

MUTUAL FUND RETIREMENT SERVICES CENTER

By Phone 1-800-407-7301

By Mail P.O. Box 219165
Kansas City, MO 64121

By Overnight Mail 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 5:00 p.m. Eastern time each day the New York Stock Exchange
is open for business.

Minimum Account Investments

To open an account $5,000,000

To add to an account $1,000,000

Minimum account balance $1,000,000

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

MAIL:

International Select Equity Fund -- Premier Class Page - 18 -
<PAGE>

Selling: 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. If you are selling shares
of Fund, you must leave at least $50,000 worth of shares in your account to keep
it open. 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 financial advisor must call the Deutsche Asset
Management Advisor line at 1-800-949-9940 to notify us in advance of a wire
transfer purchase. Inform the 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.: _______________

Attn: [_________/Deutsche Funds]

DDA No.: _______________

FBO: (Account name)
(Account number)

Credit: (Fund name and number)
International Select Equity Fund - xxx
European Equity Fund - xxx
International Small Cap Equity Fund - xxx
Emerging Markets Equity Fund - xxx

International Select Equity Fund -- Premier Class Page - 19 -
<PAGE>

See your account statement for the account name and number.

Important Information About Buying and Selling Shares

o After receiving 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.

o 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.

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

International Select Equity Fund -- Premier Class Page - 20 -
<PAGE>

o We do not issue share certificates.

o We process all sales orders free of charge.

o 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
but always within seven days.

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

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

o 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.

Please note the following conditions:

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

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

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

International Select Equity Fund -- Premier Class Page - 21 -
<PAGE>

o You will receive a written confirmation of each transaction from the
Service Center or your investment professional.

We reserve the following rights:

o The right to terminate the exchange privilege of any investor who makes
more than four exchanges out of the Fund in a calendar year.

o The right to refuse exchanges into the Fund if we believe the Fund could
not invest the proceeds from the new shares effectively according to its
objective.

International Select Equity Fund -- Premier Class Page - 22 -
<PAGE>

[BACK COVER]

[Deutsche] (logo)

Deutsche Asset Management Funds
P.O. Box 219165
Kansas City, MO 64121

or call our toll-free number: 1-800-407-7301.

You can find reports and other information about each Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing an electronic request to [email protected] or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the 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
1-202-942-8090.

International Select Equity Fund CUSIP
Product Code

Distributed by:

International Select Equity Fund -- Premier Class Page - 23 -
<PAGE>

ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

SEC File Number: 811-08006

International Select Equity Fund -- Premier Class Page - 24 -
<PAGE>

MORGAN GRENFELL INVESTMENT TRUST
No-Load Open-End Funds
One South Street
Baltimore, Maryland 21202

STATEMENT OF ADDITIONAL INFORMATION

February 28, 2000

Morgan Grenfell Investment Trust (the "Trust") is an open-end, management
investment company consisting of twenty-two investment portfolios, each having
separate and distinct investment objectives and policies. This Statement of
Additional Information ("SAI") provides supplementary information pertaining to
the following eight separate investment portfolios of the Trust (the "Funds"):

- Morgan Grenfell International Select Equity Fund

- Morgan Grenfell European Equity Fund, previously Morgan Grenfell
European Equity Growth Fund

- Morgan Grenfell International Small Cap Equity Fund

- Morgan Grenfell Emerging Markets Equity Fund

- Morgan Grenfell Core Global Fixed Income Fund

- Morgan Grenfell Global Fixed Income Fund

- Morgan Grenfell International Fixed Income Fund

- Morgan Grenfell Emerging Markets Debt Fund

This Statement of Additional Information is not a prospectus, and should be
read only in conjunction with the Funds' Institutional, Investment or Premier
Class shares Prospectuses dated February 28, 2000 (each, a "Prospectus" and
collectively, the "Prospectuses"). A copy of each Prospectus may be obtained
without charge from Deutsche Asset Management, Inc., the Trust's Administrator,
by calling 1-800-407-7301 or writing to Morgan Grenfell Investment Trust, P.O.
Box 219165, Kansas City, MO 64121.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION.......................................... 1
TABLE OF CONTENTS............................................................ i
INTRODUCTION................................................................. 1
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND STRATEGIES AND RELATED RISKS.. 2
INVESTMENT RESTRICTIONS...................................................... 30
TRUSTEES AND OFFICERS........................................................ 33
INVESTMENT ADVISORY AND OTHER SERVICES....................................... 36
SERVICE PLAN................................................................. 41
PORTFOLIO TRANSACTIONS....................................................... 43
PURCHASE AND REDEMPTION OF SHARES............................................ 46
PERFORMANCE INFORMATION...................................................... 48
TAXES........................................................................ 52
GENERAL INFORMATION ABOUT THE TRUST.......................................... 58
ADDITIONAL INFORMATION....................................................... 64
FINANCIAL STATEMENTS......................................................... 64
APPENDIX B QUALITY DISTRIBUTION FOR EMERGING MARKETS DEBT FUND............... 67
</TABLE>

No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectuses in connection with the offering made by the Prospectuses and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its Distributor. None of the Prospectuses
constitute an offering by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made. Shares of the Funds are not
available in certain states. Please call 1-800-407-7301 to determine
availability in your state.

Page -i-
<PAGE>

INTRODUCTION

The Trust is an open-end, management investment company that currently consists
of twenty-two separate investment series, including the following eight series
(the "Funds"):

Morgan Grenfell International Select Equity Fund
Morgan Grenfell European Equity Fund, previously Morgan Grenfell
European Equity Growth Fund
Morgan Grenfell International Small Cap Equity Fund
Morgan Grenfell Emerging Markets Equity Fund
(collectively, the "Equity Funds")

Morgan Grenfell Core Global Fixed Income Fund
Morgan Grenfell Global Fixed Income Fund
Morgan Grenfell International Fixed Income Fund
Morgan Grenfell Emerging Markets Debt Fund
(collectively, the "Fixed Income Funds").

Each of the Fixed Income Funds is "non-diversified" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"). Each of the Equity
Funds is "diversified" within the meaning of the 1940 Act.

Deutsche Asset Management Investment Services Limited (the "Adviser" or "DAMIS")
serves as investment adviser to the Funds other than the European Equity Fund.
Deutsche Asset Management, Inc. ("DAMI") serves as investment adviser to the
European Equity Fund. ICC Distributors, Inc. (the "Distributor") serves as the
Funds' principal underwriter and distributor.

The information contained in this Statement of Additional Information generally
supplements the information contained in the Prospectus. No investor should
invest in shares of a Fund without first reading the Prospectus. Capitalized
terms used herein and not otherwise defined have the same meaning ascribed to
them in the Prospectus.

Page -1-
<PAGE>

ADDITIONAL INFORMATION ON FUND INVESTMENTS
AND STRATEGIES AND RELATED RISKS

The following supplements the information contained in the Prospectuses
concerning the investment objectives and policies of each Fund.

Morgan Grenfell International Select Equity Fund
- ------------------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of foreign companies. Up to 35% of the
Fund's total assets may include cash equivalents, investment grade fixed income
securities (rated in one of the four highest categories by one of the major
independent rating agencies, or in unrated securities that the adviser considers
of comparable quality), and equity and equity related securities of U.S.
issuers. The Fund may invest more than 25% of its assets in securities of
companies located in each of Japan and the United Kingdom.

The Fund may use derivatives, including futures, options and foreign currency
transactions to lessen its exposure to changing currency rates, security prices,
interest rates and other factors that affect security values.

Morgan Grenfell European Equity Fund
- ------------------------------------

Under normal conditions, the Fund invests at least 65% of its assets in the
equity and equity related securities of European companies. Up to 35% of the
Fund's total assets may include cash equivalents, investment grade fixed income
securities (rated in one of the four highest categories by one of the major
independent rating agencies, or in unrated securities that the adviser considers
of comparable quality), and securities of non-European issuers (including the
U.S.). The Fund may invest more than 25% of its assets in securities
denominated in the euro, as well as in companies located in the United Kingdom.

Morgan Grenfell International Small Cap Equity Fund
- ---------------------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of small capitalization companies
located in countries other than the United States. Small capitalization
companies are: (i) companies ranked according to market capitalization in the
bottom 25% of issuers listed on a stock exchange, (ii) companies listed on a
secondary market and (iii) companies whose securities are not listed on a stock
exchange or secondary market. The Fund will focus on companies located in
countries which make up the BT Alex Brown Euro Pacific Index. The Fund,
however, may invest in stocks that are not constituents of the index. Up to 35%
of the Fund's total assets may include cash equivalents, investment grade fixed
income securities (rated in one of the four highest categories by one of the
major independent rating agencies, or in unrated securities that the adviser
considers of comparable quality) and equity securities of large and medium
capitalization companies located outside the U.S. and companies of any size
located in the U.S. The Fund may invest more than 25% of its assets in
securities of small cap companies located in each of Japan and the United
Kingdom. The Fund may use derivatives, including futures, options and foreign
currency transactions to lessen its exposure to changing currency exchange
rates, security prices, interest rates and other factors that affect security
values.

Page -2-
<PAGE>

Morgan Grenfell Emerging Markets Equity Fund
- --------------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of growth-oriented companies located in
emerging securities markets. Up to 35% of the Fund's total assets may include
cash equivalents, investment grade fixed income securities (rated in one of the
four highest categories by one of the major independent rating agencies, or in
unrated securities that the adviser considers of comparable quality) and equity
and equity related securities traded in developed markets (including the U.S.).
The Fund may invest more than 25% of its assets in securities of Mexican and
Brazilian companies. The Fund may use derivatives, including futures, options
and foreign currency transactions to lessen its exposure to changing currency
exchange rates, security prices, interest rates and other factors that affect
security values.

Morgan Grenfell Core Global Fixed Income Fund
- ---------------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the fixed income securities of issuers located throughout the world. The Fund
invests primarily in investment grade fixed income securities that, at the time
of purchase, are either rated in one of the three highest categories by a major
independent rating agency, or in unrated securities that the adviser considers
of comparable quality. The Fund may also invest in investment grade fixed
income securities rated in the fourth highest category. In the event that any
security is downgraded, the adviser will determine whether to hold or sell such
security, provided that the Fund will not hold more than 5% of its net assets in
securities that are rated below investment grade (high yield/high risk bonds).
Up to 35% of the Fund's total assets may be invested in domestic and foreign
cash equivalents. The Fund may invest more than 25% of its total assets in
securities denominated in the euro, as well as in the securities of companies
located in each of Japan, the United States, and the United Kingdom. The Fund
uses derivatives, including forward contracts and currency options to control
volatility and achieve desired currency weightings in a cost-effective manner.

Morgan Grenfell Global Fixed Income Fund
- ----------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the fixed income securities of issuers located throughout the world. The Fund
invests primarily in investment grade fixed income securities that, at the time
of purchase, are either rated in one of the four highest categories by a major
independent rating agency, or in unrated securities that the adviser considers
of comparable quality. The Fund may invest up to 15% of its total assets in
fixed income securities rated below investment grade (high yield/high risk
bonds), including the securities of issuers in emerging securities markets. Up
to 35% of the Fund's total assets may be invested in domestic and foreign cash
equivalents. The Fund may invest more than 25% of its total assets in
securities denominated in the euro, as well as in the securities of companies
located in each of Japan, the United States, and the United Kingdom. The Fund
uses derivatives, including forward contracts and currency options to control
volatility and achieve desired currency weightings in a cost-effective manner.

Morgan Grenfell International fixed Income Fund
- -----------------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the fixed income securities of foreign issuers. The Fund invests in investment
grade fixed income securities that, at the time of purchase, are rated in one of
the three highest categories by a major independent rating agency, or in unrated
securities the adviser considers of comparable quality. The Fund may invest up
to 10% of its total assets in investment grade fixed income securities rated in
the fourth highest category. In the event that any security is downgraded, the
adviser will determine whether to hold or sell such security, provided that the
Fund will not hold more than 5% of its net assets in securities that are rated
below investment grade (high yield/high risk bonds). Up to 35% of the Fund's
total assets may be invested in domestic and foreign cash equivalents and in
U.S. fixed income securities. The Fund may invest more than 25% of its total
assets in securities denominated in the euro, as well as in the securities of
companies located in each of Japan and the United Kingdom. The Fund uses
derivatives, including forward contracts and currency options to control
volatility and achieve desired currency weightings in a cost-effective manner.

Page -3-
<PAGE>

Morgan Grenfell Emerging Markets Debt Fund
- ------------------------------------------

Under normal circumstances, the Fund invests at least 65% of its total assets in
the (high yield/high risk) fixed income securities of issuers located in
countries with new or emerging securities markets. These include performing and
non-performing loans, Eurobonds, Brady Bonds (dollar denominated securities used
to refinance foreign government bank loans) and other fixed income securities of
foreign governments and their agencies as well as some corporate debt
instruments. Up to 35% of the Fund's total assets may be invested in domestic
and foreign cash equivalents and U.S. fixed income securities. The Fund may
invest more than 25% of its total assets in the securities of companies located
in each of Argentina, Brazil and Mexico. Fixed income securities in which the
Fund may invest may be of any credit quality, including securities not paying
interest currently, zero coupon bonds, pay-in-kind securities and securities in
default. The loans and debt instruments in which the Fund may invest may be
denominated in a major currency or in a local currency.

FOREIGN SECURITIES

GENERAL. Subject to their respective investment objectives and policies, the
Funds may invest in securities of foreign issuers, including U.S. dollar-
denominated and non-dollar denominated foreign equity and fixed income
securities and in certificates of deposit issued by foreign banks and foreign
branches of U.S. banks. While investments in securities of foreign issuers and
non-U.S. dollar denominated securities may offer investment opportunities not
available in the United States, such investments also involve significant risks
not typically associated with investing in domestic securities. In many foreign
countries, there is less publicly available information about foreign issuers,
and there is less government regulation and supervision of foreign stock
exchanges, brokers and listed companies. Also in many foreign countries,
companies are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic issuers.
Security trading practices and custody arrangements abroad may offer less
protection to the Funds' investments and there may be difficulty in enforcing
legal rights outside the United States. Settlement of transactions in some
foreign markets may be delayed or may be less frequent than in the United States
which could affect the liquidity of the Funds' portfolios. Additionally, in
some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of securities, property, or
other Fund assets, political or social instability or diplomatic developments
which could affect investments in foreign securities. For purposes of each
Fund's investment objective, a company is considered to be located in a
particular country if it (1) is organized under the laws of that country and has
a principal place of business in that country or (2) derives 50% or more of its
total revenues from business in that country. Each of the international equity
funds intends to invest in at least three foreign countries. Each of the global
equity funds intends to invest in at least three countries (including the U.S.).
Each of the Equity Funds intends to invest at least 60% of its total assets
directly in stocks.

To the extent the Funds' investments are denominated in foreign currencies, the
Funds' net asset values may be affected favorably or unfavorably by fluctuations
in currency exchange rates and by changes in exchange control regulations. For
example, if the Adviser increases a Fund's exposure to a foreign currency, and
that currency's value subsequently falls, the Adviser's currency management may
result in increased losses to the Fund. Similarly, if the

Page -4-
<PAGE>

Adviser hedges a Fund's exposure to a foreign currency, and that currency's
value rises, the Fund will lose the opportunity to participate in the currency's
appreciation. The Funds will incur transaction costs in connection with
conversions between currencies.

INVESTMENTS IN AMERICAN, EUROPEAN, GLOBAL AND INTERNATIONAL DEPOSITORY RECEIPTS.
The Funds may invest in foreign securities in the form of American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global Depository
Receipts ("GDRs") or International Depository Receipts ("IDRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs and
IDRs are receipts issued in Europe typically by non-U.S. banking and trust
companies that evidence ownership of either foreign or U.S. securities. GDRs
are receipts issued by either a U.S. or non-U.S. banking institution evidencing
ownership of the underlying foreign securities. Generally, ADRs, in registered
form, are designed for use in U.S. securities markets and EDRs, GDRs and IDRs,
in bearer form, are designed for use in European securities markets. An ADR,
EDR, GDR or IDR may be denominated in a currency different from the currency in
which the underlying foreign security is denominated.

INVESTMENTS IN EMERGING MARKETS. Each of the Funds may invest to varying
degrees in one or more countries with emerging securities markets. These
countries are generally located in Latin America, Europe, the Middle East,
Africa and Asia. Political and economic structures in many of these countries
may be undergoing significant evolution and rapid development, and these
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of these countries may have in the past
failed to recognize private property rights and, at times, may have nationalized
or expropriated the assets of private companies. As a result, these risks,
including the risk of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the value of a Fund's investments in these countries, as well as the
availability of additional investments in these countries. The small size and
inexperience of the securities markets in certain of these countries and the
limited volume of trading in securities in these countries may make the Funds'
investments in these countries illiquid and more volatile than investments in
most Western European countries, and the Funds may be required to establish
special custodial or other arrangements before making certain investments in
some of these countries. There may be little financial or accounting
information available with respect to issuers located in certain of these
countries, and it may be difficult as a result to assess the value or prospects
of an investment in these countries. The laws of some foreign countries may
limit the Funds' ability to invest in securities of certain issuers located in
those countries.

REGION AND COUNTRY INVESTING. Each Fund may focus its investments in a
particular region and/or in one or more foreign countries. Focusing a Fund's
investments in a particular region or country will subject the Fund, to a
greater extent than if its investments in such region or country were more
limited, to the risks of adverse securities markets, exchange rates and social,
political or economic developments which may occur in that region or country.

CURRENCY MANAGEMENT TECHNIQUES

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<PAGE>

GENERAL. The performance of foreign currencies relative to that of the U.S.
dollar is an important factor in each Fund's performance and the Adviser may
manage the Fund's exposure to various currencies to seek to take advantage of
the yield, risk and return characteristics that different currencies can
provide. Currency exchange rates may fluctuate significantly over short periods
of time causing, together with other factors, a Fund's net asset value to
fluctuate as well, notwithstanding the performance of a Fund's underlying
assets. Currency exchange rates generally are determined by the forces of
supply and demand in the foreign exchange markets and the relative merits of
investments in different countries, actual or anticipated changes in interest
rates and other complex factors, as seen from an international perspective.
Currency exchange rates also can be affected by intervention, or failure to
intervene, by U.S. or foreign governments or central banks, or by currency
controls or political developments in the United States or abroad. To the
extent that a substantial portion of a Fund's total assets, adjusted to reflect
the Fund's net position after giving effect to currency transactions, is
denominated in the currency of a foreign country, the Fund will be more
susceptible to the risk of adverse economic and political developments in that
country.

In an attempt to manage exposure to currency exchange rate fluctuations, the
Funds may enter into forward foreign currency exchange contracts or currency
swap agreements, purchase securities indexed to foreign currencies, and buy and
sell options and futures contracts relating to foreign currencies and options on
such futures contracts. The Funds may use currency hedging techniques in the
normal course of business to lock in an exchange rate in connection with
purchases and sales of securities denominated in foreign currencies. Other
currency management strategies allow the Adviser to hedge portfolio securities,
to shift investment exposure from one currency to another, or to attempt to
profit from anticipated declines in the value of a foreign currency relative to
the U.S. dollar. There is no overall limitation on the amount of assets that
any of the Funds may commit to currency management strategies. Although the
Adviser may attempt to manage currency exchange rate risks, there is no
assurance that the Adviser will do so, or do so at an appropriate time or that
the Adviser will be able to predict exchange rates accurately.

Securities held by a Fund are generally denominated in the currency of the
foreign market in which the investment is made. However, securities held by a
Fund may be denominated in the currency of a country other than the country in
which the security's issuer is located.

FOREIGN CURRENCY EXCHANGE CONTRACTS. Each of the Funds will exchange currencies
in the normal course of managing its investments and may incur costs in doing so
because a foreign exchange dealer will charge a fee for conversion. A Fund may
conduct foreign currency exchange transactions on a "spot" basis (i.e., for
cash, for prompt delivery and settlement) at the prevailing spot rate for
purchasing or selling currency in the foreign currency exchange market. A Fund
also may enter into forward currency exchange contracts ("forward currency
contracts") or other contracts to purchase and sell currencies for settlement at
a future date. A foreign exchange dealer, in that situation, will expect to
realize a profit based on the difference between the price at which a foreign
currency is sold to the Fund and the price at which the dealer will cover the
purchase in the foreign currency market. Foreign exchange transactions are
entered into at prices quoted by dealers, which may include a mark-up over the
price that the dealer must pay for the currency. Contracts to sell foreign
currency could limit

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any potential gain which might be realized by a Fund if the value of the hedged
currency increased.

A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are generally charged at any stage for trades, but currency dealers
seek to obtain a "spread" or profit on each transaction.

At the maturity of a forward contract a Fund may either accept or make delivery
of the currency specified in the contract or, at or prior to maturity, enter
into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.

The Funds may enter into forward currency contracts in several circumstances for
both hedging and non-hedging purposes, although the Emerging Local Currency Debt
Fund does not expect generally to enter into such contracts for hedging
purposes. When purchase or sold for non-hedging purposes, forward currency
contracts are speculative. First, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when a Fund
anticipates the receipt in a foreign currency of dividend or interest payments
on such a security which it holds, the Fund may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, a Fund will attempt to protect
itself against an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
security is purchased or sold, or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.

Additionally, when management of a Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward currency
contracts in an attempt to protect the value of a Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which a Fund can achieve at some future point in time. The precise
projection of short-term currency market movements is not possible, and
short-term hedging provides a means of fixing the dollar value of only a portion
of a Fund's foreign assets.

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A Fixed Income Fund may sell U.S. dollars and buy a foreign currency forward in
order to gain exposure to a currency which is expected to appreciate against the
U.S. dollar. This speculative strategy allows a Fund to benefit from currency
appreciation potential without requiring it to purchase a local fixed income
instrument, for which prospects may be relatively unattractive. It is the
Adviser's intention that each Fund's net U.S. dollar currency exposure generally
will not fall below zero (i.e., that net short positions in the U.S. dollar
generally will not be taken).

Each Fund may also utilize forward foreign currency contracts to establish a
synthetic investment position designed to change the currency characteristics of
a particular security without the need to sell such security. Synthetic
investment positions will typically involve the purchase of U.S. dollar-
denominated securities together with a forward contract to purchase the currency
to which the Fund seeks exposure and to sell U.S. dollars. This may be done
because the range of highly liquid short-term instruments available in the U.S.
may provide greater liquidity to a Fund than actual purchases of foreign
currency-denominated securities in addition to providing superior returns in
some cases. Depending on (a) each Fund's liquidity needs, (b) the relative
yields of securities denominated in different currencies and (c) spot and
forward currency rates, a significant portion of a Fund's assets may be invested
in synthetic investment positions, subject to compliance with the tax
requirements for qualification as a regulated investment company. See "Taxes."

There is a risk in adopting a synthetic investment position. It is impossible
to forecast with absolute precision what the market value of a particular
security will be at any given time. If the value of the U.S. dollar-denominated
security is not exactly matched with a Fund's obligation under a forward
currency contract on the date of maturity, the Fund may be exposed to some risk
of loss from fluctuations in the value of the U.S. dollar. Although the Adviser
will attempt to hold such mismatching to a minimum, there can be no assurance
that the Adviser will be able to do so.

A Fund's custodian will place cash or liquid securities into a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward currency contracts requiring the Fund
to purchase foreign currencies or forward contracts entered into for non-hedging
purposes. If the value of the securities placed in the segregated account
declines, additional cash or liquid securities will be placed in the account on
a daily basis so that the value of the account will equal the amount of a Fund's
commitments with respect to such contracts. The segregated account will be
marked-to-market on a daily basis. Although the contracts are not presently
regulated by the Commodity Futures Trading Commission (the "CFTC"), the CFTC may
in the future assert authority to regulate these contracts. In such event, the
Funds' ability to utilize forward currency contracts may be restricted.

A Fund generally will not enter into a forward currency contract with a term of
greater than one year. The forecasting of short-term currency market movements
is extremely difficult and there can be no assurance that short-term hedging
strategies will be successful.

While the Funds may enter into forward currency contracts in an attempt to
reduce currency exchange rate risks, transactions in currency contracts involve
certain other risks. Thus, while

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the Funds may benefit from currency transactions, unanticipated changes in
currency prices may result in a poorer overall performance for a Fund than if it
had not engaged in any such transactions. Moreover, there may be an imperfect
correlation between a Fund's portfolio holdings of securities denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may cause a Fund to sustain losses which will prevent the
Fund from achieving a complete hedge or expose the Fund to risk of foreign
exchange loss.

Forward currency contracts are subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward currency contract is
not guaranteed by an exchange or clearinghouse, a default on the contract would
deprive a Fund of unrealized profits, transaction costs or the benefits of a
currency hedge or force a Fund to cover its purchase or sale commitments, if
any, at the current market price. The Funds will not enter into forward
currency contracts unless the credit quality of the unsecured senior debt or the
claims-paying ability of the counterparty is determined to be investment grade
by the Adviser. The Adviser will monitor the claims-paying ability of the
counterparty on an ongoing basis.

A Fund's activities in forward currency exchange contracts, currency options and
currency futures contracts and related options (see below) may be limited by the
requirements of subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.

CROSS HEDGING. At the discretion of the Adviser, each of the Funds may employ
the currency hedging strategy known as "cross-hedging" by using forward currency
contracts, currency options or a combination of both. When engaging in cross-
hedging, a Fund seeks to protect against a decline in the value of a foreign
currency in which certain of its portfolio securities are denominated by selling
that currency forward into a different foreign currency for the purpose of
diversifying the Fund's total currency exposure or gaining exposure to a foreign
currency that is expected to appreciate.

OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES

Each of the Funds may write covered put and call options and purchase put and
call options. Such options may relate to particular U.S. or non-U.S.
securities, to various U.S. or non-U.S. stock indices or to U.S. or non-U.S.
currencies. The Funds may write put and call options which are issued by the
Options Clearing Corporation (the "OCC") or which are traded on U.S. and non-
U.S. exchanges and over-the-counter.

WRITTEN OPTIONS. The Funds may write (sell) covered put and call options on
equity and fixed income securities and enter into related closing transactions.
A Fund may receive fees (referred to as "premiums") for granting the rights
evidenced by the options. However, in return for the premium, the Fund assumes
certain risks. For example, in the case of a written call option, the Fund
forfeits the right to any appreciation in the underlying security while the
option is outstanding. A put option gives to its purchaser the right to compel
the Fund to purchase an underlying security from the option holder at the
specified price at any time during the option period. In contrast, a call
option written by the Fund gives to its purchaser the right to compel the Fund
to sell an underlying security to the option holder at a specified price at any
time during the option period. Upon the exercise of a put option written by a
Fund, the Fund

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may suffer a loss equal to the difference between the price at which the Fund is
required to purchase the underlying security and its market value at the time of
the option exercise, less the premium received for writing the option. All
options written by a Fund are covered. In the case of a call option, this means
that the Fund will own the securities subject to the option or an offsetting
call option as long as the written option is outstanding, or will have the
absolute and immediate right to acquire the securities that are subject to the
written option. In the case of a put option, this means that the Fund will
deposit cash or liquid securities or a combination of both in a segregated
account with the custodian with a value at least equal to the exercise price of
the put option.

PURCHASED OPTIONS. The Funds may also purchase put and call options on
securities. The advantage to the purchaser of a call option is that it may
hedge against an increase in the price of securities it ultimately wishes to
buy. The advantage to the purchaser of a put option is that it may hedge
against a decrease in the price of portfolio securities it ultimately wishes to
sell.

Each Fund may enter into closing transactions in order to offset an open option
position prior to exercise or expiration by selling an option it has purchased
or by entering into an offsetting option. If a Fund cannot effect closing
transactions, it may have to retain a security in its portfolio it would
otherwise sell or deliver a security it would otherwise retain. The Funds may
purchase and sell options traded on recognized foreign exchanges. The Funds may
also purchase and sell options traded on U.S. exchanges and, to the extent
permitted by law, options traded over-the-counter.

YIELD CURVE OPTIONS. The Funds may enter into options on the yield spread or
yield differential between two securities. These options are referred to as
yield curve options. In contrast to other types of options, a yield curve
option is based on the difference between the yields of designated securities,
rather than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.

CURRENCY OPTIONS. The Funds may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or over-the-counter) to
manage portfolio exposure to changes in U.S. dollar exchange rates. Call
options on foreign currency written by a Fund will be covered, which means that
the Fund will own an equal amount of the underlying foreign currency. With
respect to put options on foreign currency written by a Fund, the Fund will
deposit cash or liquid securities or a combination of both in a segregated
account with the custodian in an amount equal to the amount the Fund would be
required to pay upon exercise of the put option.

STOCK INDEX OPTIONS The Funds may purchase and write exchange-listed put and
call options on stock indices to hedge against risks of market-wide price
movements. A stock index measures the movement of a certain group of stocks by
assigning relative values to the common stocks included in the index. Examples
of well-known foreign stock indices are the Toronto Stock Exchange Composite 100
and the Financial Times Stock Exchange 100. Options on stock indices are
similar to options on securities. However, because options on

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stock indices do not involve the delivery of an underlying security, the option
represents the holder's right to obtain from the writer in cash a fixed multiple
of the amount by which the exercise price exceeds (in the case of a put) or is
less than (in the case of a call) the closing value of the underlying index on
the exercise date.

OTHER CONSIDERATIONS. An option on a securities index provides the holder with
the right to receive a cash payment upon exercise of the option if the market
value of the underlying index exceeds (in case of a call option), or is less
than (in the case of a put option), the option's exercise price. The amount of
this payment will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
U.S. dollars or a foreign currency, times a specified multiple. A put option on
a currency gives its holder the right to sell an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration. Conversely, a call option on a
currency gives its holder the right to purchase an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration.

The Funds will engage in over-the-counter ("OTC") options only with broker-
dealers deemed creditworthy by the Adviser. Closing transactions in certain
options are usually effected directly with the same broker-dealer that effected
the original option transaction. A Fund bears the risk that the broker-dealer
may fail to meet its obligations. There is no assurance that a Fund will be
able to close an unlisted option position. Furthermore, unlisted options are
not subject to the protections afforded purchasers of listed options by the OCC,
which performs the obligations of its members who fail to do so in connection
with the purchase or sale of options.

A Fund will write call options only if they are "covered." In the case of a call
option on a security, the option is "covered" if a portfolio owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities in such amount are held in
a segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if the Fund maintains with the Fund's custodian cash or liquid
securities equal to the contract value. A call option on a security or an index
is also covered if the Fund holds a call on the same security or index as the
call written by the Fund where the exercise price of the call held is (i) equal
to or less than the exercise price of the call written, or (ii) greater than the
exercise price of the call written provided the difference is maintained by the
Fund in cash or liquid securities in a segregated account with the Fund's
custodian. A call option on currency written by a Fund is covered if the Fund
owns an equal amount of the underlying currency.

When a Fund purchases a put option, the premium paid by it is recorded as an
asset of the Fund. When the Fund writes an option, an amount equal to the net
premium (the premium less the commission paid by the Fund) received by the Fund
is included in the liability section of the Fund's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be marked-to-market on an ongoing basis to reflect the current value of the
option purchased or written. The current value of a traded option is the last
sale price or, in the absence of a sale, the average of the closing bid and
asked prices. If an option purchased by the Fund expires unexercised, the Fund
realizes a loss equal to the premium paid. If the

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Fund enters into a closing sale transaction on an option purchased by it, the
Fund will realize a gain if the premium received by the Fund on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by the Fund expires on the stipulated
expiration date or if the Fund enters into a closing purchase transaction, it
will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option written by the
Fund is exercised, the proceeds to the Fund from the exercise will be increased
by the net premium originally received, and the Fund will realize a gain or
loss.

There are several risks associated with transactions in options on securities,
securities indices and currencies. For example, there are significant
differences between the securities markets, currency markets and the
corresponding options markets that could result in imperfect correlations,
causing a given option transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded OTC or on a
U.S. or non-U.S. securities exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the OCC may not at all times be
adequate to handle current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options that had been
issued by the OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

The hours of trading for options may not conform to the hours during which the
underlying securities and currencies are traded. To the extent that the options
markets close before the markets for the underlying securities and currencies,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the options markets. The purchase of options is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio transactions. The risks
described above also apply to options on futures, which are discussed
below.

FUTURES CONTRACTS AND RELATED OPTIONS

To hedge against changes in interest rates or securities prices and for certain
non-hedging purposes, the Funds may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts. The Funds may also enter into closing purchase and sale transactions
with respect to any of such contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities), securities
indices, currencies and other financial instruments, currencies and indices.
The Funds will engage in futures and related options transactions only for bona
fide hedging or other non-hedging purposes as defined in regulations promulgated
by the CFTC. All futures

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contracts entered into by the Funds are traded on U.S. exchanges or boards of
trade that are licensed and regulated by the CFTC or on foreign exchanges
approved by the CFTC.

FUTURES CONTRACTS. A futures contract may generally be described as an
agreement between two parties to buy and sell a particular financial instrument
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
Futures contracts obligate the long or short holder to take or make delivery of
a specified quantity of a commodity or financial instrument, such as a security
or the cash value of a securities index, during a specified future period at a
specified price.

When interest rates are rising or securities prices are falling, a Fund can seek
to offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Funds may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures on securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.

HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price and rate of return on portfolio
securities and securities that a Fund proposes to acquire. The Funds may, for
example, take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in interest rates or a
decline in market prices that would adversely affect the value of a Fund's
portfolio securities. Futures contracts that a Fund may use for hedging
purposes include contracts for the future delivery of securities held by the
Fund or securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of the Adviser, there is a sufficient degree of
correlation between price trends for a Fund's portfolio securities and futures
contracts based on other financial instruments, securities indices or other
indices, a Fund may also enter into such futures contracts as part of its
hedging strategy. Although under some circumstances prices of securities in a
Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting a
Fund's securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.

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On other occasions, the Funds may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.

OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on
futures contracts will give the Funds the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract (if the option is exercised), which may have a value higher than the
exercise price. Conversely, the writing of a put option on a futures contract
generates a premium which may partially offset an increase in the price of
securities that a Fund intends to purchase. However, a Fund becomes obligated
to purchase a futures contract (if the option is exercised), which may have a
value lower than the exercise price. Thus, the loss incurred by a Fund in
writing options on futures is potentially unlimited and may exceed the amount of
the premium received. The Funds will incur transaction costs in connection with
the writing of options on futures.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series.
There is no guarantee that such closing transactions can be effected. The
Funds' ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid market.

OTHER CONSIDERATIONS. The Funds will engage in futures and related options
transactions only for hedging or non-hedging purposes as permitted by CFTC
regulations which permit principals of an investment company registered under
the 1940 Act to engage in such transactions without registering as commodity
pool operators. A Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities or instruments held by
the Fund or securities or instruments which they expect to purchase. Except as
stated below for all the Funds and as noted above for the Emerging Local
Currency Debt Fund, the Funds' futures transactions will be entered into for
traditional hedging purposes--i.e., futures contracts will be sold to protect
against a decline in the price of securities (or the currency in which they are
denominated) that a Fund owns or futures contracts will be purchased to protect
a Fund against an increase in the price of securities (or the currency in which
they are denominated) that a Fund intends to purchase. As evidence of this
hedging intent, each Fund expects that, on 75% or more of the occasions on which
it takes a long futures or option position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities (or assets denominated in
the related currency) in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for a Fund to do so, a long

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futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.

As an alternative to compliance with the hedging definition, a CFTC regulation
now permits a Fund to elect to comply with a different test under which the
aggregate initial margin and premiums required to establish non-hedging
positions in futures contracts and options on futures will not exceed 5% of the
net asset value of a Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. A Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Code for maintaining
its qualification as a regulated investment company for federal income tax
purposes. See "Taxes."

A Fund will be required, in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits, which
will be held by the Trust's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures contracts and option
transactions. These transactions involve brokerage costs, require margin
deposits and, in the case of futures contracts and options obligating a Fund to
purchase securities, require a Fund to segregate cash or liquid securities in an
account maintained with the Trust's custodian to cover such contracts and
options.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions. The other risks associated with the
use of futures contracts and options thereon are (i) imperfect correlation
between the change in market value of the securities held by a Fund and the
prices of the futures and options and (ii) the possible absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures or option position prior to its maturity or expiration date.

In the event of an imperfect correlation between a futures or options position
and the portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of loss. The
risk of imperfect correlation may be minimized by investing in contracts whose
price behavior is expected to resemble that of a Fund's underlying portfolio
securities. The risk that the Funds will be unable to close out a futures or
related options position will be minimized by entering into such transactions on
a national exchange with an active and liquid secondary market.

LIMITATIONS AND RISKS ASSOCIATED WITH TRANSACTIONS IN FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS, OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Each of the Funds' active management techniques involves (1) liquidity risk that
contractual positions cannot be easily closed out in the event of market changes
or generally in the absence of a liquid secondary market, (2) correlation risk
that changes in the value of hedging positions may not match the securities
market and foreign currency fluctuations intended to be hedged, and (3) market
risk that an incorrect prediction of securities prices or exchange rates by
the

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<PAGE>

Adviser may cause a Fund to perform worse than if such positions had not been
taken. The ability to terminate over-the-counter options is more limited than
with exchange traded options and may involve the risk that the counterparty to
the option will not fulfill its obligations.

The use of options, futures and forward currency contracts is a highly
specialized activity which involves investment techniques and risks that are
different from those associated with ordinary portfolio transactions. Gains and
losses on investments in options and futures depend on the Adviser's ability to
predict the direction of stock prices, interest rates, currency movements and
other economic factors. The loss that may be incurred by a Fund in entering
into futures contracts and written options thereon and forward currency
contracts is potentially unlimited. There is no assurance that higher than
anticipated trading activity or other unforeseen events might not, at times,
render certain facilities of an options clearing entity or other entity
performing the regulatory and liquidity functions of an options clearing entity
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
Options and futures traded on foreign exchanges generally are not regulated by
U.S. authorities, and may offer less liquidity and less protection to a Fund in
the event of default by the other party to the contract.

Except as set forth above under "Futures Contracts and Related Options--Other
Considerations", there is no limit on the percentage of a Fund's assets that may
be invested in futures contracts and related options or forward currency
contracts. A Fund may not invest more than 25% of its total assets in purchased
protective put options. A Fund's transactions in options, forward currency
contracts, futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes.

FIXED INCOME SECURITIES

GENERAL. In order to achieve their respective investment objectives, the Funds
may invest in a broad range of U.S. and non-U.S. fixed income securities. In
periods of declining interest rates, a Fund's yield (its income from portfolio
investments over a stated period of time) may tend to be higher than prevailing
market rates, and in periods of rising interest rates, the yield of the Fund may
tend to be lower. Also, when interest rates are falling, the inflow of net new
money to each Fund from the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. To the extent a Fund invests in fixed
income securities, its net asset value can generally be expected to change as
general levels of interest rates fluctuate. The value of fixed income
securities in a Fund's portfolio generally varies inversely with changes in
interest rates. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities. The Fixed Income Funds may invest up to 5% of their net
assets in inverse floating rate securities, which have greater volatility risk
than ordinary fixed income securities.

FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which the
Funds may invest generally consist of debt obligations issued or guaranteed by
national, state or provincial governments or similar political subdivisions.
Foreign government securities also

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include debt obligations of supranational or quasi-governmental entities. Quasi-
governmental and supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Examples include the International Bank for Reconstruction
and Development (the "World Bank"), the Japanese Development Bank, the Asian
Development Bank and the InterAmerican Development Bank. Foreign government
securities also include mortgage-related securities issued or guaranteed by
national, state or provincial governmental instrumentalities, including quasi-
governmental agencies.

BRADY BONDS. Each Fund may invest in so-called "Brady Bonds," which have
recently been issued by Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Panama, the Philippines, Poland,
Uruguay and Venezuela and which may be issued by other countries. Brady Bonds
are issued as part of a debt restructuring in which the bonds are issued in
exchange for cash and certain of the country's outstanding commercial bank
loans. Brady Bonds may be collateralized or uncollateralized, are issued in
various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market. U.S. dollar denominated, collateralized
Brady Bonds, which may be fixed rate par bonds or floating rate discount bonds,
are collateralized in full as to principal by U.S. Treasury zero coupon bonds
that have the same maturity as the stated bonds. Interest payments on such
bonds generally are collateralized by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
the time and is adjusted at regular intervals thereafter.

REGISTERED LOANS. The Emerging Markets Debt Fund may invest in loan obligations
issued or guaranteed by sovereign governments or their agencies and
instrumentalities. The ownership of these loans is registered in the books of
an agent bank and/or the borrower and transfers of ownership are effected by
assignment agreements. Documentation for these assignments includes a signed
notice of assignment, which is sent to the agent and/or borrower for
registration shortly after the execution of the assignment agreement. Prior to
the notice of assignment being registered with the agent and/or borrower, the
borrower or its agent will make any payments of principal and interest to the
last registered owner.

Given the volume of secondary market trading in registered loans, the agent
and/or borrower's books may be out of date, making it difficult for a Fund to
establish independently whether the seller of a registered loan is the owner of
the loan. For this reason, the Fund will require a contractual warranty from
the seller to this effect. In addition, to assure the Fund's ability to receive
principal and interest owed to it but paid to a prior holder because of delays
in registration, the Fund will purchase registered loans only from parties that
agree to pay the amount of such principal and interest to the Fund upon demand
after the borrower's payment of such principal and interest to any prior holder
has been established.

Generally, registered loans trade in the secondary market with interest (i.e.,
the right to accrued but unpaid interest is transferred to purchasers).
Occasionally, however, the Fund may sell a registered loan and retain the right
to such interest ("sell a loan without interest"). To assure the Fund's ability
to receive such interest, the Fund will make such sales only to parties
that

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<PAGE>

agree to pay the amount of such interest to the Fund upon demand after the
borrower's payment of such interest to any subsequent holder of the loan has
been established. In this rare situation, the Fund's ability to receive such
interest (and, therefore, the value of shareholders' investments in the Fund
attributable to such interest) will depend on the creditworthiness of both the
borrower and the party who purchased the loan from the Fund.

To further assure the Fund's ability to receive interest and principal on
registered loans, the Fund will only purchase registered loans from, and sell
loans without interest to, parties determined to be creditworthy by the Adviser.
For purposes of the Fund's issuer diversification and industry concentration
policies, the Fund will treat the underlying borrower of a registered loan as an
issuer of that loan. Where the Fund sells a loan without interest, it will
treat both the borrower and the purchaser of the loan as issuers for purposes of
this policy.

U.S. GOVERNMENT SECURITIES. The Funds may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises ("U.S. Government
securities"). Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, are supported by the full faith and credit of the United
States. Others, such as obligations issued or guaranteed by U.S. Government
agencies or instrumentalities are supported either by (i) the full faith and
credit of the U.S. Government (such as securities of the Small Business
Administration), (ii) the right of the issuer to borrow from the U.S. Treasury
(such as securities of the Federal Home Loan Banks), (iii) the discretionary
authority of the U.S. Government to purchase the agency's obligations (such as
securities of the Federal National Mortgage Association ("FNMA")), or (iv) only
the credit of the issuer. No assurance can be given that the U.S. Government
will provide financial support to U.S. Government agencies or instrumentalities
in the future.

The Funds may also invest in separately traded principal and interest components
of U.S. Government securities if such components are traded independently under
the Separate Trading of Registered Interest and Principal of Securities program
("STRIPS") or any similar program sponsored by the U.S. Government.

VARIABLE AND FLOATING RATE INSTRUMENTS. Debt instruments purchased by a Fund
may be structured to have variable or floating interest rates. These
instruments may include variable amount master demand notes that permit the
indebtedness to vary in addition to providing for periodic adjustments in the
interest rates. The Adviser will consider the earning power, cash flows and
other liquidity ratios of the issuers and guarantors of such instruments and, if
the instrument is subject to a demand feature, will continuously monitor their
financial ability to meet payment on demand. Where necessary to ensure that a
variable or floating rate instrument is equivalent to the quality standards
applicable to a Fund's fixed income investments, the issuer's obligation to pay
the principal of the instrument will be backed by an unconditional bank letter
or line of credit, guarantee or commitment to lend. Any bank providing such a
bank letter, line of credit, guarantee or loan commitment will meet the Fund's
investment quality standards relating to investments in bank obligations. The
Adviser will continuously monitor the creditworthiness of issuers of such
instruments to determine whether a Fund should continue to hold the
investments.

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<PAGE>

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments, and a Fund could
suffer a loss if the issuer defaults or during periods in which a Fund is not
entitled to exercise its demand rights.

Variable and floating rate instruments held by a Fund will be subject to the
Fund's 15% limitation on investments in illiquid securities when a reliable
trading market for the instruments does not exist and the Fund may not demand
payment of the principal amount of such instruments within seven days.

YIELDS AND RATINGS. The yields on certain obligations, including the money
market instruments in which each Fund may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the obligation,
the financial condition of the issuer, the size of the offering, the maturity of
the obligation and the ratings of the issue. The ratings of Standard and
Poor's, Moody's and other nationally and internationally recognized rating
organizations represent their respective opinions as to the quality of the
obligations they undertake to rate. Ratings, however, are general and are not
absolute standards of quality or value.

Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. See Appendix A for a description of the ratings
provided by recognized statistical ratings organizations.

INTEREST RATE, MORTGAGE AND CURRENCY SWAPS AND INTEREST RATE CAPS AND FLOORS.
The Funds may enter into interest rate, mortgage and currency swaps and interest
rate caps and floors for hedging purposes and non-hedging purposes, provided
that the Emerging Local Currency Debt Fund does not expect generally to use
these instruments to attempt to hedge against potential adverse changes in
currency exchange rates. Inasmuch as transactions in swaps, caps and floors are
entered into for good faith hedging purposes or are offset by a segregated
account, the Funds and the Adviser believe that such obligations do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Funds' borrowing restrictions.

A Fund will not enter into any interest rate, mortgage, or currency swap or
interest rate cap or floor transaction unless the unsecured commercial paper,
senior debt or the claims-paying ability of the other party thereto is
considered to be investment grade by the Adviser. If there is a default by the
other party to such a transaction, a Fund will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid
in comparison with the markets for other similar instruments which are traded in
the interbank market. However, the staff of the Securities and Exchange
Commission (the "Commission") takes the position that swaps, caps and floors are
illiquid investments that are subject to the Funds' 15% limitation on such
investments.

The use of interest rate, mortgage and currency swaps and interest rate caps and
floors is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its

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forecasts of market values, interest rates or currency exchange rates, the
investment performance of a Fund may be less favorable than it would have been
if these investment techniques were not used.

INVERSE FLOATING RATE SECURITIES. The Funds may invest up to 5% of their net
assets in inverse floating rate securities. The interest rate on an inverse
floater resets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate varies by a magnitude that
exceeds the magnitude of the change in the index rate of interest. The higher
degree of leverage inherent in inverse floaters is associated with greater
volatility in their market values.

ZERO COUPON AND DEFERRED INTEREST BONDS. The Funds may invest in zero coupon
bonds and deferred interest bonds. Zero coupon and deferred interest bonds are
debt obligations which are issued at a significant discount from face value. The
original discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest accrual
date at a rate of interest reflecting the market rate of the security at the
time of issuance. While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds generally provide for a period of delay before
the regular payment of interest begins. Although this period of delay is
different for each deferred interest bond, a typical period is approximately
one-third of the bond's term to maturity. Such investments benefit the issuer by
mitigating its initial need for cash to meet debt service, but some also provide
a higher rate of return to attract investors who are willing to defer receipt of
such cash. Zero coupon and deferred interest bonds are more volatile than
instruments that pay interest regularly. The Funds will accrue income on such
investments for tax and accounting purposes, as required, which is distributable
to shareholders and which, because no cash is generally received at the time of
accrual, may require the liquidation of other portfolio securities to satisfy
the Funds' distribution obligations. See "Taxes."

RISK FACTORS OF LOWER QUALITY SECURITIES "HIGH YIELD/HIGH RISK BONDS". The
Emerging Markets Debt Fund may invest without limit in rated and unrated fixed
income securities of any credit quality, including securities in default. In
addition, the Global Fixed Income Fund may invest up to 15% of its total assets
in fixed income securities that are rated less than Baa by Moody's Investor
Service, Inc. ("Moody's") or BBB by Standard & Poor's or, if unrated, determined
to be of comparable quality by the Adviser. Securities rated BB or lower by
Standard & Poor's or Ba or lower by Moody's and comparable unrated securities
are considered speculative and, while generally offering greater income than
investments in higher quality securities, involve greater risk of loss of
principal and income, including the possibility of default or bankruptcy of the
issuers of such securities, and have greater price volatility, especially during
periods of economic uncertainty or change. These lower quality fixed income
securities tend to be affected by economic changes and short-term corporate and
industry developments to a greater extent than higher quality securities, which
react primarily to fluctuations in the general level of interest rates. To the
extent a Fund invests in such lower quality securities, the achievement of its
investment objective may be more dependent on the Adviser's own credit analysis.
The market prices of zero coupon and payment-in-kind bonds are affected to a
greater extent by interest rate changes, and therefore tend to be more volatile
than securities which pay interest periodically and in cash. Increasing

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rate note securities are typically refinanced by the issuers within a short
period of time. See "Taxes."

Lower quality fixed income securities will also be affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. In the past, economic downturns
or an increase in interest rates have, under certain circumstances, caused a
higher incidence of default by the issuers of these securities and may do so in
the future, especially in the case of highly leveraged issuers. The market for
these lower quality fixed income securities is generally less liquid than the
market for investment grade fixed income securities. Therefore, the Adviser's
judgment may at times play a greater role in valuing these securities than in
the case of investment grade fixed income securities, and it also may be more
difficult under certain adverse market conditions to sell these lower rated
securities to meet redemption requests, to respond to changes in the market, or
to determine accurately a Fund's net asset value.

If a fixed income security, that at the time of purchase satisfied a Fund's
minimum rating criteria, is subsequently downgraded, the Fund will not be
required to dispose of the security. If such a downgrading occurs, however, the
Adviser will consider what action, including the sale of the security, is in the
best interest of the Fund. No Fund, other than the Core Global Fixed Income
Fund, Global Fixed Income Fund, and the Emerging Markets Debt Fund will continue
to hold fixed income securities that have been downgraded below investment grade
if more than 5% of that Fund's net assets would consist of such securities.

CONVERTIBLE SECURITIES AND PREFERRED STOCK

Subject to their investment policies, the Funds may invest in convertible
securities, which may include corporate notes or preferred stock but are
ordinarily long-term debt obligations of the issuer convertible at a stated
exchange rate into common stock of the issuer. As with all fixed income
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
Convertible securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure and are consequently of higher quality and entail less risk
than the issuer's common stock. However, the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security. In evaluating a
convertible security, the Adviser will give primary emphasis to the
attractiveness of the underlying common stock. The convertible debt securities
in which each Fund may invest are subject to the same rating criteria as the
Fund's investments in non-convertible securities.

Each of the Funds, subject to its investment objectives, may purchase preferred
stock. Preferred stocks are equity securities, but possess certain attributes of
debt securities and are generally considered fixed income securities. Holders of
preferred stocks normally have the

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<PAGE>

right to receive dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on the preferred stock may be
cumulative, and in such cases all cumulative dividends usually must be paid
prior to dividend payments to common stockholders. Because of this preference,
preferred stocks generally entail less risk than common stocks. Upon
liquidation, preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or stated value, and are
senior in right of payment to common stocks. However, preferred stocks are
equity securities in that they do not represent a liability of the issuer and
therefore do not offer as great a degree of protection of capital or assurance
of continued income as investments in corporate debt securities. In addition,
preferred stocks are subordinated in right of payment to all debt obligations
and creditors of the issuer, and convertible preferred stocks may be
subordinated to other preferred stock of the same issuer.

WARRANTS

Each of the Equity Funds may purchase warrants, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. The purchase of warrants involves a risk that a Fund could lose the
purchase value of a warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

The Funds may invest in mortgage-backed securities. Mortgage-backed securities
represent direct or indirect participations in or obligations collateralized by
and payable from mortgage loans secured by real property. Each mortgage pool
underlying mortgage-backed securities will consist of mortgage loans evidenced
by promissory notes secured by first mortgages or first deeds of trust or other
similar security instruments creating a first lien on owner and non-owner
occupied one-unit to four-unit residential properties, multifamily residential
properties, agricultural properties, commercial properties and mixed use
properties.

Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During periods
of declining interest rates, prepayment of loans underlying mortgage-backed and
asset-backed securities can be expected to accelerate, and thus impair a Fund's
ability to reinvest the returns of principal at comparable yields. Accordingly,
the market values of such securities will vary with changes in market interest
rates generally and in yield differentials among various kinds of U.S.
Government securities and other mortgage-backed and asset-backed securities.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities because asset-backed securities generally do not have
the benefit of a security interest in collateral that is comparable to mortgage
assets. In addition, there is the possibility that, in some cases, recoveries on
repossessed collateral may not be available to support payments on these
securities.

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<PAGE>

AGENCY MORTGAGE SECURITIES. The Funds may invest in mortgage-backed securities
issued or guaranteed by the U.S. Government, foreign governments or any of their
agencies, instrumentalities or sponsored enterprises. Agencies,
instrumentalities or sponsored enterprises of the U.S. Government include but
are not limited to the Government National Mortgage Association, ("Ginnie Mae"),
Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Ginnie Mae securities are backed by the
full faith and credit of the U.S. Government, which means that the U.S.
Government guarantees that the interest and principal will be paid when due.
Fannie Mae securities and Freddie Mac securities are not backed by the full
faith and credit of the U.S. Government; however, these enterprises have the
ability to obtain financing from the U.S. Treasury. There are several types of
agency mortgage securities currently available, including, but not limited to,
guaranteed mortgage pass-through certificates and multiple class securities.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Funds may also invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in mortgage
loans and other foreign or domestic non-governmental entities (or representing
custodial arrangements administered by such institutions). These private
originators and institutions include domestic and foreign savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing. Privately
issued mortgage-backed securities are generally backed by pools of conventional
(i.e., non-government guaranteed or insured) mortgage loans. Since such
mortgage-backed securities are not guaranteed by an entity having the credit
standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high
quality rating, they normally are structured with one or more types of "credit
enhancement." Such credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.

Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. Such protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.

MORTGAGE PASS-THROUGH SECURITIES. The Funds may invest in mortgage pass-through
securities, which are fixed or adjustable rate mortgage-backed securities that
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid to
any guarantor, administrator and/or servicers of the underlying mortgage loans.

MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. The Funds may invest in collateralized mortgage obligations
("CMOs"), which are multiple class mortgage-backed securities. CMOs provide an
investor with a specified interest in the cash flow from a pool of underlying
mortgages or of other

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<PAGE>

mortgage-backed securities. CMOs are issued in multiple classes, each with a
specified fixed or adjustable interest rate and a final distribution date. In
most cases, payments of principal are applied to the CMO classes in the order of
their respective stated maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier stated maturity date
are paid in full. Sometimes, however, CMO classes are "parallel pay" (i.e.,
payments of principal are made to two or more classes concurrently).

STRIPPED MORTGAGE-BACKED SECURITIES. The Funds may also invest in stripped
mortgage-backed securities ("SMBS"), which are derivative multiple class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of the interest and principal distributions from a
pool of mortgage loans. If the underlying mortgage loans experience greater than
anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment in these securities.

A common type of SMBS will have one class receiving all of the interest from a
pool of mortgage loans ("IOs"), while the other class will receive all of the
principal ("POs"). The market value of POs generally is unusually volatile in
response to changes in interest rates. The yields on IOs are generally higher
than prevailing market yields on other mortgage-backed securities because the
cash flow patterns of IOs are more volatile and there is a greater risk that the
initial investment will not be fully recouped. Because an investment in an IO
consists entirely of a right to an interest income stream and prepayments of
mortgage loan principal amounts can reduce or eliminate such income stream, the
value of IO's can be severely adversely affected by significant prepayments of
underlying mortgage loans. In accordance with a requirement imposed by the staff
of the Commission, the Adviser will consider privately-issued fixed rate IOs and
POs to be illiquid securities for purposes of the Funds' limitation on
investments in illiquid securities. Unless the Adviser, acting pursuant to
guidelines and standards established by the Board of Trustees, determines that a
particular government-issued fixed rate IO or PO is liquid, it will also
consider these IOs and POs to be illiquid.

ASSET-BACKED SECURITIES. The Funds may invest in asset-backed securities, which
represent participations in, or are secured by and payable from, pools of assets
such as motor vehicle installment sale contracts, installment loan contracts,
leases of various types of real and personal property, receivables from
revolving credit (credit card) agreements and other categories of receivables.
Such asset pools are securitized through the use of privately-formed trusts or
special purpose corporations. Payments or distributions of principal and
interest may be guaranteed up to certain amounts and for a certain time period
by a letter of credit or a pool insurance policy issued by a financial
institution unaffiliated with the trust or corporation, or other credit
enhancements may be present.

SMALL CAPITALIZATION COMPANIES

The International Small Cap Equity Fund invests a significant portion of its
assets in smaller, lesser-known, foreign companies which the Adviser believes
offer greater growth potential than larger, more mature, better-known companies.
Investing in the securities of these companies, however, also involves greater
risk and the possibility of greater portfolio price volatility. Among the
reasons for the greater price volatility of these small companies

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and unseasoned stocks are the less certain growth prospects of smaller firms,
the lower degree of liquidity in the markets for such stocks and the greater
sensitivity of small companies to changing economic conditions in their
geographic region. For example, securities of these companies involve higher
investment risk than that normally associated with larger firms due to the
greater business risks of small size and limited product lines, markets,
distribution channels and financial and managerial resources.

CUSTODIAL RECEIPTS

Each of the Funds may acquire U.S. Government securities and their unmatured
interest coupons that have been separated ("stripped") by their holder,
typically a custodian bank or investment brokerage firm. Having separated the
interest coupons from the underlying principal of the U.S. Government
securities, the holder will resell the stripped securities in custodial receipt
programs with a number of different names, including "Treasury Income Growth
Receipts" ("TIGRs") and "Certificate of Accrual on Treasury Securities"
("CATS"). The stripped coupons are sold separately from the underlying
principal, which is usually sold at a deep discount because the buyer receives
only the right to receive a future fixed payment on the security and does not
receive any rights to periodic interest (cash) payments. The underlying U.S.
Treasury bonds and notes themselves are generally held in book-entry form at a
Federal Reserve Bank. Counsel to the underwriters of these certificates or other
evidences of ownership of U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities most likely will be deemed the
beneficial holders of the underlying U.S. Government securities for federal tax
and securities purposes. In the case of CATS and TIGRS, the Internal Revenue
Service ("IRS") has reached this conclusion for the purpose of applying the tax
diversification requirements applicable to regulated investment companies such
as the Funds. CATS and TIGRS are not considered U.S. Government securities by
the Staff of the Commission, however. Further, the IRS conclusion is contained
only in a general counsel memorandum, which is an internal document of no
precedential value or binding effect, and a private letter ruling, which also
may not be relied upon by the Funds. The Trust is not aware of any binding
legislative, judicial or administrative authority on this issue.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements. In a repurchase agreement, a
Fund buys a security subject to the right and obligation to sell it back to the
other party at the same price plus accrued interest. These transactions must be
fully collateralized at all times, but they involve some credit risk to a Fund
if the other party defaults on its obligations and the Fund is delayed in or
prevented from liquidating the collateral. A Fund will enter into repurchase
agreements only with U.S. or foreign banks having total assets of at least
US$100 million (or its foreign currency equivalent).

For purposes of the 1940 Act and, generally, for tax purposes, a repurchase
agreement is considered to be a loan from the Fund to the seller of the
obligation. For certain other purposes, it is not clear whether a court would
consider such an obligation as being owned by the Fund or as being collateral
for a loan by the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
obligation before its repurchase, under the repurchase agreement, the Fund may
encounter

Page -25-
<PAGE>

delay and incur costs before being able to sell the security. Such delays may
result in a loss of interest or decline in price of the obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the obligation, the Fund may be treated as an unsecured
creditor of the seller and required to return the obligation to the seller's
estate. As an unsecured creditor, the Fund would be at risk of losing some or
all of the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Funds, the Adviser seeks to minimize
the risk of loss from repurchase agreements by analyzing the creditworthiness of
the obligor, in this case, the seller of the obligation. In addition to the risk
of bankruptcy or insolvency proceedings, there is the risk that the seller may
fail to repurchase the security. However, if the market value of the obligation
falls below the repurchase price (including accrued interest), the seller of the
obligation will be required to deliver additional securities so that the market
value of all securities subject to the repurchase agreement equals or exceeds
the repurchase price.

MORTGAGE DOLLAR ROLLS

The Funds may enter into mortgage "dollar rolls" in which a Fund sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, a Fund forgoes principal and
interest paid on the securities. A Fund is compensated by the difference
between the current sales price and the lower forward price for the future
purchase (often referred to as the "drop") or fee income as well as by the
interest earned on the cash proceeds of the initial sale. A "covered roll" is a
specific type of dollar roll for which there is an offsetting cash position or a
cash equivalent security position which matures on or before the forward
settlement date of the dollar roll transaction. The Funds may enter into both
covered and uncovered rolls.

"WHEN-ISSUED" PURCHASES AND FORWARD COMMITMENTS (DELAYED DELIVERY)

Each Fund may purchase securities on a when-issued, delayed delivery or forward
commitment basis. These transactions, which involve a commitment by a Fund to
purchase or sell particular securities with payment and delivery taking place at
a future date (perhaps one or two months later), permit the Fund to lock in a
price or yield on a security, regardless of future changes in interest rates. A
Fund will purchase securities on a "when-issued" or forward commitment basis
only with the intention of completing the transaction and actually purchasing
the securities. If deemed appropriate by the Adviser, however, a Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases the Fund may realize a gain or
loss.

When a Fund agrees to purchase securities on a "when-issued" or forward
commitment basis, the Fund's custodian will set aside cash or liquid securities
equal to the amount of the commitment in a separate account. Normally, the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to place additional
assets in the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitments. The market value of a
Fund's net

Page -26-
<PAGE>

assets may fluctuate to a greater degree when it sets aside portfolio securities
to cover such purchase commitments than when it sets aside cash. Because a
Fund's liquidity and ability to manage its portfolio might be affected when it
sets aside cash or portfolio securities to cover such purchase commitments, each
Fund expects that its commitments to purchase when-issued securities and forward
commitments will not exceed 33% of the value of its total assets absent unusual
market conditions. When a Fund engages in "when-issued" and forward commitment
transactions, it relies on the other party to the transaction to consummate the
trade. Failure of such party to do so may result in the Fund incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.

The market value of the securities underlying a "when-issued" purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
a Fund starting on the day the Fund agrees to purchase the securities. The Fund
does not earn interest or dividends on the securities it has committed to
purchase until the settlement date.

REVERSE REPURCHASE AGREEMENTS

Each Fund may enter into reverse repurchase agreements with banks and domestic
broker-dealers. Reverse repurchase agreements involve sales by a Fund of
portfolio securities concurrently with an agreement by the Fund to repurchase
the same securities at a later date at a fixed price. During the reverse
repurchase agreement period, the Fund continues to receive principal and
interest payments on these securities. Each Fund will deposit cash or liquid
securities or a combination of both in a segregated account, which will be
marked to market daily, with its custodian equal in value to its obligations
with respect to reverse repurchase agreements. Reverse repurchase agreements
are considered borrowings, and as such are subject to the limitations on
borrowings by the Funds.

ILLIQUID SECURITIES

Each Fund will not invest more than 15% of its net assets in illiquid
securities, which include repurchase agreements and time deposits maturing in
more than seven days and securities that are not readily marketable.

BORROWINGS

Each Fund may borrow for temporary or emergency purposes. This borrowing may be
unsecured. Among the forms of borrowing in which each Fund may engage is
entering into reverse repurchase agreements. The 1940 Act requires a Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If
the asset coverage should decline below 300% as a result of market fluctuations
or for other reasons, a Fund is required to sell some of its portfolio
securities within three days to reduce its borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. To avoid the potential leveraging effects of a
Fund's borrowings, investments will not be made while borrowings (including
reverse repurchase agreements and dollar rolls) are in excess of 5% of a Fund's
total assets. Borrowing may exaggerate the effect on net asset value

Page -27-
<PAGE>

of any increase or decrease in the market value of the portfolio. Money borrowed
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. A Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
See "Investment Restrictions."

LENDING PORTFOLIO SECURITIES

Each Fund may lend portfolio securities to brokers, dealers and other financial
organizations. These loans, if and when made, may not exceed 33 1/3% of the
value of the Fund's total assets. A Fund's loans of securities will be
collateralized by cash, cash equivalents or U.S. Government securities. The
cash or instruments collateralizing the Fund's loans of securities will be
maintained at all times in a segregated account with the Trust's custodian, in
an amount at least equal to the current market value of the loaned securities.
From time to time, a Fund may pay a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Fund and is acting as a "placing
broker." No fee will be paid to affiliated persons of the Fund. The Board of
Trustees will make a determination that the fee paid to the placing broker is
reasonable.

By lending portfolio securities, a Fund can increase its income by continuing to
receive amounts equal to the interest or dividends on the loaned securities as
well as by either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when U.S.
Government securities are used as collateral. A Fund will comply with the
following conditions whenever it loans securities: (i) the Fund must receive at
least 100% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral; (iii) the Fund must
be able to terminate the loan at any time; (iv) the Fund must receive reasonable
interest on the loan, as well as amounts equal to the dividends, interest or
other distributions on the loaned securities, and any increase in market value;
(v) the Fund may pay only reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass to the borrower except
that, if a material event will occur affecting the investment in the loaned
securities, the Fund must terminate the loan in time to vote the securities on
such event.

DIVERSIFICATION

Each of the Fixed Income Funds is "non-diversified" under the 1940 Act.
Accordingly, they are subject only to certain federal tax diversification
requirements and to the policies adopted by the Adviser. With respect to 50% of
its total assets, each Fixed Income Fund may invest up to 25% of its total
assets in the securities of any one issuer (except that this limitation does not
apply to U.S. Government securities). With respect to the remaining 50% of its
total assets, a Fixed Income Fund may not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. Government securities)
nor acquire more than 10% of the outstanding voting securities of any issuer.
These federal tax diversification requirements (which also apply to the Equity
Funds) apply only at taxable quarter-ends and are subject to certain
qualifications and exceptions. To the extent that a Fixed Income Fund does not
meet standards

Page -28-
<PAGE>

for being "diversified" under the 1940 Act, it will be more susceptible to
developments affecting any single issuer of portfolio securities.

TEMPORARY DEFENSIVE INVESTMENTS

For temporary defensive purposes, each of the Funds may invest all or part of
its portfolio in U.S. or, subject to tax requirements, Canadian currencies, U.S.
Government securities maturing within one year (including repurchase agreements
collateralized by such securities), commercial paper of U.S. or foreign issuers,
and cash equivalents.

Commercial paper represents short-term unsecured promissory notes issued in
bearer form by U.S. or foreign corporations and finance companies. The
commercial paper purchased by the Funds consists of U.S. dollar-denominated
obligations of domestic or foreign issuers. Each Fund may also invest in
commercial paper which at the date of investment is rated at least A-2 by
Standard & Poor's or P-2 by Moody's, or their equivalent ratings, or, if not
rated, is issued or guaranteed as to payment of principal and interest by
companies which are rated, at the time of purchase, A or better by Standard &
Poor's or Moody's, or their equivalents, and other debt instruments, including
unrated instruments, not specifically described if such instruments are deemed
by the Adviser to be of comparable quality.

A Fund may also invest in variable rate master demand notes which typically are
issued by large corporate borrowers providing for variable amounts of principal
indebtedness and periodic adjustments in the interest rate according to the
terms of the instrument.

Demand notes are direct lending arrangements between a Fund and an issuer, and
are not normally traded in a secondary market. A Fund, however, may demand
payment of principal and accrued interest at any time. In addition, while
demand notes generally are not rated, their issuers must satisfy the same
criteria as those for issuers of commercial paper. The Adviser will consider
the earning power, cash flow and other liquidity ratios of issuers of demand
notes and continually will monitor their financial ability to meet payment on
demand. See also "Fixed Income Securities--Variable and Floating Rate
Instruments."

Cash equivalents include obligations of banks which at the date of investment
have capital, surplus and undivided profits (as of the date of their most
recently published financial statements) in excess of US$ 100 million. Bank
obligations in which the Funds may invest include certificates of deposit,
bankers' acceptances and fixed time deposits. Bank obligations also include
U.S. dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations. A
Fund will invest in the obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks only when the Adviser determines that the credit risk
with respect to the instrument is minimal.

BANK OBLIGATIONS. Certificates of Deposit ("CDs") are short-term negotiable
obligations of commercial banks. Time Deposits ("TDs") are non-negotiable
deposits maintained in banking institutions for specified periods of time at
stated interest rates. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.

Page-29-
<PAGE>

U.S. commercial banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal Deposit Insurance Corporation
(the "FDIC"). U.S. banks organized under state law are supervised and examined
by state banking authorities but are members of the Federal Reserve System only
if they elect to join. Most state banks are insured by the FDIC (although such
insurance may not be of material benefit to a Fund, depending upon the principal
amount of CDs of each bank held by the Fund) and are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of governmental regulations, U.S. branches of U.S. banks, among other
things, generally are required to maintain specified levels of reserves, and are
subject to other supervision and regulation designed to promote financial
soundness.

U.S. savings and loan associations, the CDs of which may be purchased by the
Funds, are supervised and subject to examination by the Office of Thrift
Supervision. U.S. savings and loan associations are insured by the Savings
Association Insurance Fund which is administered by the FDIC and backed by the
full faith and credit of the U.S. Government.

Non-U.S. bank obligations include Eurodollar Certificates of Deposit ("ECDs"),
which are U.S. dollar-denominated certificates of deposit issued by offices of
non-U.S. and U.S. banks located outside the United States; Eurodollar Time
Deposits ("ETDs"), which are U.S. dollar-denominated deposits in a non-U.S.
branch of a U.S. bank or a non-U.S. bank; Canadian Time Deposits ("CTDs"), which
are essentially the same as ETDs except they are issued by Canadian offices of
major Canadian banks; Yankee Certificates of Deposit ("Yankee CDs"), which are
U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a
non-U.S. bank and held in the United States; and Yankee Bankers' Acceptances
("Yankee BAs"), which are U.S. dollar-denominated bankers' acceptances issued by
a U.S. branch of a non-U.S. bank and held in the United States.

OTHER INVESTMENT COMPANIES

Each Fund may invest up to 10% of its total assets, calculated at the time of
purchase, in the securities of other U.S. registered investment companies. A
Fund may not invest more than 5% of its total assets in the securities of any
one such investment company or acquire more than 3% of the voting securities of
any such other investment company. A Fund will indirectly bear its
proportionate share of any management or other fees paid by investment companies
in which it invests, in addition to its own fees.

INVESTMENT RESTRICTIONS

The fundamental investment restrictions set forth below may not be changed with
respect to a Fund without the approval of a "majority" (as defined in the 1940
Act) of the outstanding shares of that Fund. For the purposes of the 1940 Act,
"majority" means the lesser of (a) 67% or more of the shares of the Fund present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the shares of
the Fund.

Page-30-
<PAGE>

FUNDAMENTAL INVESTMENT RESTRICTIONS

The Trust may not, on behalf of a Fund:

(1) Issue senior securities, except as permitted by paragraphs (2), (6) and (7)
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Fund's
investment policy, and the pledge, mortgage or hypothecation of the Fund's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.

(2) Borrow money (i) except from banks as a temporary measure for extraordinary
emergency purposes and (ii) except that the Fund may enter into reverse
repurchase agreements and dollar rolls with banks, broker-dealers and other
parties; provided that, in each case, the Fund is required to maintain asset
coverage of at least 300% for all borrowings. For the purposes of this
investment restriction, short sales, transactions in currency, forward
contracts, swaps, options, futures contracts and options on futures
contracts, and forward commitment transactions shall not constitute
borrowing.

(3) Pledge, mortgage, or hypothecate its assets, except to secure indebtedness
permitted by paragraph (2) above and to the extent related to the
segregation of assets in connection with the writing of covered put and call
options and the purchase of securities or currencies on a forward commitment
or delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to forward contracts, options, futures contracts
and options on futures contracts.

(4) Act as an underwriter, except to the extent that, in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.

(5) Purchase or sell real estate, or any interest therein, and real estate
mortgage loans, except that the Fund may invest in securities of corporate
or governmental entities secured by real estate or marketable interests
therein or securities issued by companies (other than real estate limited
partnerships) that invest in real estate or interests therein.

(6) Make loans, except that the Fund may lend portfolio securities in accordance
with the Fund's investment policies and may purchase or invest in repurchase
agreements, bank certificates of deposit, all or a portion of an issue of
bonds, bank loan participation agreements, bankers' acceptances, debentures
or other securities, whether or not the purchase is made upon the original
issuance of the securities.

Page-31-
<PAGE>

(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward foreign
currency exchange contracts, forward commitments, securities index put or
call warrants and repurchase agreements entered into in accordance with the
Fund's investment policies.

(8) Invest 25% or more of the value of the Fund's total assets in the securities
of one or more issuers conducting their principal business activities in the
same industry or group of industries. This restriction does not apply to
investments in obligations of the U.S. Government or any of its agencies or
instrumentalities.

In addition, each Equity Fund will adhere to the following fundamental
investment restriction:

With respect to 75% of its total assets, an Equity Fund may not purchase
securities of an issuer (other than the U.S. Government, or any of its
agencies or instrumentalities, or other investment companies), if (a) such
purchase would cause more than 5% of the Fund's total assets taken at market
value to be invested in the securities of such issuer, or (b) such purchase
would at the time result in more than 10% of the outstanding voting securities
of such issuer being held by the Fund.

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

In addition to the fundamental policies mentioned above, the Board of Trustees
of the Trust has adopted the following nonfundamental policies that may be
changed or amended by action of the Board of Trustees without shareholder
approval.

The Trust may not, on behalf of a Fund:

(a) Participate on a joint-and-several basis in any securities trading account.
The "bunching" of orders for the sale or purchase of marketable portfolio
securities with other accounts under the management of the Adviser to save
commissions or to average prices among them is not deemed to result in a
securities trading account.

(b) Purchase securities of other investment companies, except as permitted by
the Investment Company Act of 1940 and the rules, regulations and any
applicable exemptive order issued thereunder.

(d) Purchase any security, including any repurchase agreement maturing in more
than seven days, which is illiquid, if more than 15% of the net assets of
the Fund, taken at market value, would be invested in such securities.

The staff of the Commission has taken the position that fixed time deposits
maturing in more than seven days that cannot be traded on a secondary market and
participation interests in loans

Page-32-
<PAGE>

are illiquid. Until such time (if any) as this position changes, the Trust, on
behalf of each Fund, will include such investments in determining compliance
with the 15% limitation on investments in illiquid securities. Restricted
securities (including commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933) which the Board of Trustees has determined are readily
marketable will not be deemed to be illiquid for purposes of such restriction.

"Value" for the purposes of the foregoing investment restrictions shall mean the
market value used in determining each Fund's net asset value.

TRUSTEES AND OFFICERS

Information pertaining to the Trustees and officers of the Trust is set forth
below. An asterisk (*) indicates those Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act.

Page-33-
<PAGE>

<TABLE>
<CAPTION>
Positions Principal Occupation
Name and Address With Trust During Past Five Years
- ---------------- ---------- ----------------------
<S> <C> <C>
Paul K. Freeman (2) Trustee Senior Research Scholar, International
7257 South Tucson Way Institute for Applied Systems Analysis (since
Englewood, CO 80112 1998); Chief Executive Officer, The Eric Group
(age 48) Inc. (environmental insurance) (1986-1998).
Graham E. Jones Trustee Senior Vice President, BGK Realty Inc. (since
330 Garfield Street 1995); Financial Manager, Practice Management
Santa Fe, NM 87501 Systems (medical information services)
(age 65) (1988-95); Director, 12 closed-end funds
managed by Morgan Stanley Asset Management;
Trustee, 10 open-end mutual funds managed by
Weiss, Peck & Greer; Trustee, six (6)
open-ended mutual funds managed by Sun Capital
Advisers, Inc.
William N. Searcy Trustee Pension & Savings Trust Officer, Sprint
2330 Shawnee Mission Pkwy Corporation (telecommunications) (since 1989);
Westwood, KS 66205 Trustee, six (6) open-end mutual funds managed
(age 52) by Sun Capital Advisers, Inc.
Hugh G. Lynch Trustee Managing Director, International Investments,
767 Fifth Avenue General Motors Investment Management
New York, NY 10153 Corporation (since September 1990).
(age 61)
Edward T. Tokar Trustee Vice President-Investments, Allied Signal, Inc.
101 Columbia Road (advanced technology and manufacturer) (since
Morristown, NJ 07962 1985).
(age 51)
Neil P. Jenkins Trustee Director, Deutsche Asset Management, Inc.
20 Finsbury Circus (since 1991), Morgan Grenfell International
London, England Funds Mgmt (since 1995), and Morgan Grenfell &
(age 38) Co. (since 1985).
David W. Baldt Vice President Executive Vice President and Director of Fixed
150 S. Independence Sq. Income Investments, Deutsche Asset Management,
W. Philadelphia, PA 19106 Inc. (since 1989).
Ian D. Kelson Vice President Director, Deutsch Asset Management Investment
20 Finsbury Circus Services Limited (since 1988); Chief Investment
London EC2M INBEngland Officer, Fixed Income, MGIS (since 1989).
(age 42)
James Grifo Vice President Executive Vice President and Director, Deutsche
150 S. Independence Sq. Asset Management, Inc. (since 1996); Senior
W.Philadelphia, PA 19106 Vice President, GT Global Financial (1990-1996).
(age 47)
</TABLE>

Page-34-
<PAGE>

<TABLE>
<S> <C> <C>
Amy M. Olmert (1)(3) Treasurer, Chief Vice President, Deutsche Asset Management
One South Street Financial Officer Americas (since 1999); Vice President, BT Alex.
Baltimore, MD 21202 Brown Inc. (1997-1999); Senior Manager,
(age 36) PricewaterhouseCoopers LLP (1988-1997).
Daniel O. Hirsch Secretary Principal, Deutsche Asset Management Americas
One South Street (since 1999); Director, Deutsche Bank Alex.
Baltimore, MD 21202 Brown Incorporated and Investment Company
(age 45) Capital Corp. (since 1998); Assistant General
Counsel, Office of the General Counsel, United
States Securities and Exchange Commission
(1993-1998).
</TABLE>

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

1 Member of the Trust's Pricing Committee.

2 Member of the Trust's Audit Committee.

3 Member of the Trust's Dividend Committee.

It may not be possible, therefore, for investors to effect service of process
within the United States upon these persons or to enforce against them, in
United States courts or foreign courts, judgments obtained in United States
courts predicated upon the civil liability provisions of the federal securities
laws of the United States or the laws of the State of Delaware. In addition, it
is not certain that a foreign court would enforce, in original actions or in
actions to enforce judgments obtained in the United States, liabilities against
these Trustees and officers predicated solely upon the federal securities laws.

Messrs. Jones, Freeman, and Searcy are members of the Audit Committee of the
Board of Trustees. The Audit Committee's functions include making
recommendations to the Trustees regarding the selection of independent
accountants, and reviewing with such accountants and the Treasurer of the Trust
matters relating to accounting and auditing practices and procedures, accounting
records, internal accounting controls and the functions performed by the Trust's
custodian, administrator and transfer agent.

As of February , 2000, the Trustees and officers of the Trust owned, as a
group, less than one percent of the outstanding shares of each Fund other than
Morgan Grenfell International Select Equity Fund. On such date, the Trustees
and officers of the Trust owned, as a group, ___% of the outstanding shares of
Morgan Grenfell International Select Equity Fund.

COMPENSATION OF TRUSTEES

Page-35-
<PAGE>

Committee meeting attended. The Trustees are also reimbursed for out-of-pocket
expenses incurred by them in connection with their duties as Trustees.

The following table sets forth the compensation paid by the Trust to the
Trustees for the fiscal year of the Trust ended October 31, 1999:

<TABLE>
<CAPTION>
Pension or Retirement Aggregate
Benefits Accrued as Part Compensation from
Name of Trustees of Fund Expenses the Trust/Complex*
- ---------------- ------------------------ -----------------
<S> <C> <C>
Paul K. Freeman $0 $0
Graham E. Jones $0 $0
William N. Searcy $0 $0
Hugh G. Lynch $0 $0
Edward T. Tokar $0 $0
</TABLE>

- ----------

* The Trustees listed above do not serve on the Board of any other investment
company that may be considered to belong to the same complex as the Trust.

INVESTMENT ADVISORY AND OTHER SERVICES

THE ADVISER

DAMIS of London, England acts as investment adviser to each Fund, except
European Equity Fund. Deutsche Asset Management, Inc. acts as investment
adviser to European Equity Fund. Effective October 6, 1999, Morgan Grenfell
Investment Services Limited, the adviser to each Fund, changed its name to
Deutsche Asset Management Investment Services Limited. On December 2, 1999, a
majority of the shareholders of the European Equity Growth Fund approved a
change of the Fund's investment adviser from DAMIS to Deutsche Asset Management,
Inc. ("DAMI") (formerly Morgan Grenfell Inc.). This change became effective on
December 23, 1999. Each of DAMIS and DAMI are referred to individually as an
"Adviser" and collectively as the "Advisers."

DAMIS acts as investment adviser to each Fund, except European Equity Fund,
pursuant to the terms of two Management Contracts between the Trust and DAMIS.
DAMI acts as investment adviser to the European Equity Fund pursuant to the
terms of a Management Contract between the Trust and DAMI.

Pursuant to the Management Contracts, each Adviser supervises and assists in the
management of the assets of each Fund and furnishes each Fund with research,
statistical, advisory and managerial services. Each Adviser determines on a
continuous basis, the allocation of each Fund's investments among countries.
Each Adviser is responsible for the ordinary expenses of offices, if any, for
the Trust and the compensation, if any, of all officers and employees of the
Trust and all Trustees who are "interested persons" (as defined in the 1940 Act)
of the Adviser.

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<PAGE>

Under the Management Contracts, the Trust, on behalf of each Fund, is obligated
to pay the Adviser a monthly fee at an annual rate of each Fund's average daily
net assets as follows:

Annual Rate
-----------
Morgan Grenfell International Select Equity Fund 0.70%
Morgan Grenfell European Equity Fund 0.70%
Morgan Grenfell International Small Cap Equity Fund 1.00%
Morgan Grenfell Emerging Markets Equity Fund 1.00%
Morgan Grenfell Core Global Fixed Income Fund 0.50%
Morgan Grenfell Global Fixed Income Fund 0.50%
Morgan Grenfell International Fixed Income Fund 0.50%
Morgan Grenfell Emerging Markets Debt Fund 1.00%

The advisory fees are paid monthly and will be prorated if the Adviser shall not
have acted as a Fund's investment adviser during the entire monthly period. The
Adviser has temporarily agreed, under certain circumstances, to reduce or not
impose its management fee and to make arrangements to limit certain other
expenses.

For the fiscal period ended October 31, 1997, Morgan Grenfell International
Select Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell International Fixed Income Fund and Morgan Grenfell
Emerging Markets Debt Fund paid net advisory fees of $0, $137,269, $794,548
$13,612, $804,930, $444,411, $21,976 and $1,398,207, respectively. For the
fiscal period ended October 31, 1998, Morgan Grenfell International Select
Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell Core Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
paid net advisory fees of $0, $215,268, $302,152, $0, $594,742, $262,756,
$13,051, $0, and $1,035,966, respectively. For the fiscal period ended October
31, 1999, Morgan Grenfell International Select Equity Fund, Morgan Grenfell
European Equity Growth Fund, Morgan Grenfell International Small Cap Equity
Fund, Morgan Grenfell European Small Cap Equity Fund, Morgan Grenfell Emerging
Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell
Core Global Fixed Income Fund, Morgan Grenfell International Fixed Income Fund
and Morgan Grenfell Emerging Markets Debt Fund paid net advisory fees of
$______, $______, $______, $______, $______, $______, $______, $______, and
$______, respectively. The foregoing advisory fee payments and non-payments
reflect expense limitations that were in effect during the indicated periods.
The Funds not listed in this paragraph were not in operation during the relevant
periods and, accordingly, paid no advisory fees for such periods.

The Management Contracts were last approved on November 18, 1999 by a vote of
the Trust's Board of Trustees, including a majority of those Trustees who were
not parties to either Management Contract or "interested persons" of such
parties. Each Management Contract will continue in effect with respect to each
Fund that it covers only if such continuance is specifically approved annually
by the Trustees, including a majority of the Trustees who are

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<PAGE>

not parties to the Management Contract or "interested persons" (as such term is
defined in the 1940 Act) of such parties, or by a vote of a majority of the
outstanding shares of such Fund. Each Management Contract is terminable by vote
of the Board of Trustees, or, with respect to a Fund, by the holders of a
majority of the outstanding shares of the affected Fund, at any time without
penalty on 60 days' written notice to the Adviser. Termination of a Management
Contract with respect to a Fund will not terminate or otherwise invalidate any
provision of the Management Contract between the Adviser and any other Fund. The
Adviser may terminate a Management Contract at any time without penalty on 60
days' written notice to the Trust. Each Management Contract terminates
automatically in the event of its assignment (as such term is defined in the
1940 Act).

Each Management Contract provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust or any
Fund in connection with the performance of the Adviser's obligations under the
Management Contract with the Trust, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties or from reckless disregard of its duties and
obligations thereunder.

In the management of the Funds and its other accounts, the Adviser and its
subsidiaries allocate investment opportunities to all accounts for which they
are appropriate subject to the availability of cash in any particular account
and the final decision of the individual or individuals in charge of such
accounts. Where market supply is inadequate for a distribution to all such
accounts, securities are allocated based on a Fund's pro rata portion of the
amount ordered. In some cases their procedure may have an adverse effect on the
price or volume of the security as far as a Fund is concerned. However, it is
the judgment of the Board that the desirability of continuing the Trust's
advisory arrangement with the Adviser outweighs any disadvantages that may
result from contemporaneous transactions.

DAMIS is registered with the Commission as an investment adviser and provides a
full range of international investment advisory services to individual and
institutional clients. DAMI is registered with the Commission as an investment
adviser and provides a full range of investment advisory services to
institutional clients. DAMI serves as investment adviser to 11 other investment
companies and as sub-adviser to five other investment companies. Both DAMIS and
DAMI are each an indirect wholly-owned subsidiary of Deutsche Bank A.G., an
international commercial and investment banking group. As of October 31, 1999,
DAMIS managed approximately $____ billion in assets for various individual and
institutional accounts, including the following registered investment company to
which it acts as a subadviser: RSI International Equity Fund. As of October 31,
1999, DAMI managed approximately $ _____ billion in assets for various
individual and institutional accounts, including the Morgan Grenfell SMALLCap
Fund, a registered investment company for which it acts as an investment
adviser.

PORTFOLIO MANAGEMENT

A committee made up of investment professionals and analysts employed by each
Adviser makes the investment decisions for each fund other than the European
Equity Fund. For

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information on the experience and qualifications of the portfolio managers for
the European Equity Fund, see the Prospectus.

PORTFOLIO TURNOVER

The Funds do not expect to trade in securities for short-term gain. Each Fund's
portfolio turnover rate is calculated by dividing the lesser of the dollar
amount of sales or purchases of portfolio securities by the average monthly
value of a Fund's portfolio securities, excluding securities having a maturity
at the date of purchase of one year or less. For the fiscal period ended October
31, 1998, the portfolio turnover rates for Morgan Grenfell International Select
Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell Core Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
were 127%, 49%, 106%, 111%, 85%, 182%, 151%, 181% and 638%, respectively. For
the fiscal period ended October 31, 1999, the portfolio turnover rates for
Morgan Grenfell International Select Equity Fund, Morgan Grenfell European
Equity Growth Fund, Morgan Grenfell International Small Cap Equity Fund, Morgan
Grenfell European Small Cap Equity Fund, Morgan Grenfell Emerging Markets Equity
Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell International
Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund were __%, __%,
__%, __%, __%, __%, __% and __%, respectively.

THE ADMINISTRATOR

Deutsche Asset Management, Inc. ("DAMI" or the "Administrator"), 150 South
Independence Square West, Philadelphia, PA 19106, serves as the Trust's
administrator pursuant to an Administration Agreement dated August 27, 1998.
Pursuant to the Administration Agreement, the Administrator has agreed to
furnish statistical and research data, clerical services, and stationery and
office supplies; prepare and file various reports with the appropriate
regulatory agencies including the Commission and state securities commissions;
and provide accounting and bookkeeping services for the Funds, including the
computation of each Fund's net asset value, net investment income and net
realized capital gains, if any.

For its services under the Administration Agreement, the Administrator receives
a monthly fee at the following annual rates of the aggregate average daily net
assets of such Fund: 0.25% for the International Fixed Income Funds; 0.30% for
the International Equity Funds. The Administrator will pay Accounting Agency
and Transfer Agency fees out of the Administration fee. Previously, these fees
were charged directly to the Funds. Net Fund Operating Expenses will remain
unchanged since the Adviser has agreed to reduce its advisory fee and to make
arrangements to limit certain other expenses to the extent necessary to limit
Fund Operating Expenses of each Fund to the specified percentage of each Fund's
net assets as demonstrated in the Expenses Information tables in the prospectus.
In its sole discretion the Adviser may terminate or modify this voluntary
agreement at any time.

For the fiscal period ended October 31, 1999, Morgan Grenfell International
Select Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small

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<PAGE>

Cap Equity Fund, Morgan Grenfell European Small Cap Equity Fund, Morgan Grenfell
Emerging Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund, Morgan
Grenfell International Fixed Income Fund and Morgan Grenfell Emerging Markets
Debt Fund paid the Administrator administration fees of $______, $______,
$______, $______, $______, $______, $______ and $1______, respectively. Prior to
November 1, 1998, SEI Financial Management Company was the Administrator for the
funds. For the fiscal year ended October 31, 1997, Morgan Grenfell International
Select Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell International Fixed Income Fund and Morgan Grenfell
Emerging Markets Debt Fund paid the Administrator administration fees of
$60,000, $38,843, $90,975, $63,934, $99,601, $119,264, $60,000 and $139,420,
respectively. For the fiscal year ended October 31, 1998, Morgan Grenfell
International Select Equity Fund, Morgan Grenfell European Equity Growth Fund,
Morgan Grenfell International Small Cap Equity Fund, Morgan Grenfell European
Small Cap Equity Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan
Grenfell Global Fixed Income Fund, Morgan Grenfell Core Global Fixed Income
Fund, Morgan Grenfell International Fixed Income Fund and Morgan Grenfell
Emerging Markets Debt Fund paid the Administrator administration fees of
$60,177, $60,177, $60,177, $60,177, $70,980, $68,216, $10,606, $60,177, and
$116,281 respectively. The administration fees described in this paragraph were
paid pursuant to a fee schedule that is different from the one currently in
effect (described above).

The Administration Agreement provides that the Administrator shall not be liable
under the Administration Agreement except for bad faith or gross negligence in
the performance of its duties or from the reckless disregard by it of its duties
and obligations thereunder.

EXPENSES OF THE TRUST

The expenses borne by the Fund include: (i) fees and expenses of any investment
adviser and any administrator of the Funds; (ii) fees and expenses incurred by
the Funds in connection with membership in investment company organizations;
(iii) brokers' commissions; (iv) payment for portfolio pricing services to a
pricing agent, if any; (v) legal expenses (vi) interest, insurance premiums,
taxes or governmental fees; (vii) clerical expenses of issue, redemption or
repurchase of shares of the Funds; (viii) the expenses of and fees for
registering or qualifying shares of the Funds for sale and of maintaining the
registration of the Funds and registering the Funds as a broker or a dealer;
(ix) the fees and expenses of Trustees who are not affiliated with the Adviser;
(x) the fees or disbursements of custodians of the Funds' assets, including
expenses incurred in the performance of any obligations enumerated by the
Declaration of Trust or By-Laws of the Trust insofar as they govern agreements
with any such custodian; (xi) costs in connection with annual or special
meetings of shareholders, including proxy material preparation printing and
mailing; (xii) charges and expenses of the Trust's auditor; (xiii) litigation
and indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Funds' business; and (xiv) expenses of an
extraordinary and nonrecurring nature.

TRANSFER AGENT

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<PAGE>

Investment Company Capital Corp. ("ICCC") One South Street, Baltimore, Maryland
21202, has been retained as the transfer and dividend disbursing agent for the
Funds pursuant to a transfer agency agreement (the "Transfer Agency Agreement"),
under which the Transfer Agent (i) maintains record shareholder accounts, and
(ii) makes periodic reports to the Trust's Board of Trustees concerning the
operations of each Fund.

THE DISTRIBUTOR

The Trust, on behalf of the Funds, has entered into a distribution agreement
(the "Distribution Agreement") pursuant to which ICC Distributors, Inc., Two
Portland Square, Portland, Maine 04101 (the "Distributor"), as agent, serves as
principal underwriter for the continuous offering of shares of each Fund. The
Distributor has agreed to use its best efforts to solicit orders for the
purchase of shares of each Fund, although it is not obligated to sell any
particular amount of shares. Shares of the Funds are not subject to sales loads
or distribution fees. The Adviser, and not the Funds, is responsible for
payment of any expenses or fees incurred in the marketing and distribution of
shares of the Funds.

The Distribution Agreement will remain in effect for one year from its effective
date and will continue in effect thereafter only if such continuance is
specifically approved annually by the Trustees, including a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" (as such term is defined in the 1940 Act) of such parties. The
Distribution Agreement was most recently approved on November ___, 1999 by a
vote of the Trust's Board of Trustees, including a majority of those Trustees
who were not parties to the Distribution Agreement or "interested persons" of
such parties. The Distribution Agreement is terminable, as to a Fund, by vote
of the Board of Trustees, or by the holders of a majority of the outstanding
shares of the Fund, at any time without penalty on 60 days' written notice to
the Distributor. The Distributor may terminate the Distribution Agreement at
any time without penalty on 60 days' written notice to the Trust.

CUSTODIAN

Brown Brothers Harriman and Co. (the "Custodian"), 40 Water Street, Boston,
Massachusetts 02109, serves as the Trust's custodian pursuant to a Custodian
Agreement. Under the Custodian Agreement, the Custodian (i) maintains a
separate account in the name of each Fund, (ii) holds and transfers portfolio
securities on account of each Fund, (iii) accepts receipts and makes
disbursements of money on behalf of each Fund, (iv) collects and receives all
income and other payments and distributions on account of each Fund's portfolio
securities and (v) makes periodic reports to the Trust's Board of Trustees
concerning each Fund's operations. The Custodian is authorized to select one or
more foreign or domestic banks or companies to serve as sub-custodian on behalf
of the Trust.

SERVICE PLAN
(INVESTMENT SHARES ONLY)

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<PAGE>

liaison services. Pursuant to the Plans, the Funds may enter into agreements
with Service Organizations ("Service Agreements"). Under such Service Agreements
or otherwise, the Service Organizations may perform some or all of the following
services: (i) acting as record holder and nominee of all Investment shares
beneficially owned by their customers; (ii) establishing and maintaining
individual accounts and records with respect to the Investment shares owned by
each customer; (iii) providing facilities to answer inquiries and respond to
correspondence from customers about the status of their accounts or about other
aspects of the Trust or applicable Fund; (iv) processing and issuing
confirmations concerning customer orders to purchase, redeem and exchange
Investment shares; and (v) receiving and transmitting funds representing the
purchase price or redemption proceeds of such Investment shares. If your service
plan is terminated, your shares will be converted to Institutional shares of the
same Fund.

As compensation for such services, each Fund will pay each Service Organization
with which it has a Service Agreement a service fee in an amount up to 0.25% (on
an annualized basis) of the average daily net assets of the Fund's Investment
shares attributable to customers of such Service Organization. Service
Organizations may from time to time be required to meet certain other criteria
in order to receive service fees.

Pursuant to the Plans, Investment shares of a Fund that are beneficially owned
by customers of a Service Organization will convert automatically to
institutional shares of the same Fund in the event that such Service
Organization's Service Agreement expires or is terminated. Customers of a
Service Organization will receive advance notice of any such conversion, and any
such conversion will be effected on the basis of the relative net asset values
of the two classes of shares involved.

In accordance with the terms of the Service Plans, the officers of the Trust
provide to the Trust's Board of Trustees for their review a quarterly written
report of the amounts expended under the Service Plans and the purpose for which
such expenditures were made. In the Trustees' quarterly review of such reports,
they will consider the continued appropriateness and the level of compensation
that the Service Plans provide.

Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974 ("ERISA") ) may apply to a Service Organization's receipt
of compensation paid by a Fund in connection with the investment of fiduciary
assets in Investment shares of the Fund. Service Organizations that are subject
to the jurisdiction of the SEC, the Department of Labor or state securities
commissions are urged to consult their own legal advisers before investing
fiduciary assets in Investment shares and receiving service fees.

The Trust believes that fiduciaries of ERISA plans may properly receive fees
under a Service Plan if the plan fiduciary otherwise properly discharges its
fiduciary duties, including (if applicable) those under ERISA. Under ERISA, a
plan fiduciary, such as a trustee or investment manager, must meet the fiduciary
responsibility standard set forth in part 4 of Title I of ERISA. These
standards are designed to help ensure that the fiduciary's decisions are made in
the best interests of the plan and are not colored by self-interest.

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<PAGE>

Section 403 (c) (1) of ERISA provides, in part, that the assets of a plan shall
be held for the exclusive purpose of providing benefits to the plan's
participants and their beneficiaries and defraying reasonable expenses of
administering the plan. Section 404 (a) sets forth a similar requirement on how
a plan fiduciary must discharge his or her duties with respect to the plan, and
provides further that such fiduciary must act prudently and solely in the
interest of the participants and beneficiaries. These basic provisions are
supplemented by the per se prohibitions of certain classes of transactions set
forth in Section 406 of ERISA.

Section 406 (a) (1) (D) of ERISA prohibits a fiduciary of an ERISA plan from
causing that plan to engage in a transaction if he knows or should know that the
transaction would constitute a direct or indirect transfer to, or use by or for
the benefit of, a party in interest, of any assets of that plan. Section 3 (14)
includes within the definition of "party in interest" with respect to a plan any
fiduciary with respect to that plan. Thus, Section 406 (a)(1)(D) would not only
prohibit a fiduciary from causing the plan to engage in a transaction which
would benefit a third person who is a party in interest, but it also would
prohibit the fiduciary from similarly benefiting himself. In addition, Section
406 (b) (1) specifically prohibits a fiduciary with respect to a plan from
dealing with the assets of that plan in his own interest or for his own account.

Section 406 (b) (3) supplements these provisions by prohibiting a plan fiduciary
from receiving any consideration for his own personal account from any party
dealing with the plan in connection with a transaction involving the assets of
the plan.

In accordance with the foregoing, however, a fiduciary of an ERISA plan may
properly receive service fees under a Service Plan if the fees are used for the
exclusive purpose of providing benefits to the plan's participants and their
beneficiaries or for defraying reasonable expenses of administering the plan for
which the plan would otherwise be liable. See, e.g., Department of Labor ERISA
Technical Release No. 86-1 (stating a violation of ERISA would not occur where a
broker-dealer rebates commission dollars to a plan fiduciary who, in turn,
reduces its fees for which the plan is otherwise responsible for paying). Thus,
the fiduciary duty issues involved in a plan fiduciary's receipt of the service
fee must be assessed on a case-by-case basis by the relevant plan fiduciary.

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Board of Trustees, the Adviser makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Funds. In executing portfolio transactions, the
Adviser seeks to obtain the best net results for the Funds, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), size of the order, difficulty of execution and operational facilities
of the firm involved. Commission rates, being a component of price, are
considered together with such factors. Where transactions are effected on a
foreign securities exchange, the Funds employ brokers, generally at fixed
commission rates. Commissions on transactions on U.S. securities exchanges are
subject to negotiation. Where transactions are effected in the over-the-counter
market or third market, the Funds deal with the primary market makers unless a
more favorable result is obtainable elsewhere. Fixed income securities purchased
or sold on behalf of the Funds normally will be traded in the over-the-counter
market on a net basis (i.e. without

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<PAGE>

a commission) through dealers acting for their own account and not as brokers or
otherwise through transactions directly with the issuer of the instrument. Some
fixed income securities are purchased and sold on an exchange or in over-the-
counter transactions conducted on an agency basis involving a commission.

Pursuant to the Management Contracts, the Adviser agrees to select broker-
dealers in accordance with guidelines established by the Trust's Board of
Trustees from time to time and in accordance with Section 28(e) of the
Securities Exchange Act of 1934, as amended. In assessing the terms available
for any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consideration may also be given to the broker-dealer's
sale of shares of the Funds. In addition, the Management Contracts authorize
the Adviser, subject to the periodic review of the Trust's Board of Trustees, to
cause a Fund to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Adviser determines
in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Adviser to the Fund. Such brokerage and research services may consist of
pricing information, reports and statistics on specific companies or industries,
general summaries of groups of bonds and their comparative earnings and yields,
or broad overviews of the securities markets and the economy.

Supplemental research information utilized by the Adviser is in addition to, and
not in lieu of, services required to be performed by the Adviser and does not
reduce the advisory fees payable to the Adviser. The Trustees will periodically
review the commissions paid by the Funds to consider whether the commissions
paid over representative periods of time appear to be reasonable in relation to
the benefits inuring to the Funds. It is possible that certain of the
supplemental research or other services received will primarily benefit one or
more other investment companies or other accounts of the Adviser for which
investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company. During the
fiscal period ended October 31, 1999, the Adviser paid the following brokerage
commissions for research services: for the Morgan Grenfell Emerging Markets
Equity Fund $_____, for the Morgan Grenfell European Small Cap Equity Fund
$____, for the Morgan Grenfell European Equity Fund $_____, for the
International Select Equity Fund $2,036 and for the International Small Cap
Equity Fund $______.

Investment decisions for each Fund and for other investment accounts managed by
the Adviser are made independently of each other in the light of differing
conditions. However, the same investment decision may be made for two or more
of such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then averaged as to price and allocated as to amount in a
manner deemed equitable to each such account. While in some cases this practice
could have a detrimental effect on the price or value of the security as far as
a Fund is concerned, in other cases it is believed to be beneficial to a Fund.
To the extent permitted by law, the Adviser may aggregate the securities to be
sold or purchased for a Fund

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<PAGE>

with those to be sold or purchased for other investment companies or accounts in
executing transactions.

Pursuant to procedures determined by the Trustees and subject to the general
policies of the Funds and Section 17(e) of the 1940 Act, the Adviser may place
securities transactions with brokers with whom it is affiliated ("Affiliated
Brokers"). These brokers may include but are not limited to Morgan Grenfell
Asia and Morgan Grenfell Debt Arbitrage Trading.

Section 17(e) of the 1940 Act limits to "the usual and customary broker's
commission" the amount which can be paid by the Funds to an Affiliated Broker
acting as broker in connection with transactions effected on a securities
exchange. The Board, including a majority of the Trustees who are not
"interested persons" of the Trust or the Adviser, has adopted procedures
designed to comply with the requirements of Section 17(e) of the 1940 Act and
Rule 17e-1 promulgated thereunder to ensure that the broker's commission is
"reasonable and fair compared to the commission, fee or other remuneration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time...."

A transaction would not be placed with an Affiliated Broker if a Fund would have
to pay a commission rate less favorable than their contemporaneous charges for
comparable transactions for their other most favored, but unaffiliated,
customers except for accounts for which they act as a clearing broker, and any
of their customers determined, by a majority of the Trustees who are not
"interested persons" of the Fund or the Adviser, not to be comparable to the
Fund. With regard to comparable customers, in isolated situations, subject to
the approval of a majority of the Trustees who are not "interested persons" of
the Trust or the Adviser, exceptions may be made. Since the Adviser, as
investment adviser to the Funds, has the obligation to provide management, which
includes elements of research and related skills, such research and related
skills will not be used by them as a basis for negotiating commissions at a rate
higher than that determined in accordance with the above criteria. The Funds
will not engage in principal transactions with Affiliated Brokers. When
appropriate, however, orders for the account of the Funds placed by Affiliated
Brokers are combined with orders of their respective clients, in order to obtain
a more favorable commission rate. When the same security is purchased for two
or more funds or customers on the same day, each fund or customer pays the
average price and commissions paid are allocated in direct proportion to the
number of shares purchased.

Affiliated Brokers furnish to the Trust at least annually a statement setting
forth the total amount of all compensation retained by them or any associated
person of them in connection with effecting transactions for the account of the
Funds, and the Board reviews and approves all such portfolio transactions on a
quarterly basis and the compensation received by Affiliated Brokers in
connection therewith. During the fiscal year ended October 31, 1997, no Fund
paid any brokerage commissions to any Affiliated Broker. During the fiscal year
ended October 31, 1998, Morgan Grenfell European Equity Growth Fund paid $___ to
Deutsche Morgan Grenfell London, an Affiliated Broker (less than 0.01% of the
Fund's aggregate brokerage commissions paid during the period. During the
fiscal year ended October 31, 1999, Morgan Grenfell _____________ Fund paid
$____ to ______________, an Affiliated Broker (less than ____% of the Fund's
aggregate brokerage commissions paid during the period.

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<PAGE>

Affiliated Brokers do not knowingly participate in commissions paid by the Funds
to other brokers or dealers and do not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event that an
Affiliated Broker learns at any time that it has knowingly received reciprocal
business, it will so inform the Board.

For the fiscal year ended October 31, 1997, Morgan Grenfell International Select
Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell International Fixed Income Fund and Morgan Grenfell
Emerging Markets Debt Fund paid aggregate brokerage commissions of $15,439.06,
$78,071.14, $503,504.08, $23,189.97, $868,715.91, $0, $0 and $0, respectively.
For the fiscal year ended October 31, 1998, Morgan Grenfell International Select
Equity Fund, Morgan Grenfell European Equity Growth Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell Core Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
paid aggregate brokerage commissions of $23,210.14, $99,051.25, $289,584.88,
$27,986.53, $623,475.42, $0, $0, $0, $0, respectively. For the fiscal period
ended October 31, 1999, Morgan Grenfell International Select Equity Fund, Morgan
Grenfell European Equity Fund, Morgan Grenfell International Small Cap Equity
Fund, Morgan Grenfell European Small Cap Equity Fund, Morgan Grenfell Emerging
Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
paid aggregate brokerage commissions of $______, $______, $______, $______,
$______, $______, $______ and $______, respectively.

As of October 31, 1999, Morgan Grenfell European Equity Fund held securities of
HSBC Holdings, Credit Suisse Group and UBS AG, three of its regular broker-
dealers during the year then ended. The value of such securities on this date
was $_______, $_______ and $_______, respectively. As of October 31, 1999,
Morgan Grenfell International Select Equity Fund held securities of UBS AG, one
of its regular broker-dealers. The value of such securities on this date was
$_______.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Funds are distributed by ICC Distributors, Inc., the Distributor.
The Funds offer two classes of shares, institutional and Investment shares.
General information on how to buy shares of the Funds is set forth in "Managing
Your Investment" in each Fund's Prospectus. The following supplements that
information.

Investors may invest in institutional shares by establishing a shareholder
account with the Trust. In order to make an initial investment in Investment
shares of a Fund, an investor must establish an account with a service
organization. Additionally, each Fund has authorized brokers to accept purchase
and redemption orders for institutional and Investment shares for each Fund.
Brokers, including authorized brokers of service organizations, are, in turn,
authorized to designate other intermediaries to accept purchase and redemption
orders on a Fund's behalf. Investors who invest through brokers, service
organizations or their designated

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<PAGE>

intermediaries may be subject to minimums established by their broker, service
organization or designated intermediary.

Investors who establish shareholder accounts with the Trust should submit
purchase and redemption orders to the Transfer Agent as described in the
Prospectus. Investors who invest through authorized brokers, service
organizations or their designated intermediaries should submit purchase and
redemption orders directly to their broker, service organization or designated
intermediary. The broker or intermediary may charge you a transaction fee. A
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, service organization or, if applicable, an authorized
designee, accepts the order. Shares of any Fund may be purchased or redeemed on
any Business Day at the net asset value next determined after receipt of the
order, in good order, by the Transfer Agent, the service organization, broker or
designated intermediary. A "Business Day" means any day on which the New York
Stock Exchange (the "NYSE") is open. For an investor who has a shareholder
account with the Trust, the Transfer Agent must receive the investor's purchase
or redemption order before the close of regular trading on the NYSE for the
investor to receive that day's net asset value. For an investor who invests
through a mutual fund marketplace, the investor's authorized broker or
designated intermediary must receive the investor's purchase or redemption order
before the close of regular trading on the NYSE (generally 4:00 p.m., Eastern
Time) and promptly forward such order to the Transfer Agent for the investor to
receive that day's net asset value. Service organizations, brokers and
designated intermediaries are responsible for promptly forwarding such
investors' purchase or redemption orders to the Transfer Agent.

NET ASSET VALUE

Under the 1940 Act, the Board of Trustees of the Trust is responsible for
determining in good faith the fair value of the securities of each Fund. In
accordance with procedures adopted by the Board of Trustees, the net asset value
per share of each class of each Fund is calculated by determining the net worth
of the Fund attributable to the class (assets, including securities at value,
minus liabilities) divided by the number of shares of such class outstanding.
Each Fund computes net asset value for each class of its shares at the close of
such regular trading, which is generally 4:00 p.m. Eastern time, on each day on
which the New York Stock Exchange ("NYSE") is open (a "Business Day"). If the
NYSE closes early, the fund will accelerate the calculation of the NAV and
transaction deadlines to the actual closing time. The NYSE is closed on
Saturdays and Sundays as well as the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

For purposes of calculating net asset value for each class of its shares, equity
securities traded on a recognized U.S. or foreign securities exchange or the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
are valued at their last sale price on the principal exchange on which they are
traded or NASDAQ (if NASDAQ is the principal market for such securities) on the
valuation day or, if no sale occurs, at the bid price. Unlisted equity
securities for which market quotations are readily available are valued at the
most recent bid price prior to the time of valuation.

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<PAGE>

Debt securities and other fixed income investments of the Funds are valued at
prices supplied by independent pricing agents, which prices reflect broker-
dealer supplied valuations and electronic data processing techniques. Short-term
obligations maturing in sixty days or less may be valued at amortized cost,
which method does not take into account unrealized gains or losses on such
portfolio securities. Amortized cost valuation involves initially valuing a
security at its cost, and thereafter, assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods in which the value of the
security, as determined by amortized cost, may be higher or lower than the price
the Fund would receive if the Fund sold the security.

Other assets and assets for which market quotations are not readily available
are valued at fair value using methods determined in good faith by the Board of
Trustees.

Trading in securities on European and Far Eastern securities exchanges and over-
the-counter markets is normally completed well before the 4:00 P.M. (Eastern
time) close of business on each Business Day. In addition, European or Far
Eastern securities trading generally or in a particular country or countries may
not take place on all Business Days. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days
which are not Business Days in New York and on which the Funds' net asset values
are not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the regular
trading on the NYSE will not be reflected in the Funds' calculation of net asset
values unless the Adviser deems that the particular event would materially
affect net asset value, in which case an adjustment will be made.

PERFORMANCE INFORMATION

From time to time, performance information, such as total return and yield for
shares of a Fund, may be quoted in advertisements or in communications to
shareholders. A Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change
per year in value of an investment in shares of a Fund. Aggregate total return
reflects the total percentage change over the stated period. In calculating
total return, dividends and capital gain distributions made by the Fund during
the period are assumed to be reinvested in the Fund's shares. A Fund's yield
reflects a Fund's overall rate of income on portfolio investments as a
percentage of the institutional share price. Yield is computed by annualizing
the result of dividing the net investment income per share over a 30-day period
by the net asset value per share on the last day of that period.

To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding the Fund may discuss
performance as reported by various financial publications. The performance of a
Fund may be compared in publications to the performance of various indices and
investments for which reliable performance data is available. In addition, the
performance of a Fund may be compared in publications to

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<PAGE>

averages, performance rankings or other information prepared by recognized
mutual fund statistical services.

Performance quotations of a Fund represent the Fund's past performance and,
consequently, should not be considered representative of the future performance
of the Fund. The value of shares, when redeemed, may be more or less than the
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in
institutional shares of a Fund are not at the direction or within the control of
the Funds and will not be included in the Funds' calculations of total
return.

YIELD

From time to time, the Fixed Income Funds may advertise their yield. Yield is
calculated separately for premier shares investment shares and institutional
shares of a Fund. Each type of share is subject to differing yields for the same
period. The yield of a class of shares of a Fund refers to the annualized income
generated by an investment in the class of shares of the Fund over a specified
30-day period. The yield is calculated by assuming that the income generated by
the investment during that period is generated for each like period over one
year and is shown as a percentage of the investment. In particular, yield will
be calculated according to the following formula:

a-b
YIELD = 2 [ ( ---- + 1 ) 6 - 1 ]
cd

Where: a = dividends and interest earned by the Fund during the
period;

b = net expenses accrued for the period;

c = average daily number of shares outstanding during the
period entitled to receive dividends; and

d = maximum offering price per share on the last day of
the period.

Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Fund invests in, changes in interest rates
on money market instruments, changes in the expenses of the Fund and other
factors.

Yields are one basis upon which investors may compare the Funds with other
mutual funds; however, yields of other mutual funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.

For the 30-day period ended October 31, 1999, the yields of institutional shares
of Morgan Grenfell Core Global Fixed Income Fund, Morgan Grenfell Emerging
Markets Debt Fund, Morgan Grenfell Global Fixed Income Fund and Morgan Grenfell
International Fixed Income

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Fund were _____%, _____%, _____%, and _____% respectively. If the expense
limitations for these Funds had not been in effect during this period, the
yields of institutional shares of Morgan Grenfell Core Global Fixed Income Fund,
Morgan Grenfell Emerging Markets Debt Fund, Morgan Grenfell Global Fixed Income
Fund and Morgan Grenfell International Fixed Income Fund would have been _____%,
_____%, _____% and _____%, respectively.

For the 30-day period ended October 31, 1999, the yield of Investment shares of
Morgan Grenfell Emerging Markets Debt Fund was _____%. If the expense
limitation for the fund had not been in effect during this period, the yield of
Investment shares of Morgan Grenfell Emerging Markets Debt Fund would have been
_____%.

TOTAL RETURN

Average annual total return is calculated separately for Investment shares and
institutional shares of a Fund. Each class of share is subject to different
fees and expenses and, consequently, may have differing average annual total
returns for the same period. Each Fund that advertises "average annual total
return" for a class of its shares computes such return by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment
according to the following formula:

ERV
T = [ ( --- ) 1/n - 1 ]
P

Where: T = average annual total return,

ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1,
5 or 10 year (or other) periods at the end of
the applicable period (or a fractional portion
thereof);

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed in
years.

Each Fund that advertises "aggregate total return" for a class of its shares
computes such returns by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:

ERV
Aggregate Total Return = [ ( --- ) - 1 ]
P

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<PAGE>

during the periods is reflected. The ending redeemable value (variable "ERV" in
the formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

For the fiscal year ended October 31, 1999 the average annual total return of
institutional shares of Morgan Grenfell International Select Equity Fund, Morgan
Grenfell European Equity Fund, Morgan Grenfell International Small Cap Equity
Fund, Morgan Grenfell European Small Cap Equity Fund, Morgan Grenfell Emerging
Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
were _____%, _____%, _____%, _____%, _____%, _____%, _____% and -_____%,
respectively. For their respective periods from commencement of operations to
October 31, 1999, the average annual total returns for institutional shares of
Morgan Grenfell International Select Equity Fund, Morgan Grenfell European
Equity Fund, Morgan Grenfell International Small Cap Equity Fund, Morgan
Grenfell European Small Cap Equity Fund, Morgan Grenfell Emerging Markets Equity
Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell International
Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund and _____% were
_____%, _____%, _____%, _____%, _____%, _____%, _____% and _____%, respectively.
From the commencement of operations to October 31, 1999, the total return of the
Morgan Grenfell Core Global Fixed Income Fund was _____%. For the fiscal year
ended October 31, 1999, the average annual total returns for Investment shares
of Morgan Grenfell Emerging Markets Debt Fund was _____%. From its commencement
of operations to October 31, 1998, the average annual total returns for
Investment shares of Morgan Grenfell Emerging Markets Debt Fund was _____%. If
the expense limitations described in the Prospectus for the above Funds had not
been in effect during the indicated periods, the total returns for institutional
shares of these Funds for such periods would have been lower than the total
return figures shown in this paragraph.

The Funds may from time to time advertise comparative performance as measured by
various publications, including, but not limited to, Barron's, The Wall Street
Journal, Weisenberger Investment Companies Service, Dow Jones Investment
Adviser, Dow Jones Asset Management, Business Week, Changing Times, Financial
World, Forbes, Fortune and Money. In addition, a Fund may from time to time
advertise its performance relative to certain indices and benchmark investments,
including: (a) the Lipper Analytical Services, Inc. Mutual Fund Performance
Analysis, Fixed Income Analysis and Mutual Fund Indices (which measure total
return and average current yield for the mutual fund industry and rank mutual
fund performance); (b) the CDA Mutual Fund Report published by CDA Investment
Technologies, Inc. (which analyzes price, risk and various measures of return
for the mutual fund industry); (c) the Consumer Price Index published by the
U.S. Bureau of Labor Statistics (which measures changes in the price of goods
and services); (d) Stocks, Bonds, Bills and Inflation published by Ibbotson
Associates (which provides historical performance figures for stocks, government
securities and inflation); (e) the Lehman Brothers Aggregate Bond Index or its
component indices (the Aggregate Bond Index measures the performance of
Treasury, U.S. Government agency, corporate, mortgage and Yankee bonds); (f) the
Standard & Poor's Bond Indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); and (g) historical investment data
supplied by the research departments of Goldman Sachs, Lehman Brothers, Inc.,
Credit Suisse, First Boston Corporation, Morgan Stanley Dean Witter,

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<PAGE>

Salomon Smith Barney, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data. The composition of the investments in such indices and
the characteristics of such benchmark investments are not identical to, and in
some cases are very different from, those of any Fund's portfolio. These indices
and averages are generally unmanaged and the items included in the calculations
of such indices and averages may not be identical to the formulas used by a Fund
to calculate its performance figures.

TAXES

The following is a summary of the principal U.S. federal income, and certain
state and local tax considerations regarding the purchase, ownership and
disposition of shares in the Funds. This summary does not address special tax
rules applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Each prospective shareholder is
urged to consult his own tax adviser with respect to the specific federal,
state, local and foreign tax consequences of investing in the Funds. The
summary is based on the laws in effect on the date of this Statement of
Additional Information, which are subject to change.

GENERAL

Qualification of a Fund as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its gross
income for its taxable year from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stocks or
securities or foreign currencies, or other income (including but not limited to
gains from options, futures, and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% gross
income test"); and (b) the Fund diversify its holdings so that, at the close of
each quarter of its taxable year, (i) at least 50% of the market value of its
total (gross) assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more 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 United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses. Future
Treasury regulations could provide that qualifying income under the 90% gross
income test will not include gains from foreign currency transactions or
derivatives that are not directly related to a Fund's principal business of
investing in stock or securities or options and futures with respect to stock or
securities. Using foreign currency positions or entering into foreign currency
options, futures or forward contracts for purposes other than hedging currency
risk with respect to securities in a Fund's portfolio or anticipated to be
acquired may not qualify as "directly-related" under such regulations.

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<PAGE>

If a Fund complies with such provisions, then in any taxable year in which the
Fund distributes at least 90% of its "investment company taxable income" (which
includes dividends, interest, accrued original issue discount and recognized
market discount income, income from securities lending, any net short-term
capital gain in excess of net long-term capital loss and certain net realized
foreign exchange gains and is reduced by deductible expenses), the Fund (but not
its shareholders) will be relieved of federal income tax on any income of the
Fund, including long-term capital gains, distributed to shareholders. However,
if a Fund retains any investment company taxable income or net capital gain (the
excess of net long-term capital gain over net short-term capital loss), it will
be subject to federal income tax at regular corporate rates on the amount
retained.

If a Fund retains any net capital gain, the Fund may designate the retained
amount as undistributed capital gains in a notice to its shareholders who, if
subject to U.S. federal income tax on long-term capital gains, (i) will be
required to include in income for federal income tax purposes, as long-term
capital gain, their shares of such undistributed amount, and (ii) will be
entitled to credit their proportionate shares of the tax paid by the Fund
against their U.S. federal income tax liabilities, if any, and to claim refunds
to the extent the credit exceeds such liabilities.

For U.S. federal income tax purposes, the tax basis of shares owned by a
shareholder of a Fund will be increased by an amount equal under current law to
65% of the amount of undistributed net capital gain included in the
shareholder's gross income. Each Fund intends to distribute at least annually
to its shareholders all or substantially all of its investment company taxable
income and net capital gain. Exchange control or other foreign laws,
regulations or practices may restrict repatriation of investment income,
capital, or the proceeds of sales of securities by foreign investors such as the
Funds and may therefore make it more difficult for the Funds to satisfy the
distribution requirements described above, as well as the excise tax
distribution requirements described below. However, the Funds generally expect
to be able to obtain sufficient cash to satisfy such requirements from new
investors, the sale of securities or other sources. If for any taxable year a
Fund does not qualify as a regulated investment company, it will be taxed on all
of its investment company taxable income and net capital gain at corporate
rates, and its distributions to shareholders will be taxable as ordinary
dividends to the extent of its current and accumulated earnings and profits.

In order to avoid a 4% federal excise tax, each Fund must distribute (or be
deemed to have distributed) by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
capital gains over its capital losses (generally computed on the basis of the
one-year period ending on October 31 of such year), and all taxable ordinary
income and the excess of capital gains over capital losses for the previous year
that were not distributed in such year and on which no federal income tax was
paid by the Fund. For federal income tax purposes, dividends declared by a Fund
in October, November or December to shareholders of record on a specified date
in such a month and paid during January of the following year are taxable to
such shareholders as if received on December 31 of the year declared.

Gains and losses on the sale, lapse, or other termination of options and futures
contracts, options thereon and certain forward contracts (except certain foreign
currency options, forward

Page -53-
<PAGE>

contracts and futures contracts) will generally be treated as capital gains and
losses. Certain futures contracts, forward contracts and options held by the
Funds will be required to be "marked-to-market" for federal income tax purposes,
that is, treated as having been sold at their fair market value on the last day
of the Funds' taxable year. As a result, a Fund may be required to recognize
income or gain without a concurrent receipt of cash. Additionally, a Fund may be
required to recognize gain if an option, future, forward contract, short sale,
or other transaction that is not subject to these mark to market rules is
treated as a "constructive sale" of an "appreciated financial position" held by
the Fund under Section 1259 of the Code. Any gain or loss recognized on actual
or deemed sales of futures contracts, forward contracts, or options that are
subject to the mark to market rules, but not the constructive sales rules,
(except for certain foreign currency options, forward contracts, and futures
contracts) will be treated as 60% long-term capital gain or loss and 40% short-
term capital gain or loss. As a result of certain hedging transactions entered
into by a Fund, such Fund may be required to defer the recognition of losses on
futures or forward contracts and options or underlying securities or foreign
currencies to the extent of any unrecognized gains on related positions and the
characterization of gains or losses as long-term or short-term may be changed.
The tax provisions described above applicable to options, futures, forward
contracts and constructive sales may affect the amount, timing and character of
a Fund's distributions to shareholders. Certain tax elections may be available
to the Funds to mitigate some of the unfavorable consequences described in this
paragraph.

Section 988 of the Code contains special tax rules applicable to certain foreign
currency transactions and instruments that may affect the amount, timing and
character of income, gain or loss recognized by the Funds. Under these rules,
foreign exchange gain or loss realized with respect to foreign currencies and
certain futures and options thereon, foreign currency-denominated debt
instruments, foreign currency forward contracts, and foreign currency-
denominated payables and receivables will generally be treated as ordinary
income or loss, although in some cases elections may be available that would
alter this treatment. If a net foreign exchange loss treated as ordinary loss
under Section 988 of the Code were to exceed a Fund's investment company taxable
income (computed without regard to such loss) for a taxable year, the resulting
loss would not be deductible by the Fund or its shareholders in future years.
Net loss, if any, from certain foreign currency transactions or instruments
could exceed net investment income otherwise calculated for accounting purposes
with the result that either no dividends are paid or a portion of the Fund's
dividends is treated as a return of capital, which is nontaxable to the extent
of a shareholder's tax basis in his shares and, once such basis is exhausted,
generally gives rise to capital gains.

Each Fund's investments in zero coupon securities, deferred interest securities,
increasing-rate securities, pay-in-kind securities or other securities bearing
original issue discount or, if the Fund elects to include market discount in
income currently, market discount will generally cause it to realize income
prior to the receipt of cash payments with respect to these securities.
Transactions or instruments subject to the mark to market or constructive sale
rules described above may have the same result in some circumstances. In order
to obtain cash to distribute this income or gain, maintain its qualification as
a regulated investment company, and avoid federal income or excise taxes, a Fund
may be required to liquidate portfolio securities that it might otherwise have
continued to hold.

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<PAGE>

The Funds anticipate that they will be subject to foreign withholding or other
foreign taxes on certain income they derive from foreign securities, possibly
including, in some cases, capital gains from the sale of such securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. If more than 50% of a Fund's total assets at the close of
any taxable year consists of stock or securities of foreign corporations, a Fund
may file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends and distributions they actually
receive) their pro rata shares of qualified foreign taxes paid by the Fund (not
in excess of its actual tax liability) even though not actually received by the
shareholders, and (ii) treat such respective pro rata portions as foreign taxes
paid by them. If a Fund makes this election, shareholders may then deduct such
pro rata portions of qualified foreign taxes in computing their taxable incomes,
or, alternatively, use them as foreign tax credits, subject to satisfaction of
certain holding period requirements and to other applicable limitations, against
their U.S. federal income taxes. Shareholders who do not itemize deductions for
federal income tax purposes will not, however, be able to deduct their pro rata
portion of qualified foreign taxes paid by a Fund, although such shareholders
will be required to include their shares of such taxes in gross income if the
Fund makes the election referred to above.

If a shareholder chooses to take a credit for the qualified foreign taxes deemed
paid by such shareholder as a result of any such election by a Fund, the amount
of the credit that may be claimed in any year may not exceed the same proportion
of the U.S. tax against which such credit is taken which the shareholder's
taxable income from foreign sources (but not in excess of the shareholder's
entire taxable income) bears to his entire taxable income. For this purpose,
distributions from long-term and short-term capital gains or foreign currency
gains by a Fund will generally not be treated as income from foreign sources.
This foreign tax credit limitation may also be applied separately to certain
specific categories of foreign-source income and the related foreign taxes. As
a result of these rules, which have different effects depending upon each
shareholder's particular tax situation, certain shareholders of a Fund that
makes the election described above may not be able to claim a credit for the
full amount of their proportionate shares of the foreign taxes paid by the Fund.
Tax-exempt shareholders will ordinarily not benefit from this election. Each
year that a Fund files the election described above, its shareholders will be
notified of the amount of (i) each shareholder's pro rata share of qualified
foreign taxes paid by the Fund and (ii) the portion of Fund dividends which
represents income from each foreign country. If a Fund does not make this
election or otherwise pays foreign taxes that cannot be passed through to
shareholders, it generally may deduct such taxes in computing its investment
company taxable income.

If a Fund acquires stock (including, under proposed regulations, an option to
acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties, or capital
gains) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. Certain
elections may,

Page -55-
<PAGE>

if available, ameliorate these adverse tax consequences, but any such election
could require the Fund to recognize taxable income or gain without the
concurrent receipt of cash. Investments in passive foreign investment companies
may also produce ordinary income rather than capital gains, and the
deductibility of losses is subject to certain limitations. Each Fund may limit
and/or manage its holdings in passive foreign investment companies or make an
available election to minimize its tax liability or maximize its return from
these investments.

The federal income tax rules applicable to currency and interest rate swaps,
mortgage dollar rolls, certain structured securities and interest rate floors
and caps are unclear in certain respects, and the Funds may be required to
account for these transactions or instruments under tax rules in a manner that
may affect the amount, timing and character of income, gain or loss therefrom
and that may, under certain circumstances, limit the extent to which the Funds
engage in these transactions or acquire these instruments.

Each of the Fixed Income Funds other than the International Fixed Income Fund
may invest in debt obligations that are in the lowest rating categories or are
unrated, including debt obligations of issuers not currently paying interest as
well as issuers who are in default. Investments in debt obligations that are at
risk of or in default present special tax issues for these Funds. Tax rules are
not entirely clear about issues such as when a Fund may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by these Funds, to the extent
they invest in such securities, in order to reduce the risk of their
distributing insufficient income to preserve their status as regulated
investment companies and seek to avoid having to pay federal income or excise
tax.

For federal income tax purposes, each Fund is permitted to carry forward a net
capital loss in any year to offset its own capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent years'
capital gains are offset by such losses, they would not result in federal income
tax liability to the applicable Fund and, accordingly, would generally not be
distributed to shareholders. At October 31, 1999, the Morgan Grenfell
International Small Cap Equity Fund had a capital loss carryforward of
approximately $_____ expiring through the fiscal year ended October 31, 2005,
the Morgan Grenfell Emerging Markets Equity Fund had a capital loss carryforward
of approximately $_____ expiring through the fiscal year ended October 31, 2006,
the Morgan Grenfell Emerging Markets Debt Fund had a capital loss carryforward
of approximately $_____ expiring through the fiscal year ended October 31,
2006.

U.S. SHAREHOLDERS--DISTRIBUTIONS

For U.S. federal income tax purposes, distributions by the Funds, whether
reinvested in additional shares or paid in cash, generally will be taxable to
shareholders who are subject to tax. Shareholders receiving a distribution in
the form of newly issued shares will be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of cash
they would have received had they elected to receive cash and will have a cost
basis in each share received equal to such amount divided by the number of
shares received.

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<PAGE>

Distributions from investment company taxable income of any Fund for the year
will be taxable as ordinary income. Distributions to corporate shareholders
designated as derived from a Fund's dividend income, if any, that would be
eligible for the dividends received deduction if the Fund were not a regulated
investment company will be eligible, subject to certain holding period
requirements and debt-financing restrictions, for the 70% dividends received
deduction for corporations. Because eligible dividends are limited to those
received by a Fund from U.S. domestic corporations, it is unlikely that any
significant portion of any Fund's distributions will qualify for the dividends
received deduction. The dividends-received deduction, if available, is reduced
to the extent the shares with respect to which the dividends are received are
treated as debt financed under the Code and is eliminated if the shares are
deemed to have been held for less than a minimum period, generally 46 days,
extending before and after each such dividend. The entire dividend, including
the deducted amount, is considered in determining the excess, if any, of a
corporate shareholder's adjusted current earnings over its alternative minimum
taxable income, which may increase its liability for the federal alternative
minimum tax. The dividend may, if it is treated as an "extraordinary dividend"
under the Code, reduce such shareholder's tax basis in its shares of a Fund and,
to the extent such basis would be reduced below zero, require the current
recognition of income. Capital gain dividends (i.e., dividends from net capital
gain), if designated as such in a written notice to shareholders mailed not
later than 60 days after a Fund's taxable year closes, will be taxed to
shareholders as long-term capital gain regardless of how long shares have been
held by shareholders, but are not eligible for the dividends received deduction
for corporations.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.

U.S. SHAREHOLDERS--SALE OF SHARES

When a shareholder's shares are sold, redeemed or otherwise disposed of in a
transaction that is treated as a sale for tax purposes, the shareholder will
generally recognize gain or loss equal to the difference between the
shareholder's adjusted tax basis in the shares and the cash, or fair market
value of any property, received. Assuming the shareholder holds the shares as a
capital asset at the time of such sale or other disposition, such gain or loss
should be capital in character. Any loss realized on the sale, redemption or
other disposition of the shares of any Fund with a tax holding period of six
months or less, to the extent such loss is not disallowed under any other tax
rule, will be treated as a long-term capital loss to the extent of any capital
gain dividend with respect to such shares. Additionally, any loss realized on a
sale, redemption or other disposition of shares of a Fund may be disallowed
under "wash sale" rules to the extent the shares disposed of are replaced with
shares of the same Fund within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of, such as pursuant to a dividend
reinvestment in shares of the Fund. If disallowed, the loss will be reflected
in an adjustment to the basis of the shares acquired. Shareholders should
consult their own tax advisers regarding their particular circumstances to
determine whether a disposition of Fund shares is properly treated as a sale for
tax purposes, as is assumed in the foregoing discussion.

Page -57-
<PAGE>

The Funds may be required to withhold, as "backup withholding," federal income
tax at a rate of 31% from dividends (including distributions from a Fund's net
long-term capital gains) and share redemption and exchange proceeds to
individuals and other non-exempt shareholders who fail to furnish the Funds with
a correct taxpayer identification number ("TIN") certified under penalties of
perjury, or if the Internal Revenue Service or a broker notifies the Funds that
the payee has failed to properly report interest or dividend income to the
Internal Revenue Service or that the TIN furnished by the payee to the Funds is
incorrect, or if (when required to do so) the payee fails to certify under
penalties of perjury that it is not subject to backup withholding. Any amounts
withheld may be credited against a shareholder's U.S. federal income tax
liability.

NON-U.S. SHAREHOLDERS

Any gain realized by a non-U.S. shareholder upon a sale or redemption of shares
of a Fund will not be subject to U.S. federal income or withholding tax unless
the gain is effectively connected with the shareholder's trade or business in
the United States, or in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for 183 days or more
during the taxable year and certain other conditions are met. Non-U.S.
investors should consult their tax advisers about the applicability of U.S.
federal income or withholding taxes to certain distributions received by
them.

STATE AND LOCAL

The Funds may be subject to state or local taxes in jurisdictions in which the
Funds may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of a Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws, and investment in the Fund may have tax consequences for
shareholders different from those of a direct investment in the Fund's portfolio
securities. Shareholders should consult their own tax advisers concerning these
matters.

GENERAL INFORMATION ABOUT THE TRUST

Page -58-
<PAGE>

GENERAL

The Trust is an open-end investment company organized as a Delaware business
trust on September 13, 1993. The Trust commenced operations on January 3, 1994.
The Board of Trustees of the Trust is responsible for the overall management and
supervision of the affairs of the Trust. The Declaration of Trust authorizes
the Board of Trustees to create separate investment series or portfolios of
shares. As of the date hereof, the Trustees have established the thirteen Funds
described in this SAI and nine additional series. The Declaration of Trust
further authorizes the Trust to classify or reclassify any series or portfolio
of shares into one or more classes. As of the date hereof, the Trustees have
established two classes of shares: institutional shares and Investment shares.
On February __, 2000, the European Equity Growth Fund changed its name to the
European Equity Fund as indicated on the cover page of this Statement of
Additional Information.

The shares of each class represent an interest in the same portfolio of
investments of a Fund. Each class has equal rights to voting, redemption,
dividends and liquidation, except that only Investment shares bear service fees
and each class may bear other expenses properly attributable to the particular
class. Also, holders of Investment shares of each Fund have exclusive voting
rights with respect to the service plan adopted by their Fund.

When issued, shares of the Funds are fully paid and nonassessable. In the event
of liquidation, shareholders are entitled to share pro rata in the net assets of
the applicable Fund available for distribution to shareholders. Shares of the
Funds entitle their holders to one vote per share, are freely transferable and
have no preemptive, subscription or conversion rights.

Shares of a Fund will be voted separately with respect to matters pertaining to
that Fund except for the election of Trustees and the ratification of
independent accountants. For example, shareholders of each Fund are required to
approve the adoption of any investment advisory agreement relating to such Fund
and any change in the fundamental investment restrictions of such Fund.
Approval by the shareholders of one Fund is effective only as to that Fund. The
Trust does not intend to hold shareholder meetings, except as may be required by
the 1940 Act. The Trust's Declaration of Trust provides that special meetings
of shareholders shall be called for any purpose, including the removal of a
Trustee, upon written request of shareholders entitled to vote at least 10% of
the outstanding shares of the Trust, or Fund, as the case may be. In addition,
if ten or more shareholders of record who have held shares for at least six
months and who hold in the aggregate either shares having a net asset value of
$25,000 or 1% of the outstanding shares, whichever is less, seek to call a
meeting for the purpose of removing a Trustee, the Trust has agreed to provide
certain information to such shareholders and generally to assist their efforts.

In the event of a liquidation or dissolution of the Trust or an individual Fund,
shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund. Shareholders of a Fund are
entitled to participate in the net distributable assets of the particular Fund
involved on liquidation, based on the number of shares of the Fund that are held
by each shareholder.

Page -59-
<PAGE>

As of December 17, 1999, the following shareholders owned the following
respective percentages of the outstanding Institutional shares of the indicated
Funds:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Percentage of
Outstanding
Fund Shareholder Name and Address Shares
of the Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Core Global Fund University of North Dakota Foundation, J Lloyd 56.766%
Stone Alumni Center, Corner of Oxford &
University, Grand Forks, ND 58202-8157
- ----------------------------------------------------------------------------------------------------------
Bristol County Retirement Board, 645 County 27.119%
St, Taunton, MA 02780-3623
- ----------------------------------------------------------------------------------------------------------
Fleet National Bank Tr, Goodall Hospital 16.115%
Custody, Rochester, NY 14692-8900
- ----------------------------------------------------------------------------------------------------------
Emerging Markets Equity Harris Trust, c/o Motorola Pension Fund, 111 33.184%
Fund West Monroe, Chicago, IL 60690-0755
- ----------------------------------------------------------------------------------------------------------
Northern Trust Company TR, c/o Motorola 22.637%
Employees Savings & Profit Sharing Trust,
Chicago, IL 60675-2856
- ----------------------------------------------------------------------------------------------------------
Public Employees Retirement Association, ATTN 21.278%
Daryl Roberts, 1300 Logan Street, Denver, CO
80203-2386
- ----------------------------------------------------------------------------------------------------------
Public School Employees Retirement System, c/o 20.208%
State Street PA Svcs, 30 N 3rd St,
Harrisburgh, PA 17101-1712
- ----------------------------------------------------------------------------------------------------------
European Equity Fund National Investor Services Corp for the 38.874%
Exclusive Benefit of our Customers, 55 Water
St, Fl 32, New York, NY 10041-3288
- ----------------------------------------------------------------------------------------------------------
Caroline E. Altmann, 153 Mercer St, Apt 5, New 15.873%
York, NY 10012-3239
- ----------------------------------------------------------------------------------------------------------
Michael Levy & Jeffry Vonwald JTWROS, Groton 15.873%
Hdsn, NY 10520-0220
- ----------------------------------------------------------------------------------------------------------
Robert L. Reiner, 666 Greenwich St, Apt 922, 15.873%
New York, NY 10014
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Page -60-
<PAGE>

Ross C. Youngman, 155 W 68/th/ St, Apt 930, New 6.349%
York, NY 10023-5815
- ----------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund Bost & Co, FBO Bell Atlantic Master Trust 38.213%
Mutual Fund Operations, Pittsburgh, PA
15230-3198
- ----------------------------------------------------------------------------------------------------------
State of Wisconsin Investment Board, 121 E 18.391%
Wilson St, Madison, WI 53707-7847
- ----------------------------------------------------------------------------------------------------------
Los Angeles County Employees Retirement 12.179%
Association, 300 N Lake Ave, Ste 850,
Pasadena, CA 91101-4109
- ----------------------------------------------------------------------------------------------------------
Los Angles City Employees Retirement Systems, 9.306%
360 E 2/nd/ St, 8/th/ Floor, Los Angeles, CA
90012-4207
- ----------------------------------------------------------------------------------------------------------
Global Fixed Income Fund Bankers Trust Co, FBO Wofford College, ATTN 30.788%
Ryan Easley, 500 Washington Ave, STE 1010,
Saint Louis, MO 63102-1261
- ----------------------------------------------------------------------------------------------------------
The American University in Cairo, ATTN Dr. 28.872%
Larry Fabian, 420 5/th/ Ave Fl 3, New York, NY
10018-2729
- ----------------------------------------------------------------------------------------------------------
Museum of Fine Arts Boston, Mr. Thomas W. 13.729%
Fitzgerald, 465 Huntington Ave, Boston, MA
02115-5587
- ----------------------------------------------------------------------------------------------------------
Town of Plymouth Retirement System, 11 Lincoln 9.630%
St, Plymouth, MA 02380-3325
- ----------------------------------------------------------------------------------------------------------
The American University in Cairo in respect of 7.828%
USAid Endowment, ATTN Dr. Larry Fabian, 420
5/th/ Ave, Fl 3, New York, NY 10018-2729
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Page -61-
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Percentage of
Outstanding
Fund Shareholder Name and Address Shares
of the Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Fixed Income Chase Manhattan Bank Tr, FBO Federal Mogul 67.275%
Fund Corporation, Pension Master Trust-B, 28655
Northwestern Hwy, Southfield, MI 48034-2146
- ----------------------------------------------------------------------------------------------------------
Northern Trust & Barbara Trueman & Jack 15.447%
VanFossen & David Rismiller Tr, James R.
Trueman Irrev Subchapter S Trust, 50 S.
Lasalle St, Chicago, IL 80875-2956
- ----------------------------------------------------------------------------------------------------------
Dingle & Co, c/o Comerica Bank, ATTN Mutual 7.431%
Funds Unit 3446, Detroit, MI 48275-0001
- ----------------------------------------------------------------------------------------------------------
Bay City Policemen & Firemen Retirement System 5.363%
Defined Benefit Pension Plan, c/o Cathy
Szostak Acct Analyst, 301 Washington Ave, Bay
City, MI 48708-6897
- ----------------------------------------------------------------------------------------------------------
International Select Public Employees' Retirement Association, ATTN 94.585%
Equity Fund Daryl Roberts, 1300 Logan Street, Denver, CO
80203-2386
- ----------------------------------------------------------------------------------------------------------
International Small Cap State Street Bank & Trust Co TTEE Black & 72.733%
Equity Fund Decker Defined Benefit Plan Master Trust, P.O.
Box 1992, Boston, MA 02106-1992
- ----------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co, Cust FBO Pitney 18.631%
Bowes Retirement Plan, One Enterprise Drive
W7A, North Quincy, MA 02171-2126
- ----------------------------------------------------------------------------------------------------------
National Investor Services Corp for the 6.645%
Exclusive Benefit of our Customers, 55 Water
St, Fl 32, New York, NY 10041-3299
- ----------------------------------------------------------------------------------------------------------
</TABLE>

As of December 17, 1999, the following shareholders owned the following
respective percentages of the outstanding Investment shares of the indicated
Funds:

Page -62-
<PAGE>

SHAREHOLDER AND TRUSTEE LIABILITY

The Trust is organized as a Delaware business trust and, under Delaware law, the
shareholders of a business trust are not generally subject to liability for the
debts or obligations of the trust. Similarly, Delaware law provides that none of
the Funds will be liable for the debts or obligations of any other Fund.
However, no similar statutory or other authority limiting business trust
shareholder liability exists in other states. As a result, to the extent that a
Delaware business trust or a shareholder is subject to the jurisdiction of the
courts in such other states, the courts may not apply Delaware law and may
thereby subject the Delaware business trust shareholders to liability. To guard
against this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification by the relevant Fund for any loss suffered by a
shareholder as a result of an obligation of the Fund. The Declaration of Trust
also provides that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. The Trustees believe that, in view of the above,
the risk of personal liability of shareholders is remote.

The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.

ANNUAL AND SEMI-ANNUAL REPORTS

Page -63-
<PAGE>

Shareholders of each Fund receive an annual report containing audited financial
statements and semi-annual report. All transactions in institutional shares of
a Fund and dividends and distributions paid by a Fund are reflected in
confirmations issued by the Transfer Agent at the time of the transaction and/or
in monthly statements issued by the Transfer Agent. A year-to-date statement
will be provided by the Transfer Agent.

CONSIDERATION FOR PURCHASES OF SHARES

The Trust generally will not issue shares of the Funds for consideration other
than cash. At the Trust's sole discretion, however, it may issue Fund shares
for consideration other than cash in connection with an acquisition of portfolio
securities (other than municipal debt securities issued by state political
subdivisions or their agencies or instrumentalities) or pursuant to a bona fide
purchase of assets, merger or other reorganization, provided the securities meet
the investment objectives and policies of the Fund and the securities are
acquired by the Fund for investment and not for resale. An exchange of
securities for Fund shares will generally be a taxable transaction to the
shareholder.

ADDITIONAL INFORMATION

INDEPENDENT ACCOUNTANTS

[Accountant], [Address] serves as the Trust's independent accountants, providing
audit services, including review and consultation in connection with various
filings by the Trust with the Commission and tax authorities.

REGISTRATION STATEMENT

The Trust has filed with the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Funds and certain other series of
the Trust. If further information is desired with respect to the Trust, the
Funds or such other series, reference is made to the Registration Statement and
the exhibits filed as a part thereof.

FINANCIAL STATEMENTS

The Trust's audited financial statements for the period ended October 31, 1999
are included in, and incorporated by reference into, this Statement of
Additional Information in reliance upon the report of ____________________, the
Trust's independent accountants, as experts in accounting and auditing.

The financial statements of the Trust for the periods ended on and prior to
October 31, 1999 are included in, and incorporated by reference into, this
Statement of Additional Information from the Trust's 1999 Annual Report to
Shareholders for the year ended October 31, 1999 (filed electronically on
December __, 1999; file no. 811-08006; accession no .___________________, and
will be attached to each copy of such Statement of Additional Information that
is distributed.

Page -64-
<PAGE>

APPENDIX A
DESCRIPTION OF RATINGS CATEGORIES OF
MOODY'S INVESTORS SERVICE, INC. AND
STANDARD & POOR'S RATINGS GROUP

Moody's Investors Service, Inc. ("Moody's") describes classifications of fixed
income securities (not including commercial paper) as follows:

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

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

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

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

Ba--Bonds which are rated Ba are 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--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Page -65-
<PAGE>

Standard & Poor's Ratings Group ("Standard & Poor's") describes classifications
of fixed income securities (not including commercial paper) as follows:

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from the AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

Debt rated BB, B, CCC or CC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's 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 if debt service payments are
jeopardized.

Page -66-
<PAGE>

APPENDIX B
QUALITY DISTRIBUTION FOR EMERGING MARKETS DEBT FUND

During the fiscal year ended October 31, 1999, the percentages of Morgan
Grenfell Emerging Market Debt Fund's assets invested in unrated debt securities
and securities rated in particular rating categories by Standard & Poor's were,
on a weighted average basis, as follows*:

Percentage of Total
Standard & Poor's (Moody's) Ratings Investments

Not Rated.............................................. _____%

Rated by Standard & Poor's (Moody's):
BBB-................................................... _____%
BB+, BB, BB-........................................... _____%
B+..................................................... _____%

Cash................................................... _____%

__________

* Based on the average of month-end portfolio holdings during the fiscal year
ended October 31, 1999. Asset composition does not represent actual holdings on
October 31, 1999; nor does it imply that the overall quality of portfolio
holdings is fixed.

Page -67-
<PAGE>

MORGAN GRENFELL INVESTMENT TRUST

No-Load Open-End Funds

One South Street

Baltimore, MD 21202

STATEMENT OF ADDITIONAL INFORMATION

February 28, 2000

Morgan Grenfell Investment Trust (the "Trust") is an open-end, management
investment company consisting of twenty-two investment portfolios, each having
separate and distinct investment objectives and policies. This Statement of
Additional Information ("SAI") provides supplementary information pertaining to
the following investment portfolios of the Trust (each, a "Fund"):

- Morgan Grenfell Fixed Income Fund

- Morgan Grenfell Municipal Bond Fund

- Morgan Grenfell Short-Term Fixed Income Fund

- Morgan Grenfell Short-Term Municipal Bond Fund

- Morgan Grenfell High Yield Bond Fund

- Morgan Grenfell Smaller Companies Fund

- Morgan Grenfell Micro Cap Fund

This Statement of Additional Information is not a prospectus, and should be read
only in conjunction with the Funds' Institutional or Investment Shares
Prospectuses dated February 28, 2000, as amended or supplemented from time to
time (each, a "Prospectus" and collectively, the "Prospectuses"). A copy of each
Prospectus may be obtained without charge from Deutsche Asset Management, Inc.,
the Trust's Administrator, by calling 1-800-407-7301 or writing to Deutsche
Asset Management Funds, P.O. Box 219165, Kansas City, Missouri 64121.

Page -1-
<PAGE>

TABLE OF CONTENTS
- -----------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction...............................................................

Additional Information on Fund Investments and Strategies
and Related Risks........................................................

Investment Restrictions....................................................

Trustees and Officers......................................................

Investment Advisory and Other Services.....................................

Service Plan...............................................................

Portfolio Transactions.....................................................

Purchase and Redemption of Shares..........................................

Performance Information....................................................

Taxes......................................................................

General Information About the Trust........................................

Additional Information.....................................................

Financial Statements.......................................................

Appendix A - Description of Ratings........................................

Appendix B - The Adviser's Micro Cap Investment Results....................
</TABLE>

No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectuses in connection with the offering made by each Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its Distributor. Each Prospectus does not
constitute an offering by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made. Shares of the Funds are not
available in certain states. Please call 1-800-407-7301 to determine
availability in your state.

Page -2-
<PAGE>

INTRODUCTION

The Trust is an open-end, management investment company that currently consists
of twenty-two separate investment portfolios. This Statement of Additional
Information relates to the following seven separate investment portfolios of the
Trust (the "Funds"):

Morgan Grenfell Fixed Income Fund
Morgan Grenfell Short-Term Fixed Income Fund
Morgan Grenfell High Yield Bond Fund
(collectively, the "Fixed Income Funds")

Morgan Grenfell Municipal Bond Fund
Morgan Grenfell Short-Term Municipal Bond Fund
(collectively, the "Municipal Funds")

Morgan Grenfell Smaller Companies Fund
Morgan Grenfell Micro Cap Fund
(collectively, the "Equity Funds")

Each Fund is classified as "diversified" within the meaning of the Investment
Company Act of 1940 (the "1940 Act").

Deutsche Asset Management, Inc. (the "Adviser") serves as investment adviser to
the Funds. ICC Distributors, Inc. (the "Distributor") serves as the Funds'
principal underwriter and distributor. Deutsche Asset Management, Inc. serves as
the Funds' administrator (the "Administrator").

The information contained in this Statement of Additional Information generally
supplements the information contained in the Prospectuses. No investor should
invest in shares of a Fund without first reading the Prospectuses. Capitalized
terms used herein and not otherwise defined have the same meaning ascribed to
them in each Prospectus.

ADDITIONAL INFORMATION ON FUND INVESTMENTS
AND STRATEGIES AND RELATED RISKS

The following supplements the information contained in the Prospectus concerning
the investment objectives and policies of each Fund.

Morgan Grenfell Fixed Income Fund
- ---------------------------------

Under normal conditions, the Fund invests at least 80% of its assets in
intermediate-term U.S. Treasury, corporate, mortgage-backed, asset-backed,
taxable municipal and tax-exempt municipal bonds. The Fund invests primarily in
investment grade fixed income securities that, at the time of purchase, are
either rated in one of the three highest rating categories by a major
independent agency, or in unrated securities the Adviser considers of comparable
quality. The Fund may invest up to 15% of its assets in investment grade fixed
income securities rated within

Page -3-
<PAGE>

the fourth highest rating category. In the event that any security is
downgraded, the Adviser will determine whether to hold or sell such security,
provided that that Fund will not hold more than 5% of its net assets in
securities that are rated below investment grade (junk-bonds). The Fund may
invest up to 25% of its total assets in U.S. dollar-denominated securities of
foreign issuers. The Fund may hold up to 20% of its total assets in cash or
money market instruments in order to maintain liquidity, or in the event that
the Adviser determines that securities meeting the Fund's investment objective
are not otherwise readily available for purchase.

Morgan Grenfell Short-Term Fixed Income Fund
- --------------------------------------------

Under normal conditions, the Fund invests at least 80% of its assets in short-
term U.S. Treasury, corporate, mortgage-backed, asset-backed, taxable municipal
and tax-exempt municipal bonds. The Fund invests primarily in investment grade
fixed income securities that, at the time of purchase, are either rated in one
of the three highest rating categories by a major independent agency, or in
unrated securities the Adviser considers of comparable quality. The Fund may
invest up to 15% of its assets in investment grade fixed income securities rated
within the fourth highest rating category. In the event that any security is
downgraded, the Adviser will determine whether to hold or sell such security,
provided that that Fund will not hold more than 5% of its net assets in
securities that are rated below investment grade (junk-bonds). The Fund may
invest up to 25% of its total assets in U.S. dollar-denominated securities of
foreign issuers. The Fund may hold up to 20% of its total assets in cash or
money market instruments in order to maintain liquidity, or in the event that
the Adviser determines that securities meeting the Fund's investment objective
are not otherwise readily available for purchase.

Morgan Grenfell Municipal Bond Fund
- -----------------------------------

Under normal conditions, the Fund invests at least 80% of net assets in
municipal securities which pay interest exempt from federal income tax and at
least 65% of total assets in municipal bonds. There is no restriction on the
percentage of assets that may be invested in obligations the interest on which
is a preference item for purposes of the federal alternative minimum tax. The
Fund may invest 25% or more of its total assets in private activity and
industrial development bonds if the interest paid on them is exempt from regular
federal income tax. The Fund invests primarily in investment grade bonds that
are either rated in one of the three highest rating categories by one of the
major independent rating agencies, or in unrated securities that the Adviser
considers of comparable quality. The Fund may invest up to 15% of its assets in
investment grade bonds that are rated in the fourth highest category. In the
event that any security is downgraded, the Adviser will determine whether to
hold or sell such security, provided that that Fund will not hold more than 5%
of its net assets in securities that are rated below investment grade (junk-
bonds). Up to 20% of the Fund's total assets may be invested in certain taxable
securities in order to maintain liquidity. Securities may be purchased on a
when-issued basis.

Morgan Grenfell Short-Term Municipal Bond Fund
- ----------------------------------------------

Page -4-
<PAGE>

interest on which is a preference item for purposes of the federal alternative
minimum tax. The Fund may invest 25% or more of its total assets in private
activity and industrial development bonds if the interest paid on them is exempt
from regular federal income tax. The Fund invests primarily in investment grade
bonds that are either rated in one of the three highest rating categories by one
of the major independent rating agencies, or in unrated securities that the
Adviser considers of comparable quality. The Fund may invest up to 15% of its
assets in investment grade bonds that are rated in the fourth highest category.
In the event that any security is downgraded, the Adviser will determine whether
to hold or sell such security, provided that that Fund will not hold more than
5% of its net assets in securities that are rated below investment grade (junk-
bonds). Up to 20% of the Fund's total assets may be invested in certain taxable
securities in order to maintain liquidity. Securities may be purchased on a
when-issued basis.

Morgan Grenfell High Yield Bond Fund
- ------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
U.S. dollar-denominated domestic and foreign below investment grade bonds (junk-
bonds). The Fund's investments in these securities may be of any credit quality
and may include securities not paying interest currently, zero coupon bonds,
pay-in-kind securities and securities in default. The Fund may invest up to 35%
of its total assets in cash or money market instruments in order to maintain
liquidity, or in the event that the portfolio manager determines that securities
meeting the Fund's investment objectives are not otherwise readily available for
purchase.

Morgan Grenfell Smaller Companies Fund
- --------------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of U.S. small capitalization companies.
The Adviser defines the small capitalization equity securities universe as the
bottom 20% of the total domestic equity market capitalization, (at the time of
investment), using a minimum market capitalization of $10 million. Up to 35% of
the Fund's total assets may be invested in investment grade fixed income
securities, securities of medium and large capitalization companies and in cash.
Up to 5% of the Fund's net assets may be invested in the securities of foreign
issuers.

Morgan Grenfell Micro Cap Fund
- ------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the common stocks of U.S. micro capitalization companies and securities
convertible into such stocks. The Adviser defines the micro capitalization
equity universe as the bottom 5% of the total domestic equity market
capitalization, (at the time of investment), using a minimum market
capitalization of $10 million. Up to 25% of the Fund's total assets may be
invested in the securities of foreign companies that would be considered in the
bottom 5% in terms of market capitalization in the U.S. equity market. The Fund
may invest up to 35% of its assets in high quality debt instruments and money
market instruments with remaining maturities of one year or less, including
repurchase agreements. In addition, the Fund may invest up to 5% of its net
assets in non-convertible bonds and preferred stocks that are considered high
quality. To the extent that the Fund invests in foreign securities, it may
enter into forward currency exchange contracts and buy and sell currency options
to hedge against currency exchange rate fluctuations.

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FIXED INCOME SECURITIES

GENERAL. Each Fund may invest in fixed income securities. In periods of
declining interest rates, the yield (income from portfolio investments over a
stated period of time) of a Fund that invests in fixed income securities may
tend to be higher than prevailing market rates, and in periods of rising
interest rates, the yield of the Fund may tend to be lower. Also, when interest
rates are falling, the inflow of net new money to such a Fund will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value of a Fund
investing in fixed income securities can generally be expected to change as
general levels of interest rates fluctuate. The value of fixed income securities
in a Fund's portfolio generally varies inversely with changes in interest rates.
Prices of fixed income securities with longer effective maturities are more
sensitive to interest rate changes than those with shorter effective maturities.

PRIVATE ACTIVITY AND INDUSTRIAL DEVELOPMENT BONDS. Each of the Funds other than
the Equity Funds may invest in private activity and industrial development
bonds, which are obligations issued by or on behalf of public authorities to
raise money to finance various privately owned or operated facilities for
business and manufacturing, housing, sports and pollution control. These bonds
are also used to finance public facilities such as airports, mass transit
systems, ports, parking or sewage or solid waste disposal facilities, as well as
certain other facilities or projects. The payment of the principal and interest
on such bonds is generally dependent solely on the ability of the facility's
user to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.

PUT BONDS. Each of the Funds other than the Equity Funds may invest in "put"
bonds, which are tax exempt securities (including securities with variable
interest rates) that may be sold back to the issuer of the security at face
value at the option of the holder prior to their stated maturity. The Adviser
intends to purchase only those "put" bonds for which the put option is an
integral part of the security as originally issued. The option to "put" the bond
back to the issuer prior to the stated final maturity can cushion the price
decline of the bond in a rising interest rate environment. However, the premium
paid, if any, for an option to put will have the effect of reducing the yield
otherwise payable on the underlying security. For the purpose of determining the
"maturity" of securities purchased subject to an option to put, and for the
purpose of determining the dollar weighted average maturity of a Fund holding
such securities, the Fund will consider "maturity" to be the first date on which
it has the right to demand payment from the issuer of the put although the final
maturity of the security is later than such date.

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Banks), (iii) the discretionary authority of the U.S. Government to purchase the
agency's obligations (such as securities of the Federal National Mortgage
Association), or (iv) only the credit of the issuer. No assurance can be given
that the U.S. Government will provide financial support to U.S. Government
agencies or instrumentalities in the future.

Each of the Funds other than the Equity Funds may also invest in separately
traded principal and interest components of securities guaranteed or issued by
the U.S. Government or its agencies, instrumentalities or sponsored enterprises
if such components are traded independently under the Separate Trading of
Registered Interest and Principal of Securities program ("STRIPS") or any
similar program sponsored by the U.S. Government. STRIPS are sold as zero
coupon securities. See "Zero Coupon Securities."

CUSTODIAL RECEIPTS. Custodial receipts are interests in separately traded
interest and principal component parts of U.S. Government securities that are
issued by banks or brokerage firms and are created by depositing U.S. Government
securities into a special account at a custodian bank. The custodian holds the
interest and principal payments for the benefit of the registered owners of the
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Custodial receipts include Treasury Receipts ("TRs"), Treasury Investment Growth
Receipts ("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
TIGRs and CATS are interests in private proprietary accounts while TRs and
STRIPS (see "U.S. Government securities" above) are interests in accounts
sponsored by the U.S. Treasury. Receipts are sold as zero coupon securities; for
more information, see "Zero Coupon Securities."

Each of the Funds other than the Equity Funds and the Municipal Funds may
acquire U.S. Government securities and their unmatured interest coupons that
have been separated ("stripped") by their holder, typically a custodian bank or
investment brokerage firm. Having separated the interest coupons from the
underlying principal of the U.S. Government securities, the holder will resell
the stripped securities in custodial receipt programs with a number of different
names, including TIGRs, and CATS. The stripped coupons are sold separately from
the underlying principal, which is usually sold at a deep discount because the
buyer receives only the right to receive a future fixed payment on the security
and does not receive any rights to periodic interest (cash) payments. The
underlying U.S. Treasury bonds and notes themselves are generally held in book-
entry form at a Federal Reserve Bank. Counsel to the underwriters of these
certificates or other evidences of ownership of U.S. Treasury securities have
stated that, in their opinion, purchasers of the stripped securities most likely
will be deemed the beneficial holders of the underlying U.S. Government
securities for federal tax and securities purposes. In the case of CATS and
TIGRS, the Internal Revenue Service ( the "IRS") has reached this conclusion for
the purpose of applying the tax diversification requirements applicable to
regulated investment companies such as the Funds. CATS and TIGRS are not
considered U.S. Government securities by the staff of the Commission. Further,
the IRS conclusion noted above is contained only in a general counsel
memorandum, which is an internal document of no precedential value or binding
effect, and a private letter ruling, which also may not be relied upon by the
Funds. The Trust is not aware of any binding legislative, judicial or
administrative authority on this issue.

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ZERO COUPON SECURITIES. STRIPS and custodial receipts (TRs, TIGRs and CATS) are
sold as zero coupon securities, that is, fixed income securities that have been
stripped of their unmatured interest coupons. Zero coupon securities are sold at
a (usually substantial) discount and redeemed at face value at their maturity
date without interim cash payments of interest or principal. The amount of this
discount is accreted over the life of the security, and the accretion
constitutes the income earned on the security for both accounting and tax
purposes. Because a Fund must distribute the accreted amounts in order to
qualify for favorable tax treatment, it may have to sell portfolio securities to
generate cash to satisfy the applicable distribution requirements. Because of
these features, the market prices of zero coupon securities are generally more
volatile than the market prices of securities that have similar maturity but
that pay interest periodically. Zero coupon securities are likely to respond to
a greater degree to interest rate changes than are non-zero coupon securities
with similar maturity and credit qualities.

VARIABLE AND FLOATING RATE INSTRUMENTS. Each of the Funds other than the Equity
Funds may invest in variable or floating rate instruments and variable rate
demand instruments, including variable amount master demand notes. These
instruments will normally involve industrial development or revenue bonds that
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank. In
addition, the interest rate on these securities may be reset daily, weekly or on
some other reset period and may have a floor or ceiling on interest rate
changes. A Fund holding such an instrument can demand payment of the obligation
at all times or at stipulated dates on short notice (not to exceed 30 days) at
par plus accrued interest.

Debt instruments purchased by a Fund may be structured to have variable or
floating interest rates. These instruments may include variable amount master
demand notes that permit the indebtedness to vary in addition to providing for
periodic adjustments in the interest rates. The Adviser will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such instruments and, if the instrument is subject to a demand
feature, will continuously monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent to the quality standards applicable to a Fund's fixed income
investments, the issuer's obligation to pay the principal of the instrument will
be backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend. Any bank providing such a bank letter, line of credit,
guarantee or loan commitment will meet the Fund's investment quality standards
relating to investments in bank obligations. The Adviser will also continuously
monitor the creditworthiness of issuers of such instruments to determine whether
a Fund should continue to hold the investments.

Variable and floating rate instruments held by a Fund will be subject to the
Fund's limitation on investments in illiquid securities when a reliable trading
market for the instruments does not exist and the Fund may not demand payment of
the principal amount of such instruments within seven days.

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<PAGE>

YIELDS AND RATINGS. The yields on certain obligations, including the money
market instruments in which each Fund may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the obligation,
the financial condition of the issuer, the size of the offering, the maturity of
the obligation and the ratings of the issue. The ratings of Standard and Poor's
Ratings Group ("Standard & Poor's"), Moody's Investor Service, Inc. ("Moody's")
and other recognized rating organizations represent their respective opinions as
to the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality or value. Consequently,
obligations with the same rating, maturity and interest rate may have different
market prices. See Appendix A for a description of the ratings provided by
Standard & Poor's, Moody's and certain other recognized rating organizations.

Subsequent to its purchase by a Fund, a rated security may cease to be rated or
its rating may be reduced below the minimum rating required for purchase by the
Fund. The Board of Trustees or the Adviser, pursuant to guidelines established
by the Board of Trustees, will consider such an event in determining whether the
Fund should continue to hold the security in accordance with the interests of
the Fund and applicable regulations of the Securities and Exchange Commission
(the "Commission"). In no event, however, will any Fund other than the High
Yield Bond Fund hold more than 5% of its net assets in fixed income securities
that are not investment grade.

LOWER QUALITY DEBT OBLIGATIONS "JUNK-BONDS". The High Yield Bond Fund may
invest in below investment grade bonds, including securities in default. These
securities are considered speculative and, while generally offering greater
income than investments in higher quality securities, involve greater risk of
loss of principal and income, including the possibility of default or bankruptcy
of the issuers of such securities, and have greater price volatility, especially
during periods of economic uncertainty or change. These lower quality bonds tend
to be affected by economic changes and short-term corporate and industry
developments to a greater extent than higher quality securities, which react
primarily to fluctuations in the general level of interest rates.

Below investment grade bonds (junk-bonds) will also be affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. In the past, economic downturns
or an increase in interest rates have, under certain circumstances, caused a
higher incidence of default by the issuers of these securities and may do so in
the future, especially in the case of highly leveraged issuers. The market for
these lower quality bonds is generally less liquid than the market for
investment grade bonds. Therefore, the Adviser's judgment may at times play a
greater role in valuing these securities than in the case of investment grade
bonds, and it also may be more difficult under certain adverse market conditions
to sell these lower quality securities to meet redemption requests, to respond
to changes in the market, or to determine accurately a Fund's net asset value.

As discussed above, the High Yield Bond Fund may invest in high yielding fixed
income securities that are rated lower than Baa by Moody's or BBB by Standard &
Poor's and unrated securities determined to be of comparable quality. The values
of these lower quality securities generally fluctuate more than those of higher
quality securities. In addition, these securities involve a greater possibility
of an adverse change in financial condition affecting the

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<PAGE>

ability of the issuer to make payments of interest and principal. The Adviser
seeks to reduce these risks through investment analysis and attention to current
developments in interest rates and economic conditions, but there can be no
assurance that the Adviser will be successful in reducing the risks associated
with investments in such securities. To the extent a Fund invests in such lower
quality securities, the achievement of its investment objective may be more
dependent on the Adviser's own credit analysis.

The High Yield Bond Fund may invest in pay-in-kind (PIK) securities, which pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. In addition, each Fund may invest in zero coupon bonds. Both
of these types of bonds may be more speculative and subject to greater
fluctuations in value than securities which pay interest periodically and in
cash, due to changes in interest rates. A Fund will accrue income on such
investments for tax and accounting purposes, as required, which is distributable
to shareholders and which, because no cash is generally received at the time of
accrual, may require the liquidation of other portfolio securities to satisfy
the Fund's distribution obligations. See "Taxes" below.

The market value of fixed income securities which carry no equity participation
usually reflects yields generally available on securities of similar quality and
type. When such yields decline, the market value of a portfolio already invested
at higher yields can be expected to rise if such securities are protected
against early call. Similarly, when such yields increase, the market value of a
portfolio already invested at lower yields can be expected to decline.

CONVERTIBLE SECURITIES AND PREFERRED STOCKS

Subject to its investment objectives and policies, the High Yield Bond Fund and
each Equity Fund may invest in convertible securities, which are ordinarily
preferred stock or long-term debt obligations of an issuer convertible at a
stated exchange rate into common stock of the issuer. The market value of
convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. However, when the market price of the common
stock underlying a convertible security exceeds the conversion price, the price
of the convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus may
not depreciate to the same extent as the underlying common stock. Convertible
securities generally rank senior to common stocks in an issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock. However, the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security. The convertible debt securities in which
each Fund may invest are subject to the same rating criteria and downgrade
policy as the Fund's investments in fixed income securities.

The High Yield Bond Fund and each of the Equity Funds, subject to its investment
objectives, may purchase preferred stock. Preferred stocks are equity
securities, but possess certain attributes of debt securities and are generally
considered fixed income securities. Holders of preferred stocks normally have
the right to receive dividends at a fixed rate when

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and as declared by the issuer's board of directors, but do not participate in
other amounts available for distribution by the issuing corporation. Dividends
on the preferred stock may be cumulative, and in such cases all cumulative
dividends usually must be paid prior to dividend payments to common
stockholders. Because of this preference, preferred stocks generally entail less
risk than common stocks. Upon liquidation, preferred stocks are entitled to a
specified liquidation preference, which is generally the same as the par or
stated value, and are senior in right of payment to common stocks. However,
preferred stocks are equity securities in that they do not represent a liability
of the issuer and therefore do not offer as great a degree of protection of
capital or assurance of continued income as investments in corporate debt
securities. In addition, preferred stocks are subordinated in right of payment
to all debt obligations and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the same issuer.

WARRANTS

Each Equity Fund and the High Yield Bond Fund may invest in warrants. Warrants
generally entitle the holder to buy a specified number of shares of common stock
at a specified price, which is often higher than the market price at the time of
issuance, for a period of years or in perpetuity. Warrants may be issued in
units with other securities or separately, and may be freely transferable and
traded on exchanges. While the market value of a warrant tends to be more
volatile than that of the securities underlying the warrant, the market value of
a warrant may not necessarily change with that of the underlying security. A
warrant ceases to have value if it is not exercised prior to any expiration date
to which the warrant is subject. The purchase of warrants involves a risk that a
Fund could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's expiration. Also, the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.

MUNICIPAL SECURITIES

The Municipal Funds and, to a more limited extent, the Fixed Income Fund, the
Short-Term Fixed Income Fund, and the High Yield Bond Fund may invest in
municipal securities. Municipal securities consist of bonds, notes and other
instruments issued by or on behalf of states, territories and possessions of the
United States (including the District of Columbia) and their political
subdivisions, agencies or instrumentalities, the interest on which is exempt
from regular federal income tax (i.e., excluded from gross income for federal
income tax purposes but not necessarily exempt from the federal alternative
minimum tax or from state and local taxes). Municipal securities may also be
issued on a taxable basis (i.e., the interest on such securities is not exempt
from regular federal income tax).

Municipal securities are often issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which municipal securities
may be issued include refunding outstanding obligations, obtaining funds for
general operating expenses, and obtaining funds to lend to other public
institutions and facilities. Municipal securities also include "private
activity" or industrial development

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bonds, which are issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities within a
municipality for privately or publicly owned corporations.

The two principal classifications of municipal securities are "general
obligations" and "revenue obligations." General obligations are secured by the
issuer's pledge of its full faith and credit for the payment of principal and
interest although the characteristics and enforcement of general obligations may
vary according to the law applicable to the particular issuer. Revenue
obligations, which include, but are not limited to, private activity bonds,
resource recovery bonds, certificates of participation and certain municipal
notes, are not backed by the credit and taxing authority of the issuer and are
payable solely from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Nevertheless, the obligations of the issuer may also be
backed by a letter of credit, guarantee or insurance. General obligations and
revenue obligations may be issued in a variety of forms, including commercial
paper, fixed, variable and floating rate securities, tender option bonds,
auction rate bonds and capital appreciation bonds.

In addition to general obligations and revenue obligations, there is a variety
of hybrid and special types of municipal securities. There are also numerous
differences in the credit backing of municipal securities both within and
between these two principal classifications.

For the purpose of applying a Fund's investment restrictions, the identification
of the issuer of a municipal security which is not a general obligation is made
by the Adviser based on the characteristics of the municipal security, the most
important of which is the source of funds for the payment of principal and
interest on such securities.

An entire issue of municipal securities may be purchased by one or a small
number of institutional investors such as a Fund. Thus, the issue may not be
said to be publicly offered. Unlike some securities that are not publicly
offered, a secondary market exists for many municipal securities that were not
publicly offered initially and such securities can be readily marketable.

The obligations of an issuer to pay the principal of and interest on a municipal
security are subject to the provisions of bankruptcy, insolvency and other laws
affecting the rights and remedies of creditors, such as the Federal Bankruptcy
Act, and laws, if any, that may be enacted by Congress or state legislatures
extending the time for payment of principal or interest or imposing other
constraints upon the enforcement of such obligations. There is also the
possibility that, as a result of litigation or other conditions, the power or
ability of the issuer to pay when due principal of or interest on a municipal
security may be materially affected.

MUNICIPAL LEASES, CERTIFICATES OF PARTICIPATION AND OTHER PARTICIPATION
INTERESTS. A municipal lease is an obligation in the form of a lease or
installment purchase contract which is issued by a state or local government to
acquire equipment and facilities. Income from such obligations is generally
exempt from state and local taxes in the state of issuance (as well as regular
Federal income tax). Municipal leases frequently involve special risks not
normally associated with general obligation or revenue

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<PAGE>

bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt issuance limitations are deemed
to be inapplicable because of the inclusion in many leases or contracts of "non-
appropriation" clauses that relieve the governmental issuer of any obligation to
make future payments under the lease or contract unless money is appropriated
for such purpose by the appropriate legislative body on a yearly or other
periodic basis. Thus, a Fund's investment in municipal leases will be subject to
the special risk that the governmental issuer may not appropriate funds for
lease payments.

In addition, such leases or contracts may be subject to the temporary abatement
of payments in the event the issuer is prevented from maintaining occupancy of
the leased premises or utilizing the leased equipment. Although the obligations
may be secured by the leased equipment or facilities, the disposition of the
property in the event of nonappropriation or foreclosure might prove difficult,
time consuming and costly, and result in an unsatisfactory or delayed recoupment
of a Fund's original investment.

Certificates of participation represent undivided interests in municipal leases,
installment purchase contracts or other instruments. The certificates are
typically issued by a trust or other entity which has received an assignment of
the payments to be made by the state or political subdivision under such leases
or installment purchase contracts.

Certain municipal lease obligations and certificates of participation may be
deemed illiquid for the purpose of the Funds' respective limitations on
investments in illiquid securities. Other municipal lease obligations and
certificates of participation acquired by a Fund may be determined by the
Adviser, pursuant to guidelines adopted by the Trustees of the Trust, to be
liquid securities for the purpose of such Fund's limitation on investments in
illiquid securities. In determining the liquidity of municipal lease obligations
and certificates of participation, the Adviser will consider a variety of
factors including: (1) the willingness of dealers to bid for the security; (2)
the number of dealers willing to purchase or sell the obligation and the number
of other potential buyers; (3) the frequency of trades or quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Adviser will consider factors unique to particular lease obligations and
certificates of participation affecting the marketability thereof. These include
the general creditworthiness of the issuer, the importance to the issuer of the
property covered by the lease and the likelihood that the marketability of the
obligation will be maintained throughout the time the obligation is held by a
Fund. No Fund may invest more than 5% of its net assets in municipal leases.

Each of the Funds other than the Equity Funds may purchase participations in
municipal securities held by a commercial bank or other financial institution.
Such participations provide a Fund with the right to a pro rata undivided
interest in the underlying municipal securities. In addition, such
participations generally provide a Fund with the right to demand payment, on not
more than seven days notice, of all or any part of the Fund's participation
interest in the underlying municipal security, plus accrued interest.

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MUNICIPAL NOTES. Municipal securities in the form of notes generally are used
to provide for short-term capital needs, in anticipation of an issuer's receipt
of other revenues or financing, and typically have maturities of up to three
years. Such instruments may include Tax Anticipation Notes, Revenue Anticipation
Notes, Bond Anticipation Notes, Tax and Revenue Anticipation Notes and
Construction Loan Notes. Tax Anticipation Notes are issued to finance the
working capital needs of governments. Generally, they are issued in anticipation
of various tax revenues, such as income, sales, property, use and business
taxes, and are payable from these specific future taxes. Revenue Anticipation
Notes are issued in expectation of receipt of other kinds of revenue, such as
federal revenues available under federal revenue sharing programs. Bond
Anticipation Notes are issued to provide interim financing until long-term bond
financing can be arranged. In most cases, the long-term bonds then provide the
funds needed for repayment of the notes. Tax and Revenue Anticipation Notes
combine the funding sources of both Tax Anticipation Notes and Revenue
Anticipation Notes. Construction Loan Notes are sold to provide construction
financing. These notes are secured by mortgage notes insured by the Federal
Housing Authority; however, the proceeds from the insurance may be less than the
economic equivalent of the payment of principal and interest on the mortgage
note if there has been a default. The obligations of an issuer of municipal
notes are generally secured by the anticipated revenues from taxes, grants or
bond financing. An investment in such instruments, however, presents a risk that
the anticipated revenues will not be received or that such revenues will be
insufficient to satisfy the issuer's payment obligations under the notes or that
refinancing will be otherwise unavailable.

TAX-EXEMPT COMMERCIAL PAPER. Issues of tax-exempt commercial paper typically
represent short-term, unsecured, negotiable promissory notes. These obligations
are issued by state and local governments and their agencies to finance working
capital needs of municipalities or to provide interim construction financing and
are paid from general revenues of municipalities or are refinanced with long-
term debt. In most cases, tax-exempt commercial paper is backed by letters of
credit, lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or other institutions.

PRE-REFUNDED MUNICIPAL SECURITIES. The principal of and interest on municipal
securities that have been pre-refunded are no longer paid from the original
revenue source for the securities. Instead, after pre-refunding the source of
such payments of the principal of and interest on these securities are typically
paid from an escrow fund consisting of obligations issued or guaranteed by the
U.S. Government. The assets in the escrow fund are derived from the proceeds of
refunding bonds issued by the same issuer as the pre-refunded municipal
securities. Issuers of municipal securities use this advance refunding technique
to obtain more favorable terms with respect to securities that are not yet
subject to call or redemption by the issuer. For example, advance refunding
enables an issuer to refinance debt at lower market interest rates, restructure
debt to improve cash flow or eliminate restrictive covenants in the indenture or
other governing instrument for the pre-refunded municipal securities. However,
except for a change in the revenue source from which principal and interest
payments are made, the pre-refunded municipal securities remain outstanding on
their original terms until they mature or are redeemed by the issuer. Pre-
refunded municipal securities are usually purchased at a price which represents
a premium over their face value.

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TENDER OPTION BONDS. A tender option bond is a municipal security (generally
held pursuant to a custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax-exempt rates. The bond is typically issued in conjunction with the agreement
of a third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option, at
periodic intervals, to tender their securities to the institution and receive
the face value thereof.

As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax-exempt rate.

However, an institution will not be obligated to accept tendered bonds in the
event of certain defaults or a significant downgrade in the credit rating
assigned to the issuer of the bond. The liquidity of a tender option bond is a
function of the credit quality of both the bond issuer and the financial
institution providing liquidity. Tender option bonds are deemed to be liquid
unless, in the opinion of the Adviser, the credit quality of the bond issuer and
the financial institution is deemed, in light of the Fund's credit quality
requirements, to be inadequate. Each Municipal Fund intends to invest only in
tender option bonds the interest on which will, in the opinion of bond counsel,
counsel for the issuer of interests therein or counsel selected by the Adviser,
be exempt from regular federal income tax. However, because there can be no
assurance that the IRS will agree with such counsel's opinion in any particular
case, there is a risk that a Municipal Fund will not be considered the owner of
such tender option bonds and thus will not be entitled to treat such interest as
exempt from such tax. Additionally, the federal income tax treatment of certain
other aspects of these investments, including the proper tax treatment of tender
option bonds and the associated fees, in relation to various regulated
investment company tax provisions is unclear. Each Municipal Fund intends to
manage its portfolio in a manner designed to eliminate or minimize any adverse
impact from the tax rules applicable to these investments.

AUCTION RATE SECURITIES. Auction rate securities consist of auction rate
municipal securities and auction rate preferred securities issued by closed-end
investment companies that invest primarily in municipal securities. Provided
that the auction mechanism is successful, auction rate securities usually permit
the holder to sell the securities in an auction at par value at specified
intervals. The dividend is reset by "Dutch" auction in which bids are made by
broker-dealers and other institutions for a certain amount of securities at a
specified minimum yield. The dividend rate set by the auction is the lowest
interest or dividend rate that covers all securities offered for sale. While
this process is designed to permit auction rate securities to be traded at par
value, there is the risk that an auction will fail due to insufficient demand
for the securities.

Dividends on auction rate preferred securities issued by a closed-end fund may
be designated as exempt from federal income tax to the extent they are
attributable to tax-exempt interest income earned by the fund on the securities
in its portfolio and distributed to holders of the

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preferred securities, provided that the preferred securities are treated as
equity securities for federal income tax purposes and the closed-end fund
complies with certain requirements under the Internal Revenue Code of 1986, as
amended (the "Code"). For purposes of complying with the 20% limitation on each
Municipal Fund's investments in taxable investments, auction rate preferred
securities will be treated as taxable investments unless substantially all of
the dividends on such securities are expected to be exempt from regular federal
income taxes.

A Fund's investments in auction rate preferred securities of closed-end funds
are subject to limitations on investments in other U.S. registered investment
companies, which limitations are prescribed by the 1940 Act. These limitations
include prohibitions against acquiring more than 3% of the voting securities of
any other such investment company, and investing more than 5% of the Fund's
assets in securities of any one such investment company or more than 10% of its
assets in securities of all such investment companies. A Fund will indirectly
bear its proportionate share of any management fees paid by such closed-end
funds in addition to the advisory fee payable directly by the Fund.

PRIVATE ACTIVITY BONDS. Certain types of municipal securities, generally
referred to as industrial development bonds (and referred to under current tax
law as private activity bonds), are issued by or on behalf of public authorities
to obtain funds for privately-operated housing facilities, airport, mass transit
or port facilities, sewage disposal, solid waste disposal or hazardous waste
treatment or disposal facilities and certain local facilities for water supply,
gas or electricity. Other types of industrial development bonds, the proceeds of
which are used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities, may constitute municipal
securities, although the current federal tax laws place substantial limitations
on the size of such issues. The interest from certain private activity bonds
owned by a Fund (including a Municipal Fund's distributions attributable to such
interest) may be a preference item for purposes of the alternative minimum tax.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

GENERAL. The Fixed Income Fund, the Short-Term Fixed Income Fund, the High
Yield Bond Fund and, to a more limited extent, the Municipal Funds may invest in
mortgage-backed securities, which represent direct or indirect participations
in, or are collateralized by and payable from, mortgage loans secured by real
property. The Fixed Income Fund, the Short-Term Fixed Income Fund, and the High
Yield Bond Fund may also invest in asset-backed securities, which represent
participations in, or are secured by and payable from, assets such as motor
vehicle installment sales, installment loan contracts, leases of various types
of real and personal property and receivables from revolving credit (credit
card) agreements and other categories of receivables. Such securities are
generally issued by trusts and special purpose corporations.

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rates generally and in yield differentials among various kinds of U.S.
Government securities and other mortgage-backed and asset-backed securities.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities because asset-backed securities generally do not have
the benefit of a security interest in collateral that is comparable to mortgage
assets. In addition, there is the possibility that, in some cases, recoveries on
repossessed collateral may not be available to support payments on these
securities. Many mortgage and asset-backed securities may be considered
derivative instruments. No Fund will invest 25% or more of its total assets in
collateralized mortgage obligations or in asset-backed securities (in each case,
excluding U.S. Government securities).

MORTGAGE-BACKED. Each of the Funds other than the Equity Funds may invest in
mortgage-backed securities, including derivative instruments. Mortgage-backed
securities represent direct or indirect participations in or obligations
collateralized by and payable from mortgage loans secured by real property. A
Fund may invest in mortgage-backed securities issued or guaranteed by U.S.
Government agencies or instrumentalities such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). Obligations
of GNMA are backed by the full faith and credit of the U.S. Government.
Obligations of FNMA and FHLMC are not backed by the full faith and credit of the
U.S. Government but are considered to be of high quality since they are
considered to be instrumentalities of the United States. The market value and
yield of these mortgage-backed securities can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of Federally insured mortgage loans with a maximum
maturity of 30 years. The scheduled monthly interest and principal payments
relating to mortgages in the pool will be "passed through" to investors.
Government mortgage-backed securities differ from conventional bonds in that
principal is paid back to the certificate holders over the life of the loan
rather than at maturity. As a result, there will be monthly scheduled payments
of principal and interest.

Only the Fixed Income Fund, the Short-Term Fixed Income Fund and the High Yield
Bond Fund may invest in mortgage-backed securities issued by non-governmental
entities including collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). CMOs are securities collateralized by
mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds
representing an interest in a pool of mortgages where the cash flow generated
from the mortgage collateral pool is dedicated to bond repayment), and mortgage-
backed bonds (general obligations of the issuers payable out of the issuers'
general funds and additionally secured by a first lien on a pool of single
family detached properties). Many CMOs are issued with a number of classes or
series which have different maturities and are retired in sequence. Investors
purchasing such CMOs in the shortest maturities receive or are credited with
their pro rata portion of the unscheduled prepayments of principal up to a
predetermined portion of the total CMO obligation. Until that portion of such
CMO obligation is repaid, investors in the longer maturities receive interest
only. Accordingly, the CMOs in the longer maturity series are less likely than
other mortgage pass-throughs to be prepaid prior to their stated maturity.
Although some of the mortgages underlying CMOs may be supported by various types
of insurance, and some CMOs may be backed by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by U.S. Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.

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REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities, including "regular" interests
and "residual" interests. The Funds do not intend to acquire residual interests
in REMICs under current tax law, due to certain disadvantages for regulated
investment companies that acquire such interests. Mortgage-backed securities
are subject to unscheduled principal payments representing prepayments on the
underlying mortgages. Although these securities may offer yields higher than
those available from other types of securities, mortgage-backed securities may
be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of these securities likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a mortgage-backed security originally
purchased at a premium to decline in price to its par value, which may result in
a loss.

Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life. The
Adviser believes that the estimated average life is the most appropriate measure
of the maturity of a mortgage-backed security. Accordingly, in order to
determine whether such security is a permissible investment, it will be deemed
to have a remaining maturity of three years or less if the average life, as
estimated by the Adviser, is three years or less at the time of purchase of the
security by a Fund. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns. The assumption is based upon current
interest rates, current conditions in the relevant housing markets and other
factors. The assumption is necessarily objective, and thus different market
participants could produce somewhat different average life estimates with regard
to the same security. Although the Adviser will monitor the average life of the
portfolio securities of each Fund with a portfolio maturity policy and make
needed adjustments to comply with such Funds' policy as to average dollar
weighted portfolio maturity, there can be no assurance that the average life of
portfolio securities as estimated by the Adviser will be the actual average life
of such securities.

No Fund will invest 25% or more of its total assets in CMOs (other than U.S.
Government securities).

ASSET-BACKED SECURITIES. The Fixed Income Fund, the Short-Term Fixed Income
Fund and the High Yield Bond Fund may invest in asset-backed securities, which
represent participations in, or are secured by and payable from, pools of assets
including company receivables, truck and auto loans, leases and credit card
receivables. The asset pools that back asset-backed securities are securitized
through the use of privately-formed trusts or special purpose corporations.
Payments or distributions of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the trust
or corporation, or other credit enhancements may be present. Certain asset
backed securities may be considered derivative instruments. No Fund will invest
25% or more of its total assets in asset-backed securities.

SECURITIES OF FOREIGN ISSUERS

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FOREIGN SECURITIES. Subject to their respective investment objectives and
policies, each of the Funds other than the Municipal Funds may invest in
securities of foreign issuers and supranational entities. While the non-U.S.
investments of the Equity Funds may be denominated in any currency, the
investments of the Fixed Income Fund, the Short-Term Fixed Income Fund and the
High Yield Bond Fund in foreign securities may be denominated only in the U.S.
dollar. Foreign securities may offer investment opportunities not available in
the United States, but such investments also involve significant risks not
typically associated with investing in domestic securities. In many foreign
countries, there is less publicly available information about foreign issuers,
and there is less government regulation and supervision of foreign stock
exchanges, brokers and listed companies. Also, in many foreign countries,
companies are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic issuers. Security
trading practices differ and there may be difficulty in enforcing legal rights
outside the United States. Settlement of transactions in some foreign markets
may be delayed or may be less frequent than in the United States, which could
affect the liquidity of the Funds' portfolios. Additionally, in some foreign
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property, or other Fund assets,
political or social instability or diplomatic developments which could affect
investments in foreign securities.

To the extent the investments of the Equity Funds are denominated in foreign
currencies, the net asset values of such Funds may be affected favorably or
unfavorably by fluctuations in currency exchange rates and by changes in
exchange control regulations. For example, if the Adviser increases a Fund's
exposure to a foreign currency, and that currency's value subsequently falls,
the Adviser's currency management may result in increased losses to the Fund.
Similarly, if the Adviser hedges a Fund's exposure to a foreign currency, and
that currency's value rises, the Fund will lose the opportunity to participate
in the currency's appreciation. The Equity Funds will incur transaction costs in
connection with conversions between currencies.

FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which each
of the Funds other than the Municipal Funds may invest generally consist of debt
obligations issued or guaranteed by national, state or provincial governments or
similar political subdivisions. Each of the Funds other than the Municipal Funds
may invest in foreign government securities in the form of American Depositary
Receipts. Foreign government securities also include debt securities of
supranational entities. Quasi-governmental and supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the Japanese
Development Bank, the Asian Development Bank and the InterAmerican Development
Bank. Currently, the Fixed Income Fund and the Short-Term Fixed Income Fund
intend to invest only in obligations issued or guaranteed by the Asian
Development Bank, the Inter-American Development Bank, the International Bank
for Reconstruction and Development (the "World Bank"), the African Development
Bank, the European Coal and Steel Community, the European Economic Community,
the European Investment Bank and the Nordic Investment Bank. Foreign government
securities also include mortgage-related securities issued or guaranteed by

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national, state or provincial governmental instrumentalities, including quasi-
governmental agencies.

EQUITY AND EQUITY RELATED SECURITIES

The Funds may invest in common stock, preferred stock, warrants, purchased call
options and other rights to acquire stock. The market value of an equity
security will increase or decrease depending on market conditions. This affects
the value of the shares of a Fund, and the value of your investment. The Smaller
Companies Fund will invest at least 60% of its assets directly in stocks.

SMALL AND MICRO CAPITALIZATION COMPANIES

The Smaller Companies Fund and Micro Cap Fund invest a significant portion of
their assets in smaller, lesser-known companies which the Adviser believes offer
greater growth potential than larger, more mature, better-known companies.
Investing in the securities of these companies, however, also involves greater
risk and the possibility of greater portfolio price volatility. Among the
reasons for the greater price volatility of these small companies and unseasoned
stocks are the less certain growth prospects of smaller firms, the lower degree
of liquidity in the markets for such stocks and the greater sensitivity of small
companies to changing economic conditions in their geographic region. For
example, securities of these companies involve higher investment risk than that
normally associated with larger firms due to the greater business risks of small
size and limited product lines, markets, distribution channels and financial and
managerial resources. Many smaller capitalization companies in which Smaller
Companies Fund and Micro Cap Fund may invest are not well-known to the investing
public, do not have significant institutional ownership and are followed by
relatively few securities analysts. As a result, there may be less publicly
available information concerning these companies than exists for larger
capitalization companies. Also, the securities of smaller capitalization
companies traded on the over-the-counter market may have fewer market makers,
wider spreads between their quoted bid and asked prices and lower trading
volumes, resulting in comparatively greater price volatility and less liquidity
than exists for securities of larger capitalization companies.

CURRENCY MANAGEMENT TECHNIQUES

To the extent that they invest in securities denominated or quoted in foreign
currencies, the Equity Funds may enter into forward currency exchange contracts
("forward contracts") and buy and sell currency options to hedge against
currency exchange rate fluctuations. The instruments involved in Currency-
Related Transactions may be considered derivative instruments. A Fund may enter
into Currency-Related Transactions to attempt to protect against an anticipated
rise in the U.S. dollar price of securities that it intends to purchase. In
addition, a Fund may enter into Currency-Related Transactions to attempt to
protect against the decline in value of its foreign currency denominated or
quoted portfolio securities, or a decline in the value of anticipated dividends
or interest from such securities, due to a decline in the value of the foreign
currency against the U.S. dollar. The forecasting of currency market movements
is extremely difficult and there can be no assurance that currency hedging
strategies will be successful. If the Adviser is incorrect in its forecast,
currency hedging

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strategies may result in investment performance worse than if the strategies
were not attempted. In addition, forward contracts and over-the-counter currency
options may be illiquid and are subject to the risk that the counterparty will
default on its obligations.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each of the Equity Funds may
exchange currencies in the normal course of managing its investments in foreign
securities and may incur costs in doing so because a foreign exchange dealer
will charge a fee for conversion. A Fund may conduct foreign currency exchange
transactions on a "spot" basis (i.e., for prompt delivery and settlement) at the
prevailing spot rate for purchasing or selling currency in the foreign currency
exchange market. A Fund also may enter into forward foreign currency exchange
contracts ("forward currency contracts") or other contracts to purchase and sell
currencies for settlement at a future date. A foreign exchange dealer, in that
situation, will expect to realize a profit based on the difference between the
price at which a foreign currency is sold to a Fund and the price at which the
dealer will cover the purchase in the foreign currency market. Foreign exchange
transactions are entered into at prices quoted by dealers, which may include a
mark-up over the price that the dealer must pay for the currency.

At the maturity of a forward contract, a Fund may either accept or make delivery
of the currency specified in the contract or, at or prior to maturity, enter
into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.

The Equity Funds may enter into forward currency contracts only for the
following hedging purposes. First, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when a Fund
anticipates the receipt in a foreign currency of dividend or interest payments
on such a security which it holds, the Fund may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars, of the amount of
foreign currency involved in the underlying transactions, the Fund will attempt
to protect itself against an adverse change in the relationship between the U.S.
dollar and the subject foreign currency during the period between the date on
which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.

Additionally, when management of a Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may cause the Fund to enter into a forward contract to sell, for a
fixed amount of U.S. dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated

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in such foreign currency. The precise matching of the forward contract amounts
and the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date on which the contract is entered into and the date it matures.

Using forward currency contracts in an attempt to protect the value of a Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which a Fund can achieve at some future point in
time. The precise projection of short-term currency market movements is not
possible, and short-term hedging provides a means of fixing the dollar value of
only a portion of a Fund's foreign assets.

A Fund's custodian will place cash or liquid securities into a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward currency contracts requiring the Fund
to purchase foreign currencies. If the value of the securities placed in the
segregated account declines, additional cash or liquid securities will be placed
in the account on a daily basis so that the value of the account will equal the
amount of a Fund's commitments with respect to such contracts. The segregated
account will be marked-to-market on a daily basis. Although forward currency
contracts are not presently regulated by the Commodity Futures Trading
Commission (the "CFTC"), the CFTC may in the future assert authority to regulate
these contracts. In such event, the Funds' ability to utilize forward currency
contracts may be restricted. In addition, a particular forward currency contract
and assets used to cover such contract may be illiquid.

While a Fund will enter into forward currency contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus, while a Fund may benefit from currency transactions, unanticipated changes
in currency prices may result in a poorer overall performance for a Fund than if
it had not engaged in any such transactions. Moreover, there may be an imperfect
correlation between a Fund's portfolio holdings of securities denominated in a
particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may cause a Fund to sustain losses which will prevent the
Fund from achieving a complete hedge or expose the Fund to risk of foreign
currency exchange loss. Forward currency contracts may be considered derivative
instruments.

Each Fund's activities in forward currency exchange contracts, currency futures
contracts and related options and currency options (see below) may be limited by
the requirements of subchapter M of the Code, for qualification as a regulated
investment company.

OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES

GENERAL. The High Yield Bond Fund and each Equity Fund may write covered put
and call options and purchase put and call options. Such options may relate to
particular securities,

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<PAGE>

to various stock indices, or to currencies. The Funds may write call and put
options which are issued by the Options Clearing Corporation (the "OCC") or
which are traded on U.S. and non-U.S. exchanges and over-the-counter. These
instruments may be considered derivative instruments.

WRITTEN OPTIONS. The High Yield Bond Fund and each Equity Fund may write (sell)
covered put and call options on securities and enter into related closing
transactions. A Fund may receive fees (referred to as "premiums") for granting
the rights evidenced by the options. However, in return for the premium for a
written call option, the Fund assumes certain risks. For example, in the case of
a written call option, the Fund forfeits the right to any appreciation in the
underlying security while the option is outstanding. A put option gives to its
purchaser the right to compel the Fund to purchase an underlying security from
the option holder at the specified price at any time during the option period.
In contrast, a call option written by the Fund gives to its purchaser the right
to compel the Fund to sell an underlying security to the option holder at a
specified price at any time during the option period. Upon the exercise of a put
option written by the Fund, the Fund may suffer a loss equal to the difference
between the price at which the Fund is required to purchase the underlying
security and its market value at the time of the option exercise, less the
premium received for writing the option. All options written by a Fund are
covered. In the case of a call option, this means that the Fund will own the
securities subject to the option or an offsetting call option as long as the
written option is outstanding, or will have the absolute and immediate right to
acquire other securities that are the same as those subject to the written
option. In the case of a put option, this means that the Fund will deposit cash
or liquid securities in a segregated account with the custodian with a value at
least equal to the exercise price of the put option.

PURCHASED OPTIONS. The High Yield Bond Fund and each Equity Fund may also
purchase put and call options on securities. A put option entitles a Fund to
sell, and a call option entitles a Fund to buy, a specified security at a
specified price during the term of the option. The advantage to the purchaser of
a call option is that it may hedge against an increase in the price of
securities it ultimately wishes to buy. The advantage to the purchaser of a put
option is that it may hedge against a decrease in the price of portfolio
securities it ultimately wishes to sell.

A Fund may enter into closing transactions in order to offset an open option
position prior to exercise or expiration by selling an option it has purchased
or by entering into an offsetting option. If a Fund cannot effect closing
transactions, it may have to retain a security in its portfolio it would
otherwise sell, or deliver a security it would otherwise retain.

A Fund may purchase and sell options traded on U.S. exchanges and, to the extent
permitted by law, options traded over-the-counter. A Fund may also purchase and
sell options traded on recognized foreign exchanges. There can be no assurance
that a liquid secondary market will exist for any particular option. Over-the-
counter options also involve the risk that a counterparty will fail to meet its
obligation under the option.

OPTIONS ON STOCK INDICES OR CURRENCIES. The Equity Funds may purchase and write
exchange-listed put and call options on stock indices to hedge against risks of
market-wide price movements. A stock index measures the movement of a certain
group of stocks by

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<PAGE>

assigning relative values to the common stocks included in the index. Examples
of well-known stock indices are the Standard & Poor's Index of 500 Common Stocks
and the Wilshire 5000 Index. Options on stock indices are similar to options on
securities. However, because options on stock indices do not involve the
delivery of an underlying security, the option represents the holder's right to
obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the exercise date. The Equity
Funds may also purchase and write put and call options on currencies.

A call option on a securities index provides the holder with the right to
receive a cash payment upon exercise of the option if the market value of the
underlying index exceeds the option's exercise price. Conversely, a put option
on a securities index provides the holder with the right to receive a cash
payment upon exercise of the option if the market value of the underlying index
is less than the option's exercise price. The amount of any payment to the
option holder will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
U.S. dollars or a foreign currency, times a specified multiple. A put option on
a currency gives its holder the right to sell an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration. Conversely, a call option on a
currency gives its holder the right to purchase an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration.

When an Equity Fund writes an option on a stock index, it will cover the option
by depositing cash or liquid securities or a combination of both in an amount
equal to the market value of the option, in a segregated account, which will be
marked to market daily, with the Fund's custodian, and will maintain the account
while the option is open. Alternatively, and only in the case of a written call
option on a stock index, the Fund may cover the written option by owning an
offsetting call option. A call option on currency written by a Fund is covered
if the Fund owns an equal amount of the underlying currency.

OTHER CONSIDERATIONS. The Funds will engage in over-the-counter ("OTC") options
only with broker-dealers deemed creditworthy by the Adviser. Closing
transactions in certain options are usually effected directly with the same
broker-dealer that effected the original option transaction. A Fund bears the
risk that the broker- dealer may fail to meet its obligations. There is no
assurance that a Fund will be able to close an unlisted option position.
Furthermore, unlisted options are not subject to the protections afforded
purchasers of listed options by the OCC, which performs the obligations of its
members who fail to do so in connection with the purchase or sale of options.

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<PAGE>

enters into a closing sale transaction on an option purchased by it, the Fund
will realize a gain if the premium received by the Fund on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by the Fund expires on the stipulated
expiration date or if the Fund enters into a closing purchase transaction, it
will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option written by the
Fund is exercised, the proceeds to the Fund from the exercise will be increased
by the net premium originally received, and the Fund will realize a gain or
loss.

There are several risks associated with transactions in options on securities,
securities indices and currencies. For example, there are significant
differences between the securities markets, currency markets and the
corresponding options markets that could result in imperfect correlations,
causing a given option transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded OTC or on a U.S.
or non-U.S. securities exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the OCC may not at all times be
adequate to handle current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options that had been
issued by the OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

The risks described above also apply to options on futures, which are discussed
below.

FUTURES CONTRACTS AND RELATED OPTIONS

GENERAL. When deemed advisable by the Adviser, the High Yield Bond Fund and
each of the Equity Funds may enter into futures contracts and purchase and write
options on futures contracts to hedge against changes in interest rates,
securities prices or currency exchange rates or for certain non-hedging
purposes. The Funds may purchase and sell financial futures contracts, including
stock index futures, and purchase and write related options. A Fund may engage
in futures and related options transactions for hedging and non-hedging purposes
as defined in regulations of the Commodity Futures Trading Commission. A Fund
will not enter into futures contracts or options thereon for non-hedging
purposes, if immediately thereafter,

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<PAGE>

the aggregate initial margin and premiums required to establish non-hedging
positions in futures contracts and options on futures will exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. Transactions in futures
contracts and options on futures involve brokerage costs, require margin
deposits and, in the case of contracts and options obligating the Funds to
purchase securities, require the Funds to segregate cash or liquid securities
with a value equal to the amount of the Fund's obligations.

HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price and rate of return on portfolio
securities and securities that a Fund proposes to acquire. A Fund may, for
example, take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in interest rates or a
decline in market prices that would adversely affect the value of a Fund's
portfolio securities. Such futures contracts may include contracts for the
future delivery of securities held by a Fund or securities with characteristics
similar to those of the Fund's portfolio securities. If, in the opinion of the
Adviser, there is a sufficient degree of correlation between price trends for a
Fund's portfolio securities and futures contracts based on other financial
instruments, securities indices or other indices, the Fund may also enter into
such futures contracts as part of its hedging strategy. Although under some
circumstances prices of securities in a Fund's portfolio may be more or less
volatile than prices of such futures contracts, the Adviser will attempt to
estimate the extent of this volatility difference based on historical patterns
and compensate for any such differential by having the Fund enter into a greater
or lesser number of futures contracts or by attempting to achieve only a partial
hedge against price changes affecting a Fund's securities portfolio. When
hedging of this character is successful, any

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depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.

On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.

OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on
futures contracts will give a Fund the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract (if the option is exercised), which may have a value higher than the
exercise price. Conversely, the writing of a put option on a futures contract
generates a premium which may partially offset an increase in the price of
securities that a Fund intends to purchase. However, a Fund becomes obligated to
purchase a futures contract (if the option is exercised) which may have a value
lower than the exercise price. Thus, the loss incurred by a Fund in writing
options on futures is potentially unlimited and may exceed the amount of the
premium received. The Funds will incur transaction costs in connection with the
writing of options on futures.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.

A Fund may use options on futures contracts solely for bona fide hedging or
other non-hedging purposes as described below.

OTHER CONSIDERATIONS. The High Yield Bond Fund and each of the Equity Funds
will engage in futures and related options transactions only for bona fide
hedging or non-hedging purposes as permitted by CFTC regulations which permit
principals of an investment company registered under the 1940 Act to engage in
such transactions without registering as commodity pool operators. A Fund will
determine that the price fluctuations in the futures contracts and options on
futures used by it for hedging purposes are substantially related to price
fluctuations in securities or instruments held by the Fund or securities or
instruments which it expects to purchase. Except as stated below, a Fund's
futures transactions will be entered into for traditional hedging purposes--
i.e., futures contracts will be sold to protect against a decline in the price
of securities (or the currency in which they are denominated) that a Fund owns
or futures contracts will be purchased to protect a Fund against an increase

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in the price of securities (or the currency in which they are denominated) that
a Fund intends to purchase. As evidence of this hedging intent, each Fund
expects that, on 75% or more of the occasions on which it takes a long futures
or option position (involving the purchase of futures contracts), the Fund will
have purchased, or will be in the process of purchasing, equivalent amounts of
related securities (or assets denominated in the related currency) in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for a Fund to do so, a
long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.

As an alternative to compliance with the bona fide hedging definition, a CFTC
regulation now permits a Fund to elect to comply with a different test under
which the aggregate initial margin and premiums required to establish non-
hedging positions in futures contracts and options on futures will not exceed 5%
of the net asset value of a Fund's portfolio, after taking into account
unrealized profits and losses on any such positions and excluding the amount by
which such options were in-the-money at the time of purchase. A Fund will engage
in transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Code for maintaining
its qualification as a regulated investment company. See "Taxes."

A Fund will be required, in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits, which
will be held by its custodian for the benefit of the futures commission merchant
through whom the Fund engages in such futures and option transactions. These
transactions involve brokerage costs, require margin deposits and, in the case
of futures contracts and options obligating a Fund to purchase securities,
require a Fund to segregate cash or liquid securities in an account maintained
with its custodian to cover such contracts and options.

In the event of an imperfect correlation between a futures position and
portfolio position which is intended to be protected, the desired protection may
not be obtained and a Fund may be exposed to risk of loss. The risk of imperfect
correlation may be minimized by investing in contracts whose price behavior is
expected to resemble that of the Fund's underlying securities. The Funds will
attempt to minimize the risk that they will be unable to close out futures
positions by entering into such transactions on a national exchange with an
active and liquid secondary market.

LIMITATIONS AND RISKS ASSOCIATED WITH TRANSACTIONS IN OPTIONS, FUTURES CONTRACTS
AND OPTIONS ON FUTURES CONTRACTS

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Options and futures transactions involve (1) liquidity risk that contractual
positions cannot be easily closed out in the event of market changes or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging positions may not match the securities market
fluctuations intended to be hedged, and (3) market risk that an incorrect
prediction of securities prices by the Adviser may cause the Fund to perform
worse than if such positions had not been taken. The ability to terminate over-
the-counter options is more limited than with exchange traded options and may
involve the risk that the counterparty to the option will not fulfill its
obligations. In accordance with a position taken by the Commission, each Fund
will limit its investments in illiquid securities to 15% of the Fund's net
assets.

Options and futures transactions are highly specialized activities which involve
investment techniques and risks that are different from those associated with
ordinary portfolio transactions. Gains and losses on investments in options and
futures depend on the Adviser's ability to predict the direction of stock prices
and other economic factors. The loss that may be incurred by a Fund in entering
into futures contracts and written options thereon is potentially unlimited.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain facilities of an options
clearing entity or other entity performing the regulatory and liquidity
functions of an options clearing entity inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders. Most futures exchanges limit the amount
of fluctuation permitted in a futures contract's prices during a single trading
day. Once the limit has been reached no further trades may be made that day at a
price beyond the limit. The price limit will not limit potential losses, and may
in fact prevent the prompt liquidation of futures positions, ultimately
resulting in further losses.

Except as set forth above under "Futures Contracts and Options on Futures
Contracts", there is no limit on the percentage of the assets of the High Yield
Bond Fund or any Equity Fund that may be at risk with respect to futures
contracts and related options. A Fund may not invest more than 25% of its total
assets in purchased protective put options. A Fund's transactions in options,
futures contracts and options on futures contracts may be limited by the
requirements for qualification of the Fund as a regulated investment company for
tax purposes. See "Taxes" below. Options, futures contracts and options on
futures contracts are derivative instruments.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements. In a repurchase agreement, a
Fund buys a security subject to the right and obligation to sell it back to the
other party at the same price plus accrued interest. The Fund's custodian will
hold the security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the repurchase price, but
repurchase agreements involve some credit risk to a Fund if the other party
defaults on its obligation and the Fund is delayed in or prevented from
liquidating the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on guidelines established and periodically
reviewed by the Trust's Board of Trustees.

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For purposes of the 1940 Act and, generally, for tax purposes, a repurchase
agreement is considered to be a loan from the Fund to the seller of the
obligation. For other purposes, it is not clear whether a court would consider
such an obligation as being owned by the Fund or as being collateral for a loan
by the Fund to the seller. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the obligation before its
repurchase, under the repurchase agreement, the Fund may encounter delay and
incur costs before being able to sell the security. Such delays may result in a
loss of interest or decline in price of the obligation.

If the court characterizes the transaction as a loan and the Fund has not
perfected a security interest in the obligation, the Fund may be treated as an
unsecured creditor of the seller and required to return the obligation to the
seller's estate. As an unsecured creditor, the Fund would be at risk of losing
some or all of the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Funds, the Adviser seeks to minimize
the risk of loss from repurchase agreements by analyzing the creditworthiness of
the obligor, in this case, the seller of the obligation. In addition to the risk
of bankruptcy or insolvency proceedings, there is the risk that the seller may
fail to repurchase the security. However, if the market value of the obligation
falls below an amount equal to 102% of the repurchase price (including accrued
interest), the seller of the obligation will be required to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement equals or exceeds the repurchase price.

"WHEN-ISSUED" PURCHASES AND FORWARD COMMITMENTS (DELAYED DELIVERY)

Each Fund may purchase securities on a when-issued, delayed delivery or forward
commitment basis. When these transactions are negotiated, the price of the
securities is fixed at the time of the commitment, but delivery and payment may
take place up to 90 days after the date of the commitment to purchase for equity
securities, and up to 45 days after such date for fixed income securities. When-
issued securities or forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.

These transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Fund to lock in a price or yield
on a security, regardless of future changes in interest rates. A Fund will
purchase securities on a "when-issued" or forward commitment basis only with the
intention of completing the transaction and actually purchasing the securities.
If deemed appropriate by the Adviser, however, a Fund may dispose of or
renegotiate a commitment after it is entered into, and may sell securities it
has committed to purchase before those securities are delivered to the Fund on
the settlement date. In these cases the Fund may realize a gain or loss, and
distributions attributable to any such gain, including a distribution by a
Municipal Fund, would be taxable to shareholders.

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place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. The
market value of a Fund's net assets will generally fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because a Fund's liquidity and ability to manage its
portfolio might be affected when it sets aside cash or portfolio securities to
cover such purchase commitments, each Fund expects that its commitments to
purchase when-issued securities and forward commitments will not exceed 33% of
the value of its total assets. When a Fund engages in "when-issued" and forward
commitment transactions, it relies on the other party to the transaction to
consummate the trade. Failure of such party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.

BORROWING

Each Fund may borrow for temporary or emergency purposes, although borrowings by
the Fixed Income Fund and the Municipal Bond Fund may not exceed 10% of the
value of their respective total assets. This borrowing may be unsecured. The
1940 Act requires a Fund to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of 300%
of the amount borrowed. If the asset coverage should decline below 300% as a
result of market fluctuations or for other reasons, a Fund will be required to
sell some of its portfolio securities within three days to reduce its borrowings
and restore the 300% asset coverage, even though it may be disadvantageous from
an investment standpoint to sell securities at that time. To limit the potential
leveraging effects of a Fund's borrowings, each Fund other than the Fixed Income
Fund and the Municipal Bond Fund will not make investments while borrowings are
in excess of 5% of total assets. The Fixed Income Fund and the Municipal Bond
Fund may not make additional investments while they have any borrowings
outstanding. Borrowing generally will exaggerate the effect on net asset value
of any increase or decrease in the market value of the portfolio. Money borrowed
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. A Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
See "Investment Restrictions."

LENDING PORTFOLIO SECURITIES

Each Fund, other than Fixed Income Fund and Municipal Bond Fund, may lend
portfolio securities to brokers, dealers and other financial organizations.
These loans, if and when made by a Fund, may not exceed 33 1/3% of the value of
the Fund's total assets. A Fund's loans of securities will be collateralized by
cash, cash equivalents or U.S. Government securities. The cash or instruments
collateralizing the Fund's loans of securities will be maintained at all times

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in a segregated account with the Fund's custodian, in an amount at least equal
to the current market value of the loaned securities. From time to time, a Fund
may pay a part of the interest earned from the investment of collateral received
for securities loaned to the borrower and/or a third party that is unaffiliated
with the Fund and is acting as a "placing broker". No fee will be paid to
affiliated persons of the Fund. The Board of Trustees will make a determination
that the fee paid to the placing broker is reasonable.

DIVERSIFICATION

Each Fund is "diversified" under the 1940 Act and is also subject to issuer
diversification requirements imposed on regulated investment companies by
Subchapter M of the Code. See "Investment Restrictions" and "Taxes" below.

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CONCENTRATION OF INVESTMENTS

As a matter of fundamental policy, no Fund may invest 25% or more of its total
assets in the securities of one or more issuers conducting their principal
business activities in the same industry (except U.S. Government securities).
Currently, it is not anticipated that either Municipal Fund will invest 25% or
more of its total assets (at market value at the time of purchase) in: (a)
securities of one or more issuers conducting their principal activities in the
same state; or (b) securities the principal and interest of which is paid from
revenues of projects with similar characteristics, except that 25% or more of
either Municipal Fund's total assets may be invested in single family and multi-
family housing obligations. To the extent a Municipal Fund concentrates its
investments in single family and multi-family housing obligations, the Fund will
be subject to the peculiar risks associated with investments in such
obligations, including prepayment risks and the risks of default on housing
loans, which may be affected by economic conditions and other factors relating
to such obligations.

MORTGAGE DOLLAR ROLLS

Each of the Funds other than the Equity Funds and the Municipal Funds may enter
into mortgage "dollar rolls" in which a Fund sells securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, a Fund forgoes principal and interest paid on the
securities. A Fund is compensated by the difference between the current sales
price and the lower forward price for the future purchase (often referred to as
the "drop") or fee income and by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Funds may enter into both covered and uncovered rolls.

RESTRICTED SECURITIES

Each of the Funds other than the Municipal Funds may invest to a limited extent
in restricted securities. Restricted securities are securities that may not be
sold freely to the public without prior registration under federal securities
laws or an exemption from registration. Restricted securities will be considered
illiquid unless they are restricted securities offered and sold to "qualified
institutional buyers" under Rule 144A under the Securities Act of 1933 and the
Board of Trustees determines that these securities are liquid based upon a
review of the trading markets for the specific securities.

OTHER INVESTMENT COMPANIES

Each Fund may invest in the aggregate no more than 10% of its total assets,
calculated at the time of purchase, in the securities of other U.S.-registered
investment companies. In addition, a Fund may not invest more than 5% of its
total assets in the securities of any one such investment company or acquire
more than 3% of the voting securities of any other such investment company. A
Fund will indirectly bear its proportionate share of any management or other
fees paid by investment companies in which it invests, in addition to its own
fees.

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TEMPORARY DEFENSIVE INVESTMENTS

For temporary defensive purposes during periods when the Adviser determines that
conditions warrant, each of the Funds other than the Municipal Funds may invest
up to 100% of its assets in cash and money market instruments, including
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; certificates of deposit, time deposits, and bankers'
acceptances issued by banks or savings and loans associations having net assets
of at least $500 million as of the end of their most recent fiscal year;
commercial paper rated at the time of purchase at least A-1 by Standard & Poor's
or P-1 by Moody's, or unrated commercial paper determined by the Adviser to be
of comparable quality; repurchase agreements involving any of the foregoing;
and, to the extent permitted by applicable law, shares of other investment
companies investing solely in money market instruments.

COMMERCIAL PAPER

Commercial paper is a short-term, unsecured negotiable promissory note of a U.S
or non-U.S issuer. Each of the Funds may purchase commercial paper. Each Fund
may also invest in variable rate master demand notes which typically are issued
by large corporate borrowers and which provide for variable amounts of principal
indebtedness and periodic adjustments in the interest rate. Demand notes are
direct lending arrangements between a Fund and an issuer, and are not normally
traded in a secondary market. A Fund, however, may demand payment of principal
and accrued interest at any time. In addition, while demand notes generally are
not rated, their issuers must satisfy the same criteria as those that apply to
issuers of commercial paper. The Adviser will consider the earning power, cash
flow and other liquidity ratios of issuers of demand notes and continually will
monitor their financial ability to meet payment on demand. See also "Fixed
Income Securities--Variable and Floating Rate Instruments."

BANK OBLIGATIONS

Each Fund's investments in money market instruments may include certificates of
deposit, time deposits and bankers' acceptances. Certificates of Deposit ("CDs")
are short-term negotiable obligations of commercial banks. Time Deposits ("TDs")
are non-negotiable deposits maintained in banking institutions for specified
periods of time at stated interest rates. Bankers' acceptances are time drafts
drawn on commercial banks by borrowers usually in connection with international
transactions.

U.S. commercial banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal Deposit Insurance Corporation
(the "FDIC"). U.S. banks organized under state law are supervised and examined
by state banking authorities but are members of the Federal Reserve System only
if they elect to join. Most state banks are insured by the FDIC (although such
insurance may not be of material benefit to a Fund, depending upon the principal
amount of CDs of each bank held by the Fund) and are subject to federal
examination and to a substantial body of federal law and regulation. As a result
of governmental regulations, U.S. branches of U.S. banks, among other things,
generally are required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial soundness.
U.S. savings and loan associations, the

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CDs of which may be purchased by the Funds, are supervised and subject to
examination by the Office of Thrift Supervision. U.S. savings and loan
associations are insured by the Savings Association Insurance Fund which is
administered by the FDIC and backed by the full faith and credit of the U.S.
Government.

INVESTMENT RESTRICTIONS

Investment restrictions that involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by or on behalf of, a Fund
with the exception of borrowings permitted by fundamental investment restriction
(2) listed below for each Fund other than the Fixed Income Fund and the
Municipal Bond Fund and fundamental investment restriction (3) listed below for
Fixed Income Fund and Municipal Bond Fund.

In addition, the policy of each of Morgan Grenfell Municipal Bond Fund and
Morgan Grenfell Short-Term Municipal Bond Fund to invest at least 80% of its net
assets in tax-exempt securities has been designated as fundamental.

The nonfundamental investment restrictions set forth below may be changed or
amended by the Trust's Board of Trustees without shareholder approval.

INVESTMENT RESTRICTIONS THAT APPLY TO SHORT-TERM FIXED INCOME FUND, SHORT-TERM
MUNICIPAL BOND FUND, HIGH YIELD BOND FUND AND THE EQUITY FUNDS

FUNDAMENTAL INVESTMENT RESTRICTIONS The Trust may not, on behalf of a Fund:

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other parties; provided that, in each case, the Fund is required to
maintain asset coverage of at least 300% for all borrowings. For the
purposes of this investment restriction, short sales, transactions in
currency, forward contracts, swaps, options, futures contracts and options
on futures contracts, and forward commitment transactions shall not
constitute borrowing.

(3) Pledge, mortgage, or hypothecate its assets, except to secure indebtedness
permitted by paragraph (2) above and to the extent related to the
segregation of assets in connection with the writing of covered put and
call options and the purchase of securities or currencies on a forward
commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to forward contracts, options,
futures contracts and options on futures contracts.

(4) Act as an underwriter, except to the extent that, in connection with the
disposition of Fund securities, the Fund may be deemed to be an underwriter
for purposes of the Securities Act of 1933.

(6) Make loans, except that the Fund may lend Fund securities in accordance
with the Fund's investment policies and may purchase or invest in
repurchase agreements, bank certificates of deposit, all or a portion of an
issue of bonds, bank loan participation agreements, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon
the original Issuance of the securities.

(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward
foreign currency exchange contracts, forward commitments, securities index
put or call warrants and repurchase agreements entered into in accordance
with the Fund's investment policies.

(8) Invest 25% or more of the value of the Fund's total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry or group of industries. This restriction
does not apply to investments in obligations of the U.S. Government or any
of its agencies or instrumentalities.

In addition, each Fund will adhere to the following fundamental investment
restriction:

With respect to 75% of its total assets, a Fund may not purchase
securities of an issuer (other than the U.S. Government, or any of its
agencies or instrumentalities, or other investment companies), if (a) such
purchase would cause more than 5% of the Fund's total assets taken at
market value to be invested in the securities of such issuer, or

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<PAGE>

(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund.

NONFUNDAMENTAL INVESTMENT RESTRICTIONS The Trust may not, on behalf of a Fund:

(a) Participate on a joint-and-several basis in any securities trading account.
The "bunching" of orders for the sale or purchase of marketable Fund
securities with other accounts under the management of the Adviser to save
commissions or to average prices among them is not deemed to result in a
securities trading account.

(b) Purchase securities of other U.S.-registered investment companies, except
as permitted by the Investment Company Act of 1940 and the rules,
regulations and any applicable exemptive order issued thereunder.

The staff of the Commission has taken the position that fixed time deposits
maturing in more than seven days that cannot be traded on a secondary market and
participation interests in loans are illiquid. Until such time (if any) as this
position changes, the Trust, on behalf of each Fund, will include such
investments in determining compliance with the 15% limitation on investments in
illiquid securities (10% limitation for the Municipal Bond Fund and Short-Term
Municipal Bond Fund). Restricted securities (including commercial paper issued
pursuant to Section 4(2) of the Securities Act of 1933, which the Board of
Trustees has determined are readily marketable will not be deemed to be illiquid
for purposes of such restriction.

"Value" for the purposes of the foregoing investment restrictions shall mean the
market value used in determining each Fund's net asset value.

INVESTMENT RESTRICTIONS THAT APPLY TO THE FIXED INCOME FUND AND THE MUNICIPAL
BOND FUND

Fundamental Investment Restrictions. The Trust may not, on behalf of the Fixed
Income Fund or the Municipal Bond Fund:

(1) Acquire more than 10% of the voting securities of any one issuer.

(2) Invest in companies for the purpose of exercising control.

(3) Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of its total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5%
of the value of a Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, a Fund shall, within three days thereafter or such

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<PAGE>

longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to such an
extent that the asset coverage of such borrowings shall be at least 300%.
This borrowing provision is included for temporary liquidity or emergency
purposes. All borrowings will be repaid before making investments and any
interest paid on such borrowings will reduce income.

(4) Make loans, except that a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies, and a Fund may enter
into repurchase agreements.

(5) Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (3) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such
loan.

(6) Purchase or sell real estate, real estate limited partnership interests,
futures contracts, commodities or commodities contracts and interests in a
pool of securities that are secured by interests in real estate. However,
subject to the permitted investments of the Fund, a Fund may invest in
municipal securities or other obligations secured by real estate or
interests therein.

(7) Make short sales of securities, maintain a short position or purchase
securities on margin, except that a Fund may obtain short-term credits as
necessary for the clearance of security transactions.

(8) Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.

(9) Purchase securities of other investment companies except as permitted by
the Investment Company Act of 1940 and the rules and regulations
thereunder.

(10) Issue senior securities (as defined in the Investment Company Act of 1940)
except in connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the Securities and Exchange
Commission.

(11) Purchase or retain securities of an issuer if an officer, trustee, partner
or director of the Fund or any investment adviser of the Fund owns
beneficially more than 1/2 of 1% of the shares or securities of such issuer
and all such officers, trustees, partners and directors owning more than
1/2 of 1% of such shares or securities together own more than 5% of such
shares or securities.

(12) Invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.

(13) Write or purchase puts, calls, options or combinations thereof or invest
in warrants, except that a Fund may purchase "put" bonds.

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

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(1) A Fund may not invest in illiquid securities in an amount exceeding, in the
aggregate, 10% of the Municipal Bond Fund's total assets and 15% of the
Fixed Income Fund's net assets. An illiquid security is a security that
cannot be disposed of promptly (within seven days) and in the usual course
of business without a loss, and includes repurchase agreements maturing in
excess of seven days, time deposits with a withdrawal penalty, non-
negotiable instruments and instruments for which no market exists.

(2) A Fund may not purchase securities of other U.S.-registered investment
companies except as permitted by the Investment Company Act of 1940 and the
rules, regulations and any applicable exemptive order issued thereunder.

TRUSTEES AND OFFICERS

Page -39-
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name and Address Positions with Trust Principal Occupation During Past
Five Years
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward T. Tokar Trustee Vice President-Investments, Allied
101 Columbia Road Signal, Inc. (advanced technology and
Morristown, NJ 07962 manufacturer) (since 1985).
(age 51)
- -------------------------------------------------------------------------------------------------
Neil P. Jenkins Vice President Director, Deutsche Asset Management,
20 Finsbury Circus Inc. (since 1991), Morgan Grenfell
London, England International Funds Mgmt (since
(age 38) 1995), and Morgan Grenfell & Co.
(since 1985).
- -------------------------------------------------------------------------------------------------
David W. Baldt Vice President Executive Vice President and Director
150 S. Independence Sq. of Fixed Income Investments, Deutsche
W. Philadelphia, PA 19106 Asset Management, Inc. (since 1989).
(age 49)
- -------------------------------------------------------------------------------------------------
Ian D. Kelson Vice President Director, MGIS (since 1988); Chief
20 Finsbury Circus Investment Officer, Fixed Income,
London EC2M INB England (age 42) Deutsche Asset Management Investment
Services Limited(since 1989).
- -------------------------------------------------------------------------------------------------
James Grifo Vice President Executive Vice President and
150 S. Independence Sq. Director, Deutsche Asset Management,
W. Philadelphia, PA 19106 Inc. (since 1996); Senior Vice
(age 47) President, GT Global Financial (1990
- 1996).
- -------------------------------------------------------------------------------------------------
Amy M. Olmert (1)(3) Treasurer, Chief Vice President, Deutsche Asset
One South Street Financial Officer Management Americas (since 1999);
Baltimore, MD 21202 Vice President, BT Alex. Brown Inc.
(age 36) (1997-1999); Senior Manager,
PricewaterhouseCoopers LLP
(1988-1997).
- -------------------------------------------------------------------------------------------------
Daniel O. Hirsch Secretary Principal, Deutsche Asset Management
One South Street Americas (since 1999); Director,
Baltimore, MD 21202 Deutsche Bank Alex. Brown
(age 45) Incorporated and Investment Company
Capital Corp. (since 1998); Assistant
General Counsel, Office of the
General Counsel, United States
Securities and Exchange Commission
(1993-1998).
- -------------------------------------------------------------------------------------------------
</TABLE>

1 Member of the Trust's Pricing Committee.
2 Member of the Trust's Audit Committee.
3 Member of the Trust's Dividend Committee.

Page -40-
<PAGE>

Certain of the Trustees and officers of the Trust reside outside the United
States, and substantially all the assets of these persons are located outside
the United States. It may not be possible, therefore, for investors to effect
service of process within the United States upon these persons or to enforce
against them, in United States courts or foreign courts, judgments obtained in
United States courts predicated upon the civil liability provisions of the
federal securities laws of the United States or the laws of the State of
Delaware. In addition, it is not certain that a foreign court would enforce, in
original actions or in actions to enforce judgments obtained in the United
States, liabilities against these Trustees and officers predicated solely upon
the federal securities laws.

Messrs. Jones, Freeman and Searcy are members of the Audit Committee of the
Board of Trustees. The Audit Committee's functions include making
recommendations to the Trustees regarding the selection of independent
accountants, and reviewing with such accountants and the Treasurer of the Trust
matters relating to accounting and auditing practices and procedures, accounting
records, internal accounting controls and the functions performed by the Trust's
custodian, administrator and transfer agent.

As of February __, 2000, the Trustees and officers of the Trust owned, as a
group, less than one percent of the outstanding shares of each Fund other than
Morgan Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell Smaller
Companies Fund and Morgan Grenfell Micro Cap Fund. On such date, the Trustees
and officers of the Trust owned, as a group, _____% of the outstanding shares of
Morgan Grenfell Short-Term Municipal Bond Fund, ___% of the outstanding shares
of Morgan Grenfell Smaller Companies Fund and ____% of the outstanding shares of
Morgan Grenfell Micro Cap Fund, respectively.

COMPENSATION OF TRUSTEES

The Trust pays each Trustee who is not affiliated with the Adviser an annual fee
of $15,000 provided that they attend each regular Board meeting during the year.
Members of the Audit Committee also receive $1,000 for each Audit Committee
meeting attended. The Chairman of the Audit Committee, currently Mr. Searcy,
receives an additional $1,000 per Audit Committee meeting attended. The Trustees
are also reimbursed for out-of-pocket expenses incurred by them in connection
with their duties as Trustees. The following table sets forth the compensation
paid by the Trust to the Trustees for the fiscal year of the Trust ended October
31, 1999:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Pension or Retirement Benefits
Accrued as Part of Fund Aggregate Compensation from
Name of Trustee Expenses the Trust/Complex*
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Paul K. Freeman $ $
- ------------------------------------------------------------------------------------------------
Graham E. Jones $ $
- ------------------------------------------------------------------------------------------------
William N. Searcy $ $
- ------------------------------------------------------------------------------------------------
Hugh G. Lynch $ $
- ------------------------------------------------------------------------------------------------
</TABLE>

Page -41-
<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward T. Tokar $ $
- ------------------------------------------------------------------------------------------------
</TABLE>

* The Trustees listed above do not serve on the Board of any other investment
company that may be considered to belong to the same complex as the Trust.

INVESTMENT ADVISORY AND OTHER SERVICES

THE ADVISER

Effective October 6, 1999, the investment adviser to each Fund, Morgan Grenfell
Inc. changed its name to Deutsche Asset Management, Inc. Deutsche Asset
Management, Inc., 885 Third Avenue, New York, New York, acts as the investment
adviser to each Fund pursuant to the terms of Management Contracts, dated
December 28, 1994, August 7, 1996 and January 30, 1997 (referred to collectively
herein as the "Management Contracts"). Pursuant to the Management Contracts, the
Adviser supervises and assists in the management of the assets of each Fund and
furnishes each Fund with research, statistical, advisory and managerial
services. The Adviser pays the ordinary office expenses of the Trust and the
compensation, if any, of all officers and employees of the Trust and all
Trustees who are "interested persons" (as defined in the 1940 Act) of the
Adviser. Under the Management Contracts, the Trust, on behalf of each Fund, is
obligated to pay the Adviser a monthly fee at an annual rate of each Fund's
average daily net assets as follows:

<TABLE>
<CAPTION>
Fund Annual Rate
--------------------------------------------------------------
<S> <C>
Morgan Grenfell Municipal Bond Fund 0.40%
--------------------------------------------------------------
Morgan Grenfell Short-Term Municipal Bond Fund 0.40%
--------------------------------------------------------------
Morgan Grenfell Fixed Income Fund 0.40%
--------------------------------------------------------------
Morgan Grenfell Short-Term Fixed Income Fund 0.40%
--------------------------------------------------------------
Morgan Grenfell High Yield Bond Fund 0.50%
--------------------------------------------------------------
Morgan Grenfell Smaller Companies Fund 1.00%
--------------------------------------------------------------
Morgan Grenfell Micro Cap Fund 1.50%
--------------------------------------------------------------
</TABLE>

Each Fund's advisory fees are paid monthly and will be prorated if the Adviser
shall not have acted as the Fund's investment adviser during the entire monthly
period. The Adviser has temporarily agreed, under certain circumstances, to
reduce or not impose its management fee and to make arrangements to limit
certain other expenses.

Page -42-
<PAGE>

For the fiscal year ended October 31, 1999, Morgan Grenfell Fixed Income Fund,
Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-Term Fixed Income
Fund, Morgan Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell High Yield
Bond Fund, Morgan Grenfell Smaller Companies Fund and Morgan Grenfell Micro Cap
Fund each paid the Adviser net advisory fees of $______________,
$______________, $______________, $______________, $______________,
$______________ and $______________, respectively. For the fiscal year ended
October 31, 1998, Morgan Grenfell Fixed Income Fund, Morgan Grenfell Municipal
Bond Fund, Morgan Grenfell Short-Term Fixed Income Fund, Morgan Grenfell Short-
Term Municipal Bond Fund, Morgan Grenfell High Yield Bond Fund and Morgan
Grenfell Micro Cap Fund each paid the Adviser net advisory fees of $4,688,049,
$1,734,753, $2,407, $45,706, $119,581 and $37,826, respectively. During the
fiscal period ended October 31, 1998, Morgan Grenfell Smaller Companies Fund
paid no advisory fees. During the fiscal period ended October 31, 1997, Morgan
Grenfell Fixed Income Fund and Morgan Grenfell Municipal Bond Fund each paid the
Adviser net advisory fees of $3,171,809 and $977,638, respectively. During the
fiscal period ended October 31, 1997, Morgan Grenfell Short-Term Fixed Income
Fund, Morgan Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell High Yield
Bond Fund, Morgan Grenfell Smaller Companies Fund and Morgan Grenfell Micro Cap
Fund paid no advisory fees.

Each Management Contract between Deutsche Asset Management, Inc. and the Trust,
was most recently approved on November 18, 1999 by a vote of the Trust's Board
of Trustees, including a majority of those Trustees who were not parties to such
Management Contract or "interested persons" of any such parties. Each Management
Contract will continue in effect, with respect to each Fund, only if such
continuance is specifically approved annually by the Trustees, including a
majority of the Trustees who are not parties to the Management Contracts or
"interested persons" of any such parties, or by a vote of a majority of the
outstanding shares of each Fund. The Management Contracts are terminable by vote
of the Board of Trustees, or, with respect to a Fund, by the holders of a
majority of the outstanding shares of the Fund, at any time without penalty on
60 days' written notice to the Adviser. Termination of a Management Contract
(that covers more than one Fund) with respect to a Fund will not terminate or
otherwise invalidate any provision of such Management Contract with respect to
any other Fund. The Adviser may terminate any Management Contract at any time
without penalty on 60 days' written notice to the Trust. Each Management
Contract terminates automatically in the event of its "assignment" (as such term
is defined in the 1940 Act).

In the management of the Funds and its other accounts, the Adviser allocates
investment opportunities to all accounts for which they are appropriate subject
to the availability of cash in any particular account and the final decision of
the individual or individuals in charge of such accounts. Where market supply is
inadequate for a distribution to all such accounts, securities are allocated
based on a Fund's pro rata portion of the amount ordered. In some cases
this

Page -43-
<PAGE>

procedure may have an adverse effect on the price or volume of the security as
far as a Fund is concerned. However, it is the judgment of the Board that the
desirability of continuing the Trust's advisory arrangements with the Adviser
outweighs any disadvantages that may result from contemporaneous transactions.
See "Portfolio Transactions."

Deutsche Asset Management, Inc. is registered with the Commission as an
investment adviser and provides a full range of investment advisory services to
institutional clients. Deutsche Asset Management, Inc. is an indirect wholly-
owned subsidiary of Deutsche Bank AG, an international commercial and investment
banking group. As of October 31, 1999, Deutsche Asset Management, Inc. managed
approximately $_____ billion in assets for various individual and institutional
accounts, including the Morgan Grenfell SMALLCap Fund, Inc., a registered,
closed-end investment company for which it acts as investment adviser.

PORTFOLIO MANAGEMENT

Each of the Funds, except for the High Yield Bond Fund, is managed utilizing a
team approach.

Mr. Curtiss O. Barrows is a senior vice president with the Adviser and serves as
the portfolio manager of the High Yield Bond Fund. Prior to joining Deutsche
Asset Management, Inc. in March 1998, Mr. Barrows managed Phoenix High-Yield
Fund at Phoenix Duff & Phelps for 13 years.

PORTFOLIO TURNOVER

It is estimated that, under normal circumstances, the portfolio turnover rate of
each of the Equity Funds will not exceed 150%. It is estimated that, under
normal circumstances, the portfolio turnover rate of each other Fund will not
exceed 175%. The higher portfolio turnover rates of these Funds may result from
their respective portfolio management strategies. These Funds may sell
securities held for a short time in order to take advantage of what the Adviser
believes to be temporary disparities in normal yield relationships between
securities. A high rate of portfolio turnover (i.e., 100% or higher) will result
in correspondingly higher transaction costs to a Fund, particularly if the
Fund's primary investments are equity securities. A high rate of portfolio
turnover will also increase the likelihood of net short-term capital gains
(distributions of which are taxable to shareholders as ordinary income).

Each Fund's portfolio turnover rate is calculated by dividing the lesser of the
dollar amount of sales or purchases of portfolio securities by the average
monthly value of a Fund's portfolio securities, excluding securities having a
maturity at the date of purchase of one year or less. For the fiscal period
ended October 31, 1999, the portfolio turnover rates for Morgan Grenfell Fixed
Income Fund, Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-Term
Fixed Income Fund, Morgan Grenfell Short-Term Municipal Bond Fund, Morgan
Grenfell Smaller Companies Fund and Morgan Grenfell Micro Cap Fund were ____%,
__%, ___%, __%, ___% and ___%, respectively. For the fiscal period ended October
31, 1998, the portfolio turnover rates for Morgan Grenfell Fixed Income Fund,
Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-Term Fixed Income
Fund, Morgan Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell High Yield
Bond Fund, Morgan Grenfell Smaller

Page -44-
<PAGE>

Companies Fund and Morgan Grenfell Micro Cap Fund were 122%, 42%, 98%, 26%,
131%, 108% and 85%, respectively.

THE ADMINISTRATOR

Deutsche Asset Management, Inc. (the "Administrator"), 150 South Independence
Square West, Philadelphia, PA 19106, serves as the Trust's administrator
pursuant to an Administration Agreement dated August 27, 1998. Pursuant to the
Administration Agreement, the Administrator has agreed to furnish statistical
and research data, clerical services, and stationery and office supplies;
prepare and file various reports with the appropriate regulatory agencies
including the Commission and state securities commissions; and provide
accounting and bookkeeping services for the Funds, including the computation of
each Fund's net asset value, net investment income and net realized capital
gains, if any.

For its services under the Administration Agreement, the Administrator receives
a monthly fee at the following annual rates of the aggregate average daily net
assets of such Fund: 0.12% for the Fixed Income Funds; 0.22% for the Equity
Funds. The Administrator will pay Accounting Agency and Transfer Agency fees out
of the Administration fee. Previously, these fees were charged directly to the
Funds. Net Fund Operating Expenses will remain unchanged since the Adviser has
agreed to reduce its advisory fee and to make arrangements to limit certain
other expenses to the extent necessary to limit Fund Operating Expenses of each
Fund to the specified percentage of each Fund's net assets as demonstrated in
the Expense Information tables in the prospectus. For the fiscal year ended
October 31, 1999, Morgan Grenfell Fixed Income Fund, Morgan Grenfell Short-Term
Fixed Income Fund, Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-
Term Municipal Bond Fund, Morgan Grenfell High Yield Bond Fund, Morgan Grenfell
Smaller Companies Fund and Morgan Grenfell Micro Cap Fund paid the Administrator
administration fees of $____________, $____________, $____________,
$____________, $____________, $____________, and $____________, respectively.

Prior to November 1, 1998, SEI Financial Management Corporation was the
Administrator for the Funds. For the fiscal period ended October 31, 1998,
Morgan Grenfell Fixed Income Fund, Morgan Grenfell Short-Term Fixed Income Fund,
Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-Term Municipal Bond
Fund, Morgan Grenfell High Yield Bond Fund, Morgan Grenfell Smaller Companies
Fund and Morgan Grenfell Micro Cap Fund paid the Administrator administration
fees of $941,106, $60,177, $331,733, $60,177, $26,888, $60,177 and $57,677,
respectively. For the fiscal period ended October 31, 1997, Morgan Grenfell
Fixed Income Fund, Morgan Grenfell Short-Term Fixed Income Fund, Morgan Grenfell
Municipal Bond Fund, Morgan Grenfell Short-Term Municipal Bond Fund, Morgan
Grenfell Smaller Companies Fund and Morgan Grenfell Micro Cap Fund paid the
Administrator administration fees of $901,672, $60,000, $295,813, $60,000,
$60,000 and $23,000, respectively. The administration fees described in this
paragraph were paid pursuant to a fee schedule that is different from the one
currently in effect (described above).

Page -45-
<PAGE>

EXPENSES OF THE TRUST

The expenses borne by the Fund include: (i) fees and expenses of any investment
adviser and any administrator of the Funds; (ii) fees and expenses incurred by
the Funds in connection with membership in investment company organizations;
(iii) brokers' commissions; (iv) payment for portfolio pricing services to a
pricing agent, if any; (v) legal expenses; (vi) interest, insurance premiums,
taxes or governmental fees; (vii) clerical expenses of issue, redemption or
repurchase of shares of the Funds; (viii) the expenses of and fees for
registering or qualifying shares of the Funds for sale and of maintaining the
registration of the Funds and registering the Funds as a broker or a dealer;
(ix) the fees and expenses of Trustees who are not affiliated with the Adviser;
(x) the fees or disbursements of custodians of the Funds' assets, including
expenses incurred in the performance of any obligations enumerated by the
Declaration of Trust or By-Laws of the Trust insofar as they govern agreements
with any such custodian; (xi) costs in connection with annual or special
meetings of shareholders, including proxy material preparation, printing and
mailing; (xii) charges and expenses of the Trust's auditor; (xiii) litigation
and indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Trust's business; and (xiv) expenses of an
extraordinary and nonrecurring nature.

TRANSFER AGENT

Investment Company Capital Corp., One South Street, Baltimore, Maryland 21202
("ICCC"), has been retained to act as transfer and dividend disbursing agent
pursuant to a transfer agency agreement (the "Transfer Agency Agreement"), under
which the Transfer Agent (i) maintains record shareholder accounts, and (ii)
makes periodic reports to the Trust's Board of Trustees concerning the
operations of each Fund.

THE DISTRIBUTOR

The Trust, on behalf of the Funds, has entered into a distribution agreement
(the "Distribution Agreement") pursuant to which ICC Distributors, Inc., Two
Portland Square, Portland, Maine 041101 (the "Distributor"), as agent, serves as
principal underwriter for the continuous offering of shares, including
Institutional shares, of each Fund. The Distributor has agreed to use its best
efforts to solicit orders for the purchase of shares of each Fund, although it
is not obligated to sell any particular amount of shares. Shares of the Funds
are not subject to sales loads or distribution fees. The Adviser, and not the
Trust, is responsible for payment of any expenses or fees incurred in the
marketing and distribution of shares of the Funds.

The Distribution Agreement will remain in effect for one year from its effective
date and will continue in effect thereafter only if such continuance is
specifically approved annually by the Trustees, including a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" of such parties. The Distribution Agreement was most recently approved
on November 18, 1999 by a vote of the Trust's Board of Trustees, including a
majority of those Trustees who were not parties to the Distribution Agreement or
"interested persons" of any such parties. The Distribution Agreement is
terminable, as to a Fund, by vote of the Board of Trustees, or by the holders of
a majority of the outstanding shares of the Fund, at any time without penalty on
60 days' written notice to the Distributor.

Page -46-
<PAGE>

The Distributor may terminate the Distribution Agreement at any time without
penalty on 60 days' written notice to the Trust.

CUSTODIAN

Brown Brothers Harriman and Co. (the "Custodian"), 40 Water Street, Boston,
Massachusetts 02109, serves as the Trust's custodian pursuant to a Custodian
Agreement. Under its custody agreement with the Trust, the Custodian (i)
maintains separate accounts in the name of each Fund, (ii) holds and transfers
portfolio securities on account of each Fund, (iii) accepts receipts and makes
disbursements of money on behalf of each Fund, (iv) collects and receives all
income and other payments and distributions on account of each Fund's portfolio
securities and (v) makes periodic reports to the Trust's Board of Trustees
concerning each Fund's operations. The Custodian is authorized to select one or
more foreign or domestic banks or companies to serve as sub-custodian on behalf
of the Funds.

SERVICE PLAN

(INVESTMENT SHARES ONLY)

Each Fund has adopted a service plan (the "Plan") with respect to its Investment
shares which authorizes it to compensate Service Organizations whose customers
invest in Investment shares of the Funds for providing certain personal, account
administration and/or shareholder liaison services. Pursuant to the Plans, the
Funds may enter into agreements with Service Organizations ("Service
Agreements"). Under such Service Agreements or otherwise, the Service
Organizations may perform some or all of the following services: (i) acting as
record holder and nominee of all Investment shares beneficially owned by their
customers; (ii) establishing and maintaining individual accounts and records
with respect to the service shares owned by each customer; (iii) providing
facilities to answer inquiries and respond to correspondence from customers
about the status of their accounts or about other aspects of the Trust or
applicable Fund; (iv) processing and issuing confirmations concerning customer
orders to purchase, redeem and exchange Investment shares; and (v) receiving and
transmitting funds representing the purchase price or redemption proceeds of
such Investment shares. In the event that your service plan is terminated, your
shares will be converted to Institutional Class shares of the same Fund.

Page -47-
<PAGE>

Pursuant to the Plans, Investment shares of a Fund that are beneficially owned
by customers of a Service Organization will convert automatically to
Institutional shares of the same Fund in the event that such Service
Organization's Service Agreement expires or is terminated. Customers of a
Service Organization will receive advance notice of any such conversion, and any
such conversion will be effected on the basis of the relative net asset values
of the two classes of shares involved.

Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974 ("ERISA") may apply to a Service Organization's receipt of
compensation paid by a Fund in connection with the investment of fiduciary
assets in Investment shares of the Fund. Service Organizations that are subject
to the jurisdiction of the Commission, the Department of Labor or state
securities commissions are urged to consult their own legal advisers before
investing fiduciary assets in Investment shares and receiving service fees.

The Trust believes that fiduciaries of ERISA plans may properly receive fees
under a Service Plan if the plan fiduciary otherwise properly discharges its
fiduciary duties, including (if applicable) those under ERISA. Under ERISA, a
plan fiduciary, such as a trustee or investment manager, must meet the fiduciary
responsibility standards set forth in part 4 of Title I of ERISA. Those
standards are designed to help ensure that the fiduciary's decisions are made in
the best interests of the plan and are not colored by self-interest.

Section 403 (c)(1) of ERISA provides, in part, that the assets of a plan shall
be held for the exclusive purpose of providing benefits to the plan's
participants and their beneficiaries and defraying reasonable expenses of
administering the plan. Section 404(a)(1) sets forth a similar requirement on
how a plan fiduciary must discharge his or her duties with respect to the plan,
and provides further that such fiduciary must act prudently and solely in the
interests of the participants and beneficiaries. These basic provisions are
supplemented by the per se prohibitions of certain classes of transactions set
forth in Section 406 of ERISA.

Section 406(a)(1)(D) of ERISA prohibits a fiduciary of an ERISA plan from
causing that plan to engage in a transaction if he knows or should know that the
transaction would constitute a direct or indirect transfer to, or use by or for
the benefit of, a party in interest, of any assets of that plan. Section 3(14)
includes within the definition of "party in interest" with respect to a plan any
fiduciary with respect to that plan. Thus, Section 406(a)(1)(D) would not only
prohibit a fiduciary from causing the plan to engage in a transaction which
would benefit a third person who is a party in interest, but it would also
prohibit the fiduciary from similarly benefiting himself. In addition, Section
406(b)(1) specifically prohibits a fiduciary with respect to a plan from dealing
with the assets of that plan in his own interest or for his own account. Section
406(b)(3) supplements these provisions by prohibiting a plan fiduciary from
receiving any consideration for his own personal account from any party dealing
with the plan in connection with a transaction involving the assets of the plan.

Page -48-
<PAGE>

where a broker-dealer rebates commission dollars to a plan fiduciary who, in
turn, reduces its fees for which plan is otherwise responsible for paying).
Thus, the fiduciary duty issues involved in a plan fiduciary's receipt of the
service fee must be assessed on a case-by-case basis by the relevant plan
fiduciary.

PORTFOLIO TRANSACTIONS

Pursuant to the Management Contracts, the Adviser agrees to select broker-
dealers in accordance with guidelines established by the Trust's Board of
Trustees from time to time and in accordance with Section 28(e) of the
Securities Exchange Act of 1934, as amended. In assessing the terms available
for any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In addition, the Management Contracts authorize the
Adviser, subject to the periodic review of the Trust's Board of Trustees, to
cause a Fund to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Adviser determines
in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Adviser to the Fund. Such brokerage and research services may consist of pricing
information, reports and statistics on specific companies or industries, general
summaries of groups of bonds and their comparative earnings and yields, or broad
overviews of the securities markets and the economy.

Page -49-
<PAGE>

supplemental research or other services received will primarily benefit one or
more other investment companies or other accounts of the Adviser for which
investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company. During the
fiscal year ended October 31, 1999, the Adviser paid the following brokerage
commissions for research services: for the Morgan Grenfell _________________
Fund approximately $________________ and for the Morgan Grenfell _________ Fund
approximately $________________.

Investment decisions for each Fund and for other investment accounts managed by
the Adviser are made independently of each other in the light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then averaged as to price and allocated as to amount in a
manner deemed equitable to each such account. While in some cases this practice
could have a detrimental effect on the price or value of the security as far as
a Fund is concerned, in other cases it is believed to be beneficial to a Fund.
To the extent permitted by law, the Adviser may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other
investment companies or accounts in executing transactions.

Page -50-
<PAGE>

respective clients, in order to obtain a more favorable commission rate. When
the same security is purchased for two or more funds or customers on the same
day, each fund or customer pays the average price and commissions paid are
allocated in direct proportion to the number of shares purchased.

For the fiscal years ended October 31, 1997, 1998 and [1999] Morgan Grenfell
Fixed Income Fund, Morgan Grenfell Municipal Bond Fund, Morgan Grenfell Short-
Term Fixed Income Fund and Morgan Grenfell Short-Term Municipal Bond Fund paid
no brokerage commissions. For the fiscal periods ending October 31, 1998 and
[1999], Morgan Grenfell High Yield Bond Fund paid no brokerage commissions. For
the fiscal years ended October 31, 1997, 1998 and 1999, Morgan Grenfell Smaller
Companies Fund paid aggregate brokerage commissions of $7,708, $11,892 and $
_____________, respectively. For the fiscal periods ended October 31, 1997, 1998
and 1999, Morgan Grenfell Micro Cap Fund paid aggregate brokerage commissions of
$7,337, $28,211 and $ __________, respectively.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Funds are distributed by ICC Distributors, Inc., the Distributor.
The Funds offer two classes of shares, Institutional and Investment shares.
General information on how to buy shares of the Funds is set forth in "Managing
Your Investment" in each Fund's Prospectus. The following supplements that
information.

Investors may invest in Institutional shares by establishing a shareholder
account with the Trust. In order to make an initial investment in Investment
shares of a Fund, an investor must establish an account with a service
organization. Additionally, each Fund has authorized brokers to accept purchase
and redemption orders for Institutional and Investment shares for each Fund.
Brokers, including authorized brokers of service organizations, are, in turn,
authorized to designate other intermediaries to accept purchase and redemption
orders on a Fund's behalf. Investors who invest through brokers, service
organizations or their designated intermediaries may be subject to minimums
established by their broker, service organization or designated intermediary.

Page-51-
<PAGE>

submit purchase and redemption orders directly to their broker, service
organization or designated intermediary. The broker or intermediary may charge
you a transaction fee. A Fund will be deemed to have received a purchase or
redemption order when an authorized broker, service organization or, if
applicable, an authorized designee, accepts the order. Shares of any Fund may be
purchased or redeemed on any Business Day at the net asset value next determined
after receipt of the order, in good order, by the Transfer Agent, the service
organization, broker or designated intermediary. A "Business Day" means any day
on which the New York Stock Exchange (the "NYSE") is open. For an investor who
has a shareholder account with the Trust, the Transfer Agent must receive the
investor's purchase or redemption order before the close of regular trading on
the NYSE for the investor to receive that day's net asset value. For an investor
who invests through a mutual fund marketplace, the investor's authorized broker
or designated intermediary must receive the investor's purchase or redemption
order before the close of regular trading on the NYSE and promptly forward such
order to the Transfer Agent for the investor to receive that day's net asset
value. Service organizations, brokers and designated intermediaries are
responsible for promptly forwarding such investors' purchase or redemption
orders to the Transfer Agent.

NET ASSET VALUE

Under the 1940 Act, the Board of Trustees of the Trust is responsible for
determining in good faith the fair value of the securities of each Fund. In
accordance with procedures adopted by the Board of Trustees, the net asset value
per share of each class of each Fund is calculated by determining the net worth
of the Fund attributable to the class (assets, including securities at value,
minus liabilities) divided by the number of shares of such class outstanding.
Each Fund computes net asset value for each class of its shares at the close of
such regular trading, on each day on which the New York Stock Exchange ("NYSE")
is open (a "Business Day"). If the NYSE closes early, the fund will accelerate
the calculation of the NAV and transaction deadlines to the actual closing time.
The NYSE is closed on Saturdays and Sundays as well as the following holidays:
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

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the value of the security, as determined by amortized cost, may be higher or
lower than the price the Fund would receive if the Fund sold the security.

Other assets and assets for which market quotations are not readily available
are valued at fair value using methods determined in good faith by the Board of
Trustees.

Trading in securities on European and Far Eastern securities exchanges and over-
the-counter markets is normally completed well before the close of regular
trading or the NYSE each Business Day. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all Business Days. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which are
not Business Days and on which the Funds' net asset values are not calculated.
Such calculation may not take place contemporaneously with the determination of
the prices of certain portfolio securities used in such calculation. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of the regular trading on the NYSE will not
be reflected in the Funds' calculation of net asset values unless the Adviser
deems that the particular event would materially affect net asset value, in
which case an adjustment will be made.

PERFORMANCE INFORMATION

From time to time, performance information, such as total return and yield for
shares of a Fund may be quoted in advertisements or in communications to
shareholders. A Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change per
year in value of an investment in shares of a Fund. Aggregate total return
reflects the total percentage change over the stated period. In calculating
total return, dividends and capital gain distributions made by the Fund during
the period are assumed to be reinvested in the Fund's shares. A Fund's yield
reflects a Fund's overall rate of income on portfolio investments as a
percentage of the Institutional share price. Yield is computed by annualizing
the result of dividing the net investment income per share over a 30-day period
by the net asset value per share on the last day of that period.

For the Municipal Funds, tax-equivalent yield may also be quoted. Tax-equivalent
yield is calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after tax equivalent of a
Municipal Fund's yield, assuming certain tax brackets for a shareholder.

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Performance quotations of a Fund represent the Fund's past performance and,
consequently, should not be considered representative of the future performance
of the Fund. The value of shares, when redeemed, may be more or less than the
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in
Institutional shares of a Fund are not at the direction or within the control of
the Funds and will not be included in the Funds' calculations of total
return.

YIELD

From time to time, the Fixed Income Fund, the Short-Term Fixed Income Fund, the
High Yield Bond Fund and each Municipal Fund may advertise its yield and (in the
case of the Municipal Funds) its tax-equivalent yield. Yield and tax-equivalent
yield are calculated separately for Investment shares and Institutional shares
of a Fund. Each type of share is subject to differing yields for the same
period. The yield of Institutional shares of a Fund refers to the annualized
income generated by an investment in the Fund over a specified 30-day period.
The yield is calculated by assuming that the income generated by the investment
during that period is generated for each like period over one year and is shown
as a percentage of the investment. In particular, yield will be calculated
according to the following formula:

a-b
YIELD = 2 [ ( ---- + 1 ) 6 - 1 ]
cd

Where: a = dividends and interest earned by the Fund during the period;

b = net expenses accrued for the period;

c = average daily number of shares outstanding during the period
entitled to receive dividends; and

d = maximum offering price per share on the last day of the
period.

Tax-equivalent yield is computed by dividing the portion of the yield that is
tax exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield that is not tax exempt. Actual yields will
depend on such variables as asset quality, average asset maturity, the type of
instruments a Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors. Yields are
one basis upon which investors may compare the Funds with other mutual funds;
however, yields of other mutual funds and other investment vehicles may not be
comparable because of the factors set forth above and differences in the methods
used in valuing portfolio instruments.

For the 30-day period ended October 31, 1999, the yields for Institutional
shares of the Fixed Income Fund, the Municipal Bond Fund, the Short-Term Fixed
Income Fund, the Short-Term Municipal Bond Fund and the High Yield Bond Fund
were ____%, ____%, ____%, ____% and ____%, respectively. If the expense
limitations for these Funds had not been in effect during this period, the
yields for Institutional shares of these Funds would have been ____%, ____%,
____%, ____% and ____%, respectively. For the same period, the tax-equivalent
yields for Institutional shares of the Municipal Bond Fund and the Short-Term
Municipal

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Bond Fund were ____% and ____%, respectively, assuming the highest Federal
Income Tax bracket for individuals (39.6%). If the expense limitations for these
Funds had not been in effect during this period, the tax-equivalent yields for
Institutional shares of these Funds would have been ____% and ____%,
respectively, assuming the same Federal Income Tax bracket.

For the 30-day period ended October 31, 1999, the yields for the Investment
shares of the Fixed Income Fund, the Municipal Bond Fund, the Short-Term
Municipal Bond Fund and the High Yield Bond Fund were ____%, ____%, ____% and
____%, respectively. If the expense limitations described in the Prospectus for
this Fund had not been in effect during this period, the yield for Investment
shares of the Fixed Income Fund, the Municipal Bond Fund, the Short-Term
Municipal Bond Fund and the High Yield Bond Fund would be ____%, ____%, ____%,
and ____%, respectively. For the same period, the tax-equivalent yields for
Investment shares of the Municipal Bond Fund and the Short-Term Municipal Bond
Fund were ____% and ____%, respectively, assuming the highest Federal Income Tax
bracket for individuals (39.6%). If the expense limitations described in the
Prospectus for this Fund had not been in effect during this period, the tax-
equivalent yields for Investment shares of this Fund would have been ____% and
____%, respectively, assuming the same Federal Income Tax bracket.

TOTAL RETURN

Average annual total return is calculated separately for Investment shares and
Institutional shares of a Fund. Each type of share is subject to different fees
and expenses and, consequently, may have differing average annual total returns
for the same period. Each Fund that advertises "average annual total return" for
a class of its shares computes such return by determining the average annual
compounded rate of return during specified periods that equates the initial
amount invested to the ending redeemable value of such investment according to
the following formula:

ERV
T = [ ( --- ) 1/n - 1 ]
P

Where: T = average annual total return,

ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the applicable period
(or a fractional portion thereof);

P = hypothetical initial payment of $1,000; and

n = period covered by the computation, expressed in years.

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Aggregate Total Return = [( ERV ) - 1] P

The above calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

For the fiscal year ended October 31, 1999, the average annual total return of
Institutional shares of Morgan Grenfell Fixed Income Fund, Morgan Grenfell
Municipal Bond Fund, Morgan Grenfell Short-Term Fixed Income Fund, Morgan
Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell Smaller Companies Fund
and Morgan Grenfell Micro Cap Fund were ____%, ____%, ____%, ____%, ______% and
______%, respectively. For the five-year period ended October 31, 1999, the
average annual total returns of Institutional shares of Morgan Grenfell Fixed
Income Fund and Morgan Grenfell Municipal Bond Fund were ____% and ____%,
respectively. For their respective periods from commencement of operations to
October 31, 1999, the average annual total returns of Institutional shares of
Morgan Grenfell Fixed Income Fund, Morgan Grenfell Municipal Bond Fund, Morgan
Grenfell Short-Term Fixed Income Fund, Morgan Grenfell Short-Term Municipal Bond
Fund, Morgan Grenfell High Yield Bond Fund, Morgan Grenfell Smaller Companies
Fund and Morgan Grenfell Micro Cap Fund were ____%, ____%, ____%, ____%, ____%,
_____% and ____%, respectively. If expense limitations for the above Funds had
not been in effect during the indicated periods, the total returns for
Institutional shares of these Funds for such periods would have been lower than
the total return figures shown in this paragraph.

For the fiscal year ended October 31, 1999, the average annual returns for
Investment shares of Morgan Grenfell Municipal Bond Fund, Morgan Grenfell
Smaller Companies Fund and Morgan Grenfell Micro Cap Fund were ____%, ______%
and ______%, respectively. For their respective periods from commencement of
operations (for Investment shares) to October 31, 1999, the average annual total
returns for Investment shares of Morgan Grenfell Municipal Bond Fund, Morgan
Grenfell Short-Term Municipal Bond Fund, Morgan Grenfell Smaller Companies Fund
and Morgan Grenfell Micro Cap Fund were ____%, ____%, _____% and ______%,
respectively. From the commencement of operations to October 31, 1999, the total
return of the Morgan Grenfell Fixed Income Fund and Morgan Grenfell High Yield
Bond Fund were ____% and ____%, respectively. If the expense limitations
described in each Prospectus for the above Funds had not been in effect during
the indicated periods, the total returns of these Funds for such periods would
have been lower than the total return figures shown in this paragraph.

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Fund Performance Analysis, Fixed Income Analysis and Mutual Fund Indices (which
measure total return and average current yield for the mutual fund industry and
rank mutual fund performance); (b) the CDA Mutual Fund Report published by CDA
Investment Technologies, Inc. (which analyzes price, risk and various measures
of return for the mutual fund industry); (c) the Consumer Price Index published
by the U.S. Bureau of Labor Statistics (which measures changes in the price of
goods and services); (d) Stocks, Bonds, Bills and Inflation published by
Ibbotson Associates (which provides historical performance figures for stocks,
government securities and inflation); (e) the Lehman Brothers Aggregate Bond
Index or its component indices (the Aggregate Bond Index measures the
performance of Treasury, U.S. Government agency, corporate, mortgage and Yankee
bonds); (f) the Standard & Poor's Bond Indices (which measure yield and price of
corporate, municipal and U.S. Government bonds); and (g) historical investment
data supplied by the research departments of Goldman Sachs, Lehman Brothers,
Inc., Credit Suisse First Boston Corporation, Morgan Stanley Dean Witter,
Salomon Smith Barney, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data. The composition of the investments in such indices and
the characteristics of such benchmark investments are not identical to, and in
some cases are very different from, those of the Funds' portfolios. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may not be identical to the formulas
used by the Funds to calculate their performance figures.

TAXES

The following is a summary of the principal U.S. federal income, and certain
state and local tax considerations regarding the purchase, ownership and
disposition of shares in the Funds. This summary does not address special tax
rules applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Each prospective shareholder is
urged to consult his own tax adviser with respect to the specific federal,
state, local and foreign tax consequences of investing in the Funds. The summary
is based on the laws in effect on the date of this Statement of Additional
Information, which are subject to change.

GENERAL

Each Fund is a separate taxable entity. Each Fund has elected or intends to
elect to be treated, and intends to qualify for each taxable year, as a
regulated investment company under Subchapter M of the Code. Qualification of a
Fund as a regulated investment company under the Code requires, among other
things, that (a) the Fund derive at least 90% of its gross income (including
tax-exempt interest) for its taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition of
stocks or securities or foreign currencies, or other income (including but not
limited to gains from options, futures, and forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
(the "90% gross income test"); and (b) the Fund diversify its holdings so that,
at the close of each quarter of its taxable year, (i) at least 50% of the market
value of its total (gross) assets is comprised of cash, cash items, United
States Government securities, securities of other regulated investment companies
and other securities limited in respect of any one issuer to an amount not
greater in value than 5% of the value of the Fund's total assets and to not more
than 10% of the outstanding voting securities of such issuer, and

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(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than United States Government securities and
securities of other regulated investment companies) or two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses. Future Treasury regulations could provide that qualifying income
under the 90% gross income test will not include gains from foreign currency
transactions or derivatives that are not directly related to a Fund's principal
business of investing in stock or securities or options and futures with respect
to stock or securities. Using foreign currency positions or entering into
foreign currency options, futures or forward contracts for purposes other than
hedging currency risk with respect to securities in a Fund's portfolio or
anticipated to be acquired may not qualify as "directly-related" under such
regulations.

If a Fund complies with such provisions, then in any taxable year in which the
Fund distributes at least 90% of the sum of (i) its "investment company taxable
income" (which includes dividends, taxable interest, taxable accrued original
issue discount, recognized market discount income, income from securities
lending, any net short-term capital gain in excess of net long-term capital loss
and certain net realized foreign exchange gains and is reduced by deductible
expenses) and (ii) the excess of its gross tax-exempt interest, if any, over
certain disallowed deductions ("net tax-exempt interest"), the Fund (but not its
shareholders) will be relieved of federal income tax on any income of the Fund,
including long-term capital gains, distributed to shareholders. However, if a
Fund retains any investment company taxable income or net capital gain (the
excess of net long-term capital gain over net short-term capital loss), it will
be subject to federal income tax at regular corporate rates on the amount
retained.

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that were not distributed in such year and on which no federal income tax was
paid by the Fund. For federal income tax purposes, dividends declared by a Fund
in October, November or December to shareholders of record on a specified date
in such a month and paid during January of the following year are taxable to
such shareholders as if received on December 31 of the year declared.

Gains and losses on the sale, lapse, or other termination of options and futures
contracts, options thereon and certain forward contracts (except certain foreign
currency options, forward contracts and futures contracts) entered into by a
Fund will generally be treated as capital gains and losses. Certain of the
futures contracts, forward contracts and options held by the Funds will be
required to be "marked-to-market" for federal income tax purposes, that is,
treated as having been sold at their fair market value on the last day of the
Funds' taxable year. As a result, a Fund may be required to recognize income or
gain without a concurrent receipt of cash. Additionally, a Fund may be required
to recognize gain if an option, future, forward contract, short sale, or other
transaction that is not subject to these mark to market rules is treated as a
"constructive sale" of an "appreciated financial position" held by the Fund
under Section 1259 of the Code. Any gain or loss recognized on actual or deemed
sales of futures contracts, forward contracts, or options that are subject to
the mark to market rules, but not the constructive sales rules, (except for
certain foreign currency options, forward contracts, and futures contracts) will
be treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. As a result of certain hedging transactions entered into by a Fund,
such Fund may be required to defer the recognition of losses on futures or
forward contracts and options or underlying securities or foreign currencies to
the extent of any unrecognized gains on related positions and the
characterization of gains or losses as long-term or short-term may be changed.
The tax provisions described above applicable to options, futures, forward
contracts and constructive sales may affect the amount, timing and character of
a Fund's distributions to shareholders. Certain tax elections may be available
to the Funds to mitigate some of the unfavorable consequences described in this
paragraph.

Section 988 of the Code contains special tax rules applicable to certain foreign
currency transactions and instruments that may affect the amount, timing and
character of income, gain or loss recognized by Funds other than the Municipal,
Fixed Income and Short-Term Fixed Income Funds. Under these rules, foreign
exchange gain or loss realized with respect to foreign currencies and certain
futures and options thereon, foreign currency-denominated debt instruments,
foreign currency forward contracts, and foreign currency-denominated payables
and receivables will generally be treated as ordinary income or loss, although
in some cases elections may be available that would alter this treatment.

If a Fund acquires stock (including, under proposed regulations, an option to
acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties or capital
gains) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. Certain
elections may, if

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available, ameliorate these adverse tax consequences, but any such election
could require the Fund to recognize taxable income or gain without the
concurrent receipt of cash. Investments in passive foreign investment companies
may also produce ordinary income rather than capital gains, and the
deductibility of losses is subject to certain limitations. The applicable Funds
may limit and/or manage their holdings in passive foreign investment companies
or make an available election to minimize their tax liability or maximize their
return from these investments.

The federal income tax rules applicable to currency and interest rate swaps,
mortgage dollar rolls, and certain structured securities are unclear in certain
respects, and the Funds may be required to account for these transactions or
instruments under tax rules in a manner that may affect the amount, timing and
character of income, gain or loss therefrom and that may, under certain
circumstances, limit the extent to which the Funds engage in these transactions
or acquire these instruments.

The High Yield Bond Fund may invest in debt obligations that are in the lowest
rating categories or are unrated, including debt obligations of issuers not
currently paying interest as well as issuers who are in default. Investments in
debt obligations that are at risk of or in default present special tax issues
for these Funds. Tax rules are not entirely clear about issues such as when a
Fund may cease to accrue interest, original issue discount, or market discount,
when and to what extent deductions may be taken for bad debts or worthless
securities, how payments received on obligations in default should be allocated
between principal and income, and whether exchanges of debt obligations in a
workout context are taxable. These and other issues will be addressed by these
Funds, to the extent they invest in such securities, in order to reduce the risk
of their distributing insufficient income to preserve their status as regulated
investment companies and seek to avoid having to pay federal income or excise
tax.

A Fund that invests in foreign securities may be subject to foreign withholding
or other foreign taxes on certain income (possibly including, in some cases,
capital gains) from such securities. Tax conventions between certain countries
and the U.S. may reduce or eliminate such taxes in some cases. The Funds
anticipate that they generally will not be entitled to elect to pass through
such foreign taxes to their shareholders. If such an election is made,
shareholders would have to include their shares of such taxes as additional
income, but could be entitled to U.S. tax credits or deductions for such taxes,
subject to certain requirements and limitations under the Code.

Each Fund's investments in zero coupon securities, deferred interest securities,
increasing rate securities, pay-in-kind ("P.I.K.") securities, or other
securities bearing original issue discount or, if the Fund elects to include
market discount in income currently, market discount will generally cause it to
realize income prior to the receipt of cash payments with respect to these
securities. Transactions or instruments subject to the mark to market or
constructive sale rules described above may have the same result in some
circumstances. In order to obtain cash to distribute this income or gain,
maintain its qualification as a regulated investment company, and avoid federal
income or excise taxes, a Fund may be required to liquidate portfolio securities
that it might otherwise have continued to hold.

Each Municipal Fund purchases tax-exempt municipal securities which are
generally accompanied by an opinion of bond counsel to the effect that interest
on such securities is not included in gross income for federal income tax
purposes. It is not economically feasible to, and

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the Municipal Funds therefore do not, make any additional independent inquiry
into whether such securities are in fact tax-exempt. Bond counsels' opinions
will generally be based in part upon covenants by the issuers and related
parties regarding continuing compliance with federal tax requirements. Tax laws
not only limit the purposes for which tax-exempt bonds can be issued and the
supply of such bonds, but also contain numerous and complex requirements that
must be satisfied on a continuing basis in order for bonds to be and remain tax-
exempt. If the issuer of a bond or a user of a bond-financed facility fails to
comply with such requirements at any time, interest on the bond could become
taxable, retroactive to the date the bond was issued. In that event, a portion
of a Municipal Fund's distributions attributable to interest such Fund received
on such bond for the current year and for prior years could be characterized or
recharacterized as taxable income.

Each Fixed Income Fund and each Municipal Fund may purchase municipal securities
together with the right to resell the securities to the seller at an agreed upon
price or yield within a specified period prior to the maturity date of the
securities. Such a right to resell is commonly known as a "put" and is also
referred to as a "standby commitment." A Fund may pay for a standby commitment
either separately, in cash, or in the form of a higher price for the securities
which are acquired subject to the standby commitment, thus increasing the cost
of securities and reducing the yield otherwise available. Additionally, a Fund
may purchase beneficial interests in municipal securities held by trusts,
custodial arrangements or partnerships and/or combined with third-party puts or
other types of features such as interest rate swaps; those investments may
require the Fund to pay "tender fees" or other fees for the various features
provided. The IRS has issued a revenue ruling to the effect that, under
specified circumstances, a registered investment company will be the owner of
tax-exempt municipal obligations acquired subject to a put option. The IRS has
also issued private letter rulings to certain taxpayers (which do not serve as
precedent for other taxpayers) to the effect that tax-exempt interest received
by a regulated investment company with respect to such obligations will be tax-
exempt in the hands of the company and may be distributed to its shareholders as
exempt-interest dividends. The IRS has subsequently announced that it will not
ordinarily issue advance ruling letters as to the identity of the true owner of
property in cases involving the sale of securities or participation interests
therein if the purchaser has the right to cause the security, or the
participation interest therein, to be purchased by either the seller or a third
party. Each Fund intends to take the position that it is the owner of any
municipal obligations acquired subject to a standby commitment or other third
party put and that tax-exempt interest earned with respect to such municipal
obligations will be tax-exempt in its hands. There is no assurance that the IRS
will agree with such position in any particular case. Additionally, the federal
income tax treatment of certain other aspects of these investments, including
the treatment of tender fees paid by the Fund, in relation to various regulated
investment company tax provisions is unclear. However, the Adviser intends to
manage each Fund's portfolio in a manner designed to minimize any adverse impact
from the tax rules applicable to these investments.

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year ended October 31, 2006; the Morgan Grenfell High Yield Bond Fund has
capital loss carryforwards of approximately $_______ expiring through the fiscal
year ended October 31, 2006; Morgan Grenfell Smaller Companies Fund has capital
loss carryforwards of approximately $______ expiring through the fiscal year
ended October 31, 2006 and Morgan Grenfell Micro Cap Fund has capital loss
carryforwards of approximately $_________ expiring through the fiscal year ended
October 31, 2006.

U.S. SHAREHOLDERS--DISTRIBUTIONS

A Municipal Fund's distributions from the tax-exempt interest it receives will
generally be exempt from federal income tax, provided that such Fund qualifies
as a regulated investment company, at least 50% of the value of the Fund's total
assets at the close of each quarter of its taxable year consists of debt
obligations that pay interest excluded from gross income under Section 103(a) of
the Code, and the Fund properly designates such distributions as "exempt-
interest dividends." The portions of such exempt-interest dividends, if any,
derived from interest on certain private activity bonds will constitute tax
preference items and may give rise to, or increase liability under, the federal
alternative minimum tax for particular shareholders. In addition, all exempt-
interest dividends may increase certain corporate shareholders' liability, if
any, for the corporate alternative minimum tax and will be taken into account in
determining the portion, if any, of a shareholder's social security benefits or
certain railroad retirement benefits that is subject to tax.

For U.S. federal income tax purposes, distributions by the Funds other than the
Municipal Funds, as well as any distributions of the Municipal Funds that are
not designated as exempt-interest dividends as described above, whether
reinvested in additional shares or paid in cash, generally will be taxable to
shareholders who are subject to tax.

Shareholders receiving a distribution in the form of newly issued shares will be
treated for U.S. federal income tax purposes as receiving a distribution in an
amount equal to the amount of cash they would have received had they elected to
receive cash and will have a cost basis in each share received equal to such
amount divided by the number of shares received. Distributions from investment
company taxable income of any Fund, including the Municipal Funds, for the year
will be taxable as ordinary income. Investment company taxable income includes,
among other things, dividends, taxable interest, income from repurchase
agreements, certain interest from interest rate swaps and income from securities
loans; accrued, recognized market discount; a portion of the discount on certain
stripped tax-exempt obligations and their coupons; and net short-term capital
gain (in excess of net long-term capital loss) from the sale of investments or
options or futures transactions or the disposition of rights to when-issued
securities prior to issuance. Distributions to corporate shareholders designated
as derived from dividend income received by a Fund, if any, that would be
eligible for the dividends received deduction if the Fund were not a regulated
investment company will be eligible, subject to certain holding period and debt-
financing restrictions, for the 70% dividends received deduction for
corporations. Because eligible dividends are limited to those received by a Fund
from U.S. domestic corporations, dividends paid by Funds other than the Equity
Funds will generally not qualify for the dividends received deduction, and some
of the dividends paid by the Equity Funds also may not qualify for the
deduction. The dividends-received deduction, if available, is reduced to the
extent the shares with respect to which the dividends received are treated as
debt financed under

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the Code and is eliminated if the shares are deemed to have been held for less
than a minimum period, generally 46 days, extending before and after each such
dividend. The entire dividend, including the deducted amount, is considered in
determining the excess, if any, of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may increase its
liability for the federal alternative minimum tax. The dividend may, if it is
treated as an "extraordinary dividend" under the Code, reduce such shareholder's
tax basis in its shares of a Fund and, to the extent such basis would be reduced
below zero, require the current recognition of income. Capital gain dividends
(i.e., dividends from net capital gain) paid by any Fund, including the
Municipal Funds, if designated as such in a written notice to shareholders
mailed not later than 60 days after a Fund's taxable year closes, will be taxed
to shareholders as long-term capital gain regardless of how long shares have
been held by shareholders, but are not eligible for the dividends received
deduction for corporations.

Interest on indebtedness incurred directly or indirectly to purchase or carry
shares of a Municipal Fund will not be deductible to the extent it is deemed
related to exempt-interest dividends paid by such Fund.

A Municipal Fund may not be an appropriate investment for persons who are, or
are related to, substantial users of facilities financed by industrial
development or private activity bonds.

Shareholders that are required to file tax returns are required to report tax-
exempt interest income, including exempt-interest dividends, on their federal
income tax returns. Each Municipal Fund will inform shareholders of the federal
income tax status of its distributions after the end of each calendar year,
including the amounts that qualify as exempt-interest dividends and any portions
of such amounts that constitute tax preference items under the federal
alternative minimum tax. Shareholders who have not held shares of a Municipal
Fund for a full taxable year may have designated as tax-exempt or as a tax
preference item a percentage of their distributions which is not exactly equal
to a proportionate share of the amount of tax-exempt interest or tax preference
income earned during the period of their investment in the Fund. Different tax
treatment, including penalties on certain excess contributions and deferrals,
certain pre-retirement and post-retirement distributions, and certain prohibited
transactions, is accorded to accounts maintained as qualified retirement plans.
Shareholders should consult their tax advisers for more information.

U.S. SHAREHOLDERS--SALE OF SHARES

Page -63-
<PAGE>

Additionally, any loss realized on a sale, redemption or other disposition of
shares of a Fund may be disallowed under "wash sale" rules to the extent the
shares disposed of are replaced with shares of the same Fund within a period of
61 days beginning 30 days before and ending 30 days after the shares are
disposed of, such as pursuant to a dividend reinvestment in shares of the Fund.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired. Shareholders should consult their own tax advisers regarding
their particular circumstances to determine whether a disposition of Fund shares
is properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion.

The Funds may be required to withhold, as "backup withholding," federal income
tax at a rate of 31% from dividends (including distributions from a Fund's net
long-term capital gains, but not including exempt-interest dividends) and share
redemption and exchange proceeds to individuals and other non-exempt
shareholders who fail to furnish the Funds with a correct taxpayer
identification number ("TIN") certified under penalties of perjury, or if the
Internal Revenue Service or a broker notifies the Funds that the payee has
failed to properly report interest or dividend income to the IRS or that the TIN
furnished by the payee to the Funds is incorrect, or if (when required to do so)
the payee fails to certify under penalties of perjury that it is not subject to
backup withholding. Any amounts withheld may be credited against a shareholder's
United States federal income tax liability. Distributions by a Municipal Fund
will not be subject to backup withholding, however, for any year such Fund
reasonably estimates that at least 95% of its dividends will be exempt-interest
dividends.

NON-U.S. SHAREHOLDERS

Shareholders who, as to the United States, are nonresident aliens, foreign
corporations, fiduciaries of foreign trusts or estates, foreign partnerships or
other non-U.S. investors generally will be subject to U.S. withholding tax at
the rate of 30% on distributions treated as ordinary income unless the tax is
reduced or eliminated pursuant to a tax treaty or the dividends are effectively
connected with a U.S. trade or business of the shareholder. In the latter case
the dividends will be subject to tax on a net income basis at the graduated
rates applicable to U.S. individuals or domestic corporations. Distributions of
net capital gain, including amounts retained by a Fund which are designated as
undistributed capital gains, to a non-U.S. shareholder will not be subject to
U.S. federal income or withholding tax unless the distributions are effectively
connected with the shareholder's trade or business in the United States or, in
the case of a shareholder who is a nonresident alien individual, the shareholder
is present in the United States for 183 days or more during the taxable year and
certain other conditions are met. Any gain realized by a non-U.S. shareholder
upon a sale or redemption of shares of a Fund will not be subject to U.S.
federal income or withholding tax unless the gain is effectively connected with
the shareholder's trade or business in the United States, or in the case of a
shareholder who is a nonresident alien individual, the shareholder is present in
the United States for 183 days or more during the taxable year and certain other
conditions are met. Non-U.S. investors should consult their tax advisers about
the applicability of U.S. federal income or withholding taxes to certain
distributions received by them.

Page -64-
<PAGE>

STATE AND LOCAL

GENERAL INFORMATION ABOUT THE TRUST

GENERAL

The Trust was formed as a business trust under the laws of the State of Delaware
on September 13, 1993, and commenced investment operations on January 3, 1994.
The Board of Trustees of the Trust is responsible for the overall management and
supervision of the affairs of the Trust. The Declaration of Trust authorizes the
Board of Trustees to create separate investment series or portfolios of shares.
As of the date hereof, the Trustees have established the Funds described in this
Prospectus and thirteen additional series. Until December 28, 1994, the Fixed
Income Fund and the Municipal Bond Fund were series of The Advisors' Inner
Circle Fund, a business trust organized under the laws of The Commonwealth of
Massachusetts on July 18, 1991. The Declaration of Trust further authorizes the
Trust to classify or reclassify any series or portfolio of shares into one or
more classes. As of the date hereof, the Trustees have established two classes
of shares: Investment shares and Institutional shares.

The shares of each class represent an interest in the same portfolio of
investments of a Fund. Each class has equal rights as to voting, redemption,
dividends and liquidations, except that only Investment shares bear service fees
and each class may bear other expenses properly attributable to the particular
class. Also, holders of Investment shares of each Fund have exclusive voting
rights with respect to the service plan adopted by their Fund.

Shares of a Fund will be voted separately with respect to matters pertaining to
that Fund except for the election of Trustees and the ratification of
independent accountants. For example, shareholders of each Fund are required to
approve the adoption of any investment advisory agreement relating to such Fund
and any change in the fundamental investment restrictions of such Fund. Approval
by the shareholders of one Fund is effective only as to that Fund. The Trust
does not intend to hold shareholder meetings, except as may be required by the
1940 Act. The Trust's Declaration of Trust provides that special meetings of
shareholders shall be called for any purpose, including the removal of a
Trustee, upon written request of shareholders entitled to vote at least 10% of
the outstanding shares of the Trust, or Fund, as the case may be. In addition,
if ten or more shareholders of record who have held shares for at least six
months and who hold in the aggregate either shares having a net asset value of
$25,000 or 1% of the outstanding shares,

Page -65-
<PAGE>

whichever is less, seek to call a meeting for the purpose of removing a Trustee,
the Trust has agreed to provide certain information to such shareholders and
generally to assist their efforts.

As of December 17, 1999, the following shareholders owned the following
respective percentages of the outstanding Institutional shares of the Fixed
Income Fund, the Municipal Bond Fund, the Short-Term Municipal Bond Fund, the
Short-Term Fixed Income Fund, the High Yield Bond Fund, the Smaller Companies
Fund and the Micro Cap Fund:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Percentage of
Outstanding
Fund Shareholder Name and Address Shares ofhe Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Income Fund San Mateo County Employees Retirement Association, 702 11.032%
Marshall Street, Suite 280 Redwood City, CA 94063-1823
- -------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin & Jenrette SECS Corp, P.O. Box 2052, 5.984%
Jersey City, NJ 07303-2052
- -------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co Inc., Special Custody Account, 5.082%
Mutual Funds Department, 101 Montgomery St., San
Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund Charles Schwab & Co Inc., Special Custody Account, 47.508%
Mutual Funds Department, 101 Montgomery Street, San
Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Batrus & Co, c/o Bankers Trust Co, P.O. Box 9005, 17.579%
Church Street Station, New York, NY 10006
- -------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Bond Fund Charles Schwab & Co Inc., Special Custody Account, 51.109%
Mutual Funds Department, 101 Montgomery Street, San
Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Batrus & Co, c/o Bankers Trust Co, P.O. Box 9005, 16.912%
Church Street Station, New York, NY 10006
- -------------------------------------------------------------------------------------------------------------------
Short-Term Fixed Income Fund First Union National Bank, Cash/Reinvest Acct, Acct 23.115%
#988688883, 1525 W Wt Harris Blvd #NC1151, Charlotte,
NC 28262-8522
- -------------------------------------------------------------------------------------------------------------------
Independence Trust Company, Cash Account, P.O. Box 13.180%
662188, Franklin, TN 37058-2188
- -------------------------------------------------------------------------------------------------------------------
Batrus & Co, c/o Bankers Trust Co, P.O. Box 9005, 6.830%
Church Street Station, New York, NY 10006
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

Page -66-
<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Percentage of
Outstanding
Fund Shareholder Name and Address Shares ofhe Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Saxon & Co, FBO 07 CMS West PC, A/C 20-10-102-1040946, 5.903%
P.O. Box 780-1898, Philadelphia, PA 18182-0001
- -------------------------------------------------------------------------------------------------------------------
First Union Natl Bank Cust, FBO Jewish Fed of Greater 5.466%
Phil Charitable Trust Fund, AC 1080825451, 1525 W Wt
Harris Blvd, Charlotte, NC 28262-8522
- -------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund Bost & Co, A/C NYXF 1703802, FBO Bell Atlantic Mster 69.853%
Trust Mutual Fund Operations, P.O. Box 3198,
Pittsburgh, PA 15230-3198
- -------------------------------------------------------------------------------------------------------------------
Smaller Companies Fund Morgan Grenfell Capital Management Inc., 885 Third Ave 65.474%
32nd Fl, New York, NY 10022-4834
- -------------------------------------------------------------------------------------------------------------------
Deutsche Bank Securities, Inc., C/F 360-01618-83, 1251 13.715%
6th Ave, New York, NY 10020-1104
- -------------------------------------------------------------------------------------------------------------------
Micro Cap Fund Charles Schwab & Co, Inc., Special Custody Account, 40.739%
Mutual Funds Department, 101 Montgomery Street, San
Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Morgan Grenfell Capital Management Inc., 885 Third Ave 22.622%
32nd Fl, New York, NY 10022-4834
- -------------------------------------------------------------------------------------------------------------------
Currie & Co, c/o Fiduciary Trust Company Intl, P.O. Box 10.832%
3199, Church Street Station, New York, NY 10008-3199
- -------------------------------------------------------------------------------------------------------------------
National Financial Services Corp for the Exclusive 7.388%
Benefit of Our Customers, ATTN Mutual FDS-No Loads, 5th
Fl, 20 Liberty St, 1 World Fin Ctr, New York, NY
10281-1003
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

As of February __, 2000, the following shareholders owned the following
respective percentages of the outstanding Investment shares of the following
funds:

- -------------------------------------------------------------------------------------------------------------------
National Financial Services Corp for the Exclusive 41.426%
Benefit of our Customers, ATTN Mutual FDS - No Loads,
5/th/ Fl, 200 Liberty St, 1 World Fin Ctr, New York, NY
10281-1003
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

Page -67-
<PAGE>

<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Municipal Bond Fund National Financial Services Corp for the Exclusive 85.268%
Investment Shares Benefit of our Customers, ATTN Mutual FDS, No Loads,
5/th/ Fl, 200 Liberty St, 1 World Fin Ctr, New York, NY
10281-1003

- -------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co, Inc., Special Custody Account, 9.422%
Mutual Funds Department, 101 Montgomery Street, San
Francisco, CA 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Bond Fund National Investor Services Corp for Exclusive Benefit 99.414%
Investment Shares of Customers, 55 Water St., Fl 32, New York, NY
10041-3299
- -------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund Charles Schwab & Co, Inc., Special Custody Account, 81.260%
Investment Shares Mutual Funds Department, 101 Montgomery Street, San
Francisco, CA 94104-4122

- -------------------------------------------------------------------------------------------------------------------
National Financial Svcs Corp for the Exclusive Benefit 14.348%
of our Customers, ATTN Mutual FDS - No Loads - 5/th/ Fl,
200 Liberty St, 1 World Fin Ctr, New York, NY 10281-1003
- -------------------------------------------------------------------------------------------------------------------
Smaller Companies Fund National Financial Svcs Corp for Exclusive Benefit of 89.444%
Investment Shares our Customers, Sal Vella, 200 Liberty St, New York, NY
10281-1000

- -------------------------------------------------------------------------------------------------------------------
National Investor Services Corp for Exclusive Benefit 6.477%
of Customers, 55 Water St., Fl 32, New York, NY
10041-3299
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

SHAREHOLDER AND TRUSTEE LIABILITY

Page -68-
<PAGE>

Trustees. The Declaration of Trust provides for indemnification by the relevant
Fund for any loss suffered by a shareholder as a result of an obligation of the
Fund. The Declaration of Trust also provides that the Trust shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Trust and satisfy any judgment thereon. The Trustees believe
that, in view of the above, the risk of personal liability of shareholders is
remote.

ANNUAL AND SEMI-ANNUAL REPORTS

Shareholders of each Fund receive an annual report containing audited financial
statements and a semi-annual report. All transactions in Institutional shares of
a Fund and dividends and distributions paid by a Fund are reflected in
confirmations issued by the Transfer Agent at the time of the transaction and/or
in monthly statements issued by the Transfer Agent. A year-to-date statement
will be provided by the Transfer Agent.

CONSIDERATION FOR PURCHASES OF SHARES

The Trust generally will not issue shares of the Funds for consideration other
than cash. At the Trust's sole discretion, however, it may issue Fund shares for
consideration other than cash in connection with an acquisition of portfolio
securities (other than municipal debt securities issued by state political
subdivisions or their agencies or instrumentalities) or pursuant to a bona fide
purchase of assets, merger or other reorganization, provided the securities meet
the investment objectives and policies of the Fund and are acquired by the Fund
for investment and not for resale. An exchange of securities for Fund shares
will generally be a taxable transaction to the shareholder.

ADDITIONAL INFORMATION

INDEPENDENT ACCOUNTANTS

[Name of Accountant] [Address], serves as the Funds' independent accountants,
providing audit services, including review and consultation in connection with
various filings by the Trust with the Commission and tax authorities.

REGISTRATION STATEMENT

Page -69-
<PAGE>

FINANCIAL STATEMENTS

The audited financial statements for the Micro Cap Fund for the year ended
September 30, 1999 and the audited financial statements for the other Funds for
the year ended October 31, 1999 are included in, and incorporated by reference
into, this Statement of Additional Information in reliance upon the reports of
__________________________, the Fund's independent accountants, as experts in
accounting and auditing.

The financial statements of the Funds for the periods ended on and prior to
October 31, 1999 are included in, and incorporated by reference into, this
Statement of Additional Information from the 1999 Annual Report to Shareholders
of the Micro Cap Fund for the year ended September 30, 1999 (filed
electronically on _________, file no. 811-08006; accession no. ______) and the
1999 Annual Report to Shareholders of the other Funds for the year ended October
31, 1999 (filed electronically on December 30, 1999; file no. 811-08006;
accession no. ____________________), and will be attached to each copy of such
Statement of Additional Information that is distributed.

Page -70-
<PAGE>

APPENDIX A

DESCRIPTION OF BOND RATINGS

The rating descriptions set forth below are believed to be the most recent
rating descriptions available from Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group ("Standard & Poor's), Duff & Phelps, Inc.
("Duff") and Fitch IBCA Investors Service ("Fitch IBCA") at the date of this
Statement of Additional Information for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so, and the ratings indicated do not necessarily represent ratings which will be
given to these securities on the date of a Fund's fiscal year end.

I. LONG-TERM DEBT RATINGS

MOODY'S

Description of four highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2 and 3) in each rating category to indicate the
security's ranking within the category):

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

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

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

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

Page -71-
<PAGE>

STANDARD & POOR'S (1)

Description of the four highest long-term debt ratings by Standard &
Poor's (Standard & Poor's may apply a plus (+) or minus (-) to a particular
rating classification to show relative standing within the classification):

AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.

A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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
bonds in this category than in higher rated categories.

DUFF

Description of the four highest long-term debt ratings by Duff (Duff may
apply a plus or minus to show relative standing within a rating category):

AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA: High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.

A: Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.

BBB: Investment grade. Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

FITCH IBCA

Description of the four highest long-term ratings by Fitch (plus or minus
signs are used with a rating symbol to indicate the relative position of the
credit within the rating category):

AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

Page -72-
<PAGE>

AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issues is generally rated "F-1+".

A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and to repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and to repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.

II. SHORT-TERM DEBT RATINGS

Short-term debt ratings may be assigned, for example, to commercial
paper, master demand notes, bank instruments and letters of credit.

Moody's description of its highest short-term debt rating:

PRIME-1 Issuers rated Prime-1 (or supporting institutions) have superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by many of the following
characteristics:

- Leading market positions in well established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.

- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- Well-established access to a range of financial markets and assured
sources of alternative liquidity.

Standard & Poor's description of its highest short-term debt rating:

A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus sign (+).

Page -73-
<PAGE>

III. SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS

Moody's description of its two highest short-term loan / municipal note
ratings:

MIG-1/VMIG-1 This description denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG-2/VMIG-2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

Standard & Poor's description of its two highest municipal note ratings:

SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

Page -74-
<PAGE>

APPENDIX B

THE ADVISER'S MICRO CAP INVESTMENT RESULTS

Set forth below are investment results for Morgan Grenfell Micro Cap Fund and a
composite of accounts managed by the Micro Cap Equity Team of Deutsche Asset
Management, Inc. (the "Adviser" or "DAMI") in accordance with the Micro Cap
investment strategy (the "DAMI Micro Cap Composite"). For comparison purposes,
performance information is also shown for Morgan Grenfell Micro Cap Fund and the
Russell 2000 (an index of small capitalization stocks). The Russell 2000 is
comprised of issuers that are ranked according to market capitalization in the
bottom 10% of the U.S. equity market. In contrast, Morgan Grenfell Micro Cap
Fund's principal investments are common stocks of issuers that are ranked (at
time of purchase) in the bottom 5% of U.S. equity market.

Each of the Adviser's discretionary, microcap accounts (other than Morgan
Grenfell Micro Cap Fund, which commenced operations on December 18, 1996) is
included in the DAMI Micro Cap Composite. These accounts had the same investment
objective as Morgan Grenfell Micro Cap Fund and were managed using substantially
similar, though not necessarily identical, investment strategies and techniques
as those contemplated for Micro Cap Fund. Because of the similarities in
investment strategies and techniques, the Adviser believes that the accounts
included in the DAMI Micro Cap Composite are sufficiently comparable to Micro
Cap Fund to make the performance data listed below relevant to prospective
investors.*

The investment results presented on the next page for the DAMI Micro Cap
Composite includes the Micro Cap Fund's investment results and are not intended
to predict or suggest the returns that will be experienced by Micro Cap Fund or
the return an investor may achieve by investing in shares of the Fund. Most of
the accounts included in the DAMI Micro Cap Composite were not subject to the
investment limitations, diversification requirements and other restrictions
imposed on registered mutual funds by the Investment Company Act of 1940 and the
Internal Revenue Code of 1986, as amended. If more of the accounts had been
subject to these requirements, the performance of the DAMI Micro Cap Composite
might have been lower.

The investment results of the DAMI Micro Cap Composite were calculated in
accordance with the Association for Investment Management and Research (AIMR)
Performance Presentation Standards and are shown net of commissions and
transaction costs (including custody fees) and net of the highest investment
advisory fee charged to any account included in the Composite (2.00% for periods
prior to October 1, 1993 and 1.50% for subsequent periods). Micro Cap Fund's
estimated total annual operating expenses are higher than the highest investment
advisory fee charged to any account included in the DAMI Micro Cap Composite. As
a result, it is expected that fees and expenses will reduce Micro Cap Fund's
performance to a greater extent than investment advisory fees have reduced the
performance of accounts included in the DAMI Micro Cap Composite.

____________________

* Audrey Jones, John Callaghan and Mary Dugan are the members of the Adviser's
Micro Cap Equity Team. Ms. Jones has been a member of the Team throughout the
twelve-year period for which data is shown. Mr. Callaghan joined the Team in
June 1997, following the departure of a portfolio manager who has been a member
of the Team since at least 1987. Also, in May 1996, another portfolio mamager
who has been a member of the Team since at least 1987 left Deutsche Asset
Management, Inc. Ms. Dugan joined the Team in 1999.

Page -75-
<PAGE>

PERFORMANCE OF MORGAN GRENFELL MICRO CAP FUND

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C>
TOTAL RETURN FOR YEAR ENDED DECEMBER 31, 1998 _____%

- -----------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN FOR PERIOD FROM _____%
DECEMBER 18, 1996 TO DECEMBER 31, 1998

- -----------------------------------------------------------------------------------------------
</TABLE>

MORGAN GRENFELL INVESTMENT TRUST

Morgan Grenfell Micro Cap Fund
Performance of DAMI Micro Cap Composite And Russell 2000

AVERAGE ANNUAL TOTAL RETURN
DAMI MICRO CAP COMPOSITE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEAR (NET OF FEES) RUSSELL 2000
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
1999
- -------------------------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------------------------
1997
- -------------------------------------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------------------------
1995
- -------------------------------------------------------------------------------------------------
1994
- -------------------------------------------------------------------------------------------------
1993
- -------------------------------------------------------------------------------------------------
1992
- -------------------------------------------------------------------------------------------------
1991
- -------------------------------------------------------------------------------------------------
1990
- -------------------------------------------------------------------------------------------------
1989
- -------------------------------------------------------------------------------------------------
1988
- -------------------------------------------------------------------------------------------------
1987
- -------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN FOR
PERIOD FROM DECEMBER 31, 1987
TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------
</TABLE>

Page -76-
<PAGE>

MORGAN GRENFELL INVESTMENT TRUST
One South Street
Baltimore, MD 21202

INVESTMENT ADVISER
Deutsche Asset Management, Inc.
885 Third Avenue
New York, NY 10022

ADMINISTRATOR
Deutsche Asset Management, Inc.
150 South Independence Square West
Philadelphia, Pennsylvania 19106

DISTRIBUTOR
ICC Distributors, Inc.
Two Portland Square
Portland, Maine 04101

CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109

TRANSFER AGENT
ICC Company Capital Corp.
One South Street
Baltimore, Maryland 21202

INDEPENDENT ACCOUNTANTS
[Insert Name]
[Insert Address]
New York, New York

LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109

SERVICE INFORMATION
Existing accounts, new accounts, prospectuses, Statements of Additional
Information
applications, and service forms--1-800-407-7301

Telephone Exchanges--1-800-407-7301

Share Price and Performance
Information--1-800-407-7301

Page -77-
<PAGE>

PART C. OTHER INFORMATION

Item 23. EXHIBITS

Except as noted, the following exhibits are being filed herewith:

(a). Agreement and Declaration of Trust of Registrant dated September 13,
1993, as amended (previously filed with the SEC on February 14, 1996
and incorporated by reference herein).

(b). Amended By-Laws of Registrant (previously filed with the SEC on
February 14, 1996 and incorporated by reference herein).

(c). See Articles III, IV, and V of the Agreement and Declaration of Trust
(exhibit (a)) and Article II of the Amended By-Laws (exhibit (b)).

(d)(1). Management Contract dated January 3, 1994, as amended as of April 25,
1994, April 1, 1995 and September 1, 1995, between Deutsche Asset
Management Investment Services Limited (formerly Morgan Grenfell
Investment Services Limited) and Registrant, on behalf of International
Select Equity Fund, Global Equity Fund, European Equity Fund
(formerly Morgan Grenfell European Equity Growth Fund), New Asia Fund,
International Small Cap Equity Fund, Japanese Small Cap Equity Fund,
European Small Cap Equity Fund, Emerging Markets Equity Fund, Global
Fixed Income Fund, International Fixed Income Fund and Emerging Markets
Debt Fund (previously filed with the SEC on February 14, 1996 and
incorporated by reference herein).

(d)(2). Management Contract dated as of December 28, 1994 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of Fixed Income Fund and Municipal Bond Fund (previously
filed with the SEC on February 14, 1996 and incorporated by reference
herein).

(d)(3). Management Contract dated as of December 28, 1994 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of Large Cap Growth Fund, Smaller Companies Fund, Short-Term
Fixed Income Fund and Short-Term Municipal Bond Fund (previously filed
with the SEC on February 14, 1996 and incorporated by reference
herein).

(d)(4). Management Contract between Deutsche Asset Management, Inc. (formerly
Morgan Grenfell Inc.) and Registrant, on behalf of Micro Cap

C-1
<PAGE>

Fund (previously filed with the SEC on November 1, 1996 pursuant to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement).

(d)(5). Form of Management Contract between Deutsche Asset Management, Inc.
(formerly Morgan Grenfell Inc.) and Registrant, on behalf of Total
Return Bond Fund and High Yield Bond Fund (previously filed with the
SEC on December 12, 1997 pursuant to Post-Effective Amendment No. 18 to
Registrant's Registration Statement).

(d)(6). Form of Management Contract between Deutsche Asset Management
Investment Services Limited (formerly Morgan Grenfell Investment
Services Ltd.) and Registrant, on behalf of Emerging Local Currency
Debt Fund (previously filed with the SEC on December 12, 1997 pursuant
to Post-Effective Amendment No. 18 to Registrant's Registration
Statement).

(d)(7). Form of Subadvisory Contract between Deutsche Asset Management
Investment Services Limited (formerly Morgan Grenfell Investment
Services Ltd.), Deutsche Asset Management Investment, Inc. (formerly
Morgan Grenfell Inc.) and Registrant, on behalf of Total Return Bond
Fund (previously filed with the SEC on December 28, 1998 pursuant to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement).

*(d)(8). Form of Management Contract between Deutsche Asset Management, Inc. and
Registrant, on behalf of European Equity Fund.

(e)(1). Distribution Agreement dated as of December 30, 1993 between SEI
Financial Services Company and Registrant, on behalf of all of its
series (previously filed with the SEC on June 11, 1996 and incorporated
by reference herein).

*(e)(2). Form of Distribution Agreement between ICC Distributors, Inc. and
Registrant, on behalf of all of its series

(f). Not Applicable.

(g). Custody Agreement dated as of August 24, 1998 between Brown Brothers
Harriman & Co. and Registrant, on behalf of all of its series
(previously filed with the SEC on December 28, 1998 pursuant to Post-
Effective Amendment No. 20 to Registrant's Registration Statement).

(h)(1). Administration Agreement dated as of August 27, 1998 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of all of its series (previously filed with the SEC on
December 28, 1998 pursuant to Post-Effective Amendment No. 20 to
Registrant's Registration Statement).

C-2
<PAGE>

(h)(2). Transfer Agency Agreement dated as of December 30, 1993 between
Supervised Service Company, Inc. and Registrant (previously filed with
the SEC on November 1, 1996 pursuant to Post-Effective Amendment No. 12
to Registrant's Registration Statement).

(h)(3). Transfer Agency Agreement dated as of December 28, 1994 between
Supervised Service Company, Inc. and Registrant (previously filed with
the SEC on November 1, 1996 pursuant to Post-Effective Amendment No. 12
to Registrant's Registration Statement).

(h)(4). Accounting Agency Agreement dated as of September 8, 1998 between Brown
Brothers Harriman & Co., Morgan Grenfell Inc. (formerly Morgan Grenfell
Capital Management, Inc.) and Registrant on behalf of all of its series
(previously filed with the SEC on December 28, 1998 pursuant to Post-
Effective Amendment No. 20 to Registrant's Registration Statement).

(h)(5). Delegation Agreement dated as of August 24, 1998 between Brown Brothers
Harriman & Co. and Registrant on behalf of International Select Equity
Fund, Global Equity Fund, European Equity Fund, New Asia Fund,
International Small Cap Equity Fund, Japanese Small Cap Equity Fund,
European Small Cap Equity Fund, Emerging Markets Equity Fund, Core
Global Fixed Income Fund, Global Fixed Income Fund, International Fixed
Income Fund, Emerging Markets Debt and Emerging Local Currency Debt
Fund (previously filed with the SEC on December 28, 1998 pursuant to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement).

*(h)(6). Form of Transfer Agency Agreement between Investment Company Capital
Corp. and Registrant, on behalf of each of its series.

(i). Not Applicable.

C-3
<PAGE>

(j). Not Applicable.

(k). Not Applicable.

(l). Share Purchase Agreement dated as of December 29, 1993 between
Registrant and SEI Financial Management Corporation (previously filed
with the SEC on February 11, 1997 pursuant to Post-Effective Amendment
No. 16 to Registrant's Registration Statement).

(m). Not Applicable.

(n). Not Applicable.

(o). Form of Amended Rule 18f-3 Plan (previously filed with the SEC on
February 11, 1997 pursuant to Post-Effective Amendment No. 16 to
Registrant's Registration Statement).

(p). Not Applicable.

*(q). Powers of Attorney (Jones, Lynch, Searcy, Tokar)

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

* Filed herewith.

Item 24. Persons Controlled By or Under Common Control With Registrant

The Registrant does not directly or indirectly control any person.

Item 25. INDEMNIFICATION

Article III, Section 7 and Article VII, Section 2 of the Registrant's
Agreement and Declaration of Trust and Article VI of the Registrant's By-Laws
provide for indemnification of the Registrant's trustees and officers under
certain circumstances.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS

All of the information required by this item is set forth in the Form
ADV, as amended, of Deutsche Asset Management Investment Services Limited
(formerly Morgan Grenfell Investment Services Limited) (File No. 801-12880) and
in the Form ADV, as amended, of Deutsche Asset Management, Inc. (formerly Morgan
Grenfell Inc.) (File No. 801-27291). The following sections of each such Form
ADV are incorporated herein by reference:

(a) Items 1 and 2 of Part II

(b) Section 6, Business Background, of each Schedule D.

C-4
<PAGE>

Item 27. PRINCIPAL UNDERWRITER

(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 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 Funds, Glenmede Fund,
Inc. and Glenmede Portfolios.

(b) Unless otherwise stated, the principal business address for the following
persons is Two Portland Square, Portland, Maine 04101.

- --------------------------------------------------------------------------------
Name and Principal Business Position and Offices with Positions and Offices
Address Underwriter with Registrant
- --------------------------------------------------------------------------------
John Y. 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
- --------------------------------------------------------------------------------

Item 28. LOCATION OF ACCOUNTS AND RECORDS

The Agreement and Declaration of Trust, By-Laws and minute books of the
Registrant are in the physical possession of Deutsche Asset Management, Inc.,
885 Third Avenue, New York, New York 10022. All other books, records, accounts
and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder will be in
the physical possession of the Registrant's custodian: Brown Brothers Harriman
& Co., 40 Water Street, Boston, Massachusetts 02109, except for certain
transfer agency and records which are in the physical possession of Investment
Company Capital Corp., One South Street, Baltimore, Maryland 21202, the
Registrant's transfer agent, and Deutsche Asset Management, Inc., the Trust's
administrator.

C-5
<PAGE>

Item 29. MANAGEMENT SERVICES

Not Applicable.

Item 30. UNDERTAKING

Not Applicable.

C-6
<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 has duly caused
this Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on
December 23, 1999.

MORGAN GRENFELL INVESTMENT TRUST

By:/s/ Richard T. Hale
------------------------------------------
Richard T. Hale
President

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 22 to the Registrant's Registration Statement has been
signed by the following persons in the capacities and on the dates indicated:

Signatures Title Date
---------- ----- ----

/s/ Richard T. Hale President and Chief December 23, 1999
-------------------
Executive Officer
Richard T. Hale

/s/ Amy M. Olmert Chief Financial Officer December 23, 1999
-----------------
Amy M. Olmert

Trustee
--------------------
Paul K. Freeman

/s/ Graham E. Jones* Trustee December 23, 1999
--------------------
Graham E. Jones

/s/ Hugh G. Lynch* Trustee December 23, 1999
------------------
Hugh G. Lynch

/s/ William N. Searcy* Trustee December 23, 1999
----------------------
William N. Searcy

/s/ Edward T. Tokar* Trustee December 23, 1999
--------------------
Edward T. Tokar

*By: /s/ Daniel O. Hirsch Dated: December 23, 1999
Daniel O. Hirsch -------------------

Power-of-Attorney

<PAGE>

Exhibit Index
-------------

Exhibit
Number
- ------

(d)(8) Form of Management Contract between Deutsche Asset Management, Inc.
and Registrant, on behalf of Morgan Grenfell European Equity Growth
Fund.
(e)(2) Form of Distribution Agreement between ICC Distributors, Inc. and
Registrant, on behalf of all of its series
(h)(6) Form of Transfer Agency Agreement between Investment Company Capital
Corp. and Registrant, on behalf of each of its series.
(q) Powers of Attorney (Jones, Lynch, Searcy, Tokar)

<PAGE>

EXHIBIT 99.D8

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of __________ by and between MORGAN GRENFELL INVESTMENT
TRUST, a Delaware business trust (herein called the "Trust") and DEUTSCHE ASSET
MANAGEMENT, INC. (herein called the "Investment Adviser").

WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940;

WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory and other services to the Trust with respect to certain of
its series of shares of beneficial interests as may currently exist or be
created in the future (each, a "Fund") as listed on Exhibit A hereto, and the
Investment Adviser is willing to so render such services on the terms
hereinafter set forth;

NOW, THEREFORE, this Agreement

W I T N E S S E T H:

In consideration of the promises and mutual covenants herein contained, it
is agreed between the parties hereto as follows:

1. Appointment. The Trust hereby appoints the Investment Adviser to act
-----------
as investment adviser to each Fund for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.

2. Management. Subject to the supervision of the Board of Trustees of the
----------
Trust, the Investment Adviser will provide a continuous investment program for
the Fund, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Fund. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by each Fund. The Investment Adviser will
provide the services rendered by it hereunder in accordance with the investment
objective(s) and policies of each Fund as stated in the Fund's then-current
prospectus and statement of additional information (or the Fund's then current
registration statement on Form N-1A as filed with the Securities and Exchange
Commission (the "SEC") and the then-current offering memorandum if the Fund is
not registered under the Securities Act of 1933, as amended ("1933 Act"). The
Investment Adviser further agrees that it:

(a) will conform with all applicable rules and regulations of the SEC
(herein called the "Rules") and with all applicable provisions of the 1933 Act;
as amended, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Investment Company Act of 1940, as amended (the "1940 Act"); and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and will, in
addition, conduct its activities under this Agreement in accordance with
regulations of the Board of
<PAGE>

Governors of the Federal Reserve System pertaining to the investment advisory
activities of bank holding companies and their subsidiaries;

(b) will place orders pursuant to its investment determinations for
each Fund either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the Investment Adviser will
use its reasonable best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all factors it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. Consistent with this obligation,
the Investment Adviser may, to the extent permitted by law, purchase and sell
portfolio securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the 1934 Act) to or
for the benefit of any fund and/or other accounts over which the Investment
Adviser or any of its affiliates exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with respect to the
extent and continuation of the policy, the Investment Adviser is authorized to
pay to a broker or dealer who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion; and

(c) will maintain books and records with respect to the securities
transactions of each Fund and will render to the Trust's Board of Trustees such
periodic and special reports as the Board may request.

3. Services Not Exclusive. The investment advisory services rendered by
----------------------
the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to render similar services to others so long as
its services under this Agreement are not impaired thereby.

4. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
of the Rules under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
request of the Trust. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31 a-2 under the 1940 Act the records required to be
maintained by Rule 31 a-1 under the 1940 Act and to comply in full with the
requirements of Rule 204-2 under the Advisers Act pertaining to the maintenance
of books and records.

5. Expenses. During the term of this Agreement, the Investment Adviser
--------
will pay

2
<PAGE>

all expenses incurred by it in connection with its activities under
Agreement other than the cost of purchasing securities (including brokerage
commissions, if any) for the Fund.

6. Compensation. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Trust will pay the Investment Adviser, and the
Investment Adviser will accept as full compensation therefor, fees, computed
daily and payable monthly, on an annual basis equal to the percentage set forth
on Exhibit A hereto of that Fund's average daily net assets.

7. Limitation of Liability of the Investment Adviser: Indemnification.
------------------------------------------------------------------

(a) The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement;

(b) Subject to the exceptions and limitations contained in Section
7(c) below:

(i) the Investment Adviser (hereinafter referred to as a
"Covered Person") shall be indemnified by the respective Fund to the fullest
extent permitted by law, against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved, as a party or otherwise, by virtue of his being or
having been the Investment Adviser of the Fund, and against amounts paid or
incurred by him in the settlement thereof;

(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.

(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or to one or more
Funds' investors by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office, or
(B) not to have acted in good faith in the reasonable belief that his action was
in the best interest of a Fund; or

3
<PAGE>

(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;

(A) by the court or other body approving the settlement; or

(B) by at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter based upon
a review of readily available facts (as opposed to a full trial-type inquiry);
or

(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any investor in a Fund may, by appropriate
legal proceedings, challenge any such determination by the Trustees or by
independent counsel.

(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the successors and assigns of
such person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel and any other persons, other than a
Covered Person, may be entitled by contract or otherwise under law.

(e) Expenses in connection with the preparation and presentation of a
defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the Trust on behalf of the
respective Fund from time to time prior to final disposition thereto upon
receipt of an undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the Trust on behalf of the respective Fund if
it is ultimately determined that he is not entitled to indemnification under
this Section 7; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking or (ii) the Trust shall
be insured against losses arising out of any such advance payments, or (iii)
either a majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
as opposed to a trial-type inquiry or full investigation, that there is reason
to believe that such Covered Person will be entitled to indemnification under
this Section 7.

8. Duration and Termination. This Agreement shall be effective as to a
------------------------
Fund as of the date the Fund commences investment operations after this
Agreement shall have been approved by the Board of Trustees of the Trust with
respect to that Fund and the Investor(s) in the Fund in the manner contemplated
by Section 15 of the 1940 Act and,

4
<PAGE>

unless sooner terminated as provided herein, shall continue until the second
anniversary of such date. Thereafter, if not terminated, this Agreement shall
continue in effect as to such Fund for successive periods of 12 months each,
provided such continuance is specifically approved at least annually (a) by the
vote of a majority of those members of the Board of Trustees of the Trust who
are not parties to this Agreement or Interested Persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, or (b)
by Vote of a Majority of the Outstanding Voting Securities of the Trust;
provided, however, that this Agreement may be terminated by the Trust at any
time, without the payment of any penalty, by the Board of Trustees of the Trust,
by Vote of a Majority of the Outstanding Voting Securities of the Trust on 60
days' written notice to the Investment Adviser, or by the Investment Adviser as
to the Trust at any time, without payment of any penalty, on 90 days' written
notice to the Trust. This Agreement will immediately terminate in the event of
its assignment (as used in this Agreement, the terms "Vote of a Majority of the
Outstanding Voting Securities," "Interested Person" and "Assignment' shall have
the same meanings as such terms have in the 1940 Act and the rules and
regulatory constructions thereunder.)

9. Amendment of this Agreement. No material term of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective with respect to a Fund, until approved by Vote of a
Majority of the Outstanding Voting Securities of that Fund.

10. Representations and Warranties. The Investment Adviser hereby
-------------------------------
represents and warrants as follows:

(a) The Investment Adviser is registered as an investment adviser
under the Advisers Act:

(b) The Investment Adviser has all requisite authority to enter into,
execute, deliver and perform its obligations under this Agreement;

(d) The performance by the Investment Adviser of its obligations
under this Agreement does not conflict with any law to which it is

11. Covenants. The Investment Adviser hereby covenants and agrees that, so
---------
long as this Agreement shall remain in effect:

(a) The Investment Adviser shall remain registered under, the
registration provisions of the Advisers Act; and

5
<PAGE>

(b) The performance by the Investment Adviser of its obligations
under this Agreement shall not conflict with any law to which it is then
subject.

12. Notices. Any notice required to be given pursuant to this Agreement
-------
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (a) to the Investment Adviser, 885 Third Avenue, New York, New York
10022, or (b) to the Trust, c/o Deutsche Asset Management, Inc., One South
Street, Baltimore, Maryland 21202.

13. Waiver. With full knowledge of the circumstances and the effect of its
------
action, the Investment Adviser hereby waives any and all rights which it may
acquire in the future against the property of any investor in a Fund, other than
shares in that Fund, which arise out of any action or inaction of the Trust
under this Agreement.

14. Miscellaneous. The captions in this Agreement are included for
--------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.

This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the laws
of the state of New York, without reference to principles of conflicts of law.
The Trust is organized under the laws of Delaware pursuant to a Declaration of
Trust dated September 13, 1993. No Trustee, officer or employee of the Trust
shall be personally bound by or liable hereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
hereunder.

6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

MORGAN GRENFELL INVESTMENT
TRUST, on behalf of European Equity
Fund

By:________________________
Name: Daniel O. Hirsch
Title: Secretary

DEUTSCHE ASSET MANAGEMENT, INC.

By:_________________________
Name:
Title:

7
<PAGE>

EXHIBIT A
---------

TO
INVESTMENT ADVISORY AGREEMENT
MADE AS OF ____________________
BETWEEN
MORGAN GRENFELL INVESTMENT TRUST AND DEUTSCHE ASSET MANAGEMENT, INC.

Fund Investment Advisory Fee
- ---- -----------------------
European Equity Fund 0.70%

<PAGE>

EXHIBIT 99.E2

MORGAN GRENFELL INVESTMENT TRUST
DISTRIBUTION AGREEMENT

AGREEMENT made as of the 1st day of November, 1999, by and between Morgan
Grenfell Investment Trust, a Delaware business trust, with its principal office
and place of business at 855 Third Street, New York, New York 10022 (the
"Trust"), and ICC Distributors, Inc., a Delaware corporation with its principal
office and place of business at Two Portland Square, Portland, Maine 04101 (the
"Distributor").

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company, may
issue its shares of beneficial interest (the "Shares") in separate series and
classes and continuously offers for sale its Shares to the public; and

WHEREAS, the Distributor is registered under the Securities Exchange Act of
1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the business
of selling shares of registered investment companies either directly to
purchasers or through other securities dealers;

WHEREAS, the Trust offers Shares in one or more series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 16 hereof, being herein referred to as a "Series," and collectively as
the "Series") and the Trust offers shares of one or more classes (each such
class together with all other classes subsequently established by a Series being
herein referred to as a "Class," and collectively as the "Classes");

WHEREAS, the Trust desires that the Distributor offer the Shares of each
Series and Class thereof to the public and the Distributor is willing to provide
those services on the terms and conditions set forth in this Agreement in order
to promote the growth of the Trust and facilitate the distribution of the
Shares;

NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Distributor hereby agree as
follows:

SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT

(a) The Trust has delivered to the Distributor properly certified or
authenticated copies of its Declaration of Trust and Bylaws (collectively, as
amended from time to time, "Organizational Documents"), the Trust's Notification
of Registration filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, the
Trust's Registration Statement and all amendments thereto filed with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the 1940 Act (the "Registration Statement") and its current Prospectuses and
Statements of Additional Information (collectively, as currently in effect and
as amended or supplemented, the "Prospectus") and shall promptly furnish the
Distributor with all amendments of or supplements
<PAGE>

to the foregoing, each properly certified or authenticated. In addition, the
Trust shall furnish the Distributor with properly certified or authenticated
copies of all documents, notices and reports filed with the SEC.

(b) The Trust has delivered to the Distributor certified copies of the
resolutions of the Board of Trustees (the "Board") authorizing the appointment
of the Distributor as distributor and approving this Agreement.

(c) The Trust hereby appoints the Distributor as its principal underwriter
and distributor to sell its Shares to the public and hereby agrees during the
term of this Agreement to sell its Shares to the Distributor upon the terms and
conditions herein set forth.

SECTION 2. EXCLUSIVE NATURE OF DUTIES

The Distributor shall be the exclusive representative of the Trust to act
as its principal underwriter and distributor except that the rights given under
this Agreement to the Distributor shall not apply to Shares issued in connection
with the merger, consolidation or reorganization of any other investment company
with the Trust; the Trust's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment company; or the
reinvestment in Shares by the Trust's shareholders of dividends or other
distributions or any other offering by the Trust of securities to its
shareholders.

SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES

(a) The Distributor shall have the right to buy from the Trust the Shares
needed to fill unconditional orders for unsold Shares of the Trust as shall then
be effectively registered under the Securities Act placed with the Distributor
by investors or securities dealers or depository institutions or other financial
intermediaries acting as agent for their customers or on their own behalf.
Alternatively, the Distributor may act as the Trust's agent, to offer, and to
solicit offers to subscribe to, unsold Shares of the Trust as shall then be
effectively registered under the Securities Act. The Distributor will promptly
forward all orders and subscriptions for Shares of the Trust. The price which
the Distributor shall pay for Shares purchased by it from the Trust shall be the
net asset value, determined as set forth in Section 3(c) hereof, used in
determining the public offering price on which the orders are based. The price
at which the Distributor shall offer and sell Shares to investors shall be the
public offering price, as set forth in Section 3(b) hereof. The Distributor may
sell Shares to securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers that have entered into
agreements with the Distributor pursuant to Section 9 hereof or acting on their
own behalf. The Trust reserves the right to sell its Shares directly to
investors through subscriptions received by the Trust, but no such direct sales
shall affect the sales charges due to the Distributor hereunder.

(b) The public offering price of the Shares of the Trust, i.e., the price
per Share at which the Distributor or selected dealers or selected agents (each
as defined in Section 11 hereof) may sell Shares to the public or to those
persons eligible to invest in Shares as described in the Trust's Prospectus,
shall be the public offering price determined in accordance with the then

-2-
<PAGE>

currently effective Prospectus of the Trust or Class thereof under the
Securities Act, relating to such Shares, but not to exceed the net asset value
at which the Distributor, when acting as principal, is to purchase such Shares,
plus, in the case of Shares for which an initial sales charge is assessed, an
initial charge equal to a specified percentage or percentages of the public
offering price of the Shares as set forth in the current Prospectus relating to
the Shares. In the case of Shares for which an initial sales charge may be
assessed, Shares may be sold to certain classes of persons at reduced sales
charges or without any sales charge as from time to time set forth in the
current Prospectus relating to the Shares. The Trust will advise the
Distributor of the net asset value per Share at each time as the net asset value
per Share shall have been determined by the Trust.

(c) The net asset value per Share of each Series or Class thereof shall be
determined by the Trust, or an agent of the Trust, as of the close of The New
York Stock Exchange, Inc. ("NYSE") or such other time as set forth in the
applicable Prospectus on the Trust business day in accordance with the method
set forth in the Prospectus and guidelines established by the Board.

(d) The Trust reserves the right to suspend the offering of Shares of any
Class at any time in the absolute discretion of the Board, and upon notice of
such suspension the Distributor shall cease to offer Shares of the Trust or
Classes thereof specified in the notice.

(e) The Trust, or any agent of the Trust designated in writing to the
Distributor by the Trust, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Trust for
acceptance and shall not be binding until accepted by the Trust. Any order or
subscription may be rejected by the Trust; provided, however, that the Trust
will not arbitrarily or without reasonable cause refuse to accept or confirm
orders or subscriptions for the purchase of Shares. The Trust (or its agent)
will confirm orders and subscriptions upon their receipt, will make appropriate
book entries and, upon receipt by the Trust (or its agent) of payment thereof,
will issue such Shares in uncertificated or certificated (if permitted) form
pursuant to the instructions of the Distributor. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Trust
(or its agent).

SECTION 4. REPURCHASE OR REDEMPTION OF SHARES

(a) Any of the outstanding Shares of the Trust may be tendered for
redemption at any time, and the Trust agrees to redeem or repurchase the Shares
so tendered in accordance with its obligations as set forth in the Trust's
Organizational Documents and the Prospectus relating to the Shares. The price
to be paid to redeem or repurchase the Shares of the Trust shall be equal to the
net asset value calculated in accordance with the provisions of Section 3(c)
hereof less, in the case of Shares for which a deferred sales charge is
assessed, a deferred sales charge equal to a specified percentage or percentages
of the net asset value of those Shares as from time to time set forth in the
Prospectus relating to those Shares or their cost, whichever is less. Shares
for which a deferred sales charge may be assessed and that have been outstanding
for a specified period of time may be redeemed without payment of a deferred
sales charge as from time to time set forth in the Prospectus relating to those
Shares.

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(b) The Trust or its designated agent shall pay (i) the total amount of the
redemption price consisting of the redemption price less any applicable deferred
sales charge to the redeeming shareholder or its agent and (ii) except as may be
otherwise required by the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. (the "NASD") and any interpretations
thereof, any applicable deferred sales charges to the Distributor in accordance
with the Distributor's instructions on or before the third business day
subsequent to each calendar month-end.

(c) Redemption of Shares or payment therefor may be suspended at times when
the NYSE is closed for any reason other than its customary weekend or holiday
closings, when trading thereon is restricted, when an emergency exists as a
result of which disposal by the Trust of securities owned by the Trust is not
reasonably practicable or it is not reasonably practicable for the Trust fairly
to determine the value of its net assets, or during any other period when the
SEC so permits.

SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR

(a) The Distributor shall use reasonable efforts to sell Shares of the
Trust upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of the Distributor to the Trust hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.

(b) In selling Shares of the Trust, the Distributor shall comply with the
requirements of all federal and state laws relating to the sale of the Shares.
None of the Distributor, any selected dealer, any selected agent or any other
person is authorized by the Trust to give any information or to make any
representations other than as is contained in the Trust's Prospectus or any
advertising materials or sales literature specifically approved in writing by
the Trust or its agents.

(c) The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers or selected agents, the collection of
amounts payable by investors and selected dealers or selected agents on such
sales, and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the NASD and any other applicable self-
regulatory organization.

(d) The Distributor will perform its duties hereunder under the supervision
of and in accordance with the directives of the Board. The Distributor will
perform its duties hereunder in accordance with the Trust's Organizational
Documents and Prospectuses and with the instructions and directions of the Board
and will conform to and comply with the requirements of the 1940 Act, the
Securities Act and other applicable laws.

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<PAGE>

(e) The Distributor shall provide the Board with a written report of the
amounts expended in connection with this Agreement as requested by the Board.

(f) The Distributor shall be responsible for reviewing and making such
filings, as required, of advertisements and sales literature relating to the
Trust that have been furnished to the Distributor.

(g) The Distributor represents and warrants to the Trust that:

(i) It is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware and it is duly qualified to carry
on its business in the State of Maine;

(ii) It is empowered under applicable laws and by its Articles of
Incorporation to enter into and perform this Agreement;

(iii) All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement;

(iv) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement;

(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Distributor, enforceable against
the Distributor in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured
parties;

(vi) It is registered under the 1934 Act with the SEC as a broker-dealer,
it is a member in good standing of the NASD, it will abide by the rules and
regulations of the NASD, and it will notify the Trust if its membership in
the NASD is terminated or suspended;

(vii) The performance by the Distributor of its obligations hereunder does
not and will not contravene any provision of its Articles of Incorporation;
and

(viii) It has taken all reasonable business steps to ensure that any
system or software used in the operation of its business that is an any way
related to the services provided herein: (A) manages and manipulates data
involving all dates from the 20th and 21st centuries without material,
functional or data abnormality related to such dates; (B) has user
interfaces and data fields formatted to distinguish between dates from the
20th and 21st centuries; and (C) represents all data to include indications
of the millennium, century, and decade, as well as the actual year.

(h) Notwithstanding anything in this Agreement, including the Appendices,
to the contrary, the Distributor makes no warranty or representation as to the
number of selected dealers or selected agents with which it has entered into
agreements in accordance with Section 11

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<PAGE>

hereof, as to the availability of any Shares to be sold through any selected
dealer, selected agent or other intermediary or as to any other matter not
specifically set forth herein.

SECTION 6. DUTIES AND REPRESENTATIONS OF THE FUND

(a) The Trust shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two business days prior to such delivery and shall furnish the Distributor
copies of all other financial statements, documents and other papers or
information which the Distributor may reasonably request for use in connection
with the distribution of Shares. The Trust shall make available to the
Distributor the number of copies of its Prospectuses as the Distributor shall
reasonably request.

(b) The Trust shall take, from time to time, subject to the approval of
its Board and any required approval of its shareholders, all action necessary to
fix the number of authorized Shares (if such number is not limited) and to
register the Shares under the Securities Act, to the end that there will be
available for sale the number of Shares as reasonably may be expected to be sold
pursuant to this Agreement.

(c) The Trust shall register or qualify its Shares for sale under the
securities laws of the various states of the United States and other
jurisdictions ("States") as the Trust, in its sole discretion shall determine.
Any registration or qualification may be withheld, terminated or withdrawn by
the Trust at any time in its discretion. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Trust in connection with such registration or qualification.

(d) The Trust represents and warrants to the Distributor that:

(i) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware;

(ii) It is empowered under applicable laws and by its Organizational
Documents to enter into and perform this Agreement;

(iii) All proceedings required by the Organizational Documents have been
taken to authorize it to enter into and perform its duties under this
Agreement;

(iv) It is registered as an open-end management investment company with
the SEC under the 1940 Act;

(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;

(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the
Trust in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors and secured parties;

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<PAGE>

(vii) The performance by the Trust of its obligations hereunder does
not and will not contravene any provision of its Declaration of Trust.

(viii) The Trust's Registration Statement is currently effective and
will remain effective with respect to all Shares of the Trust's Series and
Classes thereof being offered for sale;

(ix) It will use its best efforts to ensure that its Registration
Statement and Prospectuses have been or will be, as the case may be,
carefully prepared in conformity with the requirements of the Securities
Act and the rules and regulations thereunder;

(x) It will use its best efforts to ensure that (A) its Registration
Statement and Prospectuses contain or will contain all statements required
to be stated therein in accordance with the Securities Act and the rules
and regulations thereunder, (B) all statements of fact contained or to be
contained in the Registration Statement or Prospectuses are or will be true
and correct at the time indicated or on the effective date as the case may
be and (C) neither the Registration Statement nor any Prospectus, when they
shall become effective or be authorized for use, will include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares;

(xi) It will from time to time file such amendment or amendments to its
Registration Statement and Prospectuses as, in the light of then-current
and then-prospective developments, shall, in the opinion of its counsel, be
necessary in order to have the Registration Statement and Prospectuses at
all times contain all material facts required to be stated therein or
necessary to make any statements therein not misleading to a purchaser of
Shares ("Required Amendments");

(xii) It shall not file any amendment to its Registration Statement or
Prospectuses without giving the Distributor reasonable advance notice
thereof (which shall be at least three Trust business days); provided,
however, that nothing contained in this Agreement shall in any way limit
the Trust's right to file at any time such amendments to its Registration
Statement or Prospectuses, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional; and

(xiii) It will use its best efforts to ensure that (A) any amendment to
its Registration Statement or Prospectuses hereafter filed will, when it
becomes effective, contain all statements required to be stated therein in
accordance with the 1940 Act and the rules and regulations thereunder, (B)
all statements of fact contained in the Registration Statement or
Prospectuses will, when it becomes effective, be true and correct at the
time indicated or on the effective date as the case may be and (C) no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Shares.

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<PAGE>

SECTION 7. STANDARD OF CARE

(a) The Distributor shall use its best judgment and efforts in rendering
services to the Trust under this Agreement but shall be under no duty to take
any action except as specifically set forth herein or as may be specifically
agreed to by the Distributor in writing. The Distributor shall not be liable to
the Trust or any of the Trust's shareholders for any error of judgment or
mistake of law, for any loss arising out of any investment, or for any action or
inaction of the Distributor in the absence of bad faith, willful misfeasance or
gross negligence in the performance of the Distributor's duties or obligations
under this Agreement or by reason of the Distributor's reckless disregard of its
duties and obligations under this Agreement

(b) The Distributor shall not be liable to the Trust for any action taken
or failure to act in good faith reliance upon:

(i) the advice of the Trust or of counsel, who may be counsel to the
Trust or counsel to the Distributor;

(ii) any oral instruction which the Distributor receives and which it
reasonably believes in good faith was transmitted by the person or persons
authorized by the Board to give such oral instruction (the Distributor
shall have no duty or obligation to make any inquiry or effort of
certification of such oral instruction);

(iii) any written instruction or certified copy of any resolution of the
Board, and the Distributor may rely upon the genuineness of any such
document or copy thereof reasonably believed in good faith by the
Distributor to have been validly executed; or

(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by the
Distributor to be genuine and to have been signed or presented by the Trust
or other proper party or parties;

and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.

(c) The Distributor shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement caused, directly or
indirectly, by circumstances beyond its reasonable control including, without
limitation, acts of civil or military authority, national emergencies, labor
difficulties (other than those related to the Distributor's employees), fire,
mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.

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<PAGE>

SECTION 8. INDEMNIFICATION

(a) The Trust will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of Section 15 of the Securities Act or Section 20
of the 1934 Act ("Distributor Indemnitees") free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) which any Distributor Indemnitee may incur,
under the Securities Act, under the securities laws of the various States or
under common law or otherwise based upon any alleged untrue statement of a
material fact contained in the Trust's Registration Statement or Prospectuses,
based upon any alleged omission to state a material fact required to be stated
in any one thereof or necessary to make the statements in any one thereof not
misleading, or based upon any filing made with the regulatory authorities of any
State unless such statement or omission was made in reliance upon, and in
conformity with, information furnished in writing to the Trust in connection
with the preparation of the Registration Statement, exhibits to the Registration
Statement or filings made with the regulatory authorities of any State by or on
behalf of the Distributor ("Distributor Claims").

After receipt of the Distributor's notice of termination under Section
13(e) of this Agreement, the Trust shall indemnify and hold each Distributor
Indemnitee free and harmless from and against any Distributor Claim; provided,
that the term Distributor Claim for purposes of this sentence shall mean any
Distributor Claim related to the matters for which the Distributor has requested
amendment to the Trust's Registration Statement and for which the Trust has not
filed a Required Amendment, regardless of with respect to such matters whether
any statement in or omission from the Registration Statement was made in
reliance upon, or in conformity with, information furnished to the Trust by or
on behalf of the Distributor.

(b) The Trust may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Trust
and approved by the Distributor, which approval shall not be withheld
unreasonably. The Trust shall advise the Distributor that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Trust assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Trust does not assume the defense of
any such suit, or if Distributor does not approve of counsel chosen by the Trust
or has been advised that it may have available defenses or claims that are not
available to or conflict with those available to the Trust, the Trust will
reimburse any Distributor Indemnitee named as defendant in such suit for the
reasonable fees and expenses of any counsel that person retains. A Distributor
Indemnitee shall not settle or confess any claim without the prior written
consent of the Trust, which consent shall not be unreasonably withheld or
delayed.

(c) The Distributor will indemnify, defend and hold the Trust and its
several officers and trustees (collectively, the "Trust Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges,

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<PAGE>

reasonable counsel fees and other expenses of every nature and character
(including the cost of investigating or defending such claims, demands, actions,
suits or liabilities and any reasonable counsel fees incurred in connection
therewith), but only to the extent that such claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses result from, arise out of or are based upon:

(i) any alleged untrue statement of a material fact contained in the
Trust's Registration Statement or Prospectus or any alleged omission of a
material fact required to be stated or necessary to make the statements
therein not misleading, if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Trust in writing
in connection with the preparation of the Registration Statement or
Prospectus by or on behalf of the Distributor; or

(ii) any act of, or omission by, the Distributor or its sales
representatives that does not conform to the standard of care set forth in
Section 7 of this Agreement (collectively, "Trust Claims").

(d) The Distributor may assume the defense of any suit brought to enforce
any Trust Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Trust, which approval shall not be withheld
unreasonably. The Distributor shall advise the Trust that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit
and retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if the Trust does not approve of counsel chosen by
the Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to the
Distributor, the Distributor will reimburse any Trust Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel that
person retains. A Trust Indemnitee shall not settle or confess any claim
without the prior written consent of the Distributor, which consent shall not be
unreasonably withheld or delayed.

(e) The Trust's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Trust or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Trust Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first legal
process is served. Such notice shall refer to the person or persons against
whom the action is brought. The failure to provide such notice shall not
relieve the party entitled to such notice of any liability that it may have to
any Distributor Indemnitee or Trust Indemnitee except to the extent that the
ability of the party entitled to such notice to defend such action has been
materially adversely affected by the failure to provide notice.

(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Trust Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The

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<PAGE>

indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Trust Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).

(g) The Distributor agrees promptly to notify the Trust of the commencement
of any litigation or proceeding of which it becomes aware arising out of or in
any way connected with the issuance or sale of Shares. The Trust agrees
promptly to notify the Distributor of the commencement of any litigation or
proceeding of which it becomes aware arising out of or in any way connected with
the issuance or sale of its Shares.

(h) Nothing contained herein shall require the Trust to take any action
contrary to any provision of its Organizational Documents or any applicable
statute or regulation or shall require the Distributor to take any action
contrary to any provision of its Articles of Incorporation or Bylaws or any
applicable statute or regulation; provided, however, that neither the Trust nor
the Distributor may amend their Organizational Documents or Articles of
Incorporation and Bylaws, respectively, in any manner that would result in a
violation of a representation or warranty made in this Agreement, except if
required by any applicable statute or regulation, and then only after notice to
the other party.

(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Trust or the security holders of the
Trust to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.

SECTION 9. NOTIFICATION TO THE DISTRIBUTOR

The Trust shall advise the Distributor immediately: (i) of any request by
the SEC for amendments to the Trust's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Trust's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Trust's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Trust's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.

SECTION 10. COMPENSATION; EXPENSES

(a) In consideration of the Distributor's services in connection with the
distribution of Shares of the Trust and each Class thereof, the Distributor
shall receive: (i) from the Trust, any applicable contingent deferred sales
charge ("CDSC") assessed upon investors in connection with the redemption of
Shares and (ii) from the Trust, the shareholder service fees with respect to the
Shares of those Classes as designated in Appendix A (the "Service Fee"). The
Service Fee shall

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<PAGE>

be accrued daily by each applicable Trust or Class thereof and shall be paid
monthly as promptly as possible after the last day of each calendar month but in
any event on or before the fifth (5th) Trust business day after month-end, at
the rate or in the amounts set forth in Appendix A.

(b) The Trust shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Series
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.

(c) Except as specified in Sections 8 and 10(a) of this Agreement, the
Distributor shall be entitled to no compensation or reimbursement of expenses
for the services provided by the Distributor pursuant to this Agreement. The
Distributor may receive compensation from the Trust's investment advisors, other
service providers or their respective affiliates (collectively, the "Advisor")
for its services hereunder or for additional services all as may be agreed to
between the Advisor and the Distributor. Notwithstanding anything in this
Agreement to the contrary, to the extent the Distributor receives compensation
from the Advisor that is disclosed to the Board, the Trust will indemnify,
defend and hold each Distributor Indemnitee free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any reasonable counsel fees
incurred in connection therewith) related in any way to such payment.

(d) The Trust shall be responsible and assumes the obligation for payment
of all its expenses, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of the Registration
Statement and Prospectuses (including but not limited to the expense of setting
in type the Registration Statement and Prospectuses and printing sufficient
quantities for internal compliance, regulatory purposes and for distribution to
current shareholders).

(e) The Trust shall bear the cost and expenses (i) of the registration of
its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Trust, or its Series or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Trust; and (iv) payable to each State for continuing registration or
qualification therein until the Trust decides to discontinue registration or
qualification. The Distributor shall pay all expenses relating to the
Distributor's broker-dealer qualification.

SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS

(a) The Distributor shall have the right to enter into sub-distribution
agreements with securities dealers of its choice ("selected dealers") and with
depository institutions and other financial intermediaries of its choice
("selected agents") for the sale of Shares and to fix therein the portion of the
sales charge, if any, that may be allocated to the selected dealers or selected

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<PAGE>

agents; provided, that all such agreements shall be in substantially the form of
agreement as set forth in Appendix B hereto or such other form as approved by
the Trust. Shares of each Series or Class thereof shall be resold by selected
dealers or selected agents only at the public offering price(s) set forth in the
Prospectus relating to the Shares. The Distributor shall offer and sell Shares
of the Trust only to such selected dealers as are members in good standing of
the NASD. The Distributor shall have the right to enter into shareholder
servicing agreements with financial intermediaries of its choice; provided, that
all such agreements shall be in substantially the form of agreement as approved
by the Trust.

(b) The Distributor will supervise the Trust's relationship with selected
dealers and agents and may make payments to those selected dealers and agents in
such amounts as the Distributor may determine from time to time in its sole
discretion. The amount of payments to selected dealers and agents by the
Distributor may be reviewed by the Board from time to time; provided, however,
that no payment by the Distributor to any selected dealer or agent with respect
to a Share shall exceed the amount of payments made to the Distributor hereunder
with respect to that Share.

SECTION 12. CONFIDENTIALITY

The Distributor agrees to treat all records and other information related
to the Trust as proprietary information of the Trust and, on behalf of itself
and its employees, to keep confidential all such information, except that the
Distributor may:

(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;

(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and

(iii) release such other information as approved in writing by the Trust,
which approval shall not be unreasonably withheld;

provided, however, that the Distributor may release any information regarding
the Trust without the consent of the Trust if the Distributor reasonably
believes that it may be exposed to civil or criminal legal proceedings for
failure to comply, when requested to release any information by duly constituted
authorities or when so requested by the Trust.

SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective with respect to each series or
class listed in Appendix A. Upon effectiveness of this Agreement, it shall
supersede all previous agreements between the parties hereto covering the
subject matter hereof insofar as such Agreement may have been deemed to relate
to the Trust.

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<PAGE>

(b) This Agreement shall continue in effect with respect to a Series Trust
for a period of one year from its effectiveness and thereafter shall continue in
effect with respect to the Series until terminated; provided, that continuance
is specifically approved at least annually (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Trust and (ii) by a vote of
a majority of Trustees of the Trust (I) who are not parties to this Agreement or
interested persons of any such party (other than as Trustees of the Trust).

(c) This Agreement may be terminated at any time with respect to a Series
or Class, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Series or Class, on 60
days' written notice to the Distributor or (ii) by the Distributor on 60 days'
written notice to the Trust.

(d) This Agreement shall automatically terminate upon its assignment and
upon the termination of the Distributor's membership in the NASD.

(e) The obligations of Sections 5(e), 6(d), 8, 9 and 10 of this Agreement
shall survive any termination of this Agreement with respect to a Series or
Class thereof.

SECTION 14. NOTICES

Any notice required or permitted to be given hereunder by the Distributor
to the Trust or the Trust to the Distributor shall be deemed sufficiently given
if personally delivered or sent by telegram, facsimile or registered, certified
or overnight mail, postage prepaid, addressed by the party giving such notice to
the other party at the last address furnished by the other party to the party
giving such notice, and unless and until changed pursuant to the foregoing
provisions hereof each such notice shall be addressed to the Trust or the
Distributor, as the case may be, at their respective principal places of
business.

SECTION 15. ACTIVITIES OF THE DISTRIBUTOR

Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a director, officer or employee of the Trust, or
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association.

SECTION 16. ADDITIONAL FUNDS AND CLASSES

In the event that the Trust establishes one or more series of Shares or one
or more classes of Shares after the effectiveness of this Agreement, such series
of Shares or classes of Shares, as the case may be, shall become Series and
Classes under this Agreement upon approval of this Agreement by the Trust with
respect to the series of Shares or class of Shares and the execution

-14-
<PAGE>

of an amended Appendix A reflecting the applicable names and terms. The
Distributor may elect not to make any such series or classes subject to this
Agreement.

SECTION 17. MISCELLANEOUS

(a) The Distributor shall not be liable to the Trust and the Trust shall
not be liable to the Distributor for consequential damages under any provision
of this Agreement except that Distributor Claims, as that term is used in
Section 8(a) of this Agreement, shall include consequential damages related to
or based upon any filing made with the regulatory authorities of any State.

(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the Trust.

(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Delaware.

(d) This Agreement constitutes the entire agreement between the Distributor
and the Trust and supersedes any prior agreement with respect to the subject
matter hereof, whether oral or written.

(e) This Agreement may be executed by the parties hereto on any number of
counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.

(f) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.

(g) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

(h) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.

(i) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.

(j) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the 1940 Act.

-15-
<PAGE>

(k) The Distributor is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be limited in
any case to the Trust and its assets and the Distributor shall not seek
satisfaction of any such obligation from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust or any of them.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.

MORGAN GRENFELL INVESTMENT TRUST

By: _________________________
Amy M. Olmert
Treasurer

ICC DISTRIBUTORS, INC.

By: _________________________
John Y. Keffer
President

-16-
<PAGE>

MORAGN GRENFELL INVESTMENT TRUST
DISTRIBUTION AGREEMENT

Appendix A
as of November 1 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Distribution Service
Series Class Fee Fee*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Select Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
International Select Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Global Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Global Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
European Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
European Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
New Asia Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
New Asia Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
International Small Cap Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
International Small Cap Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Japanese Small Cap Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Japanese Small Cap Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
European Small Cap Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
European Small Cap Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Core Global Fixed Income Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Core Global Fixed Income Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Global Fixed Income Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Global Fixed Income Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
International Fixed Income Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
International Fixed Income Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Emerging Local Currency Debt Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Emerging Local Currency Debt Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Fixed Income Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Fixed Income Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Fixed Income Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Fixed Income Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Bond Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Bond Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Total Return Bond Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Total Return Bond Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
High Yield Bond Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Smaller Companies Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Smaller Companies Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
-A1-
<PAGE>

<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Micro Cap Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Micro Cap Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund Institutional None None
- ----------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund Service None 0.25%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

* as a percentage of average net assets

-A2-
<PAGE>

MORAGN GRENFELL INVESTMENT TRUST
DISTRIBUTION AGREEMENT

Appendix B
[Form of Sub-Distribution Agreement]

SUB-DISTRIBUTION AGREEMENT

[Date]

Ladies and Gentlemen:

ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
distributor (the "Distributor") of Morgan Grenfell Institutional Trust (the
"Trust"). The Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Trust offers its shares ("Shares") to the public in accordance with the terms
and conditions contained in the Prospectus of each series of the Trust as set
forth in Appendix A to this Sub-Distribution Agreement. The term "Prospectus" as
used herein refers to each prospectus on file with the Securities and Exchange
Commission which is part of the registration statement of the Trust under the
Securities Act of 1933 (the "Securities Act"). In connection with the foregoing
you may serve as a participating dealer (and, therefore, accept orders for the
purchase or redemption of Shares, respond to shareholder inquiries and perform
other related functions) on the following terms and conditions:

1. Participating Dealer. You are hereby designated a Participating
--------------------
Dealer and as such are authorized (i) to accept orders for the purchase of
Shares and to transmit to the Trust such orders and the payment made therefore,
(ii) to accept orders for the redemption of Shares and to transmit to the Trust
such orders and all additional material, as may be required to complete the
redemption and (iii) to assist shareholders with the foregoing and other matters
relating to their investments in each series of the Trust, in each case subject
to the terms and conditions set forth in the Prospectus of each series. You are
to review each Share purchase or redemption order submitted through you or with
your assistance for completeness and accuracy. You further agree to undertake
from time to time certain shareholder servicing activities for customers of
yours who have purchased Shares and who use your facilities to communicate with
the Trust or to effect redemptions or additional purchases of the Shares.

2. Limitation of Authority. No person is authorized to make any
-----------------------
representations concerning the Trust or the Shares except those contained in the
Prospectus of each Fund and in

-C1-
<PAGE>

such printed information as the Distributor may subsequently prepare. No person
is authorized to distribute any sales material relating to any Fund without the
prior written approval of the Distributor.

3. Compensation. The Distributor will pay compensation for such services,
------------
if applicable, as agreed upon from time to time for each series of the Trust.

4. Prospectus and Reports. You agree to comply with the provisions
----------------------
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant series to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
series. We agree to furnish to you as many copies of each Prospectus, annual
and interim reports and proxy solicitation materials as you may reasonably
request.

5. Qualification to Act. You represent that you are a member in good
--------------------
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times, will comply with the Conduct Rules (formerly the
Rules of Fair Practice) of the NASD, including, without limitation, the
provisions of Rule 2830 (formerly Section 26) of such Rules. You also agree
that you will place orders immediately upon their receipt and will not withhold
any order so as to profit therefrom. In determining the amount payable to you
hereunder, we reserve the right to exclude any sales which we reasonably
determine are not made in accordance with the terms of the relevant prospectus
and provisions of the Agreement.

6. Blue Sky. The series of the Trust have registered an indefinite number
--------
of Shares under the Securities Act. The Trust intends to make appropriate notice
filings in certain states where such filing is required. We will inform you as
to the states or other jurisdictions in which we believe the Shares are eligible
for sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.

7. Authority of Trust. The Trust shall have full authority to take such
------------------
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.

8. Record Keeping. You will (i) maintain all records required by law to be
--------------
kept by you relating to transactions in Shares and, upon request by the Trust,
promptly make such of these records available to the Trust as the Trust may
reasonably request in connection with its

-C2-
<PAGE>

operations and (ii) promptly notify the Fund if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.

9. Liability. The Distributor shall be under no liability to you except
---------
for lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.

10. Termination. This Agreement may be terminated by either party, without
-----------
penalty, upon ten days' written notice to the other party and shall
automatically terminate in the event of its assignment, as defined in the
Investment Company Act. This Agreement may also be terminated at any time for
the Trust without penalty by the vote of a majority of the members of the Board
of Trustees who are not "interested persons" (as such phrase is defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Distribution Agreement between such Trust and the
Distributor or by the vote of a majority of the outstanding voting securities of
the Trust.

11. Communications. All communications other than this agreement and those
--------------
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.

[TA Address]

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:

[__________]
c/o ICC Distributors, Inc.
Attn: Dealer Services
P.O. Box 7558
Portland, Maine 04101

______________________
ICC Distributors, Inc.
By: Benjamin L. Niles
Vice President

-C3-
<PAGE>

Confirmed and accepted:

Firm Name:___________________________________________

By: _________________________________________________
Signature

_________________________________________________
Printed Name and Title

Date:________________________________________________

Address:_____________________________________________

_____________________________________________________

Clears Through:______________________________________

Phone No.:___________________________________________

-C4-

<PAGE>

EXHIBIT 99.H6

TRANSFER AGENCY AGREEMENT
-------------------------

THIS AGREEMENT is made as of the 22nd day of November, 1999 by and
between MORGAN GRENFELL INVESTMENT TRUST, a Delaware business trust (the
"Trust"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation ("ICCC").

W I T N E S S E T H:

WHEREAS, each Series of the Trust is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, the Trust desires to retain ICCC to provide certain services
on behalf of each Series of the Trust, as set forth in Appendix A to this
Agreement, and ICCC is willing so to serve.

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

1. Appointment. The Trust hereby appoints ICCC to perform such
-----------
services and to serve such functions on behalf of the Trust and on such terms as
set forth in this Agreement. ICCC accepts such appointment and agrees to
furnish such services and serve such functions. The Trust may have currently
outstanding one or more series or classes of its shares of common stock, par
value $.001 per share ("Shares") and may from time to time hereafter issue
separate series or classes of its Shares or classify and reclassify Shares of
any series or class, and the appointment effected hereby shall constitute
appointment for the provision of services with respect to all existing series
and classes and any additional series and classes unless the parties shall
otherwise agree in writing.

1
<PAGE>

2. Definitions.
-----------

(a) "Authorized Person." The term "Authorized Person" shall
-----------------
mean any officer of the Trust and any other person, who is fully authorized by
the Trust's Board of Trustees, to give Oral and Written Instructions on behalf
of the Trust. Such persons are listed in the Certificate attached hereto.

(b) "Oral Instructions." The term "Oral Instructions" shall
-----------------
mean oral instructions received by ICCC from an Authorized Person or from a
person reasonably believed by ICCC to be an Authorized Person.

(c) "Written Instructions." The term "Written Instructions"
--------------------
shall mean written instructions signed by two Authorized Persons and received by
ICCC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.

3. Delivery of Documents. The Trust has furnished ICCC with copies
---------------------
properly certified or authenticated of the following documents and will furnish
ICCC from time to time with copies, properly certified or authenticated, of all
amendments of or supplements thereto, if any:

(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of ICCC to act in such capacities on behalf of the Trust as set
forth in this Agreement, and the entering into of this Agreement by the Trust;

(b) The Trust's Declaration of Trust and all amendments thereto
(the "Charter") and the Trust's By-Laws and all amendments thereto (the "By-
Laws");

2
<PAGE>

(c) The Trust's most recent Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") and under the 1940
Act as filed with the Securities and Exchange Commission (the "SEC") relating to
the Shares; and

(d) Copies of the Trust's most recent prospectus or
prospectuses, including amendments and supplements thereto (collectively, the
"Prospectus").

4. Instructions. Unless otherwise provided in this Agreement, ICCC
------------
shall act only upon Oral and Written Instructions. ICCC shall be entitled to
rely upon any Oral and Written Instruction it receives from an Authorized Person
(or from a person reasonably believed by ICCC to be an Authorized Person)
pursuant to this Agreement. ICCC may assume that any Oral or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of the Trust's Declaration of Trust, this Agreement, or of any vote,
resolution or proceeding of the Trust's Board of Trustees or shareholders.

The Trust agrees to forward to ICCC Written Instructions confirming
Oral Instructions so that ICCC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact
that such confirming Written Instructions are not received by ICCC shall in no
way invalidate the transactions or enforceability of the transactions authorized
by the Oral Instructions. The Trust further agrees that ICCC shall incur no
liability to the Trust in acting upon Oral or Written Instructions provided such
instructions reasonably appear to have been received from an Authorized Person.

If ICCC is in doubt as to any action it should or should not take,
ICCC may request directions or advice, including Oral or Written Instructions,
from the Trust. ICCC shall be protected in any action it takes or does not take
in reliance upon directions, advice or Oral or Written Instructions it receives
from the Trust or from counsel and which ICCC believes, in good faith, to be
consistent with those directions, advice or Oral of Written Instructions.

3
<PAGE>

Notwithstanding the foregoing, ICCC shall have no obligation (i) to seek such
directions, advice or Oral or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral or Written Instructions unless, under the
terms of other provisions of this Agreement, the same is a condition of ICCC's
properly taking or not taking such action.

5. Services to be Provided; Fees. During the term of this Agreement,
-----------------------------
ICCC shall perform the services and act in such capacities on behalf of the
Trust as set forth in this Agreement. For the services performed by ICCC for the
Trust, the Trust will compensate ICCC in such amounts as may be agreed to from
time to time by the parties in writing.

(a) General Services To be Provided. ICCC shall provide to the
-------------------------------
Trust the following services on an ongoing basis:

(i) Calculate 12b-1 payments, if any;

(ii) Maintain proper shareholder registrations;

(iii) Review new applications and correspond with
shareholders, if necessary, to complete or correct
information;

(iv) Direct payment processing of checks or wires;

(v) Prepare and certify stockholder lists in conjunction
with proxy solicitations; solicit and tabulate
proxies; receive and tabulate proxy cards for
meetings of the Trust's shareholders;

(vi) Countersign securities;

4
<PAGE>

(vii) Direct shareholder confirmation of activity;

(viii) Provide toll-free lines for direct shareholder use,
plus customer liaison staff for on-line inquiry
response;

(ix) Mail duplicate confirmation to broker-dealers, if
any, of their clients' activity, whether executed
through the broker-dealer or directly with ICCC;

(x) Provide periodic shareholder lists and statistics to
the Trust;

(xi) Provide detail for broker confirmations, if any, and
underwriter confirmations;

(xii) Mail periodic year-end tax and statement information;

(xiii) Provide timely notification to investment adviser,
accounting agent, and custodian of Trust activity;
and

(xiv) Perform other participating broker-dealer shareholder
services, if any, as may be agreed upon from time to
time.

(b) Purchase of Shares. ICCC shall issue and credit an account
------------------
of an investor, in the manner described in the Prospectus, once it receives: (i)
purchase order; (ii) proper information to establish a shareholder account; and
(iii) confirmation of receipt by, or crediting of funds for such order to, the
Trust's custodian.

5
<PAGE>

(c) Redemption of Shares. ICCC shall redeem the Trust's shares
--------------------
only in accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the shareholder
tenders his or her shares and directs the method of redemption in accordance
with the terms set forth in the Prospectus. If securities are received in proper
form, Shares shall be redeemed before the funds are provided to ICCC. When the
Trust provides ICCC with funds, redemption proceeds will be wired (if requested)
or a redemption check issued. All redemption checks shall be drawn to the
recordholder unless third party payment authorizations have been signed by the
recordholder and delivered to ICCC.

(d) Dividends and Distributions. Upon receipt of certified
---------------------------
resolutions of the Trust's Board of Trustees authorizing the declaration and
payment of dividends and distributions, ICCC shall issue the dividends and
distributions in shares, or, upon shareholder election, pay such dividends and
distributions in cash. Such issuance or payment shall be made after deduction
and payment of the required amount of funds to be withheld in accordance with
any applicable tax laws or other laws, rules or regulations. The Trust's
shareholders shall receive tax forms and other information, or permissible
substitute notice, relating to dividends and distributions, paid by the Trust as
are required to be filed and mailed by applicable law, rule or regulation. ICCC
shall maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends and distributions paid by the Trust to its
shareholders as required by tax or other law, rule or regulation.

(e) Shareholder Account Services. If authorized in the
----------------------------
Prospectus, ICCC shall arrange for the following services, in accordance with
the applicable terms set forth in the Prospectus: (i) the issuance of Shares
obtained through any pre-authorized check plan and direct purchases through
broker wire orders, if any, checks and applications; (ii) exchanges of shares of
any fund for Shares of the Trust with which the Trust has exchange privileges;
(iii) automatic redemption from an account where that shareholder participates
in an automatic redemption plan; and (iv) redemption of Shares from an account
with a check writing privilege.

6
<PAGE>

(f) Communications to Shareholders. Upon timely Written
------------------------------
Instructions, ICCC shall mail all communications by the Trust to its
shareholders, including, reports to shareholders, confirmations of purchases and
sales of Shares, monthly or quarterly statements, dividend and distribution
notices, and proxy material.

(g) Records. ICCC shall maintain records of the accounts for
-------
each shareholder showing the following information: (i) name, address and U.S.
Identification or Social Security number; (ii) number and class of Shares held
and number and class of Shares for which certificates, if any, have been issued,
including certificate numbers and denominations; (iii) historical information
regarding the account of each shareholder, including dividends and distributions
paid and the date and price for all transactions on a shareholder's account;
(iv) any stop or restraining order placed against a shareholder's account; (v)
any correspondence relating to the current maintenance of a shareholder's
account; (vi) information with respect to withholdings; and (vii) any
information required in order for ICCC to perform any calculations contemplated
or required by this Agreement.

(h) Lost or Stolen Certificates. ICCC shall place a stop notice
---------------------------
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon: (i)
the shareholder's pledge of a lost instrument bond or such other appropriate
indemnity bond issued by a surety company approved by ICCC; and (ii) completion
of a release and indemnification agreement signed by the shareholder to protect
ICCC.

(i) Shareholder Inspection of Stock Records. Upon requests from
---------------------------------------
Trust shareholders to inspect stock records, ICCC will notify the Trust and the
Trust shall deliver Oral or Written Instructions granting or denying each such
request. Unless ICCC has acted

7
<PAGE>

contrary to the Trust's Instructions, the Trust agrees to release ICCC from any
liability for refusal or permission for a particular shareholder to inspect the
Trust's shareholder records.

(j) Withdrawal of Shares and Cancellation of Certificates. Upon
-----------------------------------------------------
receipt of Written Instructions, ICCC shall cancel outstanding certificates
surrendered by the Trust to reduce the total amount of outstanding shares by the
number of shares surrendered by the Trust.

(k) Telephone Transactions. In accordance with the terms of the
----------------------
Prospectus, ICCC shall act upon shareholder requests made by telephone for
redemption or exchange of Fund shares; provided that (i) the shareholder has
authorized telephone transactions on the Trust's Account Application or
otherwise in writing, (ii) if the request is a redemption, the amount to be
redeemed does not exceed $50,000 and (iii) ICCC has complied with the
identification and other security procedures required by the Trust in connection
with telephone transactions.

6. Delegation of Responsibilities. ICCC may subcontract to any third
------------------------------
party all or any part of its obligations under this Agreement; provided that any
such subcontracting shall not relieve ICCC of any of its obligations under this
Agreement. All subcontractors shall be paid by ICCC.

7. Fees. As compensation for the services performed by ICCC for the
----
Trust pursuant to this Agreement, the Trust will pay to ICCC such amounts as may
be agreed to from time to time by the parties in writing.

8. Records. The books and records pertaining to the Trust which are
-------
in the possession of ICCC shall be the property of the Trust. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations.

8
<PAGE>

The Trust, or the Trust's authorized representatives, shall have access to such
books and records at all times during ICCC's normal business hours. Upon the
reasonable request of the Trust, copies of any such books and records shall be
provided by ICCC to the Trust or the Trust's authorized representative at the
Trust's expense.

9. Cooperation With Accountants. In addition to any obligations set
----------------------------
forth in this Agreement, ICCC shall cooperate with the Trust's independent
accountants and shall take all reasonable actions in the performance of its
obligations under this Agreement to ensure that the necessary information is
made available to such accountants for the expression of such accountants'
opinion of the Trust's financial statements or otherwise, as such may be
required by the Trust from time to time.

10. Compliance with Governmental Rules and Regulations. The Trust
--------------------------------------------------
assumes full responsibility for insuring that the Trust complies with all
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act, and any laws, rules and regulations of
governmental authorities having jurisdiction. ICCC undertakes to comply with
all applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, the
Commodities Exchange Act (if applicable), and all laws, rules and regulations of
governmental authorities having jurisdiction with respect to the performance by
ICCC of its duties under this Agreement.

11. Expenses.
--------

(a) ICCC shall bear all expenses of its employees and overhead
incurred in connection with its duties under this Agreement and shall pay all
salaries and fees of the Trust's trustees and officers who are employees of
ICCC.

(b) The Trust assumes and shall pay or cause to be paid all other
expenses of the Trust, including, without limitation: the fees of the Trust's
investment adviser, administrator

9
<PAGE>

and distributor; the charges and expenses of any registrar, any custodian or
depositary appointed by the Trust for the safekeeping of its cash, portfolio
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by the Trust; brokers' commissions chargeable to the
Trust in connection with portfolio securities transactions to which the Trust is
a party, if any; all taxes, including securities issuance and transfer taxes,
and corporate fees payable by the Trust to federal, state or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Trust and its Shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the expenses of printing, including typesetting, and distributing
prospectuses of the Trust and supplements thereto to the Trust's shareholders;
all expenses of shareholders' and directors' meetings and of preparing, printing
and mailing of proxy statements and reports to shareholders; fees and travel
expenses of directors or members of any advisory board or committee other than
such directors or members who are "interested persons" of the Trust (as defined
in the 1940 Act); all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Shares; charges and
expenses of legal counsel, including counsel to the directors of the Trust who
are not "interested persons" of the Trust (as defined in the 1940 Act), and of
independent accountants, in connection with any matter relating to the Trust; a
portion of membership dues of industry associations; interest payable on Trust
borrowings; postage; insurance premiums on property or personnel (including
officers and directors) of the Trust which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Trust's operation unless otherwise explicitly provided herein.

12. Liability; Indemnification. Neither ICCC nor any of its
--------------------------
officers, directors or employees shall be liable for any error of judgment or
for any loss suffered by the Trust in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its or their part in the performance of, or from reckless
disregard by it

10
<PAGE>

or them of, its or their obligations and duties under this Agreement. The Trust
agrees to indemnify and hold harmless ICCC and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act,
and any state and foreign securities and blue sky laws, all as currently in
existence or as amended from time to time) and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
from any action or thing which ICCC takes or does or omits to take or do at the
request or on the direction of or in reliance on the advice of the Trust;
provided, that neither ICCC nor any of its nominees shall be indemnified against
- --------
any liability to the Trust or to its shareholders (or any expenses incident to
such liability) arising out of ICCC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Notwithstanding anything else in this Agreement to the contrary, ICCC
shall have no liability to the Trust for any consequential, special or indirect
losses or damages which the Trust may incur or suffer as a consequence of ICCC's
performance of the services provided in this Agreement.

13. Responsibility of ICCC. ICCC shall be under no duty to take any
----------------------
action on behalf of the Trust except as specifically set forth herein or as may
be specifically agreed to by ICCC in writing. In the performance of its duties
hereunder, ICCC shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
services provided for under this Agreement, but ICCC shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of ICCC or reckless disregard by ICCC of its duties
under this Agreement. Notwithstanding anything in this Agreement to the
contrary, ICCC shall have no liability to the Trust for any consequential,
special or indirect losses or damages which the Trust may incur or suffer by or
as a consequence of ICCC's performance of the services provided hereunder.

14. Non-Exclusivity. The services of ICCC to the Trust are not to be
---------------
deemed exclusive and ICCC shall be free to render transfer agency or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors,

11
<PAGE>

officers or employees of ICCC may serve as trustees or officers of the Trust,
and that trustees or officers of the Trust may serve as directors, officers and
employees of ICCC to the extent permitted by law; and that directors, officers
and employees of ICCC are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, directors or officers of any other firm or corporation, including
other investment companies.

15. Notice. Any notice or other communication required to be given
------
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, to the Trust at One South Street, Baltimore,
Maryland 21202, Attention: Richard T. Hale or to ICCC at One South Street,
Baltimore, Maryland 21202, Attention: Richard T. Hale.

16. Miscellaneous.
-------------

(a) This Agreement shall become effective as of the date first
above written and shall remain in force until terminated. This Agreement may be
terminated at any time without the payment of any penalty, by any party hereto
on sixty (60) days' written notice to the other party.

(b) This Agreement shall be construed in accordance with the laws
of the State of Maryland.

(c) If any provisions of this Agreement shall be held or made
invalid in whole or in part, the other provisions of this Agreement shall remain
in force. Invalid provisions shall, in accordance with the intent and purpose of
this Agreement, be replaced by mutual consent of the parties with such valid
provisions which in their economic effect come as close as legally possible to
such invalid provisions.

12
<PAGE>

(d) Except as otherwise specified in this Agreement, ICCC shall
be entitled to rely on any notice or communication believed by it to be genuine
and correct and to have been sent to it by or on behalf of the Trust.

(e) ICCC agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
prior, present, or potential shareholders, except, after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where ICCC may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.

(f) Any part of this Agreement may be changed or waived only by
an instrument in writing signed by both parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.

MORGAN GRENFELL INVESTMENT TRUST

By:_____________________________
Amy M. Olmert
Title: Treasurer

INVESTMENT COMPANY CAPITAL CORP.

By:_____________________________
Edward J. Veilleux
Title: President

13
<PAGE>

Appendix A

TRANSFER AGENCY AGREEMENT

between

MORGAN GRENFELL INVESTMENT TRUST

and

INVESTMENT COMPANY CAPITAL CORP.

(as of November 22, 1999)

Minimum
Annual Fee Annual Fee
Fund Per Account Per Series

Morgan Grenfell Fixed Income Fund $25.00 $10,000
Morgan Grenfell Municipal Bond Fund $25.00 $10,000
Morgan Grenfell Short-Term Fixed Income Fund $25.00 $10,000
Morgan Grenfell Short-Term Municipal Bond $25.00 $10,000
Morgan Grenfell Total Return Bond Fund $25.00 $10,000
Morgan Grenfell High Yield Bond Fund $25.00 $10,000
Morgan Grenfell Smaller Companies Fund $25.00 $10,000
Morgan Grenfell Micro Cap Fund $25.00 $10,000
Morgan Grenfell Large Cap Growth Fund $25.00 $10,000
Morgan Grenfell International Select Equity Fund $25.00 $10,000
Morgan Grenfell Global Equity Fund $25.00 $10,000
Morgan Grenfell European Equity Fund $25.00 $10,000
Morgan Grenfell New Asia Fund $25.00 $10,000
Morgan Grenfell International Small Cap Equity Fund $25.00 $10,000
Morgan Grenfell Japanese Small Cap Equity Fund $25.00 $10,000
Morgan Grenfell Emerging Markets Equity Fund $25.00 $10,000
Morgan Grenfell Core Global Fixed Income Fund $25.00 $10,000

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<PAGE>

Morgan Grenfell Global Fixed Income Fund $25.00 $10,000
Morgan Grenfell International Fixed Income Fund $25.00 $10,000
Morgan Grenfell Emerging Markets Debt Fund $25.00 $10,000
Morgan Grenfell Emerging Local Currency Debt Fund $25.00 $10,000

<PAGE>

Exhibit 99.Q

POWER OF ATTORNEY

The undersigned Trustees and officer, as indicated respectively below, of
Morgan Grenfell Investment Trust, a Delaware business trust (the "Trust"), each
hereby constitutes and appoints the Secretary and each Assistant Secretary of
the Trust, each of them with full powers of substitution, as his or her true and
lawful attorney-in-fact and agent to execute in his or her name and on his or
her behalf in any and all capacities the Registration Statements on Form N-1A
and Form N-14, and any and all amendments thereto, and all other documents,
filed by the Trust with the Securities and Exchange Commission (the "SEC") under
the Investment Company Act of 1940, as amended, and (as applicable) the
Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trust to comply with such Acts, the rules, regulations and requirements of the
SEC, and the securities or Blue Sky laws of any state or other jurisdiction and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the SEC and such other jurisdictions, and the undersigned each
hereby ratifies and confirms as his or her own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents has, and may exercise, all
of the powers hereby conferred. The undersigned each hereby revokes any Powers
of Attorney previously granted with respect to the Trust concerning the filings
and actions described herein.

IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her
hand as of the 15th day of October, 1999.

SIGNATURES Title

_____________________________________ Trustee
Paul K. Freeman

/s/ Graham E. Jones Trustee
- -------------------------------------
Graham E. Jones

/s/ Hugh G. Lynch Trustee
- -------------------------------------
Hugh G. Lynch
<PAGE>

/s/ William N. Searcy Trustee
- -------------------------------------
William N. Searcy

/s/ Edward T. Tokar Trustee
- --------------------------------------
Edward T. Tokar

/s/ Amy M. Olmert Treasurer
- --------------------------------------
Amy M. Olmert