DEUTSCHE ASSET MANAGEMENT, N-14, 2000-05-12

DEUTSCHE ASSET MANAGEMENT
N-14, 2000-05-12

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As filed with the Commission on May 10, 2000
1933 Act File No. _________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.
Post-Effective Amendment No.

MORGAN GRENFELL INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)

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

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

Daniel O. Hirsch, Esq. Copies to: Christopher P. Harvey, Esq.
One South Street Hale & Dorr LLP
Baltimore, Maryland 21202 60 State Street
(Name and Address of Agent Boston, MA 02109
for Service)

Title of Securities Being Registered:
Shares of beneficial interest, par value $.001 per share

No filing fee is due because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.

Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.

It is proposed that this filing will become effective on June , 2000 pursuant to
Rule 488 under the Securities Act of 1933.

<PAGE>
INTERMEDIATE TAX FREE
(A SERIES OF BT INVESTMENT FUNDS)
ONE SOUTH STREET
BALTIMORE, MD 21202

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR JULY ---, 2000

THIS IS THE FORMAL AGENDA FOR A SPECIAL MEETING AND ANY ADJOURNMENTS THEREOF
(THE "MEETING") OF SHAREHOLDERS OF YOUR MUTUAL FUND. IT TELLS YOU WHAT MATTERS
WILL BE VOTED ON AND, IN CASE YOU WANT TO ATTEND THIS MEETING IN PERSON, THE
TIME AND PLACE OF THE MEETING.

To the shareholders of Intermediate Tax Free ("Tax Free Fund"):

A Meeting of Tax Free Fund shareholders will be held at One South Street,
Baltimore, MD 21202 on July ___, 2000 at 10:00 a.m., Eastern time, to consider
the following:

1. A proposal to approve an Agreement and Plan of Reorganization between
Tax Free Fund and Municipal Bond ("Municipal Fund"). Under this
Agreement, Tax Free Fund would transfer all of its assets to Municipal
Fund in exchange for Institutional shares of Municipal Fund. These
shares would be distributed proportionately to you and the other
shareholders of Tax Free Fund. Municipal Fund would also assume Tax
Free Fund's stated liabilities. YOUR BOARD OF TRUSTEES RECOMMENDS THAT
YOU VOTE FOR THIS PROPOSAL.

2. Any other business that may properly come before the Meeting.

Shareholders of record as of the close of business on June 2, 2000 are entitled
to vote at the Meeting and any adjournments thereof.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
RETURN THE ENCLOSED PROXY CARD. YOU MAY ALSO VOTE YOUR SHARES BY CALLING THE
TOLL-FREE NUMBER ON YOUR PROXY CARD OR BY LOGGING ON TO THE INTERNET AT
WWW.PROXYVOTE.COM. IF SHAREHOLDERS DO NOT RETURN THEIR PROXIES IN SUFFICIENT
NUMBERS, TAX FREE FUND WILL INCUR ADDITIONAL COSTS TO SOLICIT PROXIES.

/s/Daniel O. Hirsch
Daniel O. Hirsch
Secretary

JUNE __, 2000

<PAGE>

PROXY STATEMENT OF
INTERMEDIATE TAX FREE
(A SERIES OF BT INVESTMENT FUNDS)

PROSPECTUS FOR
MUNICIPAL BOND -- INSTITUTIONAL CLASS
(A SERIES OF MORGAN GRENFELL INVESTMENT TRUST)

This proxy statement and prospectus sets forth concisely the information you
should know before voting on the proposed reorganization of Intermediate Tax
Free, One South Street, Baltimore, MD 21202, 1-800-730-1313 ("Tax Free Fund")
into Municipal Bond, One South Street, Baltimore, MD 21202 ("Municipal Fund").
Please read it carefully and retain it for future reference.

Both Municipal Fund and Tax Free Fund (each a "Fund" and together the "Funds" )
are open-end mutual funds investing in investment grade municipal securities.
Municipal Fund's investment objective is a high level of income exempt from
regular federal income tax, consistent with the preservation of capital and Tax
Free Fund's investment objective is a high level of current income exempt from
federal income tax consistent with moderate risk of capital.

HOW THE REORGANIZATION WILL WORK

[ ] Tax Free Fund will transfer all of its assets to Municipal Fund.
Municipal Fund will assume Tax Free Fund's stated liabilities.

[ ] Municipal Fund will issue Institutional shares to Tax Free Fund in an
aggregate amount equal to the value of the assets it receives, less the
liabilities it assumes, in the reorganization. These Institutional
shares will be distributed to Tax Free Fund's shareholders in
proportion to their holdings in Tax Free Fund on the reorganization
date.

[ ] As described below, the reorganization will be tax-free for federal
income tax purposes.

[ ] Tax Free Fund will be liquidated and terminated, and you will be a
shareholder of Municipal Fund.

AN INVESTMENT IN MUNICIPAL FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

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.

- - - - - - - - - - - --------------------------------------------------------------------------------
WHERE TO GET MORE INFORMATION
- - - - - - - - - - - --------------------------------------------------------------------------------

Prospectus of Municipal Fund dated 2/28/00. In the same envelope as this
proxy statement and
prospectus.

- - - - - - - - - - - ------------------------------------------------
Municipal Fund's annual report to shareholders
dated 10/31/99.
- - - - - - - - - - - --------------------------------------------------------------------------------
Prospectus of Tax Free Fund dated 1/31/00. On file with the Securities
and Exchange Commission
- - - - - - - - - - - ------------------------------------------------ ("SEC") and available at no
Tax Free Fund's annual report to shareholders charge by calling
dated 9/30/99 and semi-annual report dated 1-800-730-1313 or writing to
3/21/00. us at the address shown below.
- - - - - - - - - - - ------------------------------------------------
A statement of additional information dated
June __, 2000 contains additional information
about both Municipal Fund and Tax Free Fund,
respectively.
- - - - - - - - - - - ------------------------------------------------ -------------------------------

To ask questions about this proxy statement and Call our toll-free telephone
prospectus. number: 1-800-730-1313 or
write to us at Service Center,
P.O. Box 219210, Kansas City,
MO 64121-9210.
- - - - - - - - - - - ------------------------------------------------ -------------------------------

The date of this proxy statement and prospectus is June __, 2000.

<PAGE>
TABLE OF CONTENTS

Page
----
INTRODUCTION 1

SUMMARY 1

THE REORGANIZATION 6

CAPITALIZATION 10

COMPARISON OF BUSINESS TRUSTS UNDER
DELAWARE AND MASSACHUSETTS LAW 11

ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 12

BOARDS' EVALUATIONS AND RECOMMENDATIONS 13

VOTING RIGHTS AND REQUIRED VOTE 13

INFORMATION CONCERNING THE MEETING 14

OWNERSHIP OF SHARES OF THE FUNDS 15

EXPERTS 16

AVAILABLE INFORMATION 16

ADDITIONAL INFORMATION

A. Agreement and Plan of Reorganization between Municipal Fund and Tax
Free Fund(attached to this proxy statement and prospectus)

B. Prospectus dated February 28, 2000 of Municipal Fund

<PAGE>
INTRODUCTION

This proxy statement and prospectus is being used by the Board of Trustees of
Tax Free Fund to solicit proxies to be voted at a Special Meeting ( the
"Meeting" ) of shareholders of Tax Free Fund, or any adjournment of the Meeting.
The Meeting will be held at One South Street, Baltimore, MD 21202 on July ___,
2000 at 10:00 a.m., Eastern Time. The purpose of the Meeting is to consider a
proposal to approve an Agreement and Plan of Reorganization providing for the
reorganization of Tax Free Fund into Municipal Fund. This proxy statement and
prospectus and a proxy card are being mailed to Tax Free Fund's shareholders on
or about June ___, 2000.

WHO IS ELIGIBLE TO VOTE?

Tax Free Fund shareholders of record on June 2, 2000 are entitled to attend and
vote at the Meeting or any adjournments thereof. Each share of Tax Free Fund
outstanding on June 2, 2000 is entitled to one vote. Shares represented by
properly executed proxies, or shares voted by telephone or on the Internet,
unless revoked before or at the Meeting, will be voted according to
shareholders' instructions. If you sign a proxy card, but do not fill in a vote,
your shares will be voted to approve the Agreement. If any other business comes
before the Meeting, your shares will be voted at the discretion of the persons
named as proxies.

SUMMARY

The following is a summary. More complete information appears later in this
proxy statement. You should read the entire proxy statement and prospectus and
the enclosed exhibits carefully because they contain details that are not in the
summary.

COMPARISON OF MUNICIPAL FUND AND TAX FREE FUND
<TABLE>
<CAPTION>
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
MUNICIPAL FUND TAX FREE FUND
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
<S> <C> <C>
GENERAL A diversified series of Morgan Grenfell A diversified series of BT Investment
Investment Trust ("MG Trust"). MG Trust Funds ("BT Trust"). BT Trust is an
is an open-end management investment open-end management investment company
company organized as a Delaware business organized as a Massachusetts business
trust. trust.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
INVESTMENT Municipal Fund invests directly in Tax Free Fund is a feeder fund in a
STRUCTURE securities, as described below. master-feeder structure, which means that
it invests all of its assets in a master
portfolio, the Intermediate Tax Free
Portfolio ("Tax Free Portfolio"). Tax
Free Portfolio has the same investment
objective as Tax Free Fund. All
references to Tax Free Fund in this proxy
statement and prospectus include Tax Free
Portfolio where appropriate.
---------------------------- ------------------------------------------- -------------------------------------------
NET ASSETS AS OF $xxx,xxx,xxx.xxx $x,xxx,xxx.xxx
JUNE 2, 2000
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
INVESTMENT Deutsche Asset Management, Inc. ("DAMI") Bankers Trust Company ("BT") is the
ADVISERS is Municipal Fund's investment adviser. investment adviser of Tax Free Portfolio,
in which Tax Free Fund invests.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
MUNICIPAL FUND TAX FREE FUND
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
<S> <C> <C>
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
CONTROL OF INVESTMENT DAMI and BT are indirect wholly owned subsidiaries of Deutsche Bank A.G., an
ADVISERS international commercial and investment-banking group.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
INVESTMENT OBJECTIVE The Fund seeks a high level of income The Fund invests for a high level of
exempt from regular federal income tax, current income exempt from Federal income
consistent with the preservation of capital. tax consistent with moderate risk of capital.

- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
PORTFOLIO MANAGERS The Municipal Fund is managed by David Gary Pollack, a principal of B T, is the
Baldt, Managing Director of DAMI, Ted portfolio manager for Tax Free Fund.
Manges, Daniel Scholl, and Susan Beck,
each a Vice President of DAMI.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
PRINCIPAL INVESTMENTS Each Fund invests primarily (at least 80% of its net assets) in municipal securities
that are exempt from federal income tax.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
RESTRICTIONS ON Municipal Fund does not have a Tax Free Fund may invest up to 20%
INVESTMENTS restriction on the percentage of assets of its assets in obligations
that may be invested in obligations the interest on which is subject to the
the interest on which is subject to federal alternative minimum tax.
the federal alternative minimum
tax.
------------------------------------------- -------------------------------------------
Municipal Fund may invest 25% or more of Tax Free Fund may invest in private
its total assets in private activity and activity bonds if the interest paid on
industrial development bonds if the them is exempt from regular federal
interest paid on them is exempt from income tax.
regular federal income tax.
------------------------------------------- -------------------------------------------
Each Fund invests primarily in high quality bonds (those rated within the top three
rating categories). Municipal Fund may invest up to 15% of its assets in 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 the security.
---------------------------------------------------------------------------------------
Each Fund may invest up to 20% of its total assets in taxable securities to maintain
liquidity.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
PRINCIPAL STRATEGIES Municipal Fund generally uses a Tax Free Fund seeks to increase its
"bottom-up" approach to picking income primarily by managing the duration
securities. The portfolio managers focus of its portfolio. Tax Free Fund seeks a
on the securities and sectors they current yield from interest income that
believe are undervalued relative to the is greater than that generally obtainable
market, rather than relying on interest from short-term tax-exempt bonds with the
rate forecasts. highest investment ratings.

Issuer research lies at the heart of the The portfolio manager adjusts the average
investment process. In selecting duration of the bonds held by the Fund
individual securities for investment, the according to current market and credit
portfolio managers: conditions and his assessment of
prospective changes in interest rate
o Assign a relative value, based forecasts.
on creditworthiness, cash flow and price,
to each bond. o If the manager's analysis
o Use credit analysis to determine indicates that yields are not likely to
the issuer's ability to fulfill its change, the manager attempts to align the
contracts. Fund's average duration to that of the
o Compare each bond with a U.S. intermediate-duration municipal market as
Treasury instrument to develop a whole.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
MUNICIPAL FUND TAX FREE FUND
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
<S> <C> <C>
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
PRINCIPAL STRATEGIES a theoretical intrinsic value. They look o If the manager expects yields to
(continued) to exploit any inefficiencies between rise, the manager will shorten the Fund's
intrinsic value and market trading price. duration by buying shorter maturity bonds
o Subordinate sector weightings to and selling longer maturity bonds, a
individual bonds that may add tactic that seeks to insulate the value
above-market value. of Fund shares from falling bond prices.
o If the manager expects yields to
Municipal Fund intends to maintain a fall, the manager will lengthen the
dollar weighted effective average Fund's duration by selling shorter
portfolio maturity of five to ten years. maturity bonds and buying bonds with
maturities of up to 20 years to capture
the gain in prices.

Tax Free Fund's duration can vary
approximately 12 months in either
direction from the duration of the whole
intermediate-term market.

Tax Free Fund also attempts to increase
current income by capturing temporary
variations in the "spread" among
different kinds of municipal bonds.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
TEMPORARY DEFENSIVE Each Fund may depart from its principal investment strategies in order to take a
POSITIONS temporary defensive position in response to adverse market, economic or political
conditions.
- - - - - - - - - - - --------------------------------------------------------------------------------------------------------------------
PRINCIPAL INVESTMENT RISKS
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
General You could lose money on your investment in either Fund. There is no guarantee that
either Fund will achieve its investment objective.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Interest rate risk The value of each Fund will fluctuate inversely with changes in interest rates.
Typically, a rise in interest rates causes a decline in the market value of fixed
income securities and vice versa.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Prepayment Risk As interest rates decline, the issuers of securities held by each Fund may prepay
principal earlier than scheduled, forcing the Fund to reinvest in lower yielding
securities. As interest rates increase, slower than expected principal payments may
extend the average life of fixed income securities, locking in below-market interest
rates and reducing the value of these securities.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Credit risk Each Fund faces the risk that the creditworthiness of the issuers may decline,
causing the value of the bonds to decline. In addition, issuers of securities owned
by a Fund may default on their obligations to pay principal and/or interest or may
have their credit ratings downgraded.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Fixed income securities rated in the fourth highest
category have speculative characteristics. These
securities involve greater risk of loss than higher
quality securities and are more sensitive to
changes in the issuer's capacity to pay.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
MUNICIPAL FUND TAX FREE FUND
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
<S> <C> <C>
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Maturity Risk Prices of each Fund's fixed income securities with longer effective maturities are
more sensitive to interest rate changes than those with shorter effective maturities.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Tax Liability Risk Distributions by each 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 that a greater percentage of the Fund's investments will produce taxable
income, resulting in a lower tax-adjusted return.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Market Risk Although individual securities may outperform the market, the entire market may
decline as a result of rising interest rates, regulatory developments or
deteriorating economic conditions.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------

BUYING, EXCHANGING AND REDEEMING SHARES
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Each Fund calculates its net asset value per share (NAV) at the close of regular
trading on The New York Stock Exchange (NYSE) on each business day. Each Fund's
Net asset value portfolio securities are valued either based on market quotations or, if market quotations
are unavailable, by the method that most accurately reflects their fair value.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
Classes of shares Municipal Fund offers two classes of Tax Free Fund has only one class of
shares: Institutional shares and shares, which is offered without a sales
Investment shares. Both Institutional charge.
and Investment shares are offered to the
public without a sales charge. Only
Institutional shares are being offered to
Tax Free Fund shareholders in this proxy
statement and prospectus.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
Rule 12b-1 and Institutional shares are not subject to Tax Free Fund shares are not subject to
service fees any Rule 12b-1 or service fee. any Rule 12b-1 or service fee.
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
Buying and selling shares Investors may purchase or redeem shares either from authorized brokers or directly
from the Fund.
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
Minimum investment Institutional shares: $250,000 Initial: $2,500
amounts Subsequent: $250
- - - - - - - - - - - ---------------------------- ------------------------------------------- -------------------------------------------
Exchanging shares Shares may be exchanged for shares of another Deutsche Asset Management mutual fund
up to four times a year (from the date of your first exchange).
- - - - - - - - - - - ---------------------------- ---------------------------------------------------------------------------------------
</TABLE>

Municipal Fund will waive the minimum investment amount for any Tax Free Fund
account that, after the reorganization, contains less than the minimum
investment amount required for Municipal Fund.

<PAGE>

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Institutional shares of Municipal Fund or shares of Tax Free Fund. The table
also shows pro forma expenses of Institutional shares of Municipal Fund
following the proposed reorganization.

ANNUAL FEES AND EXPENSES AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
------------------------------------------------- -------------------- -------------------------- ----------------------------
Municipal Fund Tax Free Fund(1) Municipal Fund
Institutional Investment Class Institutional Class
Class Fiscal Year End
Fiscal Year End September 30, 1999 Pro Forma
October 31, 1999
------------------------------------------------- -------------------- -------------------------- ----------------------------
<S> <C> <C> <C>
Management fees 0.40% 0.40% 0.40%
------------------------------------------------- -------------------- -------------------------- ----------------------------
Distribution (12b-1) and/or service fees None None None
------------------------------------------------- -------------------- -------------------------- ----------------------------
Other expenses 0.18% 1.01% 0.18%
------------------------------------------------- -------------------- -------------------------- ----------------------------
Total annual Fund operating expenses 0.58% 1.41% 0.58%
------------------------------------------------- -------------------- -------------------------- ----------------------------
Less fee waivers or expense reimbursements (2) (0.03)% (0.56%) (0.03%)
------------------------------------------------- -------------------- -------------------------- ----------------------------
Net expenses 0.55% 0.85% 0.55%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Information on the annual operating expenses reflects the expenses of both
Tax Free Fund and Tax Free Portfolio, the master fund in which Tax Free Fund
invests its assets.

(2) The investment adviser and administrator for Municipal Fund have
contractually agreed for the 16-month period from the Fund's fiscal year end
of October 31, 1999, to waive their fees and reimburse expenses so that the
total expenses of Municipal Fund will not exceed 0.55%. Tax Free Fund's
adviser and administrator have contractually agreed for the 16-month period
from the Fund's fiscal year end of September 30, 1999, to waive their fees and
reimburse expenses so that the total expenses of Tax Free Fund will not exceed
0.85%.

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

THE REORGANIZATION

TERMS OF THE REORGANIZATION

The Board of each Fund has approved the Agreement and Plan of Reorganization
(the "Agreement"), a copy of which is attached as Exhibit A. The Agreement
provides for reorganization on the following terms:
<PAGE>

[ ] The reorganization is scheduled to occur at 5:00 p.m., Eastern
Time, on August___, 2000, but may occur on a later date agreed to by the
parties.

[ ] Prior to the reorganization Tax Free Fund will redeem its entire
interest in Tax Free Portfolio in exchange for its pro rata share of the
portfolio securities and other assets of Tax Free Portfolio. In the
reorganization, Tax Free Fund will transfer all of its assets to
Municipal Fund, and in exchange Municipal Fund will assume Tax Free
Fund's stated liabilities and issue Institutional shares as described
below.

[ ] Municipal Fund will issue Institutional shares to Tax Free Fund in
an amount equal to the value of the assets received by Municipal Fund,
less the liabilities assumed by Municipal Fund in the transaction. These
shares will immediately be distributed by Tax Free Fund to Tax Free
Fund's shareholders in proportion to their holdings in Tax Free Fund on
the reorganization date. As a result, shareholders of Tax Free Fund will
become Institutional shareholders of Municipal Fund.

[ ] The net asset value of both Funds will be computed as of the close
of regular trading on The New York Stock Exchange (normally 4:00 p.m.,
Eastern Time), on the reorganization date.

[ ] In connection with the reorganization, Tax Free Fund will be
terminated and liquidated.

The following diagram shows how the reorganization will be carried out.
<TABLE>
<CAPTION>
<S> <C> <C>
- - - - - - - - - - - ----------------------- --------------------
Tax Free Fund Municipal Fund
transfers its assets receives assets
and liabilities to ->->->->->->->->->->->->->->->->->->->->->->->->->-> from and assumes
Municipal Fund liabilities of Tax
Free Fund
- - - - - - - - - - - ----------------------- --------------------
Tax Free Fund Tax Free Fund Municipal Fund
shareholders receive receives these Institutional
Municipal Fund <-<-<-<-<-<- shares and <-<-<-<-<-<- shares are issued
Institutional shares distributes them
to its shareholders
- - - - - - - - - - - ----------------------- --------------------
</TABLE>

TAX STATUS OF THE REORGANIZATION

The reorganization will not take place unless Tax Free Fund and Municipal Fund
receive from Hale and Dorr LLP, counsel to Municipal Fund, a satisfactory
opinion substantially to the effect that:

[ ] The acquisition by Municipal Fund of all of the assets of Tax
Free Fund solely in exchange for the issuance of Institutional
shares of Municipal Fund to Tax Free Fund and the assumption
of certain scheduled Tax Free Fund liabilities by Municipal
Fund, followed by the distribution by Tax Free Fund, in
liquidation of Tax Free Fund, of Institutional shares of
Municipal Fund to the shareholders of Tax Free Fund in
exchange for their Tax Free Fund shares of beneficial interest
and the termination of Tax Free Fund, will constitute a
reorganization within the meaning of Section 368(a) of the
Code, and Tax Free Fund and Municipal Fund will each be "a
party to a reorganization" within the meaning of Section
368(b) of the Code.

[ ] No gain or loss will be recognized by Tax Free Fund upon (i)
the transfer of all of its assets to Municipal Fund solely in
exchange for the issuance of Institutional shares of Municipal
Fund to Tax Free Fund and the assumption of certain scheduled
Tax Free Fund liabilities by Municipal Fund and (ii) the
distribution by Tax Free Fund of such Institutional shares of
Municipal Fund to the shareholders of Tax Free Fund.
<PAGE>

[ ] No gain or loss will be recognized by Municipal Fund upon the
receipt of the assets of Tax Free Fund solely in exchange for
the issuance of Institutional shares of Municipal Fund to Tax
Free Fund and the assumption of certain scheduled Tax Free
Fund liabilities by Municipal Fund.

[ ] The basis of the assets of Tax Free Fund acquired by Municipal
Fund will be, in each instance, the same as the basis of those
assets in the hands of Tax Free Fund immediately prior to the
transfer.

[ ] The tax holding period of the assets of Tax Free Fund in the
hands of Municipal Fund will, in each instance, include Tax
Free Fund's tax holding period for those assets.

[ ] The shareholders of Tax Free Fund will not recognize gain or
loss upon the exchange of all of their shares of beneficial
interest of Tax Free Fund solely for Institutional shares of
Municipal Fund as part of the transaction.

[ ] The basis of Institutional shares of Municipal Fund received
by Tax Free Fund shareholders in the transaction will be the
same as the basis of the shares of beneficial interest of Tax
Free Fund surrendered in exchange therefor.

[ ] The tax holding period of the class of Institutional shares of
Municipal Fund received by Tax Free Fund shareholders will
include, for each shareholder, the tax holding period for the
shares of beneficial interest of Tax Free Fund surrendered in
exchange therefor, provided that Tax Free Fund shares were
held as capital assets on the date of the exchange.

As Municipal Fund shareholders, former Tax Free Fund shareholders will become
liable for taxes payable on their proportionate share of any taxable income and
capital gains recognized by Municipal Fund. These may include not only taxable
income and gains recognized after the reorganization, but also taxable income
and capital gains recognized but not distributed prior to the reorganization and
taxable income and capital gains attributable to pre-reorganization periods but
not recognized until after the reorganization.

REASONS FOR THE PROPOSED REORGANIZATION

The Board of Trustees of Tax Free Fund believes that the proposed reorganization
will be advantageous to the shareholders of Tax Free Fund for several reasons.
The Board of Trustees considered the following matters, among others, in
approving the reorganization at a meeting held on September 8, 1999.

OVERLAPPING INVESTMENT STRATEGY AND MARKET NICHE. Tax Free Fund and Municipal
Fund have significantly similar investment objectives and investment strategies.
In addition, the portfolios of both Funds have a generally similar average
maturity and duration, as well as comparable credit ratings. Due to the
acquisition of BT by Deutsche Bank A.G. on June 4, 1999, the same sales force is
now marketing both Funds. Because of the confusion which might be caused by
offering clients competing intermediate-duration municipal bond Funds, it is not
advantageous to operate and market the Tax Free Fund separately from the
Municipal Fund.

GREATER DIVERSIFICATION. As described further below, the Municipal Fund is
significantly larger than the Tax Free Fund. Shareholders of both Funds may be
better served by a combined Fund offering greater diversification. To the extent
that combining the Funds' assets into a single portfolio creates a larger asset
base, Municipal Fund's investment portfolio can achieve greater diversification
after the reorganization than is currently possible for both Funds and
particularly the significantly smaller Tax Free Fund. Greater diversification is
expected to benefit the shareholders of both Funds because it may reduce the
negative effect that the adverse performance of any one security may have on the
performance of the entire portfolio.
<PAGE>

INVESTMENT PERFORMANCE. Municipal Fund Institutional shares received in the
reorganization will provide Tax Free Fund's shareholders with substantially the
same investment advantages as they currently have at a comparable level of risk.
Tax Free Fund's Board of Trustees also considered the performance history of
each Fund, which is shown in the table below. For the comparable periods since
Municipal Fund's inception date of December 13, 1991, Municipal Fund
Institutional Class has outperformed Tax Free Fund. The Trustees further noted
that due to the overlapping investment strategy, market niche and the similar
marketing channels of these Funds, all shareholders may benefit by the greater
diversification and the possibility of reduced expenses due to the combination
of the Funds.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
--------------------------------------- ------------------------------------- -------------------------------------
FOR THE PERIOD ENDING MUNICIPAL FUND TAX FREE FUND
MARCH 31, 2000 INSTITUTIONAL SHARES
(INCEPTION 12/13/91) (INCEPTION 07/20/92)
--------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
1 year 0.03% (0.23)%
--------------------------------------- ------------------------------------- -------------------------------------
3 years 4.65% 4.47%
--------------------------------------- ------------------------------------- -------------------------------------
5 years 5.54% 4.83%
--------------------------------------- ------------------------------------- -------------------------------------
Inception 7.08% 4.80%
--------------------------------------- ------------------------------------- -------------------------------------
- - - - - - - - - - - --------
(1) Past performance offers no indication of how the Fund will perform in the future.
</TABLE>

POSSIBILITY OF REDUCED EXPENSES. A combined Fund offers economies of scale that
may lead to better control over expenses than is currently possible,
particularly for Tax Free Fund. Both Funds incur substantial costs for
accounting, legal, transfer agency services, insurance, and custodial and
administrative services. As shown in the Fees and Expenses table, the Total
Annual Fund Operating Expenses of Municipal Fund Institutional shares are lower
than the total for the Tax Free Fund, both on a gross and net basis.

BENEFITS TO MUNICIPAL FUND. The Board of Trustees of Municipal Fund considered
at a meeting held on August 19, 1999, that the reorganization presents an
excellent opportunity for Municipal Fund to acquire investment assets without
the obligation to pay commissions or other transaction costs that are normally
associated with the purchase of portfolio securities. This opportunity provides
an economic benefit to Municipal Fund and its shareholders.

BENEFITS TO ADVISORS AND OTHER SERVICE PROVIDERS. The Board of Trustees of each
Fund considered that the Fund's advisers, administrators and distributors might
also benefit from the reorganization. For example, the advisers and
administrators might function more efficiently and therefore realize cost
savings from a consolidated portfolio management effort and from the need to
prepare fewer prospectuses, reports and regulatory filings. The trustees
believe, however, that these savings will not amount to a significant economic
benefit.

ADDITIONAL TERMS OF AGREEMENT AND PLAN OF REORGANIZATION

SURRENDER OF SHARE CERTIFICATES. Shareholders of Tax Free Fund whose shares are
represented by one or more share certificates should, before the reorganization
date, either surrender their certificates to Tax Free Fund or deliver to Tax
Free Fund a lost certificate affidavit, in the form and accompanied by any
surety bonds that Tax Free Fund may require (collectively, an "Affidavit"). On
the reorganization date, all certificates that have not been surrendered to Tax
Free Fund will be cancelled, will no longer evidence ownership of Tax Free
Fund's shares and, if not otherwise surrendered, will evidence ownership of
Municipal Fund Institutional shares. Shareholders may not redeem or transfer
Municipal Fund Institutional shares received in the

<PAGE>
reorganization until they have surrendered their Tax Free Fund share
certificates or delivered an Affidavit. Municipal Fund will not issue share
certificates in the reorganization.

CONDITIONS TO CLOSING THE REORGANIZATION. The obligation of Tax Free Fund to
consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by Municipal Fund of all its obligations
under the Agreement and the receipt of an officers' certificate from Municipal
Fund (see Agreement, paragraphs 6 and 7).

The obligation of Municipal Fund to consummate the reorganization is also
subject to the satisfaction of certain conditions under the Agreement including
Tax Free Fund having distributed to its shareholders for its taxable year ending
on the closing date of the Reorganization: (1) all of its investment company
taxable income (prior to reduction by any dividends paid deduction); (2) all of
its net capital gain, after reduction by any capital loss carry forward; and (3)
all of the excess of (i) its interest income excludable from federal gross
income over (ii) the related deductions disallowed under the Code (see
Agreement, paragraphs 6 and 7).

The obligations of both Funds are subject to, among other things, the approval
of the Agreement by the necessary vote of the outstanding shares of Tax Free
Fund, in accordance with the provisions of Tax Free Fund's declaration of trust
and by-laws. The Funds' obligations are also subject to several other
conditions, including the receipt of all consents, orders and permits necessary
to consummate the reorganization and the receipt of a favorable opinion of
counsel for the Municipal Fund as to the federal income tax consequences of the
reorganization.

TERMINATION OF AGREEMENT. Tax Free Fund or Municipal Fund may mutually agree to
terminate the Agreement (even if the shareholders of Tax Free Fund have already
approved it) at any time before the reorganization date. Either Fund may also
terminate the Agreement if the other Fund has materially breached any
representation, warranty or agreement contained in the Agreement or if any
condition to closing the reorganization cannot or will not be met.

EXPENSES OF THE REORGANIZATION. Each fund will bear its own expenses in
connection with the reorganization.

CAPITALIZATION

The following table sets forth the capitalization of each Fund as of March 31,
2000 and the PRO FORMA combined capitalization of both Funds as if the
reorganization had occurred on that date. The table reflects PRO FORMA exchange
ratios of approximately 0.969 Municipal Fund Institutional shares being issued
for each share of Tax Free Fund. If the reorganization is consummated as
proposed, the actual exchange ratios on the reorganization date may vary from
the exchange ratios indicated due to changes in any of a number of factors,
including:

[ ] The market value of the portfolio securities of both
Municipal Fund and Tax Free Fund between March 31, 2000 and
the reorganization date.

[ ] Changes in the amount of undistributed net investment income
and net realized capital gains of Municipal Fund and Tax Free
Fund during that period resulting from income and
distributions.

[ ] Changes in the accrued liabilities of Municipal Fund and Tax
Free Fund during the same period.

<PAGE>
<TABLE>
<CAPTION>
------------------------------- ----------------------- --------------------------- -------------------------------
MUNICIPAL FUND
CAPITALIZATION AS TAX FREE FUND MUNICIPAL FUND PRO FORMA COMBINED(1)
OF MARCH 31, 2000 INSTITUTIONAL CLASS INSTITUTIONAL CLASS
------------------------------- ----------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
Net assets $19,252,541 $474,092,667 $493,345,208
------------------------------- ----------------------- --------------------------- -------------------------------
Net asset value per share $10.34 $10.67 $10.67
------------------------------- ----------------------- --------------------------- -------------------------------
Shares outstanding 1,862,775 44,428,225 46,232,587
------------------------------- ----------------------- --------------------------- -------------------------------
</TABLE>

(1) If the reorganization had taken place on March 31, 2000 Tax Free Fund would
have received 1,804,362 Institutional shares of Municipal Fund, which would have
been available for distribution to the shareholders of Tax Free Fund.

It is impossible to predict how many Institutional shares of Municipal Fund will
actually be received and distributed by Tax Free Fund on the reorganization
date. The table should not be relied upon to determine the amount of Municipal
Fund Institutional shares that will actually be received and distributed.

COMPARISON OF BUSINESS TRUSTS UNDER DELAWARE AND MASSACHUSETTS LAW

Tax Free Fund is organized as a Massachusetts business trust. Municipal Fund is
organized as a Delaware business trust. The following is a comparison of the
laws of Massachusetts and Delaware applicable to business trusts.

Limitation of Shareholders' and Funds' Liability. Delaware law provides that the
shareholders of a Delaware business trust shall not be subject to liability for
the debts or obligations of the trust. Under Massachusetts law, shareholders of
a Massachusetts business trust (such as Tax Free Fund) may, under certain
circumstances, be personally liable for the debts and obligations of that trust.
Although the risk of liability of shareholders of a Massachusetts business trust
who do not participate in the management of the trust may be remote, Delaware
statutory law may be considered to afford greater protection against potential
shareholder liability. Similarly, Delaware law provides that, to the extent that
a Delaware business trust issues multiple series of shares, each series shall
not be liable for the debts or obligations of any other series, another
potential, although remote, risk in the case of multiple series of a
Massachusetts business trust. While it is frequently assumed that a
Massachusetts business trust will be liable only for its own obligations, there
is no direct statutory or judicial support for that position.

Limitation of Trustee Liability. Delaware law provides that, except to the
extent otherwise provided in a trust's declaration of trust or by-laws, trustees
will not be personally liable to any person (other than the business trust or a
shareholder thereof) for any act, omission or obligation of the business trust
or any trustee thereof. Delaware law also provides that a trustee's actions
under a Delaware business trust's declaration of trust or by-laws will not
subject the trustee to liability to the business trust or its shareholders if
the trustee takes such action in good faith reliance on the provisions of the
business trust's declaration of trust or by-laws. These limitations on liability
under Delaware law are generally consistent with those applicable to directors
of a corporation under Delaware law and may be beneficial in attracting and
retaining qualified persons to act as trustees. The declaration of trust of a
Massachusetts business trust may limit the liability of a trustee who is not
also an officer of the trust for breach of fiduciary duty except for, among
other things, any act or omission not in good faith which involves intentional
misconduct or a knowing violation of law or any transaction from which such
trustee derives an improper direct or indirect financial benefit.

Shareholder Voting. Delaware law provides that a Delaware business trust's
declaration of trust or by-laws may set forth provisions related to voting in
any manner. This provision appears to permit shareholder voting through computer
or electronic media. For an investment company

<PAGE>
with a significant number of shareholders with access to computer or electronic
networks, the use of such voting methods could significantly reduce the costs of
shareholder voting.

Declarations of Trust. Although neither a Delaware business trust nor a
Massachusetts business trust is required to hold annual shareholder meetings,
Delaware law affords to the trustees the ability to adapt the Delaware business
trust to future contingencies without the necessity of holding a special
shareholder meeting. The trustees of a Delaware business trust may have the
power to amend the business trust's governing instrument to create a class or
series of shares of beneficial interest that was not previously outstanding; to
dissolve the business trust; to incorporate the Delaware business trust; to
merge or consolidate with another entity; to sell, lease, exchange, transfer,
pledge or otherwise dispose of all or any part of the business trust's assets;
to cause any series to become a separate trust; and to change the Delaware
business trust's domicile -- all without shareholder vote. Any exercise of
authority by the trustees will be subject to applicable state and federal law.
The flexibility of Delaware business trusts should help to assure that a
Delaware business trust operates under the most advantageous form of
organization and is intended to reduce the expense and frequency of future
shareholder meetings for non-investment-related operational issues.

ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES

The following table shows where in each Fund's prospectus you can find
additional information about the business of the Fund.
<TABLE>
<CAPTION>
--------------------------------------- ---------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN PROSPECTUSES
--------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
MUNICIPAL FUND TAX FREE FUND
--------------------------------------- ------------------------------------- -------------------------------------
RISK/RETURN SUMMARY Overview of Municipal Bond Overview of Intermediate Tax Free
--------------------------------------- ---------------------------------------------------------------------------
Investment objectives/goals Goal
--------------------------------------- ---------------------------------------------------------------------------
Principal investment strategies Core Strategy, Investment Policies and Strategies
--------------------------------------- ---------------------------------------------------------------------------
Principal risks of investing in the Principal Risks of Investing in the Fund, Who Should Consider Investing
Funds: narrative disclosure in the Fund
--------------------------------------- ---------------------------------------------------------------------------
Principal risks of investing in the Total Returns, After Fees and Expenses
Funds: risk/return bar chart and table
--------------------------------------- ---------------------------------------------------------------------------
Fee table Annual Fund Operating Expenses
--------------------------------------- ---------------------------------------------------------------------------
BODY OF PROSPECTUS A Detailed Look at Municipal Bond A Detailed Look at Intermediate Tax
Free
--------------------------------------- ------------------------------------- -------------------------------------
Investment objectives, principal Objective, Strategy, Principal Objective, Strategy, Principal
investment strategies and related Investments, Investment Process, Investments, Investment Process,
risks Other Investments and Risks Risks
--------------------------------------- ---------------------------------------------------------------------------
Management: investment Management of the Fund
Adviser and portfolio manager
--------------------------------------- ---------------------------------------------------------------------------
Shareholder information: Calculating the Fund's Share Price
Pricing of Fund shares
--------------------------------------- ---------------------------------------------------------------------------
Shareholder information: Buying and Selling Fund Shares
Purchase of Fund shares
---------------------------------------
Shareholder information:
Redemption of Fund shares
--------------------------------------- ---------------------------------------------------------------------------
Shareholder information: Dividends and Distributions, Tax Considerations
Dividends and distributions; tax
consequences
--------------------------------------- ---------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------- ---------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN PROSPECTUSES
--------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
MUNICIPAL FUND TAX FREE FUND
--------------------------------------- ------------------------------------- -------------------------------------
Financial highlights Financial Highlights
Information
--------------------------------------- ---------------------------------------------------------------------------
</TABLE>

BOARDS' EVALUATION AND RECOMMENDATION

For the reasons described above, the Board of Trustees of Tax Free Fund,
including the trustees who are not "interested persons" of either Fund or any of
their advisers ("Independent Trustees"), unanimously approved the reorganization
at a meeting held on September 8, 1999. In particular, the Trustees determined
that the reorganization was in the best interests of Tax Free Fund and that the
interests of Tax Free Fund's shareholders would not be diluted as a result of
the reorganization. Similarly, the Board of Trustees of Municipal Fund,
including the Independent Trustees, unanimously approved the reorganization at a
meeting held on August 19, 1999. The Trustees also determined that the
reorganization was in the best interests of Municipal Fund and that the
interests of Municipal Fund's shareholders would not be diluted as a result of
the reorganization.

------------------------------------------------------------------------------
THEREFORE, AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF TAX FREE FUND
INCLUDING THE INDEPENDENT TRUSTEES; RECOMMENDS THAT THE SHAREHOLDERS OF TAX
FREE FUND VOTE "FOR" THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION.
------------------------------------------------------------------------------

VOTING RIGHTS AND REQUIRED VOTE

Each share of Tax Free Fund outstanding on the Record Date is entitled to one
vote. Approval of the above proposal requires the affirmative vote of a majority
of the shares of Tax Free Fund outstanding and entitled to vote. For this
purpose, a majority of the outstanding shares of Tax Free Fund means the vote of
the lesser of:

(1) 67% or more of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares of Tax Free Fund are represented in person or
by proxy, or

(2) more than 50% of the outstanding shares of Tax Free Fund.

Shares of Tax Free Fund represented in person or by proxy, including shares that
abstain or do not vote on the proposal, will be counted for purposes of
determining whether there is a quorum at the Meeting. These include proxies
submitted by a broker or nominee holding shares in "street name" who indicate on
the proxy card that it does not have discretionary authority to vote on the
proposal. Accordingly, an abstention from voting or a "broker non-vote" has the
same effect as a vote against the proposal.

If the required approval of shareholders is not obtained, Tax Free Fund will
continue to engage in business as a separate mutual fund and the Board of
Trustees will consider what further action, if any, may be appropriate.

INFORMATION CONCERNING THE MEETING

SOLICITATION OF PROXIES

In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax, through the Internet or in person by the trustees, officers
and employees of Tax Free Fund or by personnel of Shareholder Communications
Corporation or BT or ICC Distributors, Inc., the distributor of Tax Free Fund's
shares.

<PAGE>
REVOKING PROXIES

A Tax Free Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:

[ ] By filing a written notice of revocation with Tax Free Fund's transfer
agent, or

[ ] By returning before the time of the Meeting a duly executed proxy
with a later date than the proxy being revoked, or

[ ] If a shareholder has executed a proxy but is present at the Meeting
and wishes to vote in person, by notifying the secretary of Tax Free
Fund at the Meeting at any time before the proxy is voted.

Simply attending the Meeting without voting, however, will NOT revoke a
previously executed and returned proxy.

OUTSTANDING SHARES AND QUORUM

As of June 2, 2000, xxx,xxx.xxx shares of Tax Free Fund were outstanding. Only
shareholders of record on June 2, 2000 (the "record date") are entitled to
notice of and to vote at the Meeting and any adjournments thereof. A majority of
the outstanding shares of Tax Free Fund that are entitled to vote will be
considered a quorum for the transaction of business.

OTHER BUSINESS

Tax Free Fund's Board of Trustees knows of no business to be presented for
consideration at the Meeting other than the proposal. If other business is
properly brought before the Meeting, proxies will be voted according to the best
judgment of the persons named as proxies.

ADJOURNMENTS

If a quorum is not present in person or by proxy at the time any session of the
Meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the Meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of Tax Free Fund's shares present in
person or by proxy at the session of the Meeting to be adjourned. If an
adjournment of the Meeting is proposed because there are not sufficient votes in
favor of the proposal, the persons named as proxies will vote those proxies
favoring the proposal in favor of adjournment, and will vote those proxies
against the reorganization against adjournment.

TELEPHONE AND INTERNET VOTING

Tax Free Fund may record votes over the telephone or through the Internet. In
doing so, it will use procedures designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that their instructions have
been properly recorded. Proxies voted over the telephone or through the Internet
may be revoked at any time before they are voted in the same manner that proxies
voted by mail may be revoked.
<PAGE>

OWNERSHIP OF SHARES OF THE FUNDS

To the knowledge of the Funds, as of June 2, 2000, the following persons owned,
of record or beneficially, 5% or more of the outstanding shares of Tax Free Fund
and Municipal Fund (before the reorganization) and would own (after the
reorganization), 5% or more of the shares of Municipal Fund.
<TABLE>
<CAPTION>
--------------------------------------- ------------------- ---------------------------- --------------------------
NAMES AND ADDRESSES OF TAX FREE FUND MUNICIPAL FUND MUNICIPAL FUND
OWNERS OF MORE THAN 5% OF INSTITUTIONAL SHARES INSTITUTIONAL SHARES
SHARES (BEFORE REORGANIZATION) (AFTER REORGANIZATION)
--------------------------------------- ------------------- ---------------------------- --------------------------
<S> <C> <C> <C>
--------------------------------------- ------------------- ---------------------------- --------------------------

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

--------------------------------------- ------------------- ---------------------------- --------------------------
</TABLE>

As of June 2, 2000, the table reflects PRO FORMA exchange ratios of
approximately x.x Municipal Fund Institutional shares being issued for each
share of Tax Free Fund. If the reorganization is consummated, the actual
exchange ratios on the reorganization date may vary from the exchange ratios as
previously discussed.

As of June 2, 2000, the trustees and officers of Tax Free Fund and Municipal
Fund, each as a group, owned in the aggregate less than 1% of the outstanding
shares of their respective Funds.

AVAILABLE INFORMATION

Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission" ). These reports, proxy statements and other
information filed by the Funds can be inspected and copied (at prescribed rates)
at the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C., and at the following regional offices: Chicago (500 West
Madison Street, Suite 1400, Chicago, Illinois) and New York (7 World Trade
Center, Suite 1300, New York, New York).

<PAGE>

Copies of such material can also be obtained by e-mail at [email protected], or
by writing the Public Reference Branch, Office of Consumer Affairs and
Information Services of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549-0102. For information on the Public Reference Section, call the SEC
at 1-202-942-8090. In addition, copies of these documents may be viewed
on-screen or downloaded from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov.

<PAGE>

FORM OF PROXY CARD
BT Investment Funds
INTERMEDIATE TAX FREE
ONE SOUTH STREET, BALTIMORE, MARYLAND
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
10:00 A.M., EASTERN TIME, ON ______, JULY__, 2000

The undersigned hereby appoints Daniel O. Hirsch and Amy M. Olmert to each of
them, with full power of substitution as proxies of the undersigned to vote all
shares of stock that the undersigned is entitled in any capacity to vote at the
above-stated special meeting, and any and all adjournments or postponements
thereof (the "Special Meeting"), on the matters set forth on this Proxy Card,
and, in their discretion, upon all matters incident to the conduct of the
Special Meeting and upon such other matters as may properly be brought before
the Special Meeting. This proxy revokes all prior proxies given by the
undersigned. All properly executed proxies will be voted as directed. If no
instructions are indicated on a properly executed proxy, the proxy will be voted
FOR approval of Proposal I. All ABSTAIN votes will be counted only in
determining the existence of a quorum at the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO THE
INTERMEDIATE TAX FREE FUND. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR"
PROPOSAL I. The appointed proxies will vote on any other business as may
properly come before the Special Meeting or any adjournment thereof.
Receipt of the notice and the Proxy Statement, dated June ___, 2000 (the "Proxy
Statement"), is hereby acknowledged.

To vote by Telephone

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth on the Proxy card and
follow the instructions.

To vote by Internet

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to the Website www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and
follow the instructions.

<PAGE>
Please mark boxes in blue or black ink.
I. Approval of Agreement and Plan of Reorganization between the
Institutional and Investment shares of Municipal Bond and Intermediate
Tax Free, pursuant to which: (a) the Intermediate Tax Free Fund would
transfer all of its assets to Municipal Bond Fund in exchange for
Municipal Bond Fund's assumption of Intermediate Tax Free Fund's
liabilities and the issuance of Institutional shares of Municipal Bond
Fund to be distributed pro rata to Intermediate Tax Free Fund
Investment shares, and (b) Intermediate Tax Free Fund would be
terminated.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

- - - - - - - - - - - --------------------------------------------------------------------------------
PLEASE SIGN AND DATE BELOW AND MAIL THIS PROXY CARD PROMPLY USING THE ENCLOSED
ENVELOPE.

------------------------------------------
(Title or Authority)

------------------------------------------
(Signature)

Dated: [____________________________], 2000
(Joint owners should EACH sign.
Please sign EXACTLY as your name(s)
appears on this card. When signing
as attorney, trustee, executor,
administrator, guardian or corporate
officer, please give your FULL title
below.)

- - - - - - - - - - - ------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT, PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION EXHIBIT A

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____th day of __________, 2000, among (i) Morgan Grenfell Investment
Trust (the "Morgan Grenfell Trust"), a business trust organized under the laws
of the State of Delaware with its principal place of business at One South
Street, Baltimore, Maryland 21202, on behalf of Municipal Bond (the "Acquiring
Fund"), a series of the Morgan Grenfell Trust, and (ii) BT Investment Funds (the
"BT Trust"), a business trust organized under the laws of the Commonwealth of
Massachusetts with its principal place of business at One South Street,
Baltimore, Maryland 21202, on behalf of Intermediate Tax Free Fund (the
"Acquired Fund"), a series of the BT Trust.

This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the United States Internal
Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of (i) the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange for (a) the issuance of
Institutional Class shares of beneficial interest of the Acquiring Fund
(collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund Share")
to the Acquired Fund, and (b) the assumption by the Acquiring Fund of certain
scheduled liabilities of the Acquired Fund, and (ii) the distribution by the
Acquired Fund, on the Closing Date herein referred to or as soon thereafter as
conveniently practicable, of the Acquiring Fund Shares to the shareholders of
the Acquired Fund in liquidation of the Acquired Fund and the termination of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Agreement.

WHEREAS, the Reorganization is intended to qualify as a reorganization
within the meaning of Section 368(a) of the Code;

WHEREAS, the Morgan Grenfell Trust and the BT Trust are each registered
open-end management investment companies, and the Acquired Fund owns securities
that generally are assets of the character in which the Acquiring Fund is
permitted to invest;

WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest;

WHEREAS, the Board of Trustees of the Morgan Grenfell Trust has
determined that the exchange of all of the assets of the Acquired Fund for
shares of the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain liabilities of the Acquired Fund is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing shareholders
of the Acquiring Fund would not be diluted as a result of this transaction;

WHEREAS, the Board of Trustees of the BT Trust has determined that the
exchange of all of the assets of the Acquired Fund for shares of the Acquiring
Fund Shares and the assumption by Acquiring Fund of certain liabilities of the
Acquired Fund is in the best interests of the Acquired Fund shareholders and
that the interests of the existing shareholders of the Acquired Fund would not
be diluted as a result of this transaction.

NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:

1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
INSTITUTIONAL CLASS SHARES OF THE ACQUIRING FUND AND ASSUMPTION OF THE
ACQUIRED FUND'S SCHEDULED LIABILITIES AND LIQUIDATION AND TERMINATION
OF THE ACQUIRED FUND.

1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
agrees to transfer all of its assets to Acquiring Fund as set forth in paragraph
1.2 to the Acquiring Fund free and clear of all liens and encumbrances, and the
Acquiring Fund agrees in exchange therefor: (a) to issue and deliver to the
Acquired Fund the number of Acquiring Fund Shares, including fractional
Acquiring Fund Shares, determined by dividing the value of the Acquired Fund's
net assets transferred to Acquiring Fund, computed in the manner and as of the
time

<PAGE>
and date set forth in paragraph 2.1, by the net asset value of one Acquiring
Fund Share, computed in the manner as of the time and date set forth in
paragraph 2.2; and (b) to assume certain scheduled liabilities of the Acquired
Fund, as set forth in paragraph 1.3. Such transactions shall take place at the
closing provided for in paragraph 3.1 (the "Closing").

1.2. (a) The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all of its property, including, without
limitation, all goodwill, all interests in the name of the Acquired Fund, all
other intangible property and all books and records of the Acquired Fund.

(b) The Acquired Fund has provided the Acquiring Fund with a
list of all of the Acquired Fund's assets as of the date of execution of this
Agreement. The Acquired Fund reserves the right to sell any of these securities
in the ordinary course of its business (except to the extent sales may be
limited by representations made in connection with the issuance of the tax
opinion described in paragraph 7.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other than
securities of the type in which the Acquiring Fund is permitted to invest.

1.3. The Acquired Fund will endeavor to discharge all the Acquired
Fund's known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume all liabilities, expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and Liabilities of the
Acquired Fund prepared by Bankers Trust Company, as administrator of the
Acquired Fund, as of the Valuation Date, in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
Acquiring Fund shall assume only those liabilities of the Acquired Fund
reflected in that unaudited Statement of Assets and Liabilities and shall not
assume any other liabilities, whether absolute or contingent, not reflected
thereon.

1.4. On the Closing Date or as soon thereafter as is conveniently
practicable (the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to the Acquired Fund's shareholders of record determined as
of the close of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares it receives pursuant to paragraph 1.1. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund's shareholders and representing
the respective pro rata number of the Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Acquired Fund will
simultaneously be cancelled on the books of the Acquired Fund, although share
certificates representing interests in the Acquired Fund will represent a number
of Acquiring Fund Shares after the Closing Date as determined in accordance with
paragraph 1.1. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.

1.5. Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. The Acquiring Fund Shares will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.

1.6. Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares on
the books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.

1.7. Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund up to and including the Closing
Date and such later date on which the Acquired Fund is terminated.

1.8. The Acquired Fund shall, following the Closing Date and the making
of all distributions pursuant to paragraph 1.4, be terminated under the laws of
the Commonwealth of Massachusetts and in accordance with its governing
documents.

2. VALUATION

<PAGE>
2.1. The value of the assets of the Acquired Fund to be transferred,
and liabilities of the Acquired Fund to be assumed, hereunder shall be the value
of such assets computed as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the then current prospectus or statement of additional information of
the Acquiring Fund.

2.2. The net asset value of the Acquiring Fund Shares shall be the
value computed as of the close of regular trading on the NYSE on the Valuation
Date, using the valuation procedures set forth in the then current prospectus or
statement of additional information of the Acquiring Fund.

2.3. All computations of value shall be made by Brown Brothers Harriman
& Co. in accordance with its regular practice as pricing agent for the Acquiring
Fund.

3. CLOSING AND CLOSING DATE

3.1. The Closing Date shall be ________________, 2000, or such later
date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of the close of business
on the Closing Date unless otherwise provided. The Closing shall be held as of
5:00 p.m. at the offices of Deutsche Asset Management, One South Street,
Baltimore, Maryland 21202, or at such other time and/or place as the parties may
agree.

3.2. The custodian for the Acquired Fund (the "Custodian") shall
deliver at the Closing a certificate of an authorized officer stating that: (a)
the Acquired Fund's assets have been delivered in proper form to the Acquiring
Fund on the Closing Date and (b) all necessary transfer taxes including all
applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities.

3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the BT Investment Portfolios
shall be closed to trading or trading thereon shall be restricted or (b) trading
or the reporting of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the parties hereto is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.

3.4. The Acquired Fund shall deliver to the Acquiring Fund at the
Closing a list of the names, addresses, taxpayer identification numbers and
backup withholding and nonresident alien withholding status of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding full and
fractional shares owned by each such shareholder immediately prior to the
Closing, certified on behalf of the Acquired Fund by the President or a Vice
President of the BT Trust. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired
Fund's account on the Closing Date to the Secretary of the BT Trust on behalf of
the Acquired Fund, or provide evidence satisfactory to the Acquired Fund that
such Acquiring Fund Shares have been credited to the Acquired Fund's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.

4. REPRESENTATIONS AND WARRANTIES

4.1. The BT Trust and the Acquired Fund represent and warrant to the
Morgan Grenfell Trust and the Acquiring Fund as follows:

(a) The Acquired Fund is a series of the BT Trust, which is a
business trust, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the power to own all of its properties and
assets and, subject to approval by the shareholders of the Acquired Fund, to
perform its obligations under this Agreement. The Acquired Fund is not required
to qualify to do business in any jurisdiction in which it is not so qualified or
where failure to qualify would not subject it to any material liability or
disability. The Acquired Fund has all necessary federal, state and local
authorizations

<PAGE>
to own all of its properties and assets and to carry on its business as now
being conducted;

(b) The BT Trust is a registered open-end management
investment company, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940 (the "1940 Act") is in full force and effect;

(c) The BT Trust is not, and the execution, delivery and
performance of this Agreement with respect to the Acquired Fund will not result,
in a material violation of its Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquired Fund to which the BT Trust is a party or by which it is
bound;

(d) The BT Trust has no material contracts or other
commitments (other than this Agreement) with respect to the Acquired Fund which
will be terminated with liability to the BT Trust or to the Acquired Fund prior
to the Closing Date;

(e) No material litigation or administrative proceeding or
investigation of the same, before any court or governmental body, is presently
pending or, to its knowledge, threatened against the BT Trust with respect to
the Acquired Fund or any of the Acquired Fund's properties or assets, except as
previously disclosed in writing to, and acknowledged in writing by, the
Acquiring Fund. The BT Trust and the Acquired Fund know of no facts which might
form the basis for the institution of such proceedings and neither the BT Trust
nor the Acquired Fund is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or the BT Trust's ability to
consummate the transactions herein contemplated;

(f) The Statement of Assets and Liabilities of the Acquired
Fund as of September 30, 1999, has been audited by [], independent certified
public accountants, and is in accordance with generally accepted accounting
principles consistently applied, and such statement (copies of which have been
furnished to each of the other parties hereto) fairly reflects the financial
condition of the Acquired Fund as of such date, and there are no known
contingent liabilities of the Acquired Fund as of such date not disclosed
therein;

(g) Since September 30, 1999, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date that such indebtedness was incurred, except as otherwise disclosed
to and accepted by each of the other parties hereto. For the purposes of this
subparagraph (g), a decline in net asset value per share of the Acquired Fund
shall not constitute a material adverse change;

(h) At the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law then to have been filed by such
dates shall have been timely filed, and all federal and other taxes (whether or
not shown as due on such returns and reports) shall have been paid so far as
due, or provision shall have been made for the payment thereof and, to the best
of the Acquired Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;

(i) For each taxable year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has elected to be treated as
such and will qualify and be treated as such for its final taxable year ending
on the Closing Date;

(j) For each taxable year of its operation, the Acquired Fund
has met the requirements of Section 851(g) of the Code for qualification and
treatment as a separate corporation and will qualify and be treated as such for
its final taxable year ending on the Closing Date;

(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the time of Closing, be held by the persons and in the
amounts set forth in the records of the transfer agent as provided in paragraph
3.4. The Acquired Fund does

<PAGE>
not have outstanding any options, warrants or other rights to subscribe for or
purchase any shares of the Acquired Fund, nor is there outstanding any security
convertible into any shares of the Acquired Fund;

(l) At the Closing Date, the BT Trust with respect to the
Acquired Fund will have good and marketable title to the assets to be
transferred to the Acquiring Fund pursuant to paragraph 1.1 and full right,
power and authority to sell, assign, transfer and deliver such assets hereunder
and, upon delivery and payment for such assets, the Acquiring Fund will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the
Securities Act of 1933, as amended (the "1933 Act"), other than as disclosed in
writing to, and acknowledged in writing by, the Acquiring Fund;

(m) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part of the BT Trust's
Board of Trustees on behalf of the Acquired Fund, and, subject to the approval
of the Acquired Fund shareholders, assuming due authorization, execution and
delivery by the Morgan Grenfell Trust on behalf of the Acquiring Fund, this
Agreement will constitute a valid and binding obligation of the BT Trust with
respect to the Acquired Fund, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;

(n) The information to be furnished by the Acquired Fund for
use in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations thereunder applicable thereto;

(o) The proxy statement of the Acquired Fund (the "Proxy
Statement") to be included in the registration statement on Form N-14 of the
Acquiring Fund (the "Registration Statement") (other than information therein
that relates to the Acquiring Fund and supplied in writing by the Acquiring Fund
for inclusion therein) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any 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, in light of the circumstances under which such
statements were made, not materially misleading;

(p) No consent, approval, authorization or order of any court
or governmental authority is required for the consummation by the BT Trust on
behalf of the Acquired Fund of the transactions contemplated by this Agreement;

(q) All of the issued and outstanding shares of beneficial
interest of the Acquired Fund have been offered for sale and sold in conformity
with all applicable federal and state securities laws, except as may have been
previously disclosed in writing to the Acquiring Fund; and

(r) The prospectus of the Acquired Fund dated January 31,
2000, and any amendments or supplements thereto, previously furnished to the
Acquiring Fund, does not contain any untrue statements of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.

4.2. THE MORGAN GRENFELL TRUST AND THE ACQUIRING FUND REPRESENT AND WARRANT
TO EACH OF THE OTHER PARTIES HERETO AS FOLLOWS:

(a) The Acquiring Fund is a series of the Morgan Grenfell
Trust, which is a business trust, validly existing and in good standing under
the laws of the State of Delaware and has the power to own all of its properties
and assets and to perform its obligations under this Agreement. The Acquiring
Fund is not required to qualify to do business in any jurisdiction in which it
is not so qualified or where failure to qualify would not subject it to any
material liability or disability. The Acquiring Fund has all necessary federal,
state and local authorizations to own all of its properties and assets and to
carry on its

<PAGE>
business as now being conducted;

(b) The Morgan Grenfell Trust is a registered open-end
investment company, and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect;

(c) The current prospectus of and statement of additional
information of the Morgan Grenfell Trust conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;

(d) At the Closing Date, the Morgan Grenfell Trust will have
good and marketable title to the Acquiring Fund's assets;

(e) The Morgan Grenfell Trust is not, and the execution,
delivery and performance of this Agreement on behalf of the Acquiring Fund will
not result, in a material violation of its Declaration of Trust or By-laws or of
any agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Morgan Grenfell Trust is a party or
by which it is bound;

(f) No material litigation or administrative proceeding or
investigation of the same, before any court or governmental body is presently
pending or, to the best of its knowledge, threatened against the Morgan Grenfell
Trust with respect to the Acquiring Fund or any of the Acquiring Fund's
properties or assets, except as previously disclosed in writing to, and
acknowledged in writing by, the Acquired Fund. The Morgan Grenfell Trust and the
Acquiring Fund know of no facts which might form the basis for the institution
of such proceedings and neither the Morgan Grenfell Trust nor the Acquiring Fund
is a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects the
Acquiring Fund's business or the Morgan Grenfell Trust's ability on behalf of
the Acquiring Fund to consummate the transactions contemplated herein;

(g) The Statement of Assets and Liabilities of the Acquiring
Fund as of October 31, 1999, has been audited by [ ], independent certified
public accountants, and is in accordance with generally accepted accounting
principles consistently applied, and such statement (copies of which have been
furnished to each of the other parties hereto) fairly reflects the financial
condition of the Acquiring Fund as of such date, and there are no known
contingent liabilities of the Acquiring Fund as of such date not disclosed
therein;

(h) Since October 31,1999, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date that such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquired Fund. For the purposes of this subparagraph (h),
a decline in net asset value per share of the Acquiring Fund shall not
constitute a material adverse change;

(i) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to have been filed by such
dates shall have been timely filed, and all federal and other taxes (whether or
not shown as due on such returns and reports) shall have been paid so far as
due, or provision shall have been made for the payment thereof and, to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;

(j) For each taxable year of its operations, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has elected to be treated as
such and will qualify as such on the Closing Date;

(k) For each taxable year of its operation, the Acquiring Fund
has met the requirements of Section 851(g) of the Code for qualification and
treatment as a separate corporation and will qualify and

<PAGE>
be treated as such on the Closing Date;

(l) At the date hereof, all issued and outstanding shares of
the Acquiring Fund are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any shares of the Acquiring Fund, nor is there outstanding any security
convertible into shares of the Acquiring Fund;

(m) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action, if any, on the part of the
Morgan Grenfell Trust's Board of Trustees on behalf of the Acquiring Fund, and,
assuming due authorization, execution and delivery by the BT Trust on behalf of
the Acquired Fund, this Agreement will constitute a valid and binding obligation
of the Morgan Grenfell Trust on behalf of the Acquiring Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;

(n) The Acquiring Fund Shares to be issued and delivered to
the Acquired Fund, for the account of the Acquired Fund shareholders, pursuant
to the terms of this Agreement, will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares and will be fully paid and non-assessable;

(o) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto;

(p) The information contained in the Proxy Statement and in
the Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any 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, in light of the circumstances under which such statements were made,
not materially misleading; and

(q) The Morgan Grenfell Trust, on behalf of the Acquiring
Fund, agrees to use all reasonable efforts to obtain the approvals and
authorizations required by the 1933 Act, the 1940 Act and such of the state Blue
Sky or securities laws as it may deem appropriate in order to continue the
Acquiring Fund's operations after the Closing Date.

5. COVENANTS OF EACH OF THE PARTIES

5.1. The BT Trust, on behalf of the Acquired Fund, will operate its
business in the ordinary course between the date hereof and the Closing Date. It
is understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions and any other dividends and
distributions necessary or advisable (except to the extent distributions that
are not customary may be limited by representations made in connection with the
issuance of the tax opinion described in paragraph 7.6 hereof), in each case
payable either in cash or in additional shares.

5.2. The Morgan Grenfell Trust, on behalf of the Acquiring Fund, will
operate its business in the ordinary course between the date hereof and the
Closing Date. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions necessary or advisable, in each case
payable either in cash or in additional shares.

5.3. The BT Trust will call a meeting of the Acquired Fund's
shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.

<PAGE>
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.

5.5. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.

5.6. Subject to the provisions of this Agreement, the BT Trust, on
behalf of the Acquired Fund, and the Morgan Grenfell Trust, on behalf of the
Acquiring Fund, each will take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.

5.7. The Acquired Fund shall furnish to the Acquiring Fund on the
Closing Date the Statement of Assets and Liabilities of the Acquired Fund as of
the Closing Date, which statement shall be prepared in accordance with generally
accepted accounting principles consistently applied and shall be certified by
the BT Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but
in any case within 60 days after the Closing Date, the Acquired Fund shall
furnish to the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for
federal income tax purposes, and of any capital loss carryovers and other items
that will be carried over to the Acquiring Fund as a result of Section 381 or
any other provision of the Code, and which statement will be certified by the
Treasurer of the BT Trust.

5.8. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus"),
which will include the Proxy Statement, referred to in paragraph 4.1(n), all to
be included in the Registration Statement, in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act"), and the 1940 Act in connection
with the meeting of the Acquired Fund's shareholders to consider approval of
this Agreement and the transactions contemplated herein.

5.9 The Acquired Fund and the Acquiring Fund shall each use its
reasonable efforts to cause the Reorganization to be treated as a reorganization
within the meaning of Section 368(a) of the Code.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND AND THE
ACQUIRING FUND (COLLECTIVELY, THE "MERGING FUNDS" AND INDIVIDUALLY, THE
"MERGING FUND")

The obligations of the Merging Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
each of the Merging Funds of all of the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:

6.1. All representations and warranties made in this Agreement by or on
behalf of the Merging Funds shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;

6.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities showing the federal tax
basis and holding periods as of the Closing Date, certified by BT Trust's
Treasurer or Assistant Treasurer on behalf of the Acquired Fund;

6.3. The BT Trust, on behalf of the Acquired Fund, shall have delivered
to the Acquiring Fund on the Closing Date a certificate executed in its name by
its President or Vice President and Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to the effect that the representations and warranties made in this
Agreement by or on behalf of the Acquired Fund are true and correct at and as of
the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement;

<PAGE>
6.4 The Morgan Grenfell Trust on behalf of the Acquiring Fund shall
have delivered to the Acquired Fund a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant Treasurer, in form
and substance reasonably satisfactory to the Acquired Fund and dated as of the
Closing Date, to the effect that the representations and warranties made in this
Agreement by or on behalf of the Acquiring Fund are true and correct at and as
of the Closing Date, except as they may by affected by the transactions
contemplated by this Agreement.

7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE PARTIES

If any of the conditions set forth below do not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:

7.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the BT Trust's
Declaration of Trust and By-laws and certified copies of the votes evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, no party hereto may waive the conditions set
forth in this paragraph 7.1;

7.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;

7.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by either party hereto to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
any party hereto, provided that any party may for itself waive any of such
conditions;

7.4. The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;

7.5. The Acquired Fund shall have distributed to its shareholders all
of its investment company taxable income, as defined in Section 852(b)(2) of the
Code (prior to reduction by any dividends paid deduction), and all of its net
capital gain, as such term is used in Section 852(b)(3)(C) of the Code, after
reduction by any capital loss carry forward, and all of the excess of (1) its
interest income excludable from gross income under Section 103(a) of the Code
over (2) the deductions disallowed under Sections 265 and 171(a)(2) of the Code,
in each case for its taxable year ending on the Closing Date.

7.6. The parties shall have received a written opinion of Hale and Dorr
LLP, addressed to the Morgan Grenfell Trust with respect to the Acquiring Fund
and the BT Trust with respect to the Acquired Fund and satisfactory to Daniel O.
Hirsch, as Secretary of each of the parties, respectively, substantially to the
effect that for federal income tax purposes:

(a) The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund Shares to
the Acquired Fund and the assumption of certain scheduled Acquired Fund
liabilities by the Acquiring Fund, followed by the distribution by the Acquired
Fund, in liquidation of the Acquired Fund, of Acquiring Fund Shares to the
shareholders of the Acquired Fund in exchange for their Acquired Fund shares of
beneficial interest and the termination of the Acquired Fund, will constitute a
reorganization within the meaning of Section 368(a) of the Code, and the
Acquired Fund and the Acquiring Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code;

<PAGE>
(b) No gain or loss will be recognized by the Acquired Fund upon (i)
the transfer of all of its assets to the Acquiring Fund solely in exchange for
the issuance of Acquiring Fund Shares to the Acquired Fund and the assumption of
certain scheduled Acquired Fund liabilities by the Acquiring Fund and (ii) the
distribution by the Acquired Fund of such Acquiring Fund Shares to the
shareholders of the Acquired Fund;

(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the issuance
of Acquiring Fund Shares to the Acquired Fund and the assumption of certain
scheduled Acquired Fund liabilities by the Acquiring Fund;

(d) The basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be, in each instance, the same as the basis of those assets
in the hands of the Acquired Fund immediately prior to the transfer;

(e) The tax holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will, in each instance, include the Acquired Fund's
tax holding period for those assets;

(f) The shareholders of the Acquired Fund will not recognize gain or
loss upon the exchange of all of their shares of beneficial interest of the
Acquired Fund solely for Acquiring Fund Shares as part of the transaction;

(g) The basis of the Acquiring Fund Shares received by the Acquired
Fund shareholders in the transaction will be the same as the basis of the shares
of beneficial interest of the Acquired Fund surrendered in exchange therefor;
and

(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax holding
period for the shares of beneficial interest of the Acquired Fund surrendered in
exchange therefor, provided that the Acquired Fund shares were held as capital
assets on the date of the exchange.

Notwithstanding anything herein to the contrary, no party hereto may waive in
any material respect the conditions set forth in this paragraph 7.6.

7.7 Each of the Acquiring Fund and the Acquired Fund agrees to make and
provide representations with respect to itself and its shareholders that are
reasonably necessary to enable Hale and Dorr LLP to deliver an opinion
substantially as set forth in paragraph 7.6.

8. BROKERAGE FEES AND EXPENSES

8.1. Each party hereto represents and warrants to each other party
hereto, that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.

8.2 Each party will bear its own expenses in connection with the
transactions.

8.3. Shareholders of each of Acquired Fund and Acquiring Fund will bear
their respective expenses, if any, in connection with the transactions.

9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

9.1 The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein or referred to in paragraph 4.1, 4.2
and 5.1 through 5.8 hereof and that this Agreement constitutes the entire
agreement between the parties.

9.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.

<PAGE>
10. TERMINATION

10.1. This Agreement may be terminated at any time prior to the Closing
Date by: (a) the mutual agreement of the BT Trust on behalf of the Acquired Fund
and the Morgan Grenfell Trust on behalf of the Acquiring Fund; (b) any party
hereto in the event that the other party hereto shall materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (c) a condition herein expressed to be precedent
to the obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.

10.2. In the event of any such termination, there shall be no liability
for damages on the part of any party hereto or their respective Trustees or
officers to any other party, but each shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement.

11. AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the BT
Trust on behalf of the Acquired Fund and the Morgan Grenfell Trust on behalf of
the Acquiring Fund; provided, however, that following the meeting of the
Acquired Fund shareholders called by the BT Trust pursuant to paragraph 5.3 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of the Acquiring Fund Shares to be issued to the
Acquired Fund shareholders under this Agreement to the detriment of such
shareholders without their further approval.

12. NOTICES

Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the BT Trust on behalf of the
Acquired Fund and the Morgan Grenfell Trust on behalf of the Acquiring Fund at
One South Street, Baltimore, MD 21202.

13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY

13.1. The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.

13.3. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.

13.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.

13.5. It is expressly agreed that the obligations of the Morgan
Grenfell Trust and the BT Trust shall not be binding upon any of their
respective Trustees, shareholders, nominees, officers, agents or employees
personally, but shall bind only the trust property of the Morgan Grenfell Trust
or the BT Trust, as the case may be, as provided in the trust instruments of the
Morgan Grenfell Trust and the BT Trust, respectively. The execution and delivery
of this Agreement have been authorized by the Trustees of each of the Morgan
Grenfell Trust and the BT Trust, and this Agreement has been executed by
authorized officers of the Morgan Grenfell Trust and the BT Trust on behalf of
the Acquired Fund and the Acquiring Fund, respectively, acting as such, and
neither such authorization by such Trustees nor such execution and

<PAGE>
delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Morgan Grenfell Trust and the BT Trust, as
the case may be, as provided in the Declarations of Trust of the Morgan Grenfell
Trust and the BT Trust, respectively.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President and attested by its Secretary or
Assistant Secretary.

Attest: BT INVESTMENT FUNDS ON BEHALF OF
INTERMEDIATE TAX FREE

By: __________________________ By: __________________________
Name: Daniel O. Hirsch Name: John Y. Keffer
Title: Secretary Title: President

Attest: MORGAN GRENFELL INVESTMENT TRUST
ON BEHALF OF MUNICIPAL BOND

By: __________________________ By: __________________________
Name: Daniel O. Hirsch Name: Richard T. Hale
Title: Secretary Title: President

<PAGE>
MUNICIPAL BOND

STATEMENT OF ADDITIONAL INFORMATION

June __, 2000

This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Municipal Bond,
dated February 28, 2000. This statement of additional information should be read
in conjunction with the prospectus.

Additional copies of the prospectus may be obtained by writing to the Fund at
Deutsche Asset Management Service Center, P.O. Box 219210, Kansas City, MO
641212-9210 or by telephoning the Fund toll free at 1-800-730-1313.

This statement of additional information is accompanied by the statement of
additional information dated February 28, 2000, of Morgan Grenfell Investment
Trust on behalf of seven separate investment portfolios, including Municipal
Bond Fund, and the statement of additional information dated January 31, 2000 of
BT Investment Funds on behalf of the Intermediate Tax Free Fund. Municipal Bond
Fund and Intermediate Tax Free Bond Fund are referred to collectively as the
"Funds".

<PAGE>
ADDITIONAL INFORMATION ABOUT

MUNICIPAL BOND and INTERMEDIATE TAX FREE

The following table shows where in each Fund's statement of additional
information (SAI) you can find additional information about each Fund.
<TABLE>
<CAPTION>
- - - - - - - - - - - ----------------------------------------- ----------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
<S> <C> <C>
MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 31, 2000
SAI dated February 28, 2000
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Fund history ORGANIZATION OF THE TRUST
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Description of each Fund and ADDITIONAL INFORMATION INVESTMENT OBJECTIVES,
its investments, strategies, polices ON FUND INVESTMENTS AND POLICIES AND RESTRICTIONS:
and risks STRATEGIES AND RELATED Investment Objectives
RISKS Investment Policies
Additional Risk Factors
INVESTMENT RESTRICTIONS Investment Restrictions
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Management of the Funds, TRUSTEES AND OFFICERS MANAGEMENT OF THE TRUST
Including the Board of Trustees, AND THE PORTFOLIOS:
Officers and Trustee compensation Trustees of the Trust and Portfolio
Officers of the Trust and Portfolio
Trustee Compensation Table
- - - - - - - - - - - ----------------------------------------- ---------------------------------------
Control persons, principal holders GENERAL INFORMATION
of securities and management ABOUT THE TRUST
ownership
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Investment advisory and other INVESTMENT ADVISORY MANAGEMENT OF THE TRUST
services: investment adviser, AND OTHER SERVICES AND THE PORTFOLIOS:
distributor and other service Investment Adviser
providers SERVICE PLAN Administrator
Distributor
ADDITIONAL INFORMATION Service Agent
Custodian and Transfer Agent
Counsel and Independent
Accountants
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Brokerage allocation and other PORTFOLIO TRANSACTIONS INVESTMENT OBJECTIVES,
Practices POLICIES AND RESTRICTIONS:
Portfolio Transactions and
Brokerage Commissions
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Shares of beneficial interest GENERAL INFORMATION ORGANIZATION OF THE TRUST
ABOUT THE TRUST
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
Purchase, redemption and pricing PURCHASE AND REDEMPTION VALUATION OF SECURITIES;
of shares OF SHARES REDEMPTIONS AND PURCHASES IN-KIND:
Purchase of Shares
Redemption of Shares
Redemptions and Purchases In-
Kind
Trading in Foreign Securities
- - - - - - - - - - - ----------------------------------------- --------------------------------------- ------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
- - - - - - - - - - - -------------------------------------- ------------------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- - - - - - - - - - - -------------------------------------- -------------------------------------------- ---------------------------------------------
<S> <C> <C>
MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 31, 2000
SAI dated February 28, 2000
- - - - - - - - - - - -------------------------------------- -------------------------------------------- ---------------------------------------------
Taxation of the Funds TAXES TAXATION:
Taxation of the Fund
Distributions
Taxation of the Portfolio
Other Taxation
- - - - - - - - - - - -------------------------------------- -------------------------------------------- ---------------------------------------------
Calculation of PERFORMANCE INFORMATION PERFORMANCE INFORMATION:
performance data Standard Performance Information
Expenses
Comparison of Fund Performance
Economic and Market Information
- - - - - - - - - - - -------------------------------------- -------------------------------------------- ---------------------------------------------
Financial statements FINANCIAL STATEMENTS: FINANCIAL STATEMENTS:
- - - - - - - - - - - -------------------------------------- -------------------------------------------- ---------------------------------------------
</TABLE>

<PAGE>
PART C: OTHER INFORMATION

ITEM 15. INDEMNIFICATION

The response to this Item 15 is incorporated by reference to Item 25 of
Post-Effective Amendment No. 23 to the Registrant's Registration Statement on
Form N-1A ("Registration Statement") as filed with the Securities and Exchange
Commission ("SEC") on February 28, 2000.

Item 16. EXHIBITS
Except as noted, the following exhibits are being incorporated by reference
herein.

(1) Agreement and Declaration of Trust of Registrant dated September 13,
1993, as amended. Filed as an exhibit to Post-Effective Amendment No.9 to
Registrant's Registration Statement on February 15, 1996.

(2a) Amended By-Laws of Registrant. Filed as an exhibit to Post-Effective
Amendment No.9 to Registrant's Registration Statement on February 15,
1996.

(b) 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)). Filed
as an exhibit to Post-Effective Amendment No.9 to Registrant's
Registration Statement on February 15, 1996.

(3) Not Applicable.

(4) Form of Agreement and Plan of Reorganization filed herewith.

(5) Not Applicable.

(6a) 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
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. Filed as
an exhibit to Post-Effective Amendment No. 9 to Registrant's Registration
Statement on February 15, 1996.

(b) 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. Filed as an exhibit
to Post-Effective Amendment No. 9 to Registrant's Registration Statement
on February 15, 1996.

(c) 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. Filed as an exhibit to
Post-Effective Amendment No.9 to Registrant's Registration Statement on
February 15, 1996.

(d) Management Contract between Deutsche Asset Management, Inc. (formerly
Morgan Grenfell Inc. dated August 23, 1996) and Registrant, on behalf of
Micro Cap Fund. Filed as an exhibit to Post-Effective Amendment No.12
Registrant's Registration Statement on November 1, 1996.

(e) 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. Filed as an exhibit to Post-Effective
Amendment No.18 Registrant's Registration Statement on December 12, 1997.

(f) Form of Management Contract between Deutsche Asset Management Investment
Services Limited (formerly Morgan Grenfell Investment Services Ltd.) and
Registrant, on behalf of Core Global
<PAGE>
Fixed Income Fund and Emerging Local Currency Debt Fund. Filed as an
exhibit to Post-Effective Amendment No.18 Registrant's Registration
Statement on December 12, 1997.

(g) Form of Management Contract between Deutsche Asset Management, Inc. and
Registrant, on behalf of European Equity Fund. Filed as an exhibit to
Post-Effective Amendment No.22 Registrant's Registration Statement on
December 23, 1999.

(h) 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. Filed as an
exhibit to Post-Effective Amendment No.20 Registrant's Registration
Statement on December 28, 1998.

(7a) Distribution Agreement dated as of December 30, 1993 between SEI
Financial Services Company and Registrant, on behalf of all of its
series. Filed as an exhibit to Post-Effective Amendment No.10
Registrant's Registration Statement on June 11, 1996.

(b) Form of Distribution Agreement between ICC Distributors, Inc. and
Registrant, on behalf of all of its series. Filed as an exhibit to
Post-Effective Amendment No.22 Registrant's Registration Statement on
December 23, 1999.

(8) Not Applicable.

(9a) Custody Agreement dated as of August 24, 1998 between Brown Brothers
Harriman & Co. and Registrant, on behalf of all of its series. Filed as
an exhibit to Post-Effective Amendment No.20 Registrant's Registration
Statement on December 28, 1998.

(b) 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. Filed as an exhibit to Post-Effective
Amendment No.20 Registrant's Registration Statement on December 28, 1998.

(c) Transfer Agency Agreement dated as of December 30, 1993 between
Supervised Service Company, Inc. and Registrant. Filed as an exhibit to
Post-Effective Amendment No.12 Registrant's Registration Statement on
November 1, 1996.

(d) Transfer Agency Agreement dated as of December 28, 1994 between
Supervised Service Company, Inc. and Registrant. Filed as an exhibit to
Post-Effective Amendment No.12 Registrant's Registration Statement on
November 1, 1996.

(e) Accounting Agency Agreement dated as of September 8, 1998 between Brown
Brothers Harriman & Co., Deutsche Asset Management, Inc. (formerly Morgan
Grenfell, Inc.) and Registrant on behalf of all of its series. Filed as
an exhibit to Post-Effective Amendment No.20 Registrant's Registration
Statement on December 28, 1998.

(f) 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, Morgan Grenfell Emerging Markets Equity
Fund, Core Global Fixed Income Fund, Global Fixed Income Fund,
International Fixed Income Fund, Morgan Grenfell Emerging Markets Debt
and Emerging Local Currency Debt Fund. Filed as an exhibit to
Post-Effective Amendment No.20 Registrant's Registration Statement on
December 28, 1998.

<PAGE>
(g) Form of Transfer Agency Agreement between Investment Company Capital
Corp. and Registrant, on behalf of each of its series. Filed as an
exhibit to Post-Effective Amendment No.22 Registrant's Registration
Statement on December 23, 1999.

(10) Form of Amended Rule 18f-3 Plan. Filed as an exhibit to Post-Effective
Amendment No.16 Registrant's Registration Statement on February 11, 1997.

(11) Not Applicable.

(12) Not Applicable.

(13a) Share Purchase Agreement dated as of December 29, 1993 between Registrant
and SEI Financial Management Corporation. Filed as an exhibit to
Post-Effective Amendment No.16 Registrant's Registration Statement on
February 11, 1997.

(14) Not Applicable.

(15) Not Applicable.

(16) Powers of Attorney. Filed as an exhibit to Post-Effective Amendment No.22
Registrant's Registration Statement on December 23, 1999.

Item 17. Undertakings.

. The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is part
of this registration statement by any person or party which is deemed to
be an underwriter within the meaning of Rule 145(c) under the Securities
Act of 1933, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form. The undersigned Registrant
agrees that every prospectus that is filed under paragraph (1) above will
be filed as part of an amendment to the registration statement and will
not be used until the amendment is effective, and that, in determining
any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the
securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of them.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Morgan Grenfell Investment Trust, on behalf of Municipal Bond Fund,
has duly caused this Registration Statement on Form N-14 to be signed on its
behalf by the undersigned, duly authorized, in the City of Baltimore and the
State of Maryland on this 11th day of May, 2000.

MORGAN GRENFELL INVESTMENT TRUST

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

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.

<PAGE>

Signatures Title Date
------------- --------- --------

/s/ Richard T. Hale President and Chief May 11, 2000
- - - - - - - - - - - -------------------------------- Executive Officer
Richard T. Hale

/s/ Amy M. Olmert Chief Financial Officer May 11, 2000
- - - - - - - - - - - -------------------------------
Amy M. Olmert

/s/ Paul K. Freeman* Trustee May 11, 2000
- - - - - - - - - - - --------------------------------
Paul K. Freeman

/s/ Graham E. Jones* Trustee May 11, 2000
- - - - - - - - - - - --------------------------------
Graham E. Jones

/s/ Hugh G. Lynch* Trustee May 11, 2000
- - - - - - - - - - - -------------------------------
Hugh G. Lynch

/s/ William N. Searcy* Trustee May 11, 2000
- - - - - - - - - - - --------------------------------
William N. Searcy

/s/ Edward T. Tokar* Trustee May 11, 2000
- - - - - - - - - - - --------------------------------
Edward T. Tokar

*By: /s/ Daniel O. Hirsch Dated: May 11, 2000
--------------------
Daniel O. Hirsch
Power-of-Attorney

<PAGE>
PROPOSED RESOLUTIONS RELATING TO THE REORGANIZATION OF
INTERMEDIATE TAX FREE FUND, A SERIES OF BT INVESTMENT FUNDS
("BT Fund") INTO MORGAN GRENFELL MUNICIPAL BOND FUND, A SERIES OF MORGAN
GRENFELL INVESTMENT TRUST ("Morgan Grenfell Fund")

(To be voted on by the Board of BT INVESTMENT FUNDS (the "Trust"))

RESOLVED, that the transfer of substantially all of the assets of the
BT Fund to the Morgan Grenfell Fund in exchange solely for the
shares of common stock of the Morgan Grenfell Fund and the
discharge by the BT Fund and assumption by the Morgan Grenfell
Fund of the stated liabilities of the BT Fund, the
distribution of shares of the Morgan Grenfell Fund to the
shareholders of the BT Fund in liquidation of the BT Fund,
(the "Reorganization") be, and it hereby is authorized and
approved, and that the officers of the BT Fund be, and each of
them hereby is, authorized to take such actions and to execute
such documents as such officer may deem necessary or
appropriate in order to effectuate the Reorganization, subject
to shareholder approval of and satisfaction of the terms and
conditions of the Reorganization Agreement as defined in the
next succeeding resolution;

FURTHER RESOLVED, that the Agreement and Plan of Reorganization by and
between the BT Fund and the Morgan Grenfell Fund providing for
the Reorganization (the "Reorganization Agreement"), in
substantially the form presented to this meeting, with such
changes and additions as any officer of the BT Fund, on the
advice of counsel or otherwise, may approve, such approval
being conclusively proven by the execution of the
Reorganization Agreement by such officer, be and it hereby is
approved; that the officers of the BT Fund be, and each of
them hereby is, subject to shareholder approval of the
Reorganization Agreement, authorized to execute and deliver
the Reorganization Agreement and any related documents; and
that the execution by the BT Fund of the Reorganization
Agreement and any related documents, and the transactions
contemplated thereby and any and all acts necessary in
connection therewith, the necessity and desirability thereof
being conclusively proven by the action taken by the
appropriate officers of the BT Fund on behalf of the BT Fund
be, and it hereby is, authorized, approved and directed,
subject in all cases to shareholder approval of the
Reorganization Agreement;

FURTHER RESOLVED, that participation by the BT Fund in the
Reorganization is in the best interests of such Fund and that
the interests of existing shareholders of the BT Fund will not
be diluted as a result of the effecting of such transactions
by the BT Fund; and that the Board has considered the
following factors in making this determination: (i) the terms
and conditions of the Reorganization Agreement and whether the
Reorganization would result in dilution of shareholder
interests, (ii) the costs estimated to be incurred by the BT
Fund as a result of the Reorganization, (iii) efficiencies as
a result of being part of a larger fund, (iv) marketing
advantages due to longer term and better performance and (v)
the tax consequences of the Reorganization;

FURTHER RESOLVED, that a Special Meeting of Shareholders of the BT
Fund be, and it hereby is, called to be held on _____________
for the shareholders to consider and take action on the
approval of the terms of an Agreement and Plan of
Reorganization between the BT Fund and the Morgan Grenfell
Fund and the transactions contemplated therein, and such other
matters as may properly come before said meeting or any
adjournment or adjournments thereof; and that it is hereby
recommended that such shareholders approve the Reorganization
Agreement at said meeting;

FURTHER RESOLVED, that the officers of the BT Fund be, and each of
them hereby is authorized to prepare and file the form of
notice of shareholders' meeting, proxy statement and proxy
card (collectively "Proxy Materials"), relating to the
Reorganization and such other matters as any officer of the BT
Fund may deem appropriate with the Securities and Exchange
Commission as part of the registration statement on Form N-14
of the Morgan Grenfell Fund; and that the officers of the BT
Fund be, and each of them hereby is, authorized to mail the
Proxy Materials to shareholders of the BT Fund;

FURTHER RESOLVED, that the close of business on ________________, be,
and it hereby is fixed as the record date for the
determination of shareholders of the BT Fund who shall
<PAGE>
be entitled to notice of and to vote at the Special Meeting of
Shareholders or any adjournment or adjournments thereof;

FURTHER RESOLVED, that Amy M. Olmert and Daniel O. Hirsch and each or
either of them be, and they hereby are, designated to appear,
vote and act as proxies, with powers of substitution, on
behalf of the shareholders of the BT Fund at the Special
Meeting of Shareholders or at any adjournment or adjournments
thereof, and to do all things, execute all documents and
perform all acts as fully as could be done if said
shareholders whom they represent were personally present;

FURTHER RESOLVED, that Amy M. Olmert and Daniel O. Hirsch be, and each
of them hereby is, appointed inspector of election in
connection with the Special Meeting of Shareholders;

FURTHER RESOLVED, that the proper officers of the BT Fund be, and each
of them hereby is, authorized and directed, on behalf of such
fund, to take all action and execute all documents which they
may deem necessary or appropriate, the necessity or propriety
thereof being conclusively proven by the action taken by such
officer, to completely liquidate and terminate said funds
under the laws of the State of Massachusetts and under federal
law in conjunction with the Reorganization, including
satisfying any legal or other obligations in connection
therewith; and

FURTHER RESOLVED, that the proper officers of the BT Fund be, and each of them
hereby is, authorized and directed, for and on behalf of such Fund to take all
action, execute all documents, and make any filings with the Securities and
Exchange Commission or the states, which they may deem to be necessary or
appropriate, the necessity or propriety thereof being conclusively proven by the
action taken by such officer, to effectuate each of the foregoing resolutions
and to carry out the purposes thereof.
<PAGE>
Authorization to File Registration Statement on Form N-14

with the Securities and Exchange Commission

VOTED:
- - - - - - - - - - - ------ That the President, and Vice President, Treasurer and
Secretary of the Trust be, and each of them acting singly,
hereby is, Authorized to prepare, executed on behalf of the
Trust personally or as attorney-in-fact, and to file with the
Securities and Exchange Commission a registration statement on
Form N-14 and any amendment thereto registering the
Institutional Class shares of beneficial interest of the
Morgan Grenfell Municipal Fund to be issued pursuant to the
Reorganization and containing a proxy statement of BT
Intermediate Tax Free Fund.

<PAGE>
EXHIBIT B

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Institutional Class

Emerging Markets Debt

Formerly a Morgan Grenfell Fund

[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 A Member of the
adequacy of this prospectus. Any representation to the Deutsche Bank
contrary is a criminal offense.] Group [/]

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Emerging Markets Debt

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 considers an emerging securities
market to be one where the sovereign debt issued by the government in local
currency terms is rated below investment grade. The Fund may invest more than
25% of its total assets in the sovereign debt securities of Argentina, Brazil
and Mexico. In managing the Fund, we pick securities by using a combination of
country selection and individual security selection.

Emerging Markets Debt--Institutional Class

Overview of Emerging Markets Debt

Goal........................................................................ 3
Core Strategy............................................................... 3
Investment Policies and Strategies.......................................... 3
Principal Risks of Investing in the Fund.................................... 4
Who Should Consider Investing in the Fund................................... 4
Total Returns, After Fees and Expenses...................................... 5
Annual Fund Operating Expenses.............................................. 6

A Detailed Look at Emerging Markets Debt

Calculating the Fund's Share Price.......................................... 10
Performance Information..................................................... 11
Dividends and Distributions................................................. 11
Tax Considerations.......................................................... 11
Buying and Selling Fund Shares.............................................. 11
Financial Highlights........................................................ 14

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

3
<PAGE>

Overview of Emerging Markets Debt

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. These risks are higher for below investment
grade bonds. For example:

. interest rates could increase, causing the prices of 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
speculative and subject to greater volatility and risk of loss than
investment grade securities, particularly in deteriorating economic periods;
or
. 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. These risks are more severe for
securities of issuers in emerging market countries. For example:

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

Emerging Markets Debt Institutional Class requires a minimum investment of
$250,000. You should consider investing in Emerging Markets Debt 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 Emerging Markets Debt if you are pursuing
a short-term financial goal 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
international fixed income investments. Diversifying your investments may lower
the volatility of your overall investment portfolio.

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

<PAGE>

Overview of Emerging Markets Debt

TOTAL RETURNS, AFTER FEES AND EXPENSES

The JP Morgan Emerging Markets Bond Plus Index is an unmanaged foreign
securities index representing external currency-denominated debt markets of
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1995 20.02%
1996 33.47%
1997 12.51%
1998 -34.28%
1999 28.37%

Since inception, the Fund's highest return in any calendar quarter was 16.99%
(second quarter 1995) and its lowest quarterly return was (34.74%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999.

Since
5 Inception
1 year years (8/4/94)/1/

Emerging Markets
Debt --
Institutional
Class 28.37% 8.74% 7.61%
----------------------------------------------
JP Morgan Emerging
Markets Bond Plus
Index 25.98% 16.72% 14.69%
----------------------------------------------

/1/ The JP Morgan Emerging Markets Bond Plus Index average is calculated from
July 31, 1994.
- - - - - - - - - - - --------------------------------------------------------------------------------

5
<PAGE>

Overview of Emerging Markets Debt

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 Emerging
Markets Debt.

Expense Example. The example below illustrates the expenses you will incur 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/The investment adviser and the administrator have contractually agreed, for
the 16-month period from the Fund's fiscal year end of October 31, 1999, to
waive their fees or reimburse expenses so that total expenses will not exceed
1.00%.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.00%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 0.40%
---------------------------------------------------
Total Annual Fund
Operating Expenses 1.40%
---------------------------------------------------
Less: Fee Waivers or
Expense
Reimbursements (0.40%)/1/
---------------------------------------------------
Net Expenses 1.00%
---------------------------------------------------

EXPENSE EXAMPLE/2/

1 year 3 years 5 years 10 years
-----------------------------------------------------------

$102 $406 $732 $1,655
-----------------------------------------------------------

6
<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------

at Emerging Markets Debt

OBJECTIVE

The Fund seeks total return. 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

Under normal circumstances, the Fund invests in high yield/high risk fixed
income securities (junk bonds) of issuers located in countries with new or
emerging securities markets. The Fund considers an emerging securities market
to be one where the sovereign debt issued by the government in local currency
terms is rated below investment grade.

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 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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

instruments in which the Fund may invest may be denominated in the currency of
a developed country such as the United Kingdom or the United States or in a
local currency.

The Fund may invest more than 25% of its total assets in the sovereign debt
securities of Argentina, Brazil and Mexico.

INVESTMENT PROCESS

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies, and

. political climate.

The portfolio management team also considers short-term factors such as:

. market sentiment,

. capital flows, and

. new issue programs.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

OTHER INVESTMENTS

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

We may also use as secondary investments, various instruments commonly knows as
"derivatives" to control volatility and achieve desired currency weightings in
a cost effective manner. 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.

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

Risk Related to Investing in Junk Bonds. High yield/ 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 periods 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.

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 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 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.

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:

. 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.

. 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.

. 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
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than in the U.S.

. 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.

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.

Security Selection Risk. A risk that pervades all investing is the risk that
the securities in the Fund's portfolio will decline in value.

- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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 judgment 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

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:

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

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

. 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

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc. and Deutsche Asset
Management Investment Services Limited.

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 One
Appold Street,
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

London, England, acts as investment adviser for the Fund. As investment
adviser, DAMIS makes the Fund's investment decisions. DAMIS buys and sells
securities for the Fund and conducts the research that leads to the purchase
and sale decisions. DAMIS is also responsible for selecting brokers and dealers
and for negotiating brokerage commissions and dealer charges. The investment
adviser received a fee of 1.00% of the Fund's average daily net assets for its
services in the last fiscal year. The investment adviser reimbursed a portion
of its fee during the period.

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $16.1
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.

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,
provides administrative services 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:

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

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

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

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

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

. 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.

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

David Dowsett, Portfolio Manager, Deutsche Asset Management Investment Services
Limited, Lead Portfolio Manager of the Fund.

. Joined the investment adviser in 1994.

. Analyst for the consumer and capital goods sectors.

. 6 years of experience as an investment professional.

. MBA, Fordham University

Brett Diment, Director, Fixed Income, Deutsche Asset Management Investment
Services Limited, Portfolio Manager of the Fund.

. Joined the investment adviser in 1991.

. Analyst for Continental european markets and manages global fixed income,
balanced and cash-based portfolios for international clients.

. 10 years of experience as an investment professional.

. B.Sc. from the London School of Economics

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 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

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 your broker, provided that your broker or financial
advisor forwards your order to the Fund in a timely manner.

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 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 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 Ordinary income
gains
distributions
--------------------------------------
Long-term capital Capital gains
gains
distributions
--------------------------------------

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 Generally, long-term
shares owned capital gains or
more than one losses
year
--------------------------------------------
Your sale of Generally, short-term
shares owned for capital gains or losses;
one year or less losses subject to special
rules.
--------------------------------------------

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

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

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

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

Minimum Account Investments

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

Institutional Class shares of the Fund may be purchased without regard to the
investment minimums by: 1) employees of Deutsche Bank A.G., any of its
affiliates or subsidiaries, their spouses and minor children, and 2) Directors
or Trustees of any investment company advised or administered by Deutsche Bank
A.G. or any of its affiliates or subsidiaries, their spouses and minor
children. The Fund and its service providers reserve the right to, from time to
time in their discretion, waive or reduce the minimum account investments.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

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

Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$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 service agent must call the Service Center at 1-
800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a
trade confirmation number. Instruct your bank to send payment by wire using the
wire instructions noted below. All wires must be received by 4:00 p.m. Eastern
time the next business day.

Routing No: 1010 00695

Attn: Deutsche Asset Management Funds

DDA No: 98-7052-395-7

FBO: (Account name)
(Account number)

Credit:
Emerging Markets Debt Fund--354

Refer to your account statement for the account name, number and fund 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 service agent or the Service Center at
1-800-730-1313. Inform the Service Center representative of the amount of your
redemption and receive a trade confirmation number. The minimum redemption by
wire is $1,000. We must receive your order by 4:00 p.m. Eastern time to wire
your account the next business day.

Important Information about Buying and Selling Shares

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

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

. After we or your service agent receives 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Emerging Markets Debt

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

. We do not issue share certificates.

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

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

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

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

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

Exchange Privilege. You can exchange all or part of your shares for shares in
another Deutsche Asset Management mutual fund up to four times a year (from the
date of the 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 obtain 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:

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

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

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

. You will receive a written confirmation of each transaction from the Service
Center or your service agent.

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

<PAGE>

A Detailed Look at Emerging Markets Debt

The table below helps you understand the performance of the Institutional Class
shares of the Fund for the past five years. Certain 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 PricewaterhouseCoopers LLP, 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 Service Center at
1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the Year Ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $5.82 $11.95 $13.36 $10.55 $10.19
------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income 0.19 1.81 1.05 1.21 0.65
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) 0.69 (4.12) 0.40 2.60 (0.17)
------------------------------------------------------------------------------
Total from Investment Operations 0.88 (2.31) 1.45 3.81 0.48
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.90) (1.32) (1.32) (1.00) (0.11)
------------------------------------------------------------------------------
Net Realized Gains -- (2.50) (1.54) -- (0.01)
------------------------------------------------------------------------------
Total Distributions (0.90) (3.82) (2.86) (1.00) (0.12)
------------------------------------------------------------------------------
Net Asset Value, End of Period $5.80 $ 5.82 $11.95 $13.36 $10.55
------------------------------------------------------------------------------
Total Investment Return 17.86% (30.35)% 12.03% 38.42% 4.85%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $340,365 $55,684 $187,455 $102,431 $84,438
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 10.90% 9.82% 7.15% 10.15% 10.97%
------------------------------------------------------------------------------
Expenses 1.40% 1.31% 1.47% 1.92% 2.05%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS/1/ 0.40% 0.26% 0.15% 0.42% 0.26%
------------------------------------------------------------------------------
Portfolio Turnover Rate 397% 638% 472% 227% 266%
------------------------------------------------------------------------------

/1/ DAMIS - Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
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<PAGE>

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<PAGE>

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:

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

You can find reports and other information about each Fund on the EDGAR
Database on the SEC website (http://www.sec.gov), or you can get copies of
this information, after payment of a duplicating fee, by 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.
<PAGE>

Emerging Markets Debt--Institutional Class

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101 CUSIP #61735K109
354PRO (2/00)
811-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Institutional Class

Micro Cap

Formerly Microcap Fund, a Morgan Grenfell Fund

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Micro Cap--Institutional Class

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Micro Cap--Institutional Class

Overview of Micro Cap

A Detailed Look at Micro Cap

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 7
Risks....................................................................... 8

Management of the Fund...................................................... 8
Calculating the Fund's Share Price.......................................... 9
Performance Information..................................................... 10
Dividends and Distributions................................................. 10
Tax Considerations.......................................................... 10
Buying and Selling Fund Shares.............................................. 10
Financial Highlights........................................................ 13

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

<PAGE>

Overview of Micro Cap

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:

. 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;
. stocks that the Investment Adviser has selected could perform poorly; or
. the stock market could perform poorly in the U.S.

WHO SHOULD CONSIDER INVESTING IN THE FUND

Micro Cap Institutional Class requires a minimum investment of $250,000. You
should consider investing in Micro Cap 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 Micro Cap 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 that 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 Micro Cap is not a deposit of any bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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

<PAGE>

Overview of Micro Cap

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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.
The Index is a passive measure of U.S. equity market returns. It does not
factor in the costs of buying, selling and holding stocks--costs which are
reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
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 U.S. companies based on total market capitalization. The Russell 3000
represents approximately 98% of the investable U.S. 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
(each full calendar year since inception)

[GRAPH APPEARS HERE]
1997 19.83%
1998 1.20%
1999 77.53%

Since inception, the Fund's highest return in any calendar quarter was 29.74%
(fourth quarter 1999) and its lowest quarterly return was (24.12%)(third quarter
1998). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (12/18/96)/1/

Micro Cap--Institutional
Class 77.53% 29.41%
------------------------------------------------
Russell 2000 Index 21.26% 13.08%
------------------------------------------------

/1/ The Russell 2000 Index average is calculated from December 31, 1996.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Micro Cap

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 Micro Cap.

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/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal period ended September 30, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.50% and 3.00%, respectively, of the average
daily net assets of the Institutional Class shares.

/2/The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of September 30, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 1.49%.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.50%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 0.73%/1/
---------------------------------------------------
Total Annual Fund
Operating Expense 2.23%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.74%)/2/
---------------------------------------------------
Net Expenses 1.49%
---------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------

$151 $622 $1,120 $2,490

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

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Micro Cap--Institutional Class

OBJECTIVE

The Fund seeks capital appreciation. 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

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 common stocks. 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.

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 focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

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

. The team screens the bottom 5% of the total domestic equity market
capitalization for micro cap companies with growth and profitability.

In implementing this strategy, the Fund may experience a high portfolio
turnover rate.

OTHER INVESTMENTS

The Fund may 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.

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 invest up to 5% of its
net assets in non-convertible bonds and preferred stocks that are considered of
high quality.

We may also 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.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

RISKS

Below we have set forth some of the prominent risks associated with investing
in micro cap companies, 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

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. 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. stock market,
deteriorating stock market conditions might cause an overall weakness in the
stock prices of the entire market, including stocks held by the 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.

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. This risk
may be heightened for micro capitalization companies.

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, invest in derivatives.
Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, D.B. Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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, Inc. (DAMI) with headquarters at 885 Third Avenue, New York,
New York, acts as investment adviser for the Fund. As investment adviser, DAMI
makes the Fund's investment decisions. It buys and sells securities for the Fund
and conducts the research that leads to the purchase and sale decisions. DAMI is
also responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges. The investment adviser received a fee of 1.50%
of the Fund's average daily net assets for its services in the last fiscal year.
The investment adviser reimbursed a portion of its fee during the period.

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

DAMI is an indirect wholly-owned subsidiary of Deutsche Bank A.G. Deutsche Bank
A.G. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

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

Other Services. DAMI provides administrative services 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:

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

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

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

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

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

. collecting your executed proxies.

PORTFOLIO MANAGERS

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

Audrey Jones, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1986 and the Fund at its inception.

. Portfolio manager with a primary focus on the credit sensitive, energy,
process industries and transportation sectors.

. 28 years of investment industry experience.

. BBA from Pace University Lubin School of Business.

John Callaghan, Managing Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Portfolio manager with a primary focus on the technology and health care
sectors.

. Previously, was at Odyssey Partners, a private investment partnership from
1996 to 1997 and was a co-manager of the Small Capitalization Growth Stock
Division at Weiss, Peck & Greer from 1993 to 1996).

. 17 years of investment industry experience.

. MBA from Harvard Business School.

Mary Dugan, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1999.

. Portfolio manager with a primary focus on the consumer and capital goods
sectors.

. Securities Analyst at Fred Alger Management from 1992 to 1994 and at Dean
Witter Reynolds from 1989 to 1992.

. 17 years of investment industry experience.

. BA from the University of Rochester and MBA from New York University's Stein
School of Business.

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.

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 fair value in the judgment of the Board of Trustees.
- - - - - - - - - - - -------------------------------------------------------------------------------
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.
- - - - - - - - - - - -------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

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 Ordinary income
gains
distributions
--------------------------------------------
Long-term capital Long-term capital gains
gains
distributions
--------------------------------------------

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 Generally, long-term
shares owned capital gains or losses
more than one
year
-------------------------------------------
Your sale of Generally, short-term
shares owned capital gains or losses:
for one year or losses subject to
less 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 Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210

By overnight mail Kansas City, MO 64121-9210

Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

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

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

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

WIRE:

Routing No: 1010 00695

Attn: Deutsche Asset Management Funds

DDA No: 98-7052-395-7

FBO: (Account name)

(Account number)

Credit: Micro Cap Fund [Fund number]

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

Important Information about Buying and Selling Shares

. After we or your service agent receives 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.

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

<PAGE>

A Detailed Look at Micro Cap

. We do not issue share certificates.

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

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

Please note the following conditions:

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

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

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

. You will receive a written confirmation of each transaction from the Service
Center or your service agent.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past three fiscal periods.
Certain 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 PricewaterhouseCoopers
LLP, 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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
For the For the
For the Period Ended Year Ended Period Ended
September 30, 1999/1/ October 31, 1998 October 31, 1997/3/
<S> <C> <C> <C>
For a Share Outstanding
Throughout each Period:
Net Asset Value,
Beginning of Period $9.90 $12.62 $10.00
-------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income (0.14) (0.05) (0.04)
-------------------------------------------------------------------------------------
Net Realized and
Unrealized Gains
(Losses) 6.40 (2.18) 2.66
-------------------------------------------------------------------------------------
Total from Investment
Operations 6.26 (2.23) 2.62
-------------------------------------------------------------------------------------
Distributions to
Shareholders
Net Investment Income -- -- --
-------------------------------------------------------------------------------------
Net Realized Gains -- (0.49) --
-------------------------------------------------------------------------------------
Total Distributions -- (0.49) --
-------------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.16 $9.90 $12.62
-------------------------------------------------------------------------------------
Total Investment Return 63.23%/4/ (18.16)% 26.20%/4/
-------------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s omitted) $17,000 $14,363 $3,276
-------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
-------------------------------------------------------------------------------------
Net Investment Income
(Loss) (1.07)%/2/ (0.75)% (0.49)%/2/
-------------------------------------------------------------------------------------
Expenses 3.00%/2/ 2.59% 3.39%/2/
-------------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by DAMI/5/ 1.51%/2/ 1.10% 1.76%/2/
-------------------------------------------------------------------------------------
Portfolio Turnover Rate 115% 85% 272%
-------------------------------------------------------------------------------------
</TABLE>

/1/Represents the eleven month period November 1, 1998 through September 30,
1999.
/2/Annualized.
/3/Inception of Institutional Class shares of the Fund was 12/18/96.
/4/Total return is not annualized.
/5/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.

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

<PAGE>

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<PAGE>

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<PAGE>

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

Micro Cap--Institutional Class
Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square CUSIP #61735K786
Portland, ME 04101 363PRO (2/00)
801-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Investment Class

Micro Cap

Formerly Microcap Fund, a Morgan Grenfell Fund

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Micro Cap

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Micro Cap--Investment Class

Overview of Micro Cap

Goal........................................................................ 2
Core Strategy............................................................... 2
Investment Policies and Strategies.......................................... 2
Principal Risks of Investing in the Fund.................................... 3
Who Should Consider Investing in the Fund................................... 3
Total Returns, After Fees and Expenses...................................... 4
Annual Fund Operating Expenses.............................................. 5

A Detailed Look at Micro Cap

Objective.................................................................. 6
Strategy................................................................... 6
Principal Investments...................................................... 6
Investment Process......................................................... 6
Other Investments.......................................................... 6
Risks...................................................................... 7
Management of the Fund..................................................... 7

Calculating the Fund's Share Price.......................................... 8
Performance Information..................................................... 9
Dividends and Distributions................................................. 9
Tax Considerations.......................................................... 9
Buying and Selling Fund Shares.............................................. 9
Financial Highlights........................................................ 11

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

<PAGE>

Overview of Micro Cap

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:

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in Micro Cap 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 Micro Cap 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 Micro Cap is not a deposit of any bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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

<PAGE>

Overview of Micro Cap

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. The Index is a passive
measure of U.S. equity market returns. It does not factor in the costs of
buying, selling and holding stocks--costs which are reflected in the Fund's
results.
- - - - - - - - - - - --------------------------------------------------------------------------------
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 U.S. companies based on total market capitalization. The Russell 3000
represents approximately 98% of the investable U.S. 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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1998 1.11%
1999 76.99%

Since inception, the Fund's highest return in any calendar quarter was 29.56%
(fourth quarter 1999) and its lowest quarterly return was (24.16%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (8/21/97)/1/

Micro Cap--Investment
Class 76.99% 28.06%
-----------------------------------------------
Russell 2000 Index 21.26% 9.13%
-----------------------------------------------

/1/ The Russell 2000 Index average is
calculated from August 30, 1997.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Micro Cap

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 Micro Cap.

Expense Example. The example below illustrates the expenses you will incur 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/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal period ended September 30, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.75% and 3.25%, respectively, of the average
daily net assets of the Investment Class shares.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.50%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.98%/1/
-----------------------------------------------
Total Fund Operating
Expenses 2.48%/1/
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursement (0.74%)/2/
-----------------------------------------------
Net Expenses 1.74%
-----------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------

$176 $698 $1,246 $2,741
----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Micro Cap

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

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 focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

. 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.

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

. The team screens the bottom 5% of the total domestic equity market
capitalization for micro cap companies with growth and profitability.

In implementing this strategy, the Fund may experience a high portfolio
turnover rate.

OTHER INVESTMENTS

The Fund may 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.

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

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.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

RISKS

Primary Risks

Security Selection Risk. A risk that pervades all investing is the risk that
the securities in the Fund's portfolio will decline in value.

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 fair value 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. This risk
may be heightened for micro capitalization companies.

Derivative Risks. The Fund may, but is not required to, invest in derivatives.
Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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, Inc. (DAMI) with headquarters at 885 Third Avenue, New York,
New York, acts as investment adviser for the Fund. As investment adviser, DAMI
makes the Fund's investment decisions. It 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 investment adviser received a fee
of 1.50% of the Fund's average daily net assets for its services in the last
fiscal year. The investment adviser reimbursed a portion of its fee during the
period.

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

DAMI is an indirect wholly-owned subsidiary of Deutsche Bank A.G., an
international commercial and investment banking group. Deutsche Bank A.G. 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 provides administrative services for the Fund. In
addition, DAMI--or your broker or financial advisor--
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

performs the functions necessary to establish and maintain your account. In
addition to setting up the account and processing your purchase and sale
orders, these functions include:

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

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

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

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

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

. collecting your executed proxies.

PORTFOLIO MANAGERS

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

Audrey Jones, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1986 and the Fund at its inception.

. Portfolio manager with a primary focus on the credit sensitive, energy,
process industries and transportation sectors.

. 28 years of investment industry experience.

. BBA from Pace University Lubin School of Business.

John Callaghan, Managing Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined Deutsche Asset Management, Inc. in 1997.

. Portfolio manager with a primary focus on the technology and health care
sectors.

. Previously at Odyssey Partners, a private investment partnership from 1996 to
1997 and was a co-manager of the Small Capitalization Growth Stock Division
at Weiss, Peck & Greer from 1993 to 1996.

. 17 years of investment industry experience.

. MBA from Harvard Business School.

Mary Dugan, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1994.

. Portfolio manager with a primary focus on the consumer and capital goods
sectors.

. Securities Analyst at Fred Alger Management from 1992 to 1994 and at Dean
Witter Reynolds from 1989 to 1992.

. 17 years of investment industry experience.

. BA from the University of Rochester and MBA from New York University's Stein
School of Business.

CALCULATING THE FUND'S SHARE PRICE

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their fair value in the judgment of the Board of Trustees.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

TRANSACTION TAX STATUS

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 Generally, long-term
shares owned capital gains or losses
more than one
year
-------------------------------------------
Your sale of Generally, short-term
shares owned capital gains or losses;
for one year or losses subject to
less 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 Mutual Fund Service Center of Deutsche Asset Management

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

Service Plan

The Fund has adopted a service plan for its Investment Class shares. Under the
plan, the 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 agents for providing personal services and/or
account maintenance services to their customers. In the event that your service
plan is terminated, your shares will be converted to Institutional Class shares
of the same Fund.

Minimum Account Investments

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

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

Important Information about Buying and Selling Shares

. You may buy and sell shares of the fund through authorized service agents.
Once you place your order with a service agent, it is considered received by
the fund. It is then your service agent's responsibility to transmit the
order to the fund by the next business day. You should contact your service
agent if you have a dispute as to when your order was placed with the fund.
Your service agent may charge a fee for buying and selling shares for you.

. You may place orders to buy and sell over the phone by calling your service
agent. Please contact your service agent for more information.

. After your service agent receives 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Micro Cap

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

. We process all sales orders free of charge.

. You can exchange all or part of your shares for shares in another Deutsche
Asset Management mutual fund up to four times a year (from the date of the
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 obtain 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:

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

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

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

. You will receive a written confirmation of each transaction from your
service agent.

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

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

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

. We do not issue share certificates.

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

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

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

<PAGE>

A Detailed Look at Micro Cap

The table below helps you understand the financial performance of the
Investment Class shares of the Fund for the past three fiscal periods. Certain
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 PricewaterhouseCoopers LLP, 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 Service
Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the For the For the
Period Ended Year Ended Period Ended
September 30, October 31, October 31,
1999/1/ 1998 1997/3/

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of Period $9.88 $12.62 $12.12
-----------------------------------------------------------------------------
Income from Investment Operations
Net Investment (Loss) (0.14) (0.06) (0.02)
-----------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) 6.38 (2.19) 0.52
-----------------------------------------------------------------------------
Total from Investment Operations 6.24 (2.25) 0.50
-----------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income -- -- --
-----------------------------------------------------------------------------
Net Realized Gains -- (0.49) --
-----------------------------------------------------------------------------
Total Distributions -- (0.49) --
-----------------------------------------------------------------------------
Net Asset Value, End of Period $16.12 $9.88 $12.62
-----------------------------------------------------------------------------
Total Investment Return 63.16%/4/ (18.33)% 3.87%/4/
-----------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $1,383 $1,036 $10
-----------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income (Loss) (1.29)%/1/ (0.98)% (1.15)%/2/
-----------------------------------------------------------------------------
Expenses 3.25%/3/ 2.68% 3.52%/2/
-----------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to
Absorption of Expenses by DAMI/5/ 1.51%/2/ 0.94% 1.78%/3/
-----------------------------------------------------------------------------
Portfolio Turnover Rate 115% 85% 272%
-----------------------------------------------------------------------------

/1/ Represents the eleven month period November 1, 1998 through September 30,
1999.
/2/ Annualized.
/3/ Inception of Investment Class shares of the Fund was August 21, 1997.

/4/ Total return is not annualized.

/5/ DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------
11

<PAGE>

Service Center
P.O. Box 219165
Kansas City, MO 64121
or call our toll-free number: 1-800-730-1313

Micro Cap--Investment Class

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101 CUSIP #61735K778

365PRO (2/00)

801-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Investment Class

Smaller Companies

Formerly a Morgan Grenfell Fund
<PAGE>
[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 A Member of the
adequacy of this prospectus. Any representation to the Deutsche Bank
contrary is a criminal offense.] Group [/]

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Smaller 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Smaller Companies--Investment Class

Overview of Smaller Companies

A Detailed Look at Smaller Companies

Objective................................................................... 6
Strategy.................................................................... 6
Principal Investments....................................................... 6
Investment Process.......................................................... 6
Other Investments........................................................... 6
Risks....................................................................... 7
Management of the Fund...................................................... 7
Portfolio Managers.......................................................... 8
Calculating the Fund's Share Price.......................................... 8
Performance Information..................................................... 9
Dividends and Distributions................................................. 9
Tax Considerations.......................................................... 9
Buying and Selling Fund Shares.............................................. 9
Financial Highlights........................................................ 11

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

<PAGE>

Overview of Smaller 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:

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

. the stock market could perform poorly in the U.S.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in Smaller Companies 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 Smaller Companies 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 Smaller Companies is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Smaller Companies

TOTAL RETURNS, AFTER FEES AND EXPENSES

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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1998 0.73%
1999 35.15%

Since inception, the Fund's highest return in any calendar quarter was 26.75%
(fourth quarter 1999) and its lowest quarterly return was (23.04%) (third
quarter 1998). Past performance offers no indications of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (7/11/97)/1/

Smaller Companies--
Investment Class 36.15% 15.90%
------------------------------------------------
S&P 600 Index 12.41% 6.89%
------------------------------------------------

/1/ The S&P 600 Index average is
calculated from July 31, 1997.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Smaller Companies

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 Smaller Companies.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 2.98% and 3.98%, respectively, of the average
daily net assets of the Investment Class shares.

/2/The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 1.50%.

/3/For the first 12 months, the expense example takes into account fee waivers
or reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.00%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 2.48%/1/
--------------------------------------------------
Total Annual Fund
Operating Expenses 3.48%/1/
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (1.98%)/2/
--------------------------------------------------
Net Expenses 1.50%
--------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - -----------------------------------------------------------------

$153 $884 $1,638 $3,625
- - - - - - - - - - - -----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------

at Smaller Companies

OBJECTIVE

The Fund seeks capital appreciation, with current income as a secondary
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 primarily in equity securities of U.S. smaller capitalization
companies. 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

Under normal circumstances, the Fund invests at least 65% of its total assets
in the equity securities of U.S. smaller capitalization companies. 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.

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 focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

. 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.

. The team screens the bottom 20% of the total domestic equity market
capitalization for smaller cap companies with growth and profitability.

The team looks for two financial attributes that set these companies apart:

. Evidence of above-average growth in revenues and earnings; and

. A balance sheet that can support this growth potential with sufficient
working capital and manageable levels of debt.

In implementing this strategy, the Fund may experience a high portfolio
turnover rate.

OTHER INVESTMENTS

The Fund may also invest up to 35% of its assets in investment grade fixed
income securities, stocks of medium and large capitalization companies,
securities of foreign issuers and in cash.

We may invest in various instruments commonly known as "derivatives" to
increase or decrease the Fund's exposure to a securities market, index or
currency. 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.

- - - - - - - - - - - --------------------------------------------------------------------------------
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.

Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directing in those securities.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

6
<PAGE>
A Detailed Look at Smaller Companies

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. 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.

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.

Security Selection Risk. A risk that pervades all investing is the risk that
the securities in the Fund's portfolio will decline in value.

Secondary Risks

Futures and Options. The Fund may invest, to a limited extent, in stock index
futures or options, which are types of derivatives. Risks associated with
derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

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.

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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, Inc. (DAMI) with headquarters at 885 Third Avenue, New York,
New York, acts as investment adviser for the Fund. As investment adviser, DAMI
makes the Fund's investment decisions. It 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 investment adviser received a fee
of 1.00% of the Fund's average daily net assets for its services in the last
fiscal year. The investment adviser reimbursed a portion of its fee during the
period.

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

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

<PAGE>

A Detailed Look at Smaller Companies

Other Services. DAMI provides administrative services 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:

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

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

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

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

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

. collecting your executed proxies.

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Audrey Jones, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1986 and the Fund at its inception.

. Portfolio manager with a primary focus on the credit sensitive, energy,
process industries and transportation sectors.

. 28 years of investment industry experience.

. BBA from Pace University Lubin School of Business.

John Callaghan, Managing Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Portfolio manager with a primary focus on the technology and health care
sectors.

. Previously at Odyssey Partners, a private investment partnership from 1996 to
1997 and was a co-manager of the Small Capitalization Growth Stock Division
at Weiss, Peck & Greer from 1993 to 1996.

. 17 years of investment industry experience.

. MBA from Harvard Business School.

Mary Dugan, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1994.

. Portfolio manager with a primary focus on the consumer and capital goods
sectors.

. Securities Analyst at Fred Alger Management from 1992 to 1994 and at Dean
Witter Reynolds from 1989 to 1992.

. 17 years of investment industry experience.

. BA from the University of Rochester and MBA from New York University's Stein
School of Business.

CALCULATING THE FUND'S SHARE PRICE

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their fair value in the judgment of the Board of Trustees.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Smaller Companies

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

TRANSACTION TAX STATUS

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 Generally, long-term
shares owned capital gains or losses
more than one
year
-------------------------------------------
Your sale of Generally, short-term
shares owned capital gains or losses;
for one year or losses subject to
less 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 agent 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 agents for providing personal services and/or
account maintenance services to their customers. In the event that your service
plan is terminated, your shares will be converted to Institutional Class shares
of the same Fund.

Minimum Account Investments

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

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

Important Information about Buying and Selling Shares

. You may buy and sell shares of a fund through authorized service agents. Once
you place your order with a service agent, it is considered received by the
fund. It is then your service agent's responsibility to transmit the order to
the fund by the next business day. You should contact your service agent if
you have a dispute as to when your order was placed with the fund. Your
service agent may charge a fee for buying and selling shares for you.

. You may place orders to buy and sell over the phone by calling your service
agent. Please contact your service agent for more information.

. After your service agent receives 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.

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

<PAGE>

A Detailed Look at Smaller Companies

. We process all sales orders free of charge.

Please note the following conditions:

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

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

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

. You will receive a written confirmation of each transaction from your
service agent.

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

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

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

. We do not issue share certificates.

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

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

10
<PAGE>
A Detailed Look at Smaller Companies

The table below helps you understand the financial performance of the
Investment Class shares of the Fund for the past three fiscal periods. Certain
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 PricewaterhouseCoopers LLP,
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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the Year
Ended For the Period Ended
October 31, October 31,
1999 1998 1997/1/

For a Share Outstanding Througout
each Period:
Net Asset Value, Beginning of Period $11.18 $14.71 $13.77
-----------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.00 (0.05) (0.03)
-----------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investment, Option,
Foreign Currency, Forward Foreign
Currency and Foreign Futures
Contracts 2.76 (1.80) 0.97
-----------------------------------------------------------------------------
Total from Investment Operations 2.76 (1.85) 0.94
-----------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.03) -- --
-----------------------------------------------------------------------------
Net Realized Gains -- (1.68) --
-----------------------------------------------------------------------------
Total Distributions (0.03) (1.68) --
-----------------------------------------------------------------------------
Net Asset Value, End of Period $13.91 $11.18 $14.71
-----------------------------------------------------------------------------
Total Investment Return 24.74% (13.79)% 7.45%/3/
-----------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $ 340 $ 997 $ 6
-----------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income (1.03)% 0.09% (0.77)%/2/
-----------------------------------------------------------------------------
Expenses 3.98% 2.76% 2.79%/2/
-----------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by DAMI/4/ 2.48% 1.26% 1.29%/2/
-----------------------------------------------------------------------------
Portfolio Turnover Rate 105% 108% 122%
-----------------------------------------------------------------------------

/1/Inception date for Investment Class shares of the Fund was July 11, 1997.

/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

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

Smaller Companies--Investment Class

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101 CUSIP #61735K745

366PRO (2/00)

801-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Institutional Class

Smaller Companies

Formerly a Morgan Grenfell Fund

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Smaller Companies

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

SMALLER COMPANIES--Institutional Class

Overview of Smaller Companies

Goal..........................................................................3
Core Strategy.................................................................3
Investment Policies and Strategies............................................3
Principal Risks of Investing in the Fund......................................4
Who Should Consider Investing in the Fund.....................................4
Total Returns, After Fees and Expenses........................................5
Annual Fund Operating Expenses................................................6

A Detailed Look at Smaller Companies

Objective.....................................................................7
Strategy......................................................................7
Principal Investments.........................................................7
Investment Process............................................................7
Other Investments.............................................................7
Risks.........................................................................8
Management of the Fund........................................................8
Portfolio Managers............................................................9
Calculating the Fund's Share Price............................................9
Performance Information......................................................10
Dividends and Distributions..................................................10
Tax Considerations...........................................................10
Buying and Selling Fund Shares...............................................10
Financial Highlights.........................................................13

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

<PAGE>

Overview of Smaller 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:

. 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;
. stocks that the Investment Adviser has selected could perform poorly; or
. the stock market could perform poorly in the U.S.

WHO SHOULD CONSIDER INVESTING IN THE FUND

Smaller Companies Fund Institutional Class requires a minimum investment of
$250,000. You should consider investing in Smaller Companies 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.

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 Smaller Companies is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

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

<PAGE>

Overview of Smaller Companies

TOTAL RETURNS, AFTER FEES AND EXPENSES

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.

[GRAPH APPEARS HERE]
YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1996 22.21%
1997 15.13%
1998 1.06%
1999 35.38%

Since inception, the Fund's highest return in any calendar quarter was 26.91%
(fourth quarter 1999) and its lowest quarterly return was (22.92%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year (6/30/95)/1/

Smaller Companies --
Institutional Class 35.38% 18.94%
-----------------------------------------------
S&P 600 Index 12.41% 15.53%
-----------------------------------------------

/1/ The S&P 600 Index average is calculated from June 30, 1995.

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

<PAGE>

Overview of Smaller Companies

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

estimated expenses that you may pay if you buy and hold Institutional Class
shares of Smaller Companies.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 3.40% and 4.40%, respectively, of the average
daily net assets of the Institutional Class shares.

/3/For the first 12 months, the expense example takes into account fee waivers
or reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.00%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 2.23%/1/
-----------------------------------------------
Total Annual Fund
Operating Expenses 3.23%/1/
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (1.98%)/2/
-----------------------------------------------
Net Expenses 1.25%
-----------------------------------------------

EXPENSE EXAMPLE/3/

1 year 3 years 5 years 10 years
----------------------------------------------------------------

$127 $809 $1,516 $3,395
----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------

at Smaller Companies

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests at least 65% of its total assets
in the equity securities of U.S. smaller capitalization companies. 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.

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 focuses on undervalued stocks with fast-growing earnings and
superior near-to-intermediate term performance potential.

. 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.

. The team screens the bottom 20% of the total domestic equity market
capitalization for smaller cap companies with growth and profitability.

The team looks for two financial attributes that set these companies apart:

. Evidence of above-average growth in revenues and earnings; and

. A balance sheet that can support this growth potential with sufficient
working capital and manageable levels of debt.

In implementing this strategy the Fund may experience a high portfolio turnover
rate.

OTHER INVESTMENTS

The Fund may also invest up to 35% of its assets in investment grade fixed
income securities, stocks of medium and large capitalization companies,
securities of foreign issuers and in cash.

Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directing in those securities.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

7
<PAGE>
A Detailed Look at Smaller Companies

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.

RISKS

Primary Risks

Security Selection Risk. A risk that pervades all investing is the risk that
the securities in the Fund's portfolio will decline in value.

Secondary Risks

Futures and Options. The Fund may invest, to a limited extent, in stock index
futures or options, which are types of derivatives. Risks associated with
derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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, Inc. (DAMI) with headquarters at 885 Third Avenue, New York,
New York, acts as investment adviser for the Fund. As investment adviser, DAMI
makes the Fund's investment decisions. It 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 investment adviser received a fee
of 1.00% of the Fund's average daily net assets for its services in the last
fiscal year. The investment adviser reimbursed a portion of its fee during the
period.

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

<PAGE>

A Detailed Look at Smaller Companies

investment management, mutual fund, retail and commercial banking, investment
banking and insurance.

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

Other Services. DAMI provides administrative services 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:

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

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

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

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

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

. collecting your executed proxies.

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Audrey Jones, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1986 and the Fund at its inception.

. Portfolio manager with a primary focus on the credit sensitive, energy,
process industries and transportation sectors.

. 28 years of investment industry experience.

. BBA from Pace University Lubin School of Business.

John Callaghan, Managing Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Portfolio manager with a primary focus on the technology and health care
sectors.

. Previously, at Odyssey Partners, a private investment partnership from 1996
to 1997 and was a co-manager of the Small Capitalization Growth Stock
Division at Weiss, Peck & Greer from 1993 to 1996.

. 17 years of investment industry experience.

. MBA from Harvard Business School.

Mary Dugan, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1994.

. Co-manager of the investment adviser's small cap equity group.

. Portfolio manager with a primary focus on the consumer and capital goods
sectors.

. Securities Analyst at Fred Alger Management from 1992 to 1994 and at Dean
Witter Reynolds from 1989 to 1992.

. 17 years of investment industry experience.

. BA from the University of Rochester and MBA from New York University's Stein
School of Business.

CALCULATING THE FUND'S SHARE PRICE

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 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Smaller Companies

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

TRANSACTION TAX STATUS

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

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

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

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail
Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

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

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

<PAGE>

A Detailed Look at Smaller Companies

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:

WIRE:

Routing No: 1010 00695
Attn: Deutsche Asset Management Funds
DDA No: 98-7052-395-7
(Account name)
FBO: (Account number)
Credit: Smaller Companies Fund [Fund number]

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

Important Information about Buying and Selling Shares

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

. We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Smaller Companies

transfer. Please note that we cannot accept starter checks or third-party
checks.

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

. We do not issue share certificates.

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

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

Exchange Privilege. You can exchange all or part of your shares for shares of
another Deutsche Asset Management mutual fund up to four times a year (from the
date of the 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 only order exchanges over the phone if your account is
authorized to do so.

Please note the following conditions:

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

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

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

<PAGE>

A Detailed Look at Smaller Companies

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past five fiscal periods.
Certain 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 PricewaterhouseCoopers
LLP, 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 Service Center at 1-800-730-1313.

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>
For a Share Outstanding
Throughout each Period:
Net Asset Value,
Beginning of Period $11.22 $14.72 $13.10 $10.55 $10.00
------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income
(Loss) 0.00 (0.01) (0.03) (0.02) 0.03
------------------------------------------------------------------------------------
Net Realized and
Unrealized Gains
(Losses) 2.80 (1.81) 2.87 2.61 0.52
------------------------------------------------------------------------------------
Total from Investment
Operations 2.80 (1.82) 2.84 2.59 0.55
------------------------------------------------------------------------------------
Distributions to
Shareholders
Net Investment Income (0.03) -- -- (0.04) --
------------------------------------------------------------------------------------
Net Realized Gains -- (1.68) (1.22) -- --
------------------------------------------------------------------------------------
Total Distributions (0.03) (1.68) (1.22) (0.04) --
------------------------------------------------------------------------------------
Net Asset Value, End of
Period $13.99 $11.22 $14.72 $13.10 $10.55
------------------------------------------------------------------------------------
Total Investment Return 25.03% (13.54)% 23.29% 24.58% 5.50%/3/
------------------------------------------------------------------------------------
Net Assets, End of
Period (000s omitted) $6,299 $4,734 $5,724 $4,115 $2,638
------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Net Investment Income
(Loss) (0.78)% 0.26% (0.29)% (0.23)% 0.94%/2/
------------------------------------------------------------------------------------
Expenses 4.40% 2.44% 2.63% 2.55% 2.28%/2/
------------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by DAMI/4/ 3.15% 1.19% 1.38% 1.30% 1.03%/2/
------------------------------------------------------------------------------------
Portfolio Turnover Rate 105% 108% 122% 141% 23%
------------------------------------------------------------------------------------
</TABLE>

/1/The Fund's inception date was June 30, 1995.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI-Deutsche Asset Management Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

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<PAGE>

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<PAGE>

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

Smaller Companies--Institutional Class

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101 CUSIP #61735K844

362PRO (2/00)

801-8006

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

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents

Fixed Income................................................................ 3
Short-Term Fixed Income..................................................... 11
Municipal Bond.............................................................. 19
Short-Term Municipal Bond................................................... 27
High Yield Bond............................................................. 35
Information Concerning All of the Funds..................................... 43
Management of the Funds..................................................... 43
Calculating a Fund's Share Price............................................ 43
Dividends and Distributions................................................. 44
Tax Considerations.......................................................... 44
Buying and Selling Fund Shares.............................................. 44

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

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Fixed Income

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 investment grade 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Fixed Income--Institutional Class

Overview of Fixed Income

A Detailed Look at Fixed Income

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 8
Risks....................................................................... 8
Portfolio Managers.......................................................... 9
Financial Highlights........................................................ 10

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

<PAGE>

Overview of Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest; and
. 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

Fixed Income Institutional Class requires a minimum investment of $250,000. You
should consider investing in Fixed Income 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 Fixed Income 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 Fixed Income is not a deposit of any bank, and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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 securities--costs which are reflected in
the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond Index represents U.S. domestic taxable
investment grade bonds which include securities from the following sectors:
U.S. Treasuries, agencies, corporate, mortgage-backed and asset-backed
securities. The Index includes over 5,500 public issued securities with a
minimum one year to final maturity and $150 million par amount outstanding. The
average maturity and duration of the index is in the intermediate range.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1993 13.67%
1994 - 1.93%
1995 18.17%
1996 4.49%
1997 9.46%
1998 7.91%
1999 - 0.55%

Since inception, the Fund's highest return in any calendar quarter was 5.87%
(first quarter 1993) and its lowest quarterly return was (3.20%) (first quarter
1994). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Years (9/18/92)/1/

Fixed Income--
Institutional
Class (0.55)% 7.72% 7.12%
-----------------------------------------------
Lehman Brothers
Aggregate Bond
Index (0.82)% 7.73% 6.23%
-----------------------------------------------

/1/The Lehman Brothers Aggregate Bond Index average is calculated from
September 30, 1992.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Fixed Income

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 Fixed
Income.

/1/The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 0.55%.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.40%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.15%
-----------------------------------------------
Total Annual Fund
Operating Expenses 0.55%
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements 0.00%/1/
-----------------------------------------------
Net Expenses 0.55%
-----------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------

$56 $176 $307 $689
-------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Fixed Income

OBJECTIVE

The Fund seeks a high level of income consistent with the preservation of
capital. 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. Subject to its portfolio maturity
policy, the Fund may purchase individual securities with any stated maturity.
The dollar weighted average portfolio maturity may be shorter than the stated
maturity due to several factors, including but not limited to prepayment
patterns, call dates and put features. In implementing this strategy, the Fund
may experience a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

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.
Fixed income funds usually have a higher portfolio turnover rate as a group as
compared to equity funds because fixed income security maturities contribute to
turnover. High turnover can increase the Fund's transaction costs, thereby
lowering its returns.

PRINCIPAL INVESTMENTS

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 primarily
in investment grade fixed income securities rated within the top three rating
categories. 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.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on credit worthiness, cash flow and price, to
each bond;

. 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;

. use credit analysis to determine the issuer's ability to fulfill its
contracts; and

. subordinate sector weightings to individual bonds that may add above-market
value.
- - - - - - - - - - - --------------------------------------------------------------------------------

Fixed income securities are investment grade if:

. They are rated in one of the top four, long-term rating categories of a
nationally recognized statistical rating organization.

. They have received a comparable short-term or other rating.

. 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.

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

7
<PAGE>
A Detailed Look at Fixed Income

OTHER INVESTMENTS

The Fund may invest up to 15% of its assets in investment grade fixed income
securities rated within the fourth highest rating category.

The Fund may invest up to 25% of its total assets in U.S. dollar-denominated
securities of foreign issuers and governments, including American Depositary
Receipts (ADRs). 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.

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

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. 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

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 fair value 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.

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

<PAGE>

A Detailed Look at Fixed Income

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Gary Bartlett, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1992.

. Analyst specializing in taxable municipal and government investments.

. MBA, Drexel University.

Warren Davis, Director of Deutsche Asset Management, Inc. and Co-Manager of the
Fund

. Joined the investment adviser in 1995.

. Analyst specializing in mortgage and asset backed securities.

. MBA, Drexel University.

Thomas Flaherty, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1995.

. Analyst specializing in corporate bonds and mortgages.

J. Christopher Gagnier, Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Prior to that, portfolio manager, Paine Webber, from 1984 to 1997.

. Analyst specializing in asset backed securities and government investments.

Daniel Taylor, CFA, Vice President of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1998.

. Prior to that, fixed income portfolio manager, asset backed securities
analyst and senior credit analyst, CoreStates Investments Advisors, from 1992
to 1998.

. Analyst specializing in asset backed securities and government securities.

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

<PAGE>

A Detailed Look at Fixed Income

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past five years. Certain
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 PricewaterhouseCoopers LLP,
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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the year ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value,
Beginning of Period $10.88 $10.76 $10.51 $10.62 $9.93
- - - - - - - - - - - --------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income 0.64 0.65 0.68 0.68 0.70
- - - - - - - - - - - --------------------------------------------------------------------------------
Net Realized and
Unrealized Gains
(Losses) on Investment (0.54) 0.20 0.25 (0.04) 0.69
- - - - - - - - - - - --------------------------------------------------------------------------------
Total from Investment
Operations 0.10 0.85 0.93 0.64 1.39
- - - - - - - - - - - --------------------------------------------------------------------------------
Distributions to
Shareholders from
Net Investment Income (0.64) (0.65) (0.68) (0.68) (0.70)
- - - - - - - - - - - --------------------------------------------------------------------------------
Net Realized Gains (0.17) (0.08) -- (0.07) --
- - - - - - - - - - - --------------------------------------------------------------------------------
Total Distributions (0.81) (0.73) (0.68) (0.75) (0.70)
- - - - - - - - - - - --------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.17 $10.88 $10.76 $10.51 $10.62
- - - - - - - - - - - --------------------------------------------------------------------------------
Total Investment Return 0.86% 8.25% 9.22% 6.27% 14.53%
- - - - - - - - - - - --------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s omitted) $1,258,869 $1,263,215 $1,103,121 $758,003 $494,221
- - - - - - - - - - - --------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Net Investment Income 6.08% 6.01% 6.50% 6.52% 6.81%
- - - - - - - - - - - --------------------------------------------------------------------------------
Expenses 0.55% 0.56% 0.60% 0.61% 0.63%
- - - - - - - - - - - --------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by DAMI/1/ -- 0.01% 0.05% 0.06% 0.09%
- - - - - - - - - - - --------------------------------------------------------------------------------
Portfolio Turnover Rate 157% 122% 178% 176% 182%
- - - - - - - - - - - --------------------------------------------------------------------------------

/1/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - ------------------------------------------------------------------------------

10
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Short-Term Fixed Income

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Short-Term Fixed Income--Institutional Class

Overview of Short-Term Fixed Income

Goal........................................................................ 11
Core Strategy............................................................... 11
Investment Policies and Strategies.......................................... 11
Principal Risks of Investing in the Fund.................................... 12
Who Should Consider Investing in the Fund................................... 12
Total Returns, After Fees and Expenses...................................... 13
Annual Fund Operating Expenses.............................................. 14

A Detailed Look at Short-Term Fixed Income

Objective................................................................... 15
Strategy.................................................................... 15
Principal Investments....................................................... 15
Investment Process.......................................................... 15
Other Investments........................................................... 16
Risks....................................................................... 16
Portfolio Managers.......................................................... 17
Financial Highlights........................................................ 18

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

<PAGE>

Overview of Short-Term Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest; and
. 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

Short-Term Fixed Income Institutional Class requires a minimum investment of
$250,000. You should consider investing in Short-Term Fixed Income 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 Fixed Income may provide.

You should not consider investing in Short-Term Fixed Income if you are
pursuing a long-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 Short-Term Fixed Income is not a deposit of any bank, and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Short-Term Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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 13, 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 and the Merrill
Lynch 1-Year Treasury Bill Index over the last one year and since its
inception. The Fund has changed its benchmark from the Merrill Lynch 6-Month
Treasury Bill Index to the Merrill Lynch 1-Year Treasury Bill Index. This index
more closely reflects the dollar weighted average portfolio maturity of the
Fund. 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.
It does not factor in the costs of buying, selling and holding securities--
costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------

The Merrill Lynch 6-Month Treasury Bill Index and the Merrill Lynch 1-Year
Treasury Bill Index are each measures of the performance of the 6-month and 1-
year Treasury Bills, respectively, assuming all cash flows are reinvested on a
daily basis. Each Index is comprised of a single issue purchased at the
beginning of the month and held for the full month. At the end of the month,
that issue is sold and rolled into a newly selected issue. The issue at each
month-end rebalancing is the outstanding Treasury Bill that matures, closest
to, but not beyond 6 months and 1-year, respectively, from the rebalancing
date.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1996 5.48%
1997 6.77%
1998 6.54%
1999 4.47%

Since inception, the Fund's highest return in any calendar quarter was 3.22%
(third quarter 1998) and its lowest quarterly return was 0.17% (fourth quarter
1998). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (3/13/95)/1/

Short-Term Fixed Income--
Institutional Class 4.47% 5.95%
-----------------------------------------------
Merrill Lynch 6-Month
Treasury Bill Index 4.64% 5.44%
-----------------------------------------------
Merrill Lynch 1-Year
Treasury Bill Index 4.03% 5.63%
-----------------------------------------------

/1/The Merrill Lynch 6-Month Treasury Bill Index average and the Merrill Lynch
1-Year Treasury Bill Index average are each calculated from March 31, 1995.

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

<PAGE>

Overview of Short-Term Fixed Income

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 Short-Term Fixed Income.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.89% and 1.29%, respectively, of the average
daily net assets of the Institutional Class shares.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of Average
Daily Net Assets

Management Fees 0.40%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 0.65%/1/
--------------------------------------------------
Total Annual Fund
Operating Expenses 1.05%/1/
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.50%)/2/
--------------------------------------------------
Net Expenses 0.55%
--------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------

$56 $283 $528 $1,232
-----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Short-Term Fixed Income

OBJECTIVE

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. Subject to its portfolio
maturity policy, the Fund may purchase individual securities with any stated
maturity. The dollar weighted average portfolio maturity of the Fund is
generally shorter than the stated maturity (usually about 1 year) due to
several factors, including but not limited to prepayment patterns, call dates
and put features. In implementing this strategy, the Fund may experience a high
portfolio turnover rate.

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

Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund 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. The Fund invests primarily in
investment grade fixed income securities rated within the top three rating
categories. 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.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on credit worthiness, cash flow and price, to
each bond;

. 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;

. use credit analysis to determine the issue's ability to fulfill its
contracts; and

. subordinate sector weightings to individual bonds that may add above-market
value.

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

Fixed income securities are investment grade if:

. They are rated in one of the top four, long-term rating categories of a
nationally recognized statistical rating organization.

. They have received a comparable short-term or other rating.

. They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

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

<PAGE>

A Detailed Look at Short-Term Fixed Income

OTHER INVESTMENTS

The Fund may invest up to 15% of its assets in investment grade fixed income
securities rated within the fourth highest rating category.

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.

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

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.

Secondary Risks

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

<PAGE>

A Detailed Look at Short-Term Fixed Income

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Gary Bartlett, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1992.

. Analyst specializing in taxable municipal and government investments.

. MBA, Drexel University.

Warren Davis, Director of Deutsche Asset Management, Inc. and Co-Manager of the
Fund

. Joined the investment adviser in 1995.

. Analyst specializing in mortgage and asset backed securities.

. MBA, Drexel University.

Thomas Flaherty, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1995.

. Analyst specializing in corporate bonds and mortgages.

J. Christopher Gagnier, Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Prior to that, portfolio manager, Paine Webber, from 1984 to 1997.

. Analyst specializing in asset backed securities and government investments.

Daniel Taylor, CFA, Vice President of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1998.

. Prior to that, fixed income portfolio manager, asset backed securities
analyst and senior credit analyst, CoreStates Investments Advisors, from 1992
to 1998.

. Analyst specializing in asset backed securities and government securities.

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

<PAGE>

A Detailed Look at Short-Term Fixed Income

FINANCIAL HIGHLIGHTS

For the
Period Ended
For the Year Ended October 31, October 31,
1999 1998 1997 1996 1995/1/

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning
of Period $10.13 $10.06 $10.00 $10.01 $10.00
------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income 0.59 0.60 0.58 0.60 0.37
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) on
Investment (0.14) 0.07 0.06 (0.01) 0.01
------------------------------------------------------------------------------
Total from Investment
Operations 0.45 0.67 0.64 0.59 0.38
------------------------------------------------------------------------------
Distributions to
Shareholders from
Net Investment Income (0.60) (0.60) (0.58) (0.60) (0.37)
------------------------------------------------------------------------------
Net Realized Gains (0.02) -- -- -- --
------------------------------------------------------------------------------
Total Distributions (0.62) (0.60) (0.58) (0.60) (0.37)
------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.96 $10.13 $10.06 $10.00 $10.01
------------------------------------------------------------------------------
Total Investment Return 4.49% 6.85% 6.61% 6.09% 3.82%/3/
------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of Period
(000s omitted) $26,753 $20,201 $17,083 $6,751 $4,140
------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Net Investment Income 6.03% 5.92% 5.77% 6.00% 5.86%/2/
------------------------------------------------------------------------------
Expenses 1.29% 0.93% 1.09% 1.29% 2.84%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
DAMI/4/ 0.74% 0.38% 0.56% 0.76% 2.32%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 142% 98% 186% 124% 90%
------------------------------------------------------------------------------

/1/The Fund's inception was March 13, 1995.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Municipal Bond

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Municipal Bond--Institutional Class

Overview of Municipal Bond

Goal........................................................................ 19
Core Strategy............................................................... 19
Investment Policies and Strategies.......................................... 19
Principal Risks of Investing in the Fund.................................... 20
Who Should Consider Investing in the Fund................................... 20
Total Returns, After Fees and Expenses...................................... 21
Annual Fund Operating Expenses.............................................. 22

A Detailed Look at Municipal Bond

Objective................................................................... 23
Strategy.................................................................... 23
Principal Investments....................................................... 23
Investment Process.......................................................... 23
Other Investments........................................................... 23
Risks....................................................................... 24
Portfolio Managers.......................................................... 25
Financial Highlights........................................................ 26

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

<PAGE>

Overview of Municipal Bond

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio.
. a greater-than-anticipated percentage of the Fund's investments could produce
taxable income, resulting in a lower tax-adjusted return; and
. unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

Municipal Bond Institutional Class requires a minimum investment of $250,000.
You should consider investing in Municipal Bond if you 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 Municipal Bond 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 Municipal Bond is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Municipal Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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. It does not factor in the costs of buying, selling and
holding securities--costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The Lehman Brothers 5-Year G.O. Index includes over 1,900 intermediate term
General Obligation tax-exempt municipal bonds with an average maturity range of
4 to 6 years. The index includes tax-exempt municipal issues with a minimum par
amount of $5 million.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1992 11.99%
1993 12.31%
1994 - 0.99%
1995 13.34%
1996 5.84%
1997 8.18%
1998 5.44%
1999 - 1.25%

Since inception, the Fund's highest return in any calendar quarter was 5.16%
(first quarter 1995) and its lowest quarterly return was (2.98%) (first quarter
1994). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year 5 years (12/13/91)/1/

Municipal Bond--
Institutional
Class (1.25)% 6.21% 7.05%
------------------------------------------------
Lehman 5 Year
G.O Index 0.71% 5.81% 5.60%
------------------------------------------------

/1/The Lehman 5 Year G.O. Index average is calculated from December 31, 1991.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Municipal Bond

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 Municipal Bond.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.40%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 0.18%
--------------------------------------------------
Total Annual Fund
Operating Expenses 0.58%
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.03%)/1/
--------------------------------------------------
Net Expenses 0.55%

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------

$56 $183 $324 $723
--------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Municipal Bond

OBJECTIVE

The Fund seeks a high level of income exempt from regular federal income tax,
consistent with the preservation of capital. 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 relying on interest rate forecasts.

PRINCIPAL INVESTMENTS

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. 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
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

Fixed income securities are investment grade if:

invested in obligations the interest on which is a preference item for purposes
of the federal alternative minimum tax.

The Fund invests primarily in high quality bonds (those rated within the top
three rating categories) and may invest up to 15% of its assets in bonds that
are rated in the fourth highest category.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on creditworthiness, cash flow and price, to
each bond;

. use credit analysis to determine the issuer's ability to fulfill its
contracts;

. compare each bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value;

. look to exploit any inefficiencies between intrinsic value and market trading
price; and

. subordinate sector weightings to individual bonds that may add above-market
value.

OTHER INVESTMENTS

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.

Up to 20% of the fund's total assets may be invested in certain taxable
securities in order to maintain liquidity. The Fund may also purchase
securities on a when-issued basis.

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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 not had a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------

23
<PAGE>
A Detailed Look at Municipal Bond

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.

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.

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

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.

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

<PAGE>

A Detailed Look at Municipal Bond

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Ted Manges, Vice President of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1999. Prior to that, Manager of Trading and
Sales, Commerce Capital Markets, from 1995 to 1999.

. Analyst specializing in tax-exempt municipal bonds.

Daniel Scholl, Vice President, Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1998.

. Prior to that, Special Assistant for Economic Development to Governor Tom
Carper in Delaware, from 1996 to 1998. Prior to that, Executive Assistant to
Delaware's Secretary of Finance, from 1992 to 1996.

. Analyst specializing in tax exempt municipals.

. MGA, University of Pennsylvania.

Susan Beck, Vice President of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1989.

. Fixed income research analyst.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Municipal Bond

FINANCIAL HIGHLIGHTS

For the year ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $11.30 $11.12 $10.99 $10.86 $10.37
------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income 0.51 0.53 0.57 0.60 0.61
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) on Investment (0.59) 0.18 0.22 0.13 0.49
------------------------------------------------------------------------------
Total from Investment
Operations (0.08) 0.71 0.79 0.73 1.10
------------------------------------------------------------------------------
Distributions to Shareholders
from
Net Investment Income (0.51) (0.53) (0.57) (0.60) (0.61)
------------------------------------------------------------------------------
Net Realized Gains (0.05) -- (0.09) -- --
------------------------------------------------------------------------------
Total Distributions (0.56) (0.53) (0.66) (0.60) (0.61)
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.66 $11.30 $11.12 $10.99 $10.86
------------------------------------------------------------------------------
Total Investment Return (0.78%) 6.58% 7.49% 6.90% 10.90%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted) $622,896 $570,743 $361,461 $252,152 $221,058
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 4.62% 4.71% 5.19% 5.50% 5.75%
------------------------------------------------------------------------------
Expenses 0.58% 0.58% 0.61% 0.61% 0.62%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of
Expenses by DAMI/1/ 0.03% 0.04% 0.07% 0.06% 0.08%
------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 42% 67% 66% 63%
------------------------------------------------------------------------------

/1/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Short-Term Municipal Bond

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 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Short-Term Municipal Bond--Institutional Class

Overview of Short-Term Municipal Bond

Goal........................................................................ 27
Core Strategy............................................................... 27
Investment Policies and Strategies.......................................... 27
Principal Risks of Investing in the Fund.................................... 28
Who Should Consider Investing in the Fund................................... 28
Total Returns, After Fees and Expenses...................................... 29
Annual Fund Operating Expenses.............................................. 30

A Detailed Look at Short-Term Municipal Bond

Objective................................................................... 31
Strategy.................................................................... 31
Principal Investments....................................................... 31
Investment Process.......................................................... 31
Other Investments........................................................... 31
Risks....................................................................... 32
Portfolio Managers.......................................................... 33
Financial Highlights........................................................ 34

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

27
<PAGE>
Overview of Short-Term Municipal Bond

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio;
. a greater-than-anticipated percentage of the Fund's investments could produce
taxable income, resulting in a lower tax-adjusted return; and
. unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

Short-Term Municipal Bond Institutional Class requires a minimum investment of
$250,000. You should consider investing in Short-Term Municipal Bond if you 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 Municipal
Bond. 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 Short-Term Municipal Bond if you are
pursuing a long-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 Short-Term Municipal Bond is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Short-Term Municipal Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
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.
- - - - - - - - - - - --------------------------------------------------------------------------------
The IBC Financial All Tax-Free Average Index is the average of all tax-exempt
municipal money market funds that invest in obligations of tax-exempt entities,
including state and municipal authorities.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1996 5.59%
1997 6.94%
1998 5.13%
1999 1.20%

Since inception, the Fund's highest return in any calendar quarter was 2.39%
(fourth quarter 1995) and its lowest quarterly return was (0.03%) (second
quarter 1999). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (3/6/95)/1/

Short-Term Municipal
Bond--Institutional Class 1.20% 5.11%
-----------------------------------------------
IBC Financial All Tax-Free
Average 2.73% 3.04%
-----------------------------------------------

/1/IBC Financial All Tax-Free Average is calculated from February 28, 1995.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Short-Term Municipal Bond

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 Short-Term
Municipal Bond.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of Average
Daily Net Assets

Management Fees 0.40%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.40%
-----------------------------------------------
Total Annual Fund
Operating Expenses 0.80%
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.25%)/1/
-----------------------------------------------
Net Expenses 0.55%
-----------------------------------------------

EXPENSE EXAMPLE/2/

1 year 3 years 5 years 10 years
--------------------------------------------------------------------

$56 $230 $419 $964
--------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Short-Term Municipal Bond

OBJECTIVE

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. Subject to its portfolio
maturity policy, the Fund may purchase individual securities with any stated
maturity. The dollar weighted average portfolio maturity may be shorter than
the stated maturity due to several factors, including but not limited to
prepayment patterns, call dates and put features.

PRINCIPAL INVESTMENTS

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.

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
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

Fixed income securities are investment grade if:

. They are rated in one of the top four, long-term rating categories of a
nationally recognized statistical rating organization.
. They have received a comparable short-term or other rating.
. They are unrated securities that the Investment Adviser believes to be of
comparable quality to rated investment grade securities.

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 invests primarily in high quality bonds (those rated within the top
three rating categories) and may invest up to 15% of its assets in investment
grade bonds that are rated in the fourth highest category.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on creditworthiness, cash flow and price, to
each bond;

. use credit analysis to determine the issuer's ability to fulfill its
contracts;

. compare each bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value;

. look to exploit any inefficiencies between intrinsic value and market trading
price; and

. subordinate sector weightings to individual bonds that may add above-market
value.

OTHER INVESTMENTS

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. Up to 20% of the fund's total assets may be
invested in certain taxable securities in order to maintain liquidity. The Fund
may also purchase securities on a when-issued basis.

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

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 not had a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Short-Term Municipal Bond

RISKS

Primary Risks

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.

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

<PAGE>

A Detailed Look at Short-Term Municipal Bond

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Ted Manges, Vice President of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1999. Prior to that, Manager of Trading and
Sales, Commerce Capital Markets, from 1995 to 1999.

. Analyst specializing in tax-exempt municipal bonds.

Daniel Scholl, Vice President, Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1998.

. Analyst specializing in tax exempt municipals.

. MGA, University of Pennsylvania.

Susan Beck, Vice President of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1989.

. Fixed income research analyst.
- - - - - - - - - - - -------------------------------------------------------------------------------

33
<PAGE>
A Detailed Look at Short-Term Municipal Bond

FINANCIAL HIGHLIGHTS

For the
period ended
For the year ended October 31, October 31,
1999 1998 1997 1996 1995/1/

For a Share Outstanding
Throughout each Period:
Net Asset Value,
Beginning of Period $10.37 $10.28 $10.13 $10.13 $10.00
-----------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income 0.40 0.46 0.52 0.54 0.30
-----------------------------------------------------------------------------
Net Realized and
Unrealized Gains
(Losses) on Investment (0.26) 0.09 0.16 0.04 0.13
-----------------------------------------------------------------------------
Total from Investment
Operations 0.14 0.55 0.68 0.58 0.43
-----------------------------------------------------------------------------
Distributions to
Shareholders from
Net Investment Income (0.40) (0.46) (0.52) (0.54) (0.30)
-----------------------------------------------------------------------------
Net Realized Gains -- -- (0.01) (0.04) --
-----------------------------------------------------------------------------
Total Distributions (0.40) (0.46) (0.53) (0.58) (0.30)
-----------------------------------------------------------------------------
Net Asset Value, End of
Period $10.11 $10.37 $10.28 $10.13 $10.13
-----------------------------------------------------------------------------
Total Investment Return 1.33% 5.51% 6.93% 5.90% 4.39%/3/
-----------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s omitted) $107,427 $54,369 $19,950 $9,132 $3,724
-----------------------------------------------------------------------------
Ratios to Average Net
Assets:
Net Investment Income 3.92% 4.46% 5.14% 5.34% 4.60%/2/
-----------------------------------------------------------------------------
Expenses 0.80% 0.82% 1.02% 1.58% 2.16%/2/
-----------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by DAMI/4/ 0.25% 0.27% 0.49% 1.05% 1.64%/2/
-----------------------------------------------------------------------------
Portfolio Turnover Rate 64% 28% 95% 129% 62%
-----------------------------------------------------------------------------

/1/The Fund's inception was March 6, 1995.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of High Yield Bond

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 seeks to achieve its 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

High Yield Bond--Institutional Class

Overview of High Yield Bond

Goal........................................................................ 35
Core Strategy............................................................... 35
Investment Policies and Strategies.......................................... 35
Principal Risks of Investing in the Fund.................................... 36
Who Should Consider Investing in the Fund................................... 36
Total Returns, After Fees and Expenses...................................... 37
Annual Fund Operating Expenses.............................................. 38

A Detailed Look at High Yield Bond

Objective................................................................... 39
Strategy.................................................................... 39
Principal Investments....................................................... 39
Investment Process.......................................................... 39
Other Investments........................................................... 40
Risks....................................................................... 40
Portfolio Manager........................................................... 41
Financial Highlights........................................................ 42

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

<PAGE>

Overview of High Yield Bond

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:

. 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;
. 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;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; and
. The lower rated debt securities in which the Fund invests are considered
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

High Yield Bond Institutional Class requires a minimum investment of
$250,000.You should consider investing in High Yield Bond 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 High Yield Bond 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 High Yield Bond is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of High Yield Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
of investing in the Fund by showing changes in the Fund's performance. 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. 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 securities--costs which are reflected in the
Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The CS First Boston High Yield Index is an unmanaged, trader priced portfolio
constructed to mirror the global high yield debt market. The index includes
over 1,625 issues with a total market value of $350 billion.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1999 15.72%

Since inception, the Fund's highest return in any calendar quarter was 7.28%
(fourth quarter 1999) and its lowest quarterly return was (8.17%) (third quarter
1998). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year (3/16/98)/1/

High Yield Bond Fund--
Institutional Class 15.72% 7.34%
-----------------------------------------------
CS First Boston High
Yield Index 3.28% 0.43%
-----------------------------------------------

/1/The CS First Boston High Yield Index average is calculated from March 31,
1998.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of High Yield Bond

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 High Yield
Bond.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of Average
Daily Net Assets

Management Fees 0.50%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.25%
-----------------------------------------------
Total Annual Fund
Operating Expenses 0.75%
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.10%)/1/
-----------------------------------------------
Net Expenses 0.65%
-----------------------------------------------

EXPENSE EXAMPLE/2/

1 year 3 years 5 years 10 years
-----------------------------------------------------------------

$66 $229 $407 $920
-----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at High Yield Bond

OBJECTIVE

The Fund seeks high current income and, as a secondary objective, capital
appreciation. While we seek current income and, to a lesser extent, capital
appreciation, we cannot offer any assurance of achieving these objectives. The
Fund's objectives are not fundamental policies. We must notify shareholders
before we change them, 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. Subject to its
portfolio maturity policy, the Fund may purchase individual securities with any
stated maturity. The dollar weighted average portfolio maturity may be shorter
than the stated maturity due to several factors, including but not limited to
prepayment patterns, call dates and put features. In implementing this
strategy, the Fund may experience a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

PRINCIPAL INVESTMENTS

The Fund invests primarily in U.S.-dollar denominated high yield bonds of
domestic and foreign issuers. Under normal conditions, the Fund invests at
least 65% of its total assets in 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.

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:

. analyze economic conditions for improving or undervalued sectors and
industries;

. use independent credit research and on-site management visits to evaluate
individual issues' debt service, growth rate, and both downside and upgrade
potential;

. assess new issues versus secondary market opportunities; and

. seek issues within attractive industry sectors and with strong long-term
fundamentals and improving credits.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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

<PAGE>

A Detailed Look at High Yield Bond

OTHER INVESTMENTS

The Fund may invest up to 10% of its total assets in non-U.S. dollar-
denominated, below investment grade securities.

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.

We may also use as secondary investments, various instruments commonly known as
"derivatives." 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.

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 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

<PAGE>

A Detailed Look at High Yield Bond

Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also engage in
short sales to attempt to limit its exposure to a possible market decline in
the value of its portfolio securities through short sales of securities which
the Adviser believes possess volatility characteristics similar to those being
hedged. Short selling may produce a higher than normal portfolio turnover which
may result in increased transaction costs to the Fund and may result in gains
from the sale of securities deemed to have been held for less than three
months. Such gains must be less than 30% of the Fund's gross income in order
for the Fund to qualify as a regulated investment company under the Internal
Revenue Code.

Derivative Risks. The Fund may, but is not required to, use derivative
contracts for any of the following purposes:

. 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;

. as a substitute for purchasing or selling securities or foreign currencies;

. to shorten or lengthen the effective maturity or duration of the Fund's fixed
income portfolio; or

. in non-hedging situations, to attempt to profit from anticipated market
developments.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

PORTFOLIO MANAGER

The following portfolio manager is responsible for the day-to-day management of
the Fund's investments:

Andrew Cestone, Vice President of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in March 1998. Prior to that, investment
analyst, Phoenix Investment Partners, from 1997 to 1998. Prior to that,
Credit Officer, asset based lending group, Fleet Bank, from 1995 to 1997.

. Portfolio manager specializing in the U.S. high yield bond market.
- - - - - - - - - - - --------------------------------------------------------------------------------

41
<PAGE>
A Detailed Look at High Yield Bond

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past two fiscal periods. Certain
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 PricewaterhouseCoopers LLP,
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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the year For the period
ended October 31, ended October 31,
1999 1998/1/

For a Share Outstanding Throughout each
Period:
Net Asset Value, Beginning of Period $8.71 $10.00
------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 1.03 0.54
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) 0.37 (1.29)
------------------------------------------------------------------------------
Total from Investment Operations 1.40 (0.75)
------------------------------------------------------------------------------
Distributions to Shareholders from
Net Investment Income (1.03) (0.54)
------------------------------------------------------------------------------
Net Realized Gains -- --
------------------------------------------------------------------------------
Total Distributions (1.03) (0.54)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.08 $8.71
------------------------------------------------------------------------------
Total Investment Return 16.54% (7.84%)/3/
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $318,247 $92,668
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 11.37% 9.34%/2/
------------------------------------------------------------------------------
Expenses 0.75% 0.82%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
DAMI/4/ 0.10% 0.17%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 180% 131%
------------------------------------------------------------------------------

/1/ The Fund's inception was March 16, 1998.
/2/ Annualized.

/3/ Total return is not annualized.

/4/ DAMI-Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information
- - - - - - - - - - - --------------------------------------------------------------------------------
concerning all Funds

MANAGEMENT OF THE FUNDS

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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. As investment adviser,
DAMI makes the Fund's investment decisions. It 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 investment adviser received the following fees as a percentage of
the average daily net assets for each Fund for its services in the last fiscal
year. The investment adviser reimbursed a portion of its fee during the period.

Percentage of
Average Daily
Fund Net Assets
- - - - - - - - - - - ---------------------------------------------
Fixed Income Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Short-Term Fixed Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Municipal Bond Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Short-Term Municipal Bond Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
High Yield Bond Fund 0.50%
- - - - - - - - - - - ---------------------------------------------

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

DAMI is an indirect wholly owned subsidiary of Deutsche Bank A.G. Deutsche Bank
A.G. 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 provides administrative services 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:

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

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

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

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

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

. collecting your executed proxies.

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

CALCULATING THE FUND'S SHARE PRICE

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information concerning all Funds

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 your 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 fair value in the judgment of the Board of Trustees.

PERFORMANCE INFORMATION

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 and Short-Term Municipal Bond. Your taxes will
vary from year to year, based on the amount of capital 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 Ordinary income
(except exempt-
interest
dividends)
--------------------------------------------
Short-term capital Ordinary income
gains
distributions
--------------------------------------------
Long-term capital Long-term capital gains
gains
distributions
--------------------------------------------

Municipal Bond and Short-Term Municipal Bond 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.

TRANSACTION TAX STATUS

Your sale of Generally, long-term
shares owned capital gains or losses
more than one
year
-------------------------------------------
Your sale of Generally, short-term
shares owned capital gains or losses;
for one year or losses subject to
less 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 Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information concerning all Funds

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 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:

WIRE:

Routing No: 1010 00695

Attn: Deutsche Asset Management Funds

DDA No: 98-7052-395-7

FBO: (Account name)
(Account number)

Credit: [Fund name and Fund number]

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

Important Information about Buying and Selling Shares

. You may buy and sell shares of a fund through authorized service agents as
well as directly from us. The same terms and conditions apply. Specifically,
once you place your order with a service agent, it is considered received by
the Service
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information concerning all Funds

Center. It is then your service agent's responsibility to transmit the order
to the Service Center by the next business day. You should contact your
service agent if you have a dispute as to when your order was placed with the
fund.

. After we or your service agent receives 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.

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

. We do not issue share certificates.

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

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

Please note the following conditions:

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

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

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

<PAGE>

This page intentionally left blank

<PAGE>

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:

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

You can find reports and other information about each Fund on the EDGAR
database on the SEC website (http://www.sec.gov), or you can get copies of
this information, after payment of a duplicating fee, by 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.
<PAGE>

Fixed Income--Institutional Class

Short-Term Fixed Income

Municipal Bond

Short-Term Municipal Bond

High Yield Bond

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square CUSIP #61735K836
Portland, ME 04101 61735K828
61735K810
61735K794
61735K646
INSTFIPRO (2/00)
811-8006

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

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents

Fixed Income................................................................ 3
Short-Term Fixed Income..................................................... 11
Municipal Bond.............................................................. 19
Short-Term Municipal Bond................................................... 27
High Yield Bond............................................................. 35
Information Concerning All Funds............................................ 43
Management of the Fund...................................................... 43
Calculating the Fund's Share Price.......................................... 43
Performance Information..................................................... 44
Dividends and Distributions................................................. 44
Tax Considerations.......................................................... 44
Buying and Selling Fund Shares.............................................. 44

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

2
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Fixed Income

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.

Fixed Income--Investment Class

Overview of Fixed Income

A Detailed Look at Fixed Income

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 8
Risks....................................................................... 8
Portfolio Managers.......................................................... 9
Financial Highlights........................................................ 10

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

<PAGE>

Overview of Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest; and
. 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 Fixed Income 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.

<PAGE>

Overview of Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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 securities--costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond Index represents U.S. domestic taxable
investment grade bonds which include securities from the following sectors:
U.S. Treasuries, agencies, corporate, mortgage-backed and asset-backed
securities. The Index includes over 5,500 public issued securities with a
minimum one year to final maturity and $150 million par amount outstanding. The
average maturity and duration of the index is in the intermediate range.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1999 -0.79%

Since inception, the Fund's highest return in any calendar quarter was 4.13%
(third quarter 1998) and its lowest quarterly return was (0.74%)(second quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year (2/11/98)/1/

Fixed Income--Investment
Class (0.79%) 2.89%
-----------------------------------------------
Lehman Brothers
Aggregate Bond Index (0.82%) 3.49%
-----------------------------------------------

/1/ The Lehman Brothers Aggregate Bond Index average is calculated from
February 28, 1998.
- - - - - - - - - - - --------------------------------------------------------------------------------

5
<PAGE>
Overview of Fixed Income

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 Fixed Income.

/1/ The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 0.80%.

/2/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.40%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 0.40%
--------------------------------------------------
Total Annual Fund
Operating Expenses 0.80%
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements 0.00%/1/
--------------------------------------------------
Net Expenses 0.80%
--------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------

$82 $255 $444 $990
------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Fixed Income

OBJECTIVE

STRATEGY

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

Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

PRINCIPAL INVESTMENTS

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 primarily
in investment grade fixed income securities rated within the top three rating
categories. 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.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on credit worthiness, cash flow and price, to
each bond;
. 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;

. use credit analysis to determine the issuer's ability to fulfill its
contracts; and
. subordinate sector weightings to individual bonds that may add above-market
value.
- - - - - - - - - - - --------------------------------------------------------------------------------

Fixed income securities are investment grade if:

. They are rated in one of the top four long-term rating categories of a
nationally recognized statistical rating organization.

. They have received a comparable short-term or other rating.

. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Fixed Income

OTHER INVESTMENTS

The Fund may invest up to 15% of its assets in investment grade fixed income
securities rated within the fourth highest rating category.

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.

Secondary Risks

<PAGE>

A Detailed Look at Fixed Income

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Gary Bartlett, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1992.

. Analyst specializing in taxable municipal and government investments.

. MBA, Drexel University.

Warren Davis, Director of Deutsche Asset Management, Inc. and Co-Manager of the
Fund

. Joined the investment adviser in 1995.

. Analyst specializing in mortgage and asset backed securities.

. MBA, Drexel University.

Thomas Flaherty, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1995.

. Analyst specializing in corporate bonds and mortgages.

J. Christopher Gagnier, Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Prior to that, portfolio manager, Paine Webber, from 1984 to 1997.

. Analyst specializing in asset backed securities and government investments.

Daniel Taylor, CFA, Vice President of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1998.

. Prior to that, fixed income portfolio manager, asset backed securities
analyst and senior credit analyst, CoreStates Investments Advisors, from 1992
to 1998.

. Analyst specializing in asset backed securities and government securities.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Fixed Income

The table below helps you understand the financial performance of the
Investment Class shares of the Fund for the past two fiscal periods. Certain
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 PricewaterhouseCoopers LLP, 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 Service
Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the year For the period
ended ended
October 31, October 31,
1999 1998/1/

For a Share Outstanding Throughout each Period:
Net Asset Value, Beginning of Period $10.88 $10.75
------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.61 0.45
------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Losses) (0.54) 0.13
------------------------------------------------------------------------------
Total from Investment Operations 0.07 0.58
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.61) (0.45)
------------------------------------------------------------------------------
Net Realized Gains (0.17) --
------------------------------------------------------------------------------
Total Distributions (0.78) (0.45)
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.17 $10.88
------------------------------------------------------------------------------
Total Investment Return 0.65% 5.28%/3/
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $ 7,389 $ 1,533
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 5.86% 5.77%/2/
------------------------------------------------------------------------------
Expenses 0.80% 0.87%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMI/4/ 0.00% 0.07%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 157% 122%
------------------------------------------------------------------------------

/1/The inception of Investment Class shares of the Fund was February 11, 1998.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Short-Term Fixed Income

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.

Short-Term Fixed Income--Investment Class

Overview of Short-Term Fixed Income

A Detailed Look at Short-Term Fixed Income

Other Investments........................................................... 15
Risks....................................................................... 16
Portfolio Managers.......................................................... 17
Financial Highlights........................................................ 18

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

11
<PAGE>
Overview of Short-Term Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest; and
. 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 Short-Term Fixed Income 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 Fixed Income may provide.

<PAGE>

Overview of Short-Term Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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
no 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 13, 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 and the Merrill Lynch 1-Year Treasury Bill
Index over the last one year and since its inception. The Fund has changed its
benchmark from the Merrill Lynch 6-Month Treasury Bill Index to the Merrill
Lynch 1-Year Treasury Bill Index. This index more closely reflects the dollar
weighted average portfolio maturity of the Fund. 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. It does not factor in the costs of
buying, selling and holding securities--costs which are reflected in the Fund's
results.
- - - - - - - - - - - --------------------------------------------------------------------------------

The Merrill Lynch 6-Month Treasury Bill Index and the Merrill Lynch 1-Year
Treasury Bill Index are measures of the performance of the 6-month and 1-year
U.S. Treasury Bills, respectively, assuming all cash flows are reinvested on a
daily basis. Each Index is comprised of a single issue purchased at the
beginning of the month and held for the full month. At the end of the month,
that issue is sold and rolled into a newly selected issue. The issue at each
month-end rebalancing is the outstanding Treasury Bill that matures, closest
to, but not beyond 6 months or 1-year, respectively, from the rebalancing date.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

1996 5.48%
1997 6.77%
1998 6.54%
1999 4.47%

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
1 Inception
year (3/13/95)/2/

Short-Term Fixed Income--
Institutional Class/1/ 4.47% 5.95%
-----------------------------------------------
Merrill Lynch 6-Month
Treasury Bill Index 4.64% 5.44%
-----------------------------------------------
Merrill Lynch 1-Year
Treasury Bill Index 4.03% 5.63%
-----------------------------------------------

/1/Institutional Class performance is presented because Investment Class shares
have no performance history. Investment Class shares will have different
performance. The chart does not reflect 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. Institutional Class shares are offered under a separate
prospectus, which is available upon request.

/2/The Merrill Lynch 6-Month Treasury Bill Index average and the Merrill Lynch
1-Year Treasury Bill Index average are each calculated from March 31, 1995.

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

<PAGE>

Overview of Short-Term Fixed Income

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 Short-Term Fixed Income.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
Investment Class shares are a new class of shares with no operating history.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.89% and 1.29%, respectively, of the average
daily net assets of the Institutional Class shares. Expenses for the
Institutional Class shares do not reflect service fees paid by the Investment
Class shares at an aggregate annual rate of up to 0.25% of the average daily
net assets of that Class.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of Average
Daily Net Assets

Management Fees 0.40%
------------------------------------------------
Distribution and
Service (12b-1) Fees None
------------------------------------------------
Other Expenses 0.90%/1/
------------------------------------------------
Total Annual Fund
Operating Expenses 1.30%/1/
------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.50%)/2/
------------------------------------------------
Net Expenses 0.80%
------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - -----------------------------------------------------------------

$81 $361 $662 $1,517
- - - - - - - - - - - -----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Short-Term Fixed Income

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund 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. The Fund invests primarily in
investment grade fixed income securities rated within the top three rating
categories. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

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.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on credit worthiness, cash flow and price, to
each bond;

. 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;

. use credit analysis to determine the issue's ability to fulfill its
contracts; and

. subordinate sector weightings to individual bonds that may add above-market
value.

OTHER INVESTMENTS

The Fund may invest up to 15% of its assets in investment grade fixed income
securities rated within the fourth highest rating category.

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

Fixed income securities are investment grade if:

. They are rated in one of the top four long-term rating categories of a
nationally recognized statistical rating organization.
. They have received a comparable short-term or other rating.
. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Short-Term Fixed Income

determine that securities meeting the Fund's investment objective are not
otherwise readily available for purchase.

RISKS

Primary Risks

Secondary Risks

<PAGE>

A Detailed Look at Short-Term Fixed Income

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Gary Bartlett, CFA, Director of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1992.

. Analyst specializing in taxable municipal and government investments.

. MBA, Drexel University.

Warren Davis, Director of Deutsche Asset Management, Inc. and Co-Manager of the
Fund

. Joined the investment adviser in 1995.

. Analyst specializing in mortgage and asset backed securities.

. MBA, Drexel University.

Thomas Flaherty, Director of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1995.

. Analyst specializing in corporate bonds and mortgages.

J. Christopher Gagnier, Director of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1997.

. Prior to that, portfolio manager, Paine Webber, from 1984 to 1997.

. Analyst specializing in asset backed securities and government investments.

Daniel Taylor, CFA, Vice President of Deutsche Asset Management, Inc. and Co-
Manager of the Fund

. Joined the investment adviser in 1998.

. Prior to that, fixed income portfolio manager, asset backed securities
analyst and senior credit analyst, CoreStates Investments Advisors, from 1992
to 1998.

. Analyst specializing in asset backed securities and government securities.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Short-Term Fixed Income

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 PricewaterhouseCoopers LLP, 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 Service Center at
1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the
period ended
For the year ended October 31, October 31,
1999 1998 1997 1996 1995/1/

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $10.13 $10.06 $10.00 $10.01 $10.00
------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income 0.59 0.60 0.58 0.60 0.37
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) (0.14) 0.07 0.06 (0.01) 0.01
------------------------------------------------------------------------------
Total from Investment
Operations 0.45 0.67 0.64 0.59 0.38
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.60) (0.60) (0.58) (0.60) (0.37)
------------------------------------------------------------------------------
Net Realized Gains (0.02) -- -- -- --
------------------------------------------------------------------------------
Total Distributions (0.62) (0.60) (0.58) (0.60) (0.37)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.96 $10.13 $10.06 $10.00 $10.01
------------------------------------------------------------------------------
Total Investment Return 4.49% 6.85% 6.61% 6.09% 3.82%/3/
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $26,753 $20,201 $17,083 $6,751 $4,140
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 6.03% 5.92% 5.77% 6.00% 5.86%/2/
------------------------------------------------------------------------------
Expenses 1.29% 0.93% 1.09% 1.29% 2.84%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
DAMI/4/ 0.74% 0.38% 0.56% 0.76% 2.32%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 142% 98% 186% 124% 90%
------------------------------------------------------------------------------

/1/The Fund's inception was March 13, 1995.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc.--the Fund's Investment Adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Municipal Bond

Municipal Bond--Investment Class

Overview of Municipal Bond

A Detailed Look at Municipal Bond

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

<PAGE>

Overview of Municipal Bond

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio.
. a greater-than-anticipated percentage of the Fund's investments could produce
taxable income, resulting in a lower tax-adjusted return; and
. unfavorable legislation could affect the tax-exempt status of municipal
bonds.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in Municipal Bond if you 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.

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.

<PAGE>

Overview of Municipal Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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. It does not factor in the costs of buying, selling and
holding securities--costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The Lehman Brothers 5-Year G.O. Index includes over 1,900 intermediate term
General Obligation tax-exempt municipal bonds with an average maturity range of
4 to 6 years. The index includes tax-exempt municipal issues with a minimum par
amount of $5 million.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1998 5.28%
1999 -1.56%

Since inception, the Fund's highest return in any calendar quarter was 2.42%
(fourth quarter 1997) and its lowest quarterly return was (1.01%) (second
quarter 1999). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year (7/30/97)/1/

Municipal Bond--
Investment Class (1.56%) 2.77%
-----------------------------------------------
Lehman 5 Year G.O. Index 0.71% 4.38%
-----------------------------------------------

/1/The Lehman 5 Year G.O. Index average is calculated from July 31, 1997.
- - - - - - - - - - - --------------------------------------------------------------------------------

21
<PAGE>
Overview of Municipal Bond

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 Municipal Bond.

/1/ The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 0.80%.

/2/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.40%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 0.42%
--------------------------------------------------
Total Annual Fund
Operating Expenses 0.82%
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.02%)/1/
--------------------------------------------------
Net Expenses 0.80%
--------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ----------------------------------------------------------------

$82 $260 $453 $1,011
- - - - - - - - - - - ----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Municipal Bond

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

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. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

Fixed income securities are investment grade if:

. They are rated in one of the top four long-term rating categories of a
nationally recognized statistical rating organization.
. They have received a comparable short-term or other rating.
. 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.
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.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:

. assign a relative value, based on creditworthiness, cash flow and price, to
each bond;

. use credit analysis to determine the issuer's ability to fulfill its
contracts;

. compare each bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value;

. look to exploit any inefficiencies between intrinsic value and market trading
price; and

. subordinate sector weightings to individual bonds that may add above-market
value.

OTHER INVESTMENTS

Up to 20% of the fund's total assets may be invested in certain taxable
securities in order to maintain liquidity. The Fund may also purchase
securities on a when-issued basis.

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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 not had a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------

23
<PAGE>
A Detailed Look at Municipal Bond

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.

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.

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.

<PAGE>

A Detailed Look at Municipal Bond

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Ted Manges, Vice President of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1999. Prior to that, Manager of Trading and
Sales, Commerce Capital Markets, from 1995 to 1999.

. Analyst specializing in tax-exempt municipal bonds.

Daniel Scholl, Vice President, Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1998.

. Analyst specializing in tax exempt municipals.

. MGA, University of Pennsylvania.

Susan Beck, Vice President of Deutsche Asset Management, Inc. and Co-Manager of
the Fund

. Joined the investment adviser in 1989.

. Fixed income research analyst.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Municipal Bond

FINANCIAL HIGHLIGHTS

For the Year
Ended For the Period
October 31, Ended October 31,
1999 1998 1997/1/

For a Share Outstanding Throughout each
Period:
Net Asset Value, Beginning of Period $11.30 $11.11 $11.11
------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.49 0.50 0.14
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (0.59) 0.19 --
------------------------------------------------------------------------------
Total from Investment Operations (0.10) 0.69 0.14
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.49) (0.50) (0.14)
------------------------------------------------------------------------------
Net Realized Gains (0.05) -- --
------------------------------------------------------------------------------
Total Distributions (0.54) (0.50) (0.14)
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.66 $11.30 $11.11
------------------------------------------------------------------------------
Total Investment Return (1.01%) 6.42% 1.22%3
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $7,172 $5,126 $192
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 4.33% 4.41% 4.95%/2/
------------------------------------------------------------------------------
Expenses 0.82% 0.85% 0.85%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by DAMI/4/ 0.02% 0.06% 0.06%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 42% 67%
------------------------------------------------------------------------------

/1/The inception of Investment Class shares of the Fund was July 30, 1997.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Short-Term Municipal Bond

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

Short-Term Municipal Bond--Investment Class

Overview of Short-Term Municipal Bond

A Detailed Look at Short-Term Municipal Bond

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

<PAGE>

Overview of Short-Term Municipal Bond

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:

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

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

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

. a greater-than-anticipated percentage of the Fund's investments could produce
taxable income, resulting in a lower tax-adjusted return; and

. unfavorable legislation could affect the tax-exempt status of municipal
bonds.
WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in Short-Term Municipal Bond if you 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 Municipal
Bond. 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.

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.

<PAGE>

Overview of Short-Term Municipal Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
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.
- - - - - - - - - - - --------------------------------------------------------------------------------
The IBC Financial All Tax-Free Average Index is the average of all tax-exempt
municipal money market funds that invest in obligations of tax-exempt entities,
including state and municipal authorities.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1998 4.75%
1999 0.93%

Since inception, the Fund's highest return in any calendar quarter was 4.13%
(third quarter 1998) and its lowest quarterly return was (0.74%) (second quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
1 Inception
Year (12/3/97)/1/

Short-Term Municipal
Bond--Investment Class 0.93% 3.04%
-----------------------------------------------
IBC Financial All Tax-Free
Average 2.73% 2.87%
-----------------------------------------------

/1/IBC Financial All Tax-Free Average is calculated from November 30, 1997.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Short-Term Municipal Bond

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 Short-Term Municipal
Bond.

/1/ The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 0.80%.

/2/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.40%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 0.60%
---------------------------------------------------
Total Annual Fund
Operating Expenses 1.00%
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.20%)/1/
---------------------------------------------------
Net Expenses 0.80%
---------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ------------------------------------------------------------------

$82 $298 $532 $1,204
- - - - - - - - - - - ------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Short-Term Municipal Bond

OBJECTIVE

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. Subject to its portfolio
maturity policy, the Fund may purchase individual securities with any stated
maturity. The dollar weighted average portfolio maturity may be shorter than
the stated maturity due to several factors, including but not limited to
prepayment patterns, call dates and put features.

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 bonds. There is no restriction on the
percentage of assets that
- - - - - - - - - - - --------------------------------------------------------------------------------
Maturity measures the time remaining until an issuer must repay a bond's
principal in full.

Fixed income securities are investment grade if:

may be invested in obligations the interest on which is a preference item for
purposes of the federal alternative minimum tax.

INVESTMENT PROCESS

Issuer research lies at the heart of our investment process. In selecting
individual securities for investment, we:
. assign a relative value, based on creditworthiness, cash flow and price, to
each bond;
. use credit analysis to determine the issuer's ability to fulfill its
contracts;

. compare each bond with a U.S. Treasury instrument to develop a theoretical
intrinsic value;
. look to exploit any inefficiencies between intrinsic value and market trading
price; and
. subordinate sector weightings to individual bonds that may add above-market
value.

OTHER INVESTMENTS

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

31
<PAGE>
A Detailed Look at Short-Term Municipal Bond

RISKS

Primary Risks

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.

<PAGE>

A Detailed Look at Short-Term Municipal Bond

PORTFOLIO MANAGERS

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

David Baldt, CFA, Managing Director of Deutsche Asset Management, Inc. and
Lead Manager of the Fund

. Joined the investment adviser in 1989.

. Chief Investment Officer of the Fixed Income Group.

Ted Manges, Vice President of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1999. Prior to that, Manager of Trading and
Sales, Commerce Capital Markets, from 1995 to 1999.

.Analyst specializing in tax-exempt municipal bonds.

Daniel Scholl, Vice President, Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1998.

. Prior to that, Special Assistant for Economic Development to Governor Tom
Carper in Delaware, from 1996 to 1998. Prior to that, Executive Assistant to
Delaware"s Secretary of Finance, from 1992 to 1996.

. Analyst specializing in tax exempt municipals.

. MGA, University of Pennsylvania.

Susan Beck, Vice President of Deutsche Asset Management, Inc. and Co-Manager
of the Fund

. Joined the investment adviser in 1989.

. Fixed income research analyst.
- - - - - - - - - - - -------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Short-Term Municipal Bond

FINANCIAL HIGHLIGHTS

For the Year Ended For the Period Ended
October 31, 1999 October 31, 1998/1/

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of Period $10.37 $10.28
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.37 0.39
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (0.26) 0.09
------------------------------------------------------------------------------
Total from Investment Operations 0.11 0.48
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.37) (0.39)
------------------------------------------------------------------------------
Net Realized Gains -- --
------------------------------------------------------------------------------
Total Distributions (0.37) (0.39)
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.11 $10.37
------------------------------------------------------------------------------
Total Investment Return 1.08% 4.81%/3/
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $268 $436
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 3.91% 4.20%/2/
------------------------------------------------------------------------------
Expenses 1.00% 1.02%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by DAMI/4/ 0.20% 0.22%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 64% 26%
------------------------------------------------------------------------------

/1/Inception of Investment Class shares of the Fund was December 3, 1997.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of High Yield Bond

High Yield Bond--Investment Class

Overview of High Yield Bond

A Detailed Look at High Yield Bond

Portfolio Manager........................................................... 41
Financial Highlights........................................................ 42

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

<PAGE>

Overview of High Yield Bond

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:

. 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;
. 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;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; and
. The lower rated debt securities in which the Fund invests are considered
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 High Yield Bond 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 High Yield Bond 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 High Yield Bond is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
- - - - - - - - - - - -------------------------------------------------------------------------------

<PAGE>

Overview of High Yield Bond

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
of investing in the Fund by showing changes in the Fund's performance. 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. 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 securities--
costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The CS First Boston High Yield Index is an unmanaged, trader priced portfolio
constructed to mirror the global high yield debt market. The index includes
over 1,625 issues with a total market value of $350 billion.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Investment Class
(each full calendar year since inception)

1999 15.36%

Since inception, the Fund's highest return in any calendar quarter was 7.03%
(fourth quarter 1999) and its lowest quarterly return was 0.63% (third quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (9/15/98)/1/

High Yield Bond--
Investment Class 15.36% 17.44%
-----------------------------------------------
CS First Boston High
Yield Index 3.28% 4.84%
-----------------------------------------------

/1/ The CS First Boston High Yield Index average is calculated from September
30, 1998.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of High Yield Bond

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 High Yield
Bond.

/2/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.50%
-----------------------------------------------
Total Annual Fund
Operating Expenses 1.00%
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.10%)/1/
-----------------------------------------------
Net Expenses 0.90%
-----------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ------------------------------------------------------------------

$92 $308 $542 $1,214
- - - - - - - - - - - ------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at High Yield Bond

OBJECTIVE

STRATEGY

INVESTMENT PROCESS

. analyze economic conditions for improving or undervalued sectors and
industries;

. use independent credit research and on-site management visits to evaluate
individual issues' debt service, growth rate, and both downside and upgrade
potential;

. assess new issues versus secondary market opportunities; and

<PAGE>

A Detailed Look at High Yield Bond

OTHER INVESTMENTS

The Fund may invest up to 10% of its total assets in non-U.S. dollar-
denominated, below investment grade securities.

We may also use as secondary investments, various instruments commonly known as
"derivatives". 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.

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 objectives.

RISKS

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

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.
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 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.

Secondary Risks

<PAGE>

A Detailed Look at High Yield Bond

Derivative Risks. The Fund may, but is not required to, use derivative
contracts for any of the following purposes:

. as a substitute for purchasing or selling securities or foreign currencies;

. to shorten or lengthen the effective maturity or duration of the Fund's fixed
income portfolio; or

Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses and missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

PORTFOLIO MANAGER

The following portfolio manager is responsible for the day-to-day management of
the Fund's investments:

Andrew Cestone, Vice President of Deutsche Asset Management, Inc. and Lead
Manager of the Fund

. Portfolio manager specializing in the U.S. high yield bond market.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at High Yield Bond

FINANCIAL HIGHLIGHTS

For the Year Ended For the Period Ended
October 31, 1999 October 31, 1998/1/

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of Period $8.71 $10.28
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 1.00 0.11
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) 0.36 (1.57)
------------------------------------------------------------------------------
Total from Investment Operations 1.36 (1.46)
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (1.00) (0.11)
------------------------------------------------------------------------------
Net Realized Gains -- --
------------------------------------------------------------------------------
Total Distributions (1.00) (0.11)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.07 $ 8.71
------------------------------------------------------------------------------
Total Investment Return 16.07% 0.27%/3/
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $2,875 $ 81
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 11.24% 11.89%/2/
------------------------------------------------------------------------------
Expenses 1.00% 1.05%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by DAMI/4/ 0.10% 0.15%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 180% 131%
------------------------------------------------------------------------------

/1/The Fund's inception was September 15, 1998.
/2/Annualized.

/3/Total return is not annualized.

/4/DAMI--Deutsche Asset Management, Inc., the Fund's investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

42
<PAGE>
Information
- - - - - - - - - - - --------------------------------------------------------------------------------
concerning all Funds

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.

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. 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. The investment adviser reimbursed a portion of its fee
during the year.

Percentage of
Average Daily
Fund Net Assets
- - - - - - - - - - - ---------------------------------------------
Fixed Income Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Short-Term Fixed Income Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Municipal Bond Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
Short-Term Municipal Bond Fund 0.40%
- - - - - - - - - - - ---------------------------------------------
High Yield Bond Fund 0.50%
- - - - - - - - - - - ---------------------------------------------

DAMI provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $12.6
billion in assets.

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

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

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

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

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

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

. collecting your executed proxies.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information Concerning all Funds

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

TAX CONSIDERATIONS

TRANSACTION TAX STATUS
---------------------------------------

Income Ordinary income
dividends
(except
exempt-
interest
dividends)
---------------------------------------
Short-term Ordinary income
capital gains
distributions
---------------------------------------
Long-term
capital gains
distributions Long-term capital gains

------------------------------------
Municipal Bond and Short-Term Municipal Bond 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.

TRANSACTION TAX STATUS
---------------------------------

Your sale Generally, long-
of shares term capital gains
owned more or losses
than one
year
---------------------------------
Your sale Generally, short-
of shares term capital gains
owned for or losses; losses
one year or subject to special
less 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

<PAGE>

Information Concerning all Funds

Minimum Account Investments

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

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

Important Information about Buying and Selling Shares

. You may place orders to buy and sell over the phone by calling your service
agent. Please contact your service agent for more information.

. After your service agent receives 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.

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

. We process all sales orders free of charge.

Please note the following conditions:

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

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

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

. You will receive a written confirmation of each transaction from your
service agent.

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

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

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

. We do not issue share certificates.

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

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

<PAGE>

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<PAGE>

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<PAGE>

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

Fixed Income--Investment Class

Short-Term Fixed Income

Municipal Bond

Short-Term Municipal Bond

High Yield Bond

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square CUSIP #61735K760
Portland, ME 04101
61735K588

61735K737

61735K729

61735K596

INVFIPRO (2/00)

811-08006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Investment Class

Core Global Fixed Income

Global Fixed Income

International Fixed Income

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents
- - - - - - - - - - - -----------------

Core Global Fixed Income.................................................... 3
Global Fixed Income......................................................... 12
International Fixed Income.................................................. 21
Information Concerning All Funds............................................ 30
Management of the Fund...................................................... 30
Calculating the Fund's Share Price.......................................... 30
Performance Information..................................................... 31
Dividends and Distributions................................................. 31
Tax Considerations.......................................................... 31
Buying and Selling Fund Shares.............................................. 31

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

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Core Global Fixed Income

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. In
managing the Fund, we use a combination of "top-down" and "bottom-up" analyses
to select securities. This approach places equal emphasis on country selection,
currency management, yield curve analysis and individual security selection.
The portfolio management team intends to maintain a portfolio duration of (+/-)
1 1/2 years around the Fund"s benchmark index.

Core Global Fixed Income--Investment Class

Overview of Core Global Fixed Income

A Detailed Look at Core Global Fixed Income

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 8
Risks....................................................................... 8
Portfolio Managers.......................................................... 10
Financial Highlights........................................................ 11

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

<PAGE>

Overview of Core Global Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; or
. 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.

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their full
value;
. 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;
. 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
. 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 Core Global Fixed Income 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 Core Global Fixed Income if you are
pursuing a short-term financial goal or if you cannot tolerate fluctuations in
the value of your investments.

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

<PAGE>

Overview of Core Global Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
of investing in the Fund by showing changes in the Fund's performance. Because
Investment Class shares are a newly offered class of shares with no 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 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

1999 -6.67%

Since inception, the Fund's highest return in any calendar quarter was 7.24%
(third quarter 1998) and its lowest quarterly return was (4.17%) (first quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
(May 4,
1 Year 1982)/2/

Core Global Fixed Income--
Institutional Class -6.67% 2.13%
------------------------------------------------
Salomon World Government
Bond Index -4.27% 4.60%
------------------------------------------------

/1/ Institutional Class performance is presented because Investment Class
shares, have no performance history. Investment Class shares will have
different performance. The chart does not reflect 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. 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 April 30, 1998.
- - - - - - - - - - - --------------------------------------------------------------------------------

5
<PAGE>
Overview of Core Global Fixed Income

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 Core Global Fixed Income.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
Investment Class shares are a new class of shares with no operating history.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.83% and 1.33%, respectively, of the average
daily net assets of the Institutional Class shares. Expenses for the
Institutional Class shares do not reflect service fees paid by the Investment
Class shares at an aggregate annual rate of up to 0.25% of the average daily
net assets of that Class.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 1.23%/1/
---------------------------------------------------
Total Annual Fund
Operating Expenses 1.73%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.93%)/2/
---------------------------------------------------
Net Expenses 0.80%
---------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------

$81 $450 $844 $1,946
-------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Core Global Fixed Income

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. 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

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.

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 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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.

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.

INVESTMENT PROCESS

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies,

. taxation and

. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Core Global Fixed Income

OTHER INVESTMENTS

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

We may also use as secondary investments, 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.

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

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

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. 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 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.

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than in the U.S.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Core Global Fixed Income

. 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 actively manage 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.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------
Currency management is used in an attempt to offset investment risks
("hedging") and 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.

Secondary Risks

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

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.
- - - - - - - - - - - --------------------------------------------------------------------------------

9
<PAGE>
A Detailed Look at Core Global Fixed Income

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Core Global Fixed Income

Institutional Class performance is presented because Investment Class shares
are a newly offered class of shares with no performance history. Investment
Class shares will have different performance. The table below helps you
understand the financial performance of the Institutional Class shares of the
Fund for the past two fiscal periods. Certain 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 PricewaterhouseCoopers LLP, 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 Service Center at
1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the year For the period
ended ended
October 31, October 31,
1999 1998/1/

For a Share Outstanding Throughout each Period:
Net Asset Value, Beginning of Period $10.97 $10.00
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.47 0.19
------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) (0.87) 0.78
------------------------------------------------------------------------------
Total from Investment Operations (0.40) 0.97
------------------------------------------------------------------------------
Distributions to Shareholders from
Net Investment Income (0.53) --
------------------------------------------------------------------------------
Net Realized Gains (0.03) --
------------------------------------------------------------------------------
Total Distributions (0.56) --
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.01 $10.97
------------------------------------------------------------------------------
Total Investment Return/3/ (3.93%) 9.70%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $34,563 $33,585
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 3.90% 4.19%/2/
------------------------------------------------------------------------------
Expenses 1.33% 0.96%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMIS/4/ 0.78% 0.41%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 155% 151%
------------------------------------------------------------------------------

/1/The Fund's inception was May 4, 1998.
/2/Annualized.

/3/Total Investment Returns for periods less than 1 year are not annualized.

/4/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

11
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Global Fixed Income

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 in investment
grade fixed income securities of issuers located throughout the world. In
managing the Fund, we use a combination of "top-down" and "bottom-up" analyses
to select securities. This approach places equal emphasis on country selection,
currency management, yield curve analysis and individual security selection. The
portfolio management team intends to maintain a portfolio duration of (+/-) 1
1/2 years around the Fund"s benchmark index.

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 up to 15% of
its total assets in fixed income securities rated below investment grade,
including the securities of issuers in emerging securities markets.

Global Fixed Income--Investment Class

Overview of Global Fixed Income

Goal........................................................................ 12
Core Strategy............................................................... 12
Investment Policies and Strategies.......................................... 12
Principal Risks of Investing in the Fund.................................... 13
Who Should Consider Investing in the Fund................................... 13
Total Returns, After Fees and Expenses...................................... 14
Annual Fund Operating Expenses.............................................. 15

A Detailed Look at Global Fixed Income

Objective................................................................... 16
Strategy.................................................................... 16
Principal Investments....................................................... 16
Investment Process.......................................................... 16
Other Investments........................................................... 17
Risks....................................................................... 17
Portfolio Managers.......................................................... 19
Financial Highlights........................................................ 20

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

<PAGE>

Overview of Global Fixed Income

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:

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

. 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 (junk bonds) than a
typical fixed income fund;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio;
. the fixed income market could perform poorly in one or more of the countries
in which the Fund has invested; or
. 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 and, to a more limited extent, the emerging markets, in which
the Fund invests. For example:

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their full
value;
. 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;
. 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
. 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 Global Fixed Income 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 Global Fixed Income if you are pursuing a
short-term financial goal or if you cannot tolerate fluctuations in the value
of your investments.

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

13
<PAGE>
Overview of Global Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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
no 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

1995 17.76%
1996 5.23%
1997 1.04%
1998 13.30%
1999 - 5.90%

Since inception, the Fund's highest return in any calendar quarter was 9.6%
(first quarter 1995) and its lowest quarterly return was (4.68%) (first quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Years (1/4/94)/2/

Global Fixed
Income--
Institutional
Class -5.90% 5.95% 4.52%
-----------------------------------------------
Salomon World
Government Bond
Index -4.27% 6.42% 5.73%
-----------------------------------------------

/1/ Institutional Class performance is presented because Investment Class
shares, have no performance history. Investment Class shares will have
different performance. The chart does not reflect 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. 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 December 31, 1993.
- - - - - - - - - - - --------------------------------------------------------------------------------

14
<PAGE>
Overview of Global Fixed Income

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 Global Fixed Income.

Expense Example. The example on this page illustrates the expenses you will
incur 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.

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/Restated to reflect estimated Other Expenses for the current fiscal year.
Investment Class shares are a new class of shares with no operating history.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.63% and 1.13%, respectively, of the average
daily net assets of the Institutional Class shares. Expenses for the
Institutional Class shares do not reflect service fees paid by the Investment
Class shares at an aggregate annual rate of up to 0.25% of the average daily
net assets of that Class.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 1.14%/1/
--------------------------------------------------
Total Fund Operating
Expense 1.64%/1/
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.79%)/2/
--------------------------------------------------
Net Expenses 0.85%
--------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------

$86 $437 $811 $1,863
--------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Global Fixed Income

OBJECTIVE

STRATEGY

In managing the Fund, we use a combination of "top-down" and "bottom-up"
analyses to select securities. This approach places equal emphasis on country
selection, currency management, yield curve analysis and individual security
selection. The portfolio management team analyzes macro-economic factors such
as inflation, interest rates, monetary and fiscal policies, taxation and
political climate as well as fundamental analysis of individual companies.

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 primarily 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
interest. The Fund invests primarily in investment grade securities that, at
the time of purchase, are either rated in one of the three highest
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

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.

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 countries 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

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,
. interest rates,
. monetary and fiscal policies,
. taxation and
. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

The Fund follows a rigorous sell strategy. We set for each security a target
price objective and for each currency, a target exchange rate objective. These
objectives represent our opinions of the intrinsic value of the security or the
currency. Securities are sold or currencies exchanged when they meet their
target price objectives or when we revise price objectives downward. Because
the Fund does not typically hold a security to maturity, the Fund may
experience a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Global Fixed Income

OTHER INVESTMENTS

The Fund may also invest up to 15% of its total assets in fixed income
securities rated below investment grade (junk bonds), including the securities
of issuers in emerging securities markets.

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

We may also use as secondary investments 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.

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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 (junk bonds) 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. 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 securities on some
foreign exchanges is inherently more difficult than trading in the United
States for several reasons including:

. 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.

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

17
<PAGE>
A Detailed Look at Global Fixed Income

. 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 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.

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
- - - - - - - - - - - --------------------------------------------------------------------------------
Currency management is used in an attempt to offset investment risks
("hedging") and 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.

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 risks may include:

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.
- - - - - - - - - - - --------------------------------------------------------------------------------

18
<PAGE>
A Detailed Look at Global Fixed Income

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Global Fixed Income

Institutional Class performance is presented because Investment Class shares
are a newly offered class of shares with no performance history. Investment
Class shares will have different performance. The table below helps you
understand the financial performance of the Institutional Class shares of the
Fund for the past five years. Certain 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 PricewaterhouseCoopers LLP, 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 Service Center at 1-800-730-
1313.

FINANCIAL HIGHLIGHTS

For the Year Ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $11.36 $10.84 $11.26 $10.99 $9.85
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.68 0.63 0.35 0.59 0.35
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (1.07) 0.45 0.01 0.12 0.99
------------------------------------------------------------------------------
Total from Investment Operations (0.39) 1.08 0.36 0.71 1.34
------------------------------------------------------------------------------
Distributions to Shareholders
from
Net Investment Income (0.73) (0.34) (0.50) (0.37) (0.20)
------------------------------------------------------------------------------
Net Realized Gains (0.52) (0.22) (0.28) (0.07) --
------------------------------------------------------------------------------
Total Distributions (1.25) (0.56) (0.78) (0.44) (0.20)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.72 $11.36 $10.84 $11.26 $10.99
------------------------------------------------------------------------------
Total Investment Return (3.91%) 10.58% 3.34% 6.60% 13.88%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $52,220 $58,422 $42,180 $149,917 $139,337
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 6.67% 4.82% 5.30% 5.39% 5.61%
------------------------------------------------------------------------------
Expenses 1.13% 0.77% 0.77% 0.79% 0.87%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS/1/ 0.53% 0.17% 0.12% 0.04% 0.09%
------------------------------------------------------------------------------
Portfolio Turnover Rate 161% 182% 179% 223% 147%
------------------------------------------------------------------------------

/1/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

20
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of International Fixed Income

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. In
managing the Fund, we use a combination of "top-down" and "bottom-up" analyses
to select securities. This approach places equal emphasis on country selection,
currency management, yield curve analysis and individual security selection. The
portfolio management team intends to maintain a portfolio duration of (+/-) 1
1/2 years around the Fund"s benchmark index.

International Fixed Income--Investment Class

Overview of International Fixed Income

Goal........................................................................ 21
Core Strategy............................................................... 21
Investment Policies and Strategies.......................................... 21
Principal Risks of Investing in the Fund.................................... 22
Who Should Consider Investing in the Fund................................... 22
Total Returns, After Fees and Expenses...................................... 23
Annual Fund Operating Expenses.............................................. 24

A Detailed Look at International Fixed Income

Objective................................................................... 25
Strategy.................................................................... 25
Principal Investments....................................................... 25
Investment Process.......................................................... 25
Other Investments........................................................... 26
Risks....................................................................... 26
Portfolio Managers.......................................................... 28
Financial Highlights........................................................ 29

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

<PAGE>

Overview of International Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; or
. 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.

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their full
value;
. 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;
. 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
. 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 International Fixed Income 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 International Fixed Income if you are
pursuing a short-term financial goal or if you cannot tolerate fluctuations in
the value of your investments.

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

22
<PAGE>
Overview of International Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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
no 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

1995 17.81%
1996 5.54%
1997 - 3.31%
1998 17.44%
1999 - 6.99%

Since inception, the Fund's highest return in any calendar quarter was 22.28%
(third quarter 1997) and its lowest quarterly return was (5.03%) (second quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Years (3/15/94)/2/

International
Fixed Income--
Institutional
Class -6.99% 5.60% 4.68%
-----------------------------------------------
Salomon World
Government Bond
(non-U.S.) Index -5.07% 5.90% 5.83%
-----------------------------------------------

/1/ Institutional Class performance is presented because Investment Class
shares, have no performance history. Investment Class shares will have
different performance. The chart does not reflect 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. 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 March 31, 1994.
- - - - - - - - - - - --------------------------------------------------------------------------------

23
<PAGE>
Overview of International Fixed Income

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Expense Example. The example below illustrates the expenses you will incur 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.

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

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

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
Investment Class shares are a new class of shares with no operating history.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.20% and 1.70%, respectively, of the average
daily net assets of the Institutional Class shares. Expenses for the
Institutional Class shares do not reflect service fees paid by the Investment
Class shares at an aggregate annual rate of up to 0.25% of the average daily
net assets of that Class.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Expenses 0.81%/1/
--------------------------------------------------
Total Fund Operating
Expenses 1.31%/1/
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.51%)/2/
--------------------------------------------------
Net Expenses 0.80%
--------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------

$81 $363 $666 $1,527
-------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at International Fixed Income Fund

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

The Fund invests primarily 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 invests primarily in investment grade securities
that, at the time of purchase, are either rated in
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

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.

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.

INVESTMENT PROCESS

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies,

. taxation and

. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

25
<PAGE>
A Detailed Look at International Fixed Income Fund

OTHER INVESTMENTS

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

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.

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. 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 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.

<PAGE>

A Detailed Look at International Fixed Income Fund

. 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. Additionally, a change in economic policy may cause a greater
fluctuation in a country's currency than in bonds denominated in that
currency. We 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.

- - - - - - - - - - - --------------------------------------------------------------------------------
Currency management is used in an attempt to offset investment risks
("hedging") and 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.

Secondary Risks

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

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at International Fixed Income Fund

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at International Fixed Income Fund

Institutional Class performance is presented because Investment Class shares
are a newly offered class of shares with no performance history. Investment
Class shares will have different performance. The table below helps you
understand the financial performance of the Institutional Class shares of the
Fund for the past five years. Certain 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 PricewaterhouseCoopers LLP, 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 Service Center at 1-800-730-
1313.

FINANCIAL HIGHLIGHTS

For the year ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of
Period $10.95 $10.16 $11.30 $11.34 $9.94
------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.21 0.51 0.20 0.86 0.42
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (0.56) 0.65 (0.11) (0.12) 1.03
------------------------------------------------------------------------------
Total from Investment Operations (0.35) 1.16 0.09 0.74 1.45
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.48) (0.27) (0.64) (0.66) (0.05)
------------------------------------------------------------------------------
Net Realized Gains (0.36) (0.10) (0.59) (0.12) --
------------------------------------------------------------------------------
Total Distributions (0.84) (0.37) (1.23) (0.78) (0.05)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.76 $10.95 $10.16 $11.30 $11.34
------------------------------------------------------------------------------
Total Investment Return (3.53%) 11.87% 0.82% 6.82% 14.66%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $55,997 $19,521 $27,937 $21,155 $27,603
------------------------------------------------------------------------------
Ratios to Average Net Assets:
------------------------------------------------------------------------------
Net Investment Income 3.53% 4.36% 5.00% 5.41% 5.51%
Expenses 1.70% 1.08% 1.06% 1.03% 1.15%
------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of
Expenses by DAMIS/1/ 1.15% 0.51% 0.41% 0.28% 0.37%
------------------------------------------------------------------------------
Portfolio Turnover Rate 140% 181% 174% 235% 187%
------------------------------------------------------------------------------

/1/DAMIS-Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

29
<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 One
Appold Street, London, England, acts as investment adviser for each Fund. DAMIS
makes each Fund's investment decisions. DAMIS buys and sells securities for
each Fund and conducts the research that leads to the purchase and sale
decisions. DAMIS is also responsible for selecting brokers and dealers and for
negotiating brokerage commissions and dealer charges.

The investment adviser received the following fees as a percentage of the
average daily net assets for each Fund for its services in the last fiscal
year. The investment adviser reimbursed a portion of its fee during the period.

Percentage of
Average Daily
Fund Net Assets
- - - - - - - - - - - ----------------------------------------------
Core Global Fixed Income Fund 0.50%
- - - - - - - - - - - ----------------------------------------------
Global Fixed Income Fund 0.50%
- - - - - - - - - - - ----------------------------------------------
International Fixed Income Fund 0.50%
- - - - - - - - - - - ----------------------------------------------

DAMIS provides a full range of international investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $16.1
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 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:

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

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

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

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

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

. collecting your executed proxies.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information Concerning all Funds

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.

PERFORMANCE INFORMATION

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

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

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 Generally, long-term
shares owned capital gains or losses
more than one
year
-------------------------------------------
Your sale of Generally, short-term
shares owned capital gains or losses,
for one year or losses subject to
less 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

Minimum Account Investments

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

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

31
<PAGE>
Information Concerning all Funds

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

Important Information about Buying and Selling Shares

. You may place orders to buy and sell over the phone by calling your service
agent. Please contact your service agent for more information.

. After your service agent receives 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.

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

. We process all sales orders free of charge.

Please note the following conditions:

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

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

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

. You will receive a written confirmation of each transaction from your
service agent.

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

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

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

. We do not issue share certificates.

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

32
<PAGE>
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<PAGE>

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<PAGE>

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<PAGE>

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:

Service Center
P.O. Box 219210
Kansas City, MO 64121

or call our toll-free number: 1-800-730-1313

You can find reports and other information about each Fund on the EDGAR
database on the SEC website (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by 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.
<PAGE>

Core Global Fixed Income--Investment Class

Global Fixed Income

International Fixed Income

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square INVINTLFIPRO (2/00)

Portland, ME 04101
801-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Institutional Class

Core Global Fixed Income

Global Fixed Income

International Fixed Income

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents
- - - - - - - - - - - -----------------

Core Global Fixed Income.................................................... 3
Global Fixed Income......................................................... 12
International Fixed Income.................................................. 21
Information Concerning All of the Funds..................................... 30
Management of the Funds..................................................... 30
Calculating a Fund's Share Price............................................ 30
Performance Information..................................................... 31
Dividends and Distributions................................................. 31
Tax Considerations.......................................................... 31
Buying and Selling Fund Shares.............................................. 31

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

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Core Global Fixed Income

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. In
managing the Fund, we use a combination of "top-down" and "bottom-up" analyses
to select securities. This approach places equal emphasis on country selection,
currency management, yield curve analysis and individual security selection.
The portfolio management team intends to maintain a portfolio duration of
(+/-)1 1/2 years around the Fund"s benchmark index.

Core Global Fixed Income--Institutional Class

Overview of Core Global Fixed Income

A Detailed Look at Core Global Fixed Income

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 8
Risks....................................................................... 8
Portfolio Managers.......................................................... 10
Financial Highlights........................................................ 11

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

<PAGE>

Overview of Core Global Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; or
. 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.

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

Core Global Fixed Income Institutional Class requires a minimum investment of
$250,000. You should consider investing in Core Global Fixed Income 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 Core Global Fixed Income if you are
pursuing a short-term financial goal or if you cannot tolerate fluctuations in
the value of your investments.

4
<PAGE>
Overview of Core Global Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

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

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

-6.67

1999

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (5/4/98)/1/

Core Global Fixed
Income--Institutional
Class -6.67% 2.13%
-----------------------------------------------
Salomon World
Government Bond Index -4.27% 4.60%
-----------------------------------------------
/1/The Salomon World Government Bond Index average is calculated from April 30,
1998.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Core Global Fixed Income

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 Core Global Fixed Income.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.83% and 1.33%, respectively, of the average
daily net assets of the Institutional Class shares.

/2/The investment adviser and the administrator have contractually agreed, for
the 16-month period from the Fund's fiscal year end of October 31, 1999, to
waive their fees or reimburse expenses so that total expenses will not exceed
0.55%.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.98%/1/
-----------------------------------------------
Total Annual Fund
Operating Expense 1.48%/1/
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.93%)/2/
-----------------------------------------------
Net Expenses 0.55%
-----------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ----------------------------------------------------------------

$56 $373 $713 $1,674
- - - - - - - - - - - ---------------------------------------------------------------

6
<PAGE>
A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Core Global Fixed Income

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

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 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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

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.

INVESTMENT PROCESS

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies,

. taxation and

. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

7
<PAGE>
A Detailed Look at Core Global Fixed Income

OTHER INVESTMENTS

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

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 in
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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. 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 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.

. 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.

<PAGE>

A Detailed Look at Core Global Fixed Income

. 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 actively manage 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.

Currency management is used in an attempt to offset investment risks
("hedging") and 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.

Secondary Risks

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

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

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

9
<PAGE>
A Detailed Look at Core Global Fixed Income

PORTFOLIO MANAGERS

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

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that, Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at Core Global Fixed Income

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past two fiscal periods. Certain
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 PricewaterhouseCoopers
LLP, 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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the Year For the Period
Ended Ended October
October 31, 31,
1999 1998/1/

For a Share Outstanding Throughout each Period:
Net Asset Value, Beginning of Period $10.97 $10.00
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.47 0.19
------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) (0.87) 0.78
------------------------------------------------------------------------------
Total from Investment Operations (0.40) 0.97
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.53) --
------------------------------------------------------------------------------
Net Realized Gains (0.03) --
------------------------------------------------------------------------------
Total Distributions (0.56) --
------------------------------------------------------------------------------
Net Asset Value, End of Period $10.01 $10.97
------------------------------------------------------------------------------
Total Investment Return/4/ (3.93)% 9.70%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $34,563 $33,585
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 3.90% 4.19%/2/
------------------------------------------------------------------------------
Expenses 1.33% 0.96%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by DAMIS/3/ 0.78% 0.41%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 155% 151%
------------------------------------------------------------------------------

/1/The Fund's inception was May 4, 1998.
/2/Annualized.

/3/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.

/4/Total Investment Returns for periods less than 1 year are not annualized.

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

11
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Global Fixed Income

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

Global Fixed Income--Institutional Class

Overview of Global Fixed Income

A Detailed Look at Global Fixed Income

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

<PAGE>

Overview of Global Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. 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 (junk bonds) than a
typical fixed income fund;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio;
. the fixed income market could perform poorly in one or more of the countries
in which the Fund has invested; or
. 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.

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

Global Fixed Income Institutional Class requires a minimum investment of
$250,000. You should consider investing in Global Fixed Income 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 Global Fixed Income if you are pursuing a
short-term financial goal or if you cannot tolerate fluctuations in the value
of your investments.

13
<PAGE>
Overview of Global Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1995 17.76%
1996 5.23%
1997 1.04%
1998 13.30%
1999 - 5.90%

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Year (1/4/94)/1/

/1/ The Salomon World Government Bond Index average is calculated from December
31, 1993.
- - - - - - - - - - - --------------------------------------------------------------------------------

14
<PAGE>
Overview of Global Fixed Income

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 Global Fixed Income.

Expense Example. The example on this page illustrates the expenses you will
incur 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.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.63% and 1.13%, respectively, of the average
daily net assets of the Institutional Class shares.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.89%/1/
-----------------------------------------------
Total Annual Fund
Operating Expense 1.39%/1/
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.79%)/2/
-----------------------------------------------
Net Expenses 0.60%
-----------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ----------------------------------------------------------------

$61 $360 $680 $1,588
- - - - - - - - - - - ----------------------------------------------------------------

15
<PAGE>
A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Global Fixed Income

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

The Fund invests primarily 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
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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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.

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.

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 countries 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

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies,

. taxation and

. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

<PAGE>

A Detailed Look at Global Fixed Income

OTHER INVESTMENTS

The Fund may also invest up to 15% of its total assets in fixed income
securities rated below investment grade (junk bonds), including the securities
of issuers in emerging securities markets.

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

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

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 (junk bonds) 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. It may also create a capital gains tax liability because bond issuers
usually pay a premium for the right to pay off bonds early.

<PAGE>

A Detailed Look at Global Fixed Income

. 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 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.

Secondary Risks

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 risks may include:

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

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

18
<PAGE>
A Detailed Look at Global Fixed Income

PORTFOLIO MANAGERS

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

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that, Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.

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

<PAGE>

A Detailed Look at Global Fixed Income

FINANCIAL HIGHLIGHTS

For the Year Ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $11.36 $10.84 $11.26 $10.99 $9.85
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.68 0.63 0.35 0.59 0.35
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (1.07) 0.45 0.01 0.12 0.99
------------------------------------------------------------------------------
Total from Investment Operations (0.39) 1.08 0.36 0.71 1.34
------------------------------------------------------------------------------
Distributions to Shareholders
from
Net Investment Income (0.73) (0.34) (0.50) (0.37) (0.20)
------------------------------------------------------------------------------
Net Realized Gains (0.52) (0.22) (0.28) (0.07) --
------------------------------------------------------------------------------
Total Distributions (1.25) (0.56) (0.78) (0.44) (0.20)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.72 $11.36 $10.84 $11.26 $10.99
------------------------------------------------------------------------------
Total Investment Return (3.91%) 10.58% 3.34% 6.60% 13.88%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $52,220 $58,422 $42,180 $149,917 $139,337
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 6.67% 4.82% 5.30% 5.39% 5.61%
------------------------------------------------------------------------------
Expenses 1.13% 0.77% 0.77% 0.79% 0.87%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
DAMIS/1/ 0.53% 0.17% 0.12% 0.04% 0.09%
------------------------------------------------------------------------------
Portfolio Turnover Rate 161% 182% 179% 223% 147%
------------------------------------------------------------------------------

/1/ DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------
20
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of International Fixed Income

INVESTMENT POLICIES AND STRATEGIES

INTERNATIONAL FIXED INCOME--Institutional Class

Overview of International Fixed Income

A Detailed Look at International Fixed Income

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

21
<PAGE>
Overview of International Fixed Income

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:

. an issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline;
. the issuer of a security owned by the Fund could default on its obligation to
pay principal and/or interest;
. interest rates could increase, causing the prices of fixed income securities
to decline, thereby reducing the value of the Fund's portfolio; or
. 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.

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their full
value;
. 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;
. 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
. 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 Institutional Class requires a minimum investment of
$250,000. You should consider investing in International Fixed Income 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 International Fixed Income if you are
pursuing a short-term financial goal or if you cannot tolerate fluctuations in
the value of your investments.

<PAGE>

Overview of International Fixed Income

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1995 17.81%
1996 5.54%
1997 -3.31%
1998 17.44%
1999 -6.99%

Since inception, the Fund's highest return in any calendar quarter was 22.28%
(third quarter 1997) and its lowest quarterly return was (5.03%)(second quarter
1999). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Year (3/15/94)/1/

International
Fixed Income--
Institutional
Class -6.99% 5.60% 4.68%
----------------------------------------------
Salomon World
Government Bond
(non-U.S.) Index -5.07% 5.90% 5.83%
----------------------------------------------

/1/The Salomon World Government Bond (non-U.S.) Index average is calculated
from March 31, 1994.
- - - - - - - - - - - --------------------------------------------------------------------------------

23
<PAGE>
Overview of International Fixed Income

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Expense Example. The example below illustrates the expenses you will incur 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.

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

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

/1/ Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.20% and 1.70%, respectively, of the average
daily net assets of the Institutional Class shares.

/2/ The investment adviser and the administrator have contractually agreed, for
the 16-month period from the Fund's fiscal year end of October 31, 1999, to
waive their fees or reimburse expenses so that total expenses will not exceed
0.55%.

/3/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.50%
------------------------------------------------
Distribution and
Service (12b-1) Fees None
------------------------------------------------
Other Expenses 0.56%/1/
------------------------------------------------
Total Annual Fund
Operating Expenses 1.06%/1/
------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.51%)/2/
------------------------------------------------
Net Expenses 0.55%
------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - ----------------------------------------------------------------

$56 $285 $533 $1,242
- - - - - - - - - - - ----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at International Fixed Income

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

- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

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.

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.

INVESTMENT PROCESS

In selecting securities for the Fund, the portfolio management team considers
macro-economic factors such as:

. inflation,

. interest rates,

. monetary and fiscal policies,

. taxation and

. political climate.

We seek to identify those securities that will offer, in our opinion, the
greatest potential capital appreciation on a three month outlook.

25
<PAGE>
A Detailed Look at International Fixed Income

OTHER INVESTMENTS

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

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. 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 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.

26
<PAGE>
A Detailed Look at International Fixed Income

. 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. Additionally, a change in economic policy may cause a greater
fluctuation in a country's currency than in bonds denominated in that
currency. We 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.

Secondary Risks

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

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

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

. 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.

Derivative Risk. Risks associated with derivatives include:

. that the derivative is not well correlated with the security for which it is
acting as a substitute;

. that derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and

. that the Fund cannot sell the derivative because of an illiquid secondary
market.

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

<PAGE>

A Detailed Look at International Fixed Income

PORTFOLIO MANAGERS

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

Annette Fraser, Director, Deutsche Asset Management Investment Services Limited
and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. Specializes in core European markets.

. 9 years of experience as an investment professional.

Ian Clarke, Director, Deutsche Asset Management Investment Services Limited and
Co-Manager of the Fund.

. Joined the investment adviser in 1999.

. Chief investment officer, fixed income in the UK.

. Specializes in global fixed income asset allocation strategy.

. 14 years of investment industry experience.

. Previously, Executive Director, Morgan Stanley Dean Witter from 1992 to 1999
and prior to that, Director, United Bank of Kuwait plc from 1983 to 1992.

Dipankar Shewaram, Portfolio Manager, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997.

. Specializes in emerging markets.

. 2 years of investment industry experience.

. Degrees in economics and finance from London School of Economics.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at International Fixed Income

For the Year Ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of
Period $10.95 $10.16 $11.30 $11.34 $9.94
------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.21 0.51 0.20 0.86 0.42
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) (0.56) 0.65 (0.11) (0.12) 1.03
------------------------------------------------------------------------------
Total from Investment Operations (0.35) 1.16 0.09 0.74 1.45
------------------------------------------------------------------------------
Distributions to Shareholders from
Net Investment Income (0.48) (0.27) (0.64) (0.66) (0.05)
------------------------------------------------------------------------------
Net Realized Gains (0.36) (0.10) (0.59) (0.12) --
------------------------------------------------------------------------------
Total Distributions (0.84) (0.37) (1.23) (0.78) (0.05)
------------------------------------------------------------------------------
Net Asset Value, End of Period $9.76 $10.95 $10.16 $11.30 $11.34
------------------------------------------------------------------------------
Total Investment Return (3.53%) 11.87% 0.82% 6.82% 14.66%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $55,997 $19,521 $27,937 $21,155 $27,603
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 3.53% 4.36% 5.00% 5.41% 5.51%
------------------------------------------------------------------------------
Expenses 1.70% 1.08% 1.06% 1.03% 1.15%
------------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by DAMIS/1/ 1.15% 0.51% 0.41% 0.28% 0.37%
------------------------------------------------------------------------------
Portfolio Turnover Rate 140% 181% 174% 235% 187%
------------------------------------------------------------------------------

/1/ DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------
29
<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 One
Appold Street, London, England, acts as investment adviser for each Fund. DAMIS
makes each Fund's investment decisions. It buys and sells securities for each
Fund and conducts the research that leads to the purchase and sale decisions.
DAMIS is also responsible for selecting brokers and dealers and for negotiating
brokerage commissions and dealer charges.

DAMIS provides a full range of institutional investment advisory services to
institutional clients, and as of October 31, 1999, managed approximately $16.1
billion in assets.

DAMIS is an indirect wholly-owned subsidiary of Deutsche Bank A.G. Deutsche
Bank A.G. 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.

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

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

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

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

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

. collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Information Concerning all Funds

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.

PERFORMANCE INFORMATION

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

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

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

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

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

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight Service Center
mail 210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

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

Institutional class shares of the Fund may be purchased without regard to the
investment minimums by: 1) employees of Deutsche Bank A.G., any of its
affiliates or subsidiaries, their spouses and minor children, and 2) Directors
or Trustees of any investment company advised or administered by Deutsche Bank
A.G. or any of its affiliates or subsidiaries, their spouses and minor
children. The Fund and its service providers reserve the right to, from time to
time in their discretion, waive or reduce the minimum account investments.
- - - - - - - - - - - --------------------------------------------------------------------------------

31
<PAGE>
Information Concerning all Funds

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:

WIRE:

Routing No: 1010 00695
Attn: Deutsche Asset Management/ Mutual Funds
DDA No:
98-7052-395-7
(Account name)
FBO: (Account number)
Credit: [Fund name and Fund number]

Refer to your account statement for the account name, number and fund 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 service agent or the Service Center at
1-800 730-1313. Inform the Service Center representative of the amount of your
redemption and receive a trade confirmation number. The minimum redemption by
wire is $1,000. We must receive your order by 4:00 p.m. Eastern time to wire
your account the next business day.

Important Information about Buying and Selling Shares

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

. We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. Please note that we
cannot accept starter checks or third-party checks.
- - - - - - - - - - - --------------------------------------------------------------------------------

32
<PAGE>
Information Concerning all Funds

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

. We do not issue share certificates.

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

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

. Exchange Privilege. You can exchange all or part of your shares for shares in
another Deutsche Asset Management mutual fund up to four times a year (from
the date of the 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 obtain 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:

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

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

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

<PAGE>

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<PAGE>

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<PAGE>

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

Core Global Fixed Income--Institutional Class

Global Fixed Income

International Fixed Income

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square CUSIP #61735K620
Portland, ME 04101 61735K208
61735K505

INSINTLFIPRO

811-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Institutional Class

International Select Equity

European Equity

International Small Cap Equity

Emerging Markets Equity

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents
- - - - - - - - - - - -----------------

International Select Equity................................................. 3
European Equity............................................................. 11
International Small Cap Equity.............................................. 20
Emerging Markets Equity..................................................... 29
Information Concerning All of the Funds..................................... 38
Management of the Funds..................................................... 38
Calculating a Fund's Share Price............................................ 38
Performance Information..................................................... 39
Dividends and Distributions................................................. 39
Tax Considerations.......................................................... 39
Buying and Selling Fund Shares.............................................. 39

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

2
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of International Select Equity

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 the developed countries that
make up the MSCI EAFE Index.

INVESTMENT POLICIES AND STRATEGIES
The Fund seeks to achieve its investment objective by investing in a focused
list of approximately 30 to 40 stocks offering, in our opinion, the greatest
upside potential on a 12 month view. We use an entirely bottom-up approach,
with no active allocation between countries, regions or industries.

The Fund follows a strict buy and sell strategy. We begin with a broad universe
of equity securities that show long-term prospects for growth. We set for each
security a target price objective. The price objective represents our opinion
of the intrinsic value of the security. We rank each security based on these
target price objectives and purchase the top 30 to 40 securities in the
ranking. Stocks are sold when they meet their target price objectives or when
we revise price objectives downward.
- - - - - - - - - - - --------------------------------------------------------------------------------

International Select Equity--Institutional Class

Overview of International Select Equity

A Detailed Look at International Select Equity

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

<PAGE>

Overview of International Select Equity

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:

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

. 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:

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

. 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

. 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 Select Equity Institutional Class requires a minimum investment
of $250,000. You should consider investing in International Select Equity 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 more diversified equity funds
or in bond or money market funds.

You should not consider investing in International Select Equity 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 International Select Equity is not a deposit of any bank, and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

4
<PAGE>
Overview of International Select Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. The Index is a passive measure of
combined national stock market returns. It does not factor in the costs of
buying, selling and holding stocks--costs which are reflected in the Fund's
results.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1996 10.31%
1997 0.51%
1998 23.49%
1999 88.85%

Since inception, the Fund's highest return in any calendar quarter was 42.80%
(fourth quarter 1999) and its lowest quarterly return was (15.37%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 year (5/15/95)/1/

International Select
Equity--Institutional
Class 88.85% 26.59%
-----------------------------------------------
EAFE Index 26.96% 12.98%
-----------------------------------------------

/1/ EAFE Index performance is calculated from May 30, 1995.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of International Select Equity

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 International Select Equity.

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/ Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.51% and 2.21%, respectively, of the average
daily net assets of the Institutional Class shares.

/2/ The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 1.25%.

/3/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of Average
Daily Net Assets

Management Fees 0.70%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 0.45%/1/
-----------------------------------------------
Total Annual Fund
Operating Expenses 1.15%/1/
-----------------------------------------------
Less: Fee Waivers or
Expense Reimbursements 0.00%/2/
-----------------------------------------------
Net Expenses 1.15%
-----------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
- - - - - - - - - - - -----------------------------------------------------------------

$117 $365 $633 $1,398
- - - - - - - - - - - -----------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at International Select Equity

OBJECTIVE

The Fund seeks capital appreciation. 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

We seek to identify a focused list of approximately 30 to 40 companies that
offer, in our opinion, the greatest upside potential on a rolling 12 month
view. We use an entirely bottom-up approach, with no active allocation between
countries, regions or industries.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests primarily in stocks and other
securities with equity characteristics located in the countries that make up
the MSCI (Morgan Stanley Capital International) EAFE Index. The MSCI EAFE Index
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.
The majority of securities in which the Fund invests are represented in the
MSCI EAFE Index. However, the Fund may invest up to 50% of its total assets in
non-Index securities of companies located in the countries that make up the
Index. The MSCI EAFE Index has a median market capitalization of over $29
billion.

Under normal market conditions, the Fund invests in securities of issuers with
a minimum market capitalization of $500 million.

INVESTMENT PROCESS

The Fund's process begins with a broad universe of equity securities of issuers
located in the countries that make up the MSCI EAFE Index. The universe
includes all securities in the Index and a large number of securities not
included in the Index but whose issuers are located in the countries that make
up the Index.
- - - - - - - - - - - --------------------------------------------------------------------------------
Equity securities and other securities with equity characteristics include
common stock, preferred stock, warrants, purchased call and put options and
other rights to acquire stock.

Teams of analysts worldwide screen the companies in the universe to identify
those with high and sustainable return on capital and long-term prospects for
growth. We focus on companies with real cash flow on investment rather than
published earnings. The research teams rely on information gleaned from a
variety of sources and perspectives, including broad trends such as lifestyle
and technological changes, industry cycles and regulatory changes, quantitative
screening and individual company analysis.

OTHER INVESTMENTS

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

Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directly in those securities.

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. 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.
- - - - - - - - - - - --------------------------------------------------------------------------------

7
<PAGE>
A Detailed Look at International Select Equity

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.

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

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.

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:

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than in the U.S.

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 fair value 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.

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.

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options, which are types of derivatives.
Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and
- - - - - - - - - - - -------------------------------------------------------------------------------

<PAGE>

A Detailed Look at International Select Equity

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

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. The use of futures and
options for non-hedging purposes involve greater risks than stock investments.

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

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

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

. 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

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Alexander Tedder, Director--Equities, Deutsche Asset Management Investment
Services Limited and Co-Lead Manager of the Fund

. Joined the investment adviser in 1994.

. 11 years of investment industry experience.

. Head of EAFE equities.

. European portfolio manager/analyst.

. Masters in Economics and Business Administration, Freilburg University.

Patrick Deane, Director--Equities, Deutsche Asset Management Investment
Services Limited and Co-Lead Manager of the Fund

. Joined the investment adviser in 1994.

. 12 years of investment industry experience.

. UK portfolio manager/analyst.

James Pulsford, Director--Equities, Deutsche Asset Management Investment
Services Limited

. Joined the investment adviser in 1994.

. 15 years investment experience.

. Japanese portfolio manager with an emphasis on small cap securities.

Stuart Kirk, Portfolio Manager, Deutsche Asset Management Investment Services
Limited

. Joined the investment adviser in 1995.

. 5 years of investment industry experience.

. Asia-Pacific portfolio manager/analyst.

Syed Adlan, Analyst/Portfolio Manager, Deutsche Asset Management Investment
Services Limited

. Joined the investment adviser in 1997.

. Prior to that, foreign exchange reserves management team member, Central Bank
of Malaysia, from 1995 to 1997.

. 5 years of investment industry experience.

. Analyst specializing in Asian equities.

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

9
<PAGE>
A Detailed Look at International Select Equity

FINANCIAL HIGHLIGHTS

For the Period
Ended
For the Year Ended October 31, October 31,
1999 1998 1997 1996 1995/1/

For a Share Outstanding
throughout each Period:
Net Asset Value, Beginning of
Period $12.02 $11.62 $11.88 $10.95 $10.00
------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income (Loss) (0.09) 0.12 0.16 0.11 0.08
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) 6.91 0.90 0.28 1.25 0.87
------------------------------------------------------------------------------
Total from Investment
Operations 6.82 1.02 0.44 1.36 0.95
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.07) (0.23) (0.15) (0.43) --
------------------------------------------------------------------------------
Net Realized Gains (0.67) (0.39) (0.55) -- --
------------------------------------------------------------------------------
Total Distributions (0.74) (0.62) (0.70) (0.43) --
------------------------------------------------------------------------------
Net Asset Value, End of
Period $18.10 $12.02 $11.62 $11.88 $10.95
------------------------------------------------------------------------------
Total Investment Return 59.39% 9.28% 3.78% 12.70% 9.50%+
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted) $61,577 $5,419 $4,954 $3,423 $2,738
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 0.52% 0.92% 0.97% 0.72% 1.55%/2/
------------------------------------------------------------------------------
Expenses 2.21% 2.89% 2.79% 3.59% 2.73%/2/
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
DAMIS/3/ 1.31% 1.99% 1.89% 2.69% 1.83%/2/
------------------------------------------------------------------------------
Portfolio Turnover Rate 239% 127% 55% 39% 19%
------------------------------------------------------------------------------

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

/3/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.

+Return is for the period indicated and has not been annualized.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of European Equity

(formerly European Equity Growth Fund)

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.

The Fund's investment team has a sell discipline which maintains upside and
downside target prices, which are adjusted to keep pace with changes in
company, industry and market circumstances.

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

European Equity--Institutional Class

Overview of European Equity

A Detailed Look at European Equity

Objective................................................................... 15
Strategy.................................................................... 15
Principal Investments....................................................... 15
Investment Process.......................................................... 15
Other Investments........................................................... 16
Risks....................................................................... 16
Portfolio Managers.......................................................... 18
Financial Highlights........................................................ 19

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

<PAGE>

Overview of European Equity

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:

. stocks that the Investment Adviser has selected could perform poorly; or
. 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 developed and emerging countries in which the Fund invests. For example:

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

European Equity Institutional Class requires a minimum investment of $250,000.
You should consider investing in European Equity 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 European Equity 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 European Equity is not a deposit of any bank, and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

12
<PAGE>
Overview of European Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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. The Index is a passive measure of
combined national stock market returns. It does not factor in the costs of
buying, selling and holding stocks--costs which are reflected in the Fund's
results.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1997 15.54%
1998 22.89%
1999 45.43%

Since inception, the Fund's highest return in any calendar quarter was 39.68%
(fourth quarter 1999) and its lowest quarterly return was (16.78%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999/1/

Since
Inception
1 Year (9/3/96)/2/

European Equity--
Institutional Class 45.43% 29.71%
------------------------------------------------
MSCI Europe Index 16.23% 24.69%
------------------------------------------------

/1/ Effective December 23, 1999, Deutsche Asset Management, Inc. replaced
Deutsche Asset Management Investment Services Limited as the investment adviser
to the Fund.

/2/ MSCI Europe Index performance is calculated from August 30, 1996.

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

<PAGE>

Overview of European Equity

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 European Equity.

/1/Restated to reflect estimated Other Expenses and estimated net assets for
the current fiscal year. For the fiscal year ended October 31, 1999, Other
Expenses and Total Annual Fund Operating Expenses were 0.94% and 1.64%,
respectively, of the average daily net assets of the Institutional Class
shares.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES/1/

Percentage of average
daily net assets

Management Fees 0.70%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 2.52%/1/
---------------------------------------------------
Total Annual Fund
Operating Expenses 3.22%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (1.97%)/2/
---------------------------------------------------
Net Expenses 1.25%
---------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------

$127 $807 $1,512 $3,386
--------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at European Equity

OBJECTIVE

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.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests at least 65% of its total assets
in stock and other securities with equity characteristics. Companies in which
the Fund invests are generally based in the developed countries of Europe,
including the countries that make up the MSCI Europe Index. The Fund may invest
a portion of its assets in companies based in the emerging markets of Eastern
and Central Europe and the Mediterranean region. Although the Fund intends to
diversify its investments across different countries, the Fund may invest a
significant portion of its assets in a single country.

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

An emerging market is commonly defined as one that experienced comparatively
little industrialization or that has a relatively new stock market and a low
level of quoted market capitalization. Bulgaria, Croatia, Estonia and Lithuania
are examples of emerging markets from Eastern and Central Europe in which the
Fund may invest. Greece, Egypt, Morocco and Tunisia are examples of emerging
markets in the Mediterranean region in which the Fund may invest.

The Fund may invest in companies of any market capitalization.

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 be undervalued 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.

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

. stock price relative to the company's rate of earnings growth;
. valuation relative to other European companies and market averages;
. valuation relative to global peers;
. merger and acquisition trends; and
. 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.

The Fund's investment team has a sell discipline which maintains upside and
downside target prices, which are adjusted to keep pace with changes in
company, industry and market circumstances.

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

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.
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

15
<PAGE>
A Detailed Look at European Equity

OTHER INVESTMENTS

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.

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

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.

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

Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directly in those securities.
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.
inherently more difficult than trading in the United States for several reasons
including:

. 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.

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than 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 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
- - - - - - - - - - - --------------------------------------------------------------------------------

16
<PAGE>
A Detailed Look at European Equity

addition, 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.

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options, which are types of derivatives.
Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

If the Fund invests in futures contracts and options 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. The Fund may invest a portion of its assets in
companies based in the emerging markets of Eastern and Central Europe and the
Mediterranean region.

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

. changes in the relative strength and value of the U.S. dollar or other major
currencies;
. adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and
. 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.

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

<PAGE>

A Detailed Look at European Equity

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.

. Joined the investment adviser in 1993.

. Head of international equities, New York, responsible for overseeing the
management of over $7 billion of international and global equities.

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

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

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

. Joined the investment adviser in 1999.

. Previously, portfolio manager, Clay Finlay from 1987 to 1999.

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

. 14 years of investment industry experience.

. MBA from Columbia University.

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

. Joined the investment adviser in 1993.

. 9 years of investment industry experience.

. Global telecommunication services/equipment and pulp and paper analyst.

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

. Joined the investment adviser in 1995.

. 5 years of investment industry experience.

. Global engineering, construction, utility and automotive analyst.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

A Detailed Look at European Equity

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past four fiscal periods.
Certain 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 PricewaterhouseCoopers
LLP, 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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the Period
For the Year Ended
Ended October 31, October 31,
1999 1998 1997 1996/1/

For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of Period $13.50 $12.81 $10.60 $10.00
-----------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.29 0.15 0.25 --
-----------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) 2.04 1.68 2.11 0.60
-----------------------------------------------------------------------------
Total from Investment Operations 2.33 1.83 2.36 0.60
-----------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income (0.29) (0.24) (0.03) --
-----------------------------------------------------------------------------
Net Realized Gains (4.11) (0.90) (0.12) --
-----------------------------------------------------------------------------
Total Distributions (4.40) (1.14) (0.15) --
-----------------------------------------------------------------------------
Net Asset Value, End of Period $11.43 $13.50 $12.81 $10.60
-----------------------------------------------------------------------------
Total Investment Return 21.18% 15.36% 22.48% 6.00%+
-----------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $897 $5,387 $39,330 $17,902
-----------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income (Loss) 1.23% 1.12% 1.71% (0.41)%/2/
-----------------------------------------------------------------------------
Expenses 1.64% 1.13% 1.17% 1.40%/2/
-----------------------------------------------------------------------------
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by DAMIS/3/ 0.74% 0.23% 0.27% 0.50%/2/
-----------------------------------------------------------------------------
Portfolio Turnover Rate 80% 49% 45% 5%
-----------------------------------------------------------------------------

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

/2/Annualized.

/3/DAMIS--Deutsche Asset Management Investment Services Limited until December
23, 1999, the Fund's investment adviser.

+Return is for the period indicated and has not been annualized.
- - - - - - - - - - - --------------------------------------------------------------------------------

19
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of International Small Cap Equity

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, leading or dominant
positions in their particular markets and high quality management.
- - - - - - - - - - - --------------------------------------------------------------------------------

International Small Cap Equity--Institutional Class

Overview of International Small Cap Equity

Goal........................................................................ 20
Core Strategy............................................................... 20
Investment Policies and Strategies.......................................... 20
Principal Risks of Investing in the Fund.................................... 21
Who Should Consider Investing in the Fund................................... 21
Total Returns, After Fees and Expenses...................................... 22
Annual Fund Operating Expenses.............................................. 23

A Detailed Look at International Small Cap Equity

Objective................................................................... 24
Strategy.................................................................... 24
Principal Investments....................................................... 24
Investment Process.......................................................... 24
Other Investments........................................................... 24
Risks....................................................................... 25
Portfolio Managers.......................................................... 27
Financial Highlights........................................................ 28

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

<PAGE>

Overview of International Small Cap Equity

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:

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

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

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

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their full
value;
. 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;
. 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
. 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 Small Cap Equity Institutional Class requires a minimum
investment of $250,000. You should consider investing in International Small
Cap Equity 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 International Small Cap Equity 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.

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

21
<PAGE>
Overview of International Small Cap Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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 Global Equity Extended Market Index and the DB Euro
Pacific Small Cap Index over the last one year, five years and since inception.
The Fund has changed its benchmark from the DB Euro Pacific Small Cap Index to
the Salomon Extended Market Index. This index more closely reflects the market
sectors in which the Fund invests. The Salomon Global Equity Extended Market
Index is recognized as the leading international small cap index in the United
States. Each Index is a passive measure of combined national stock market
returns. They do not factor in the costs of buying, selling and holding
stocks--costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
The Salomon Global Equity 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.

The DB Euro Pacific Small Cap Index is a broad-based index of the equity
securities of non-U.S. small capitalization companies.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1994 - 3.20%
1995 2.77%
1996 1.86%
1997 -14.33%
1998 15.49%
1999 8.34%

Since inception, the Fund's highest return in any calendar quarter was 28.09%
(fourth quarter 1999) and its lowest quarterly return was (12.55%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Years (1/3/94)/1/

International
Small Cap
Equity--
Institutional
Class 61.23% 10.80% 8.34%
----------------------------------------------
Salomon Global
Equity Extended
Market Index 20.01% 10.92% 9.29%
----------------------------------------------
DB Euro Pacific
Small Cap Index 13.72% 2.57% 4.45%
----------------------------------------------

/1/ Salomon Global Equity Extended Market Index performance is calculated from
December 31, 1993. DB Euro Pacific Small Cap Index performance is calculated
from December 31, 1993.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of International Small Cap Equity

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

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

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.47% and 2.47%, respectively, of the average
daily net assets of the Institutional Class shares.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.00%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 1.37%/1/
---------------------------------------------------
Total Annual Fund
Operating Expenses 2.37%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (1.12%)/2/
---------------------------------------------------
Net Expenses 1.25%
---------------------------------------------------

EXPENSE EXAMPLE/2/

1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------

$127 $626 $1,152 $2,593
---------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at International Small Cap Equity

OBJECTIVE

The Fund seeks capital appreciation. 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

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.

The Fund invests for the long term. In evaluating stocks, we look for companies
with above average earnings growth, leading or dominant positions in their
particular markets and high quality management.

Generally, investments in securities issued by companies which appreciate after
being purchased by the Fund, such that the capitalization of the company
exceeds our definition of a small capitalization company will not be sold.

PRINCIPAL INVESTMENTS

The Fund focuses primarily in stock and other securities with equity
characteristics. The Fund focuses principally on small capitalization
companies. For this purpose, we define small capitalization companies as, at
the time of purchase, companies ranked according to market capitalization
outside the top 25% of issuers listed on a stock exchange, companies listed on
a secondary market or companies whose securities are not listed on a stock
exchange or traded in a secondary market.

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.
- - - - - - - - - - - --------------------------------------------------------------------------------
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. 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. We focus our investment strategy on high quality,
growth companies with visible earnings streams and above average return on
capital.

OTHER INVESTMENTS

The Fund may 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 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.

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.
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.

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

<PAGE>

A Detailed Look at International Small Cap Equity

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.

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

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.

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. 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.

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than 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 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

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 will work, and their use could cause
lower returns or even losses to the Fund.
- - - - - - - - - - - --------------------------------------------------------------------------------

25
<PAGE>
A Detailed Look at International Small Cap Equity

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.

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options on futures contracts, which are
types of derivatives. Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

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

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

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

<PAGE>

A Detailed Look at International Small Cap Equity

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Richard Curling, Director--Head of Global Small Cap, Deutsche Asset Management
Investment Services Limited and Lead Manager of the Fund.

. Joined the investment adviser in 1981.

. 18 years of investment industry experience.

. Global responsibility for UK small companies team and global small companies
team.

Jonathan Wild, Fund Manager, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1996. Prior to that, fund manager, Finsbury
Asset Management from 1988 to 1996.

. Analyst specializing in the building and construction and building materials
sectors.

. 12 years of investment industry experience.

Marco Ricci, Fund Manager, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997. Prior to that, analyst, Fidelity
International Limited from 1994 to 1997.

. 9 years of investment industry experience.

. Analyst specializing in smaller companies.

. MBA, University of Pennsylvania.

Ser Mui Lim, Fund Manager, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1991. Prior to that, Fund Manager, Deutsche
Asset Management (Asia) Limited from 1988 to 1991.

. 20 years of investment industry experience.

. Analyst specializing in small cap investments in the Asian region including
Hong Kong, Korea, Malaysia and Singapore.

Eric Forday, Vice President, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997. Prior to that, equity analyst, SBC
Warburg Securities from 1991 to 1997.

. 8 years of investment industry experience.

. Japanese small cap equity analyst.
- - - - - - - - - - - --------------------------------------------------------------------------------

27
<PAGE>
A Detailed Look at International Small Cap Equity

FINANCIAL HIGHLIGHTS

For the year ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $8.86 $8.81 $9.96 $9.40 $10.35
------------------------------------------------------------------------------
Income from Investment Operations
Net Investment Income 0.03 0.08 0.10 0.03 0.03
------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) 3.38 0.07 (1.12) 0.57 (0.72)
------------------------------------------------------------------------------
Total from Investment Operations 3.41 0.15 (1.02) 0.60 (0.69)
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income -- (0.10) (0.13) (0.04) (0.04)
------------------------------------------------------------------------------
Net Realized Gains -- -- -- -- (0.22)
------------------------------------------------------------------------------
Total Distributions -- (0.10) (0.13) (0.04) (0.26)
------------------------------------------------------------------------------
Net Asset Value, End of Period $12.27 $8.86 $ 8.81 $9.96 $ 9.40
------------------------------------------------------------------------------
Total Investment Return 38.49% 1.81% (10.40)% 6.43% (6.67)%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $10,930 $24,410 $53,395 $106,709 $90,917
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 0.86% 0.43% 0.16% 0.35% 0.41%
------------------------------------------------------------------------------
Expenses 2.47% 1.49% 1.37% 1.38% 1.48%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS/1/ 1.22% 0.24% 0.12% 0.13% 0.23%
------------------------------------------------------------------------------
Portfolio Turnover Rate 86% 106% 59% 47% 62%
------------------------------------------------------------------------------

/1/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - --------------------------------------------------------------------------------

28
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of Emerging Markets Equity

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 companies in
Mexico, Brazil and Taiwan. The Fund seeks undervalued stocks with fast-growing
earnings and superior near-to-intermediate term performance potential.
- - - - - - - - - - - --------------------------------------------------------------------------------

Emerging Markets Equity--Institutional Class

Overview of Emerging Markets Equity

Goal........................................................................ 29
Core Strategy............................................................... 29
Investment Policies and Strategies.......................................... 29
Principal Risks of Investing in the Fund.................................... 30
Who Should Consider Investing in the Fund................................... 30
Total Returns, After Fees and Expenses...................................... 31
Annual Fund Operating Expenses.............................................. 32

A Detailed Look at Emerging Markets Equity

Objective................................................................... 33
The Case for Emerging Markets............................................... 33
Strategy.................................................................... 33
Principal Investments....................................................... 33
Investment Process.......................................................... 33
Other Investments........................................................... 33
Risks....................................................................... 34
Portfolio Managers.......................................................... 36
Financial Highlights........................................................ 37

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

<PAGE>

Overview of Emerging Markets Equity

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:

. stocks that the Investment Adviser has selected could perform poorly; or
. 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 emerging markets in which the Fund invests. For example:

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

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

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

. 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

. 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

Emerging Markets Equity Institutional Class requires a minimum investment of
$250,000. You should consider investing in Emerging Markets Equity 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 Emerging Markets Equity 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 Emerging Markets Equity is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
- - - - - - - - - - - --------------------------------------------------------------------------------

30
<PAGE>
Overview of Emerging Markets Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
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 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 stocks-costs which are reflected in the
Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------

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 and Venezuela.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class
(each full calendar year since inception)

1995 -10.01%
1996 10.64%
1997 -12.07%
1998 -29.69%
1999 69.67%

Since inception, the Fund's highest return in any calendar quarter was 31.54%
(fourth quarter 1999) and its lowest quarterly return was (25.85%) (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year 5 Years (2/1/94)/1/

Emerging Markets
Equity--
Institutional
Class 69.67% 0.87% 2.36%
-----------------------------------------------
MSCI Emerging
Markets Free
Index 66.41% 2.00% 0.50%
-----------------------------------------------

/1/ MSCI Emerging Markets Free Index performance is calculated from January 31,
1994.
- - - - - - - - - - - --------------------------------------------------------------------------------

<PAGE>

Overview of Emerging Markets Equity

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Expense Example. This example illustrates the expenses you will incur 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/Restated to reflect estimated Other Expenses for the current fiscal year.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 0.90% and 1.90%, respectively, of the average
daily net assets of the Institutional Class shares.

/3/For the first 16 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 1.00%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 0.65%/1/
---------------------------------------------------
Total Annual Fund
Operating Expense 1.65%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.40%)/2/
---------------------------------------------------
Net Expenses 1.25%
---------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------

$127 $481 $859 $1,921
--------------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at Emerging Markets Equity

OBJECTIVE

The Fund seeks capital appreciation. 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 or that has a relatively new stock market and a low level of
quoted market capitalization. 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. 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 or with significant operations in emerging
markets. 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 of
growth and value may identify
- - - - - - - - - - - --------------------------------------------------------------------------------

Equity securities and other securities with equity characteristics include
common stock, preferred stock, warrants, purchased call options and other
rights to acquire stock.
companies with improving prospects before the market in general has taken
notice.

PRINCIPAL INVESTMENTS

The Fund invests primarily in stocks and other securities with equity
characteristics. 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,
Brazilian and Taiwanese companies.

INVESTMENT PROCESS

OTHER INVESTMENTS

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

We may use various instruments commonly known as "derivatives" to increase or
decrease the Fund's exposure to a securities market, index or currency. 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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
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.

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 not had a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------

33
<PAGE>
A Detailed Look at Emerging Markets Equity

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.

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 long-term capital growth.

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

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.

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.

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:

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

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than 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 Mexico, Brazil or Taiwan, or a particular
region, market swings
- - - - - - - - - - - -------------------------------------------------------------------------------
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.

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

<PAGE>

A Detailed Look at Emerging Markets Equity

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 fair value 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.

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;

. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and

. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

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

<PAGE>

A Detailed Look at Emerging Markets Equity

PORTFOLIO MANAGERS

The following portfolio managers are responsible for the day-to-day management
of the Fund's investments:

Neil Jenkins, CFA, Director--Head of Global Emerging Markets, Deutsche Asset
Management Investment Services Limited and Lead Manager of the Fund.

. Joined the investment adviser in 1990.

. 14 years of investment industry experience.

. Analyst with an emphasis on Eastern and Central European markets.

Daniel Salter, Fund Manager of Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1994.

. Analyst with an emphasis on the Central and European markets.

. 5 years of investment industry experience.

Ong Eng-Hock, CFA, Director of Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1992.

. 12 years of investment industry experience.

. Analyst specializing in emerging markets of Asia, in particular, Malaysia the
Indian sub-continent and Korea.

. MBA, University of Singapore.

Andrew Williamson, Fund Manager of Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1996. Prior to that, UK Mergers and
Acquisitions Team member, Morgan Grenfell & Co. 1993 to 1996.

. 5 years of investment industry experience.

. Analyst with an emphasis on Latin America.

Richard Rothwell, Fund Manager of Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund.

. Joined the investment adviser in 1997. Prior to that, portfolio manager,
Hermes Investment Management Limited from 1993 to 1997.

. 6 years of investment industry experience.

. Analyst with an emphasis on emerging markets.
- - - - - - - - - - - --------------------------------------------------------------------------------

36
<PAGE>
A Detailed Look at Emerging Markets Equity

The table below helps you understand the financial performance of the
Institutional Class shares of the Fund for the past five years. Certain
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 PricewaterhouseCoopers
LLP, 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 Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

For the Year Ended October 31,
1999 1998 1997 1996 1995

For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period $4.92 $7.69 $8.80 $8.11 $11.00
------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income (Loss) 0.03 0.03 (0.03) 0.06 0.04
------------------------------------------------------------------------------
Net Realized and Unrealized
Gains (Losses) 1.89 (2.42) (0.85) 0.75 (2.29)
------------------------------------------------------------------------------
Total from Investment Operations 1.92 (2.39) (0.88) 0.81 (2.25)
------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income -- -- (0.01) (0.03) (0.02)
------------------------------------------------------------------------------
Net Realized Gains -- (0.38) (0.22) (0.09) (0.62)
------------------------------------------------------------------------------
Total Distributions -- (0.38) (0.23) (0.12) (0.64)
------------------------------------------------------------------------------
Net Asset Value, End of Period $6.84 $4.92 $7.69 $8.80 $8.11
------------------------------------------------------------------------------
Total Investment Return 39.02% (32.66)% (10.31)% 10.02% (21.00)%
------------------------------------------------------------------------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s
omitted) $163,886 $46,080 $94,101 $88,279 $43,288
------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income 0.63% 0.90% 0.68% 0.63% 0.44%
------------------------------------------------------------------------------
Expenses 1.90% 1.52% 1.44% 1.52% 1.55%
------------------------------------------------------------------------------
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by DAMIS/1/ 0.65% 0.27% 0.19% 0.27% 0.30%
------------------------------------------------------------------------------
Portfolio Turnover Rate 70% 85% 94% 69% 49%
------------------------------------------------------------------------------

/1/DAMIS--Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
- - - - - - - - - - - -------------------------------------------------------------------------------

<PAGE>

Information
- - - - - - - - - - - --------------------------------------------------------------------------------
concerning all Funds

MANAGEMENT OF THE FUNDS

Deutsche Asset Management is marketing name for the asset management activities
of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust Company, DB
Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche Asset Management
Investment Services Limited.

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 One
Appold Street, London, England, acts as investment adviser for each Fund, other
than European Equity. Deutsche Asset Management, Inc. (DAMI) with headquarters
at 885 Third Avenue, New York, New York, acts as the investment adviser for
European Equity. Each Fund's investment adviser makes each Fund's investment
decisions. 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. Each
investment adviser received the following fees as a percentage of the average
daily net assets for each Fund for its services in the last fiscal year. Each
investment adviser reimbursed a portion of its fee during the period.

Percentage of
Average Daily
Fund Net Assets
- - - - - - - - - - - -----------------------------------------------
International Select Equity Fund 0.70%
- - - - - - - - - - - -----------------------------------------------
European Equity Fund/1/ 0.70%
- - - - - - - - - - - -----------------------------------------------
International Small Cap Fund 1.00%
- - - - - - - - - - - -----------------------------------------------
Emerging Markets Equity Fund 1.00%
- - - - - - - - - - - -----------------------------------------------

/1/DAMIS was the Fund's investment adviser until December 23, 1999.

DAMIS and DAMI provide a full range of international investment advisory
services to institutional clients, and as of October 31, 1999, managed
approximately $16.1 billion and $12.6 billion, respectively, in assets.

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

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

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

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

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

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

. collecting your executed proxies.

CALCULATING A FUND'S SHARE PRICE

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
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

38
<PAGE>
Information Concerning all Funds

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.

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

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 Generally, long-term
owned more than one capital gains
year or losses
--------------------------------------------
Your sale of shares Generally, short-term
owned for one year capital gains or
or less 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 Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

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

<PAGE>

Information Concerning all Funds

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

Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$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: 1010 00695

Attn: Deutsche Asset Management/ Mutual Funds
DDA No: 98-7052-395-7

FBO: (Account name)
(Account number)

Credit: [Fund name and Fund number]

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

Important Information about Buying and Selling Shares

. After we or your service agent receives 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.

40
<PAGE>
Information Concerning all Funds

transfer. Please note that we cannot accept starter checks or third-party
checks.

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

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

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

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

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

. We do not issue share certificates.

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

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

Please note the following conditions:

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

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

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

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

International Select Equity--Institutional Class

European Equity

International Small Cap Equity

Emerging Markets Equity

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
Two Portland Square CUSIP #
Portland, ME 04101 61735K604
61735K307
61735K406
61735K109

INSTINTLPRO (2/00)

811-8006

Deutsche Asset Management

Mutual Fund
Prospectus
February 28, 2000
Investment Class

International Select Equity

European Equity

International Small Cap Equity

Emerging Markets Equity

Each formerly a Morgan Grenfell Fund

<PAGE>

Table of Contents
- - - - - - - - - - - -----------------

International Select Equity................................................. 3
European Equity............................................................. 12
International Small Cap Equity.............................................. 21
Emerging Markets Equity..................................................... 30
Information Concerning All of the Funds..................................... 39
Management of the Funds..................................................... 39
Calculating a Fund's Share Price............................................ 39
Performance Information..................................................... 40
Dividends and Distributions................................................. 40
Tax Considerations.......................................................... 40
Buying and Selling Fund Shares.............................................. 40

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2
<PAGE>
Overview
- - - - - - - - - - - --------------------------------------------------------------------------------
of International Select Equity

International Select Equity--Investment Class

Overview of International Select Equity

A Detailed Look at International Select Equity

Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Investment Process.......................................................... 7
Other Investments........................................................... 8
Risks....................................................................... 8
Portfolio Managers.......................................................... 10
Financial Highlights........................................................ 11

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<PAGE>

Overview of International Select Equity

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:

. stocks that the Investment Adviser has selected could perform poorly; or
. the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in International Select Equity 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 more diversified equity funds or in bond or
money market funds.

4
<PAGE>
Overview of International Select Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
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
no 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. The Index is a passive measure of combined national stock
market returns. It does not factor in the costs of buying, selling and holding
stocks--costs which are reflected in the Fund's results.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.

[GRAPH APPEARS HERE]

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

1996 10.31%
1997 0.51%
1998 23.49%
1999 88.85%

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since
Inception
1 Year (5/15/95)/2/

International Select
Equity--Institutional
Class 88.85% 26.59%
------------------------------------------------
EAFE Index 26.96% 12.98%
------------------------------------------------

/1/ Institutional Class performance is presented because Investment Class
shares have no performance history. Investment Class shares will have different
performance. The chart does not reflect 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. Institutional Class shares are offered under a separate
prospectus, which is available upon request.

/2/ EAFE Index performance is calculated from May 30, 1995.
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<PAGE>

Overview of International Select Equity

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 International Select Equity.

/1/Restated to reflect estimated Other Expenses for the current fiscal year.
Investment Class shares are a new class of shares with no operating history.
For the fiscal year ended October 31, 1999, Other Expenses and Total Annual
Fund Operating Expenses were 1.51% and 2.21%,. respectively, of the average
daily net assets of the Institutional Class shares. Expenses for the
Institutional Class shares do not reflect service fees paid by the Investment
Class shares at an aggregate annual rate of up to 0.25% of the average daily
net assets of that Class.

/3/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

ANNUAL FEES AND EXPENSES

Percentage of average
daily net assets

Management Fees 0.70%
---------------------------------------------------
Distribution and
Service (12b-1) Fees None
---------------------------------------------------
Other Expenses 0.69%/1/
---------------------------------------------------
Total Annual Fund
Operating Expenses 1.39%/1/
---------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.00%)/2/
---------------------------------------------------
Net Expenses 1.39%
---------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------

$142 $440 $761 $1,669
-------------------------------------------------------------

<PAGE>

A detailed look
- - - - - - - - - - - --------------------------------------------------------------------------------
at International Select Equity

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

Under normal market conditions, the Fund invests in securities of issuers with
a minimum market capitalization of $500 million.

INVESTMENT PROCESS

Based on this fundamental research, we set for each security a target price
objective (our opinion of the intrinsic value of the security) and rank the
securities based on these target price objectives. We apply a strict buy and
sell strategy. The top 30 to 40 stocks in the ranking are purchased for the
Fund. Stocks are sold when they meet their target price objectives or when we
revise price objectives downward. In implementing this strategy, the Fund may
experience a high portfolio turnover rate.
- - - - - - - - - - - --------------------------------------------------------------------------------
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.
- - - - - - - - - - - --------------------------------------------------------------------------------

7
<PAGE>
A Detailed Look at International Select Equity

OTHER INVESTMENTS

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

RISKS

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.
- - - - - - - - - - - --------------------------------------------------------------------------------

Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directly in those securities.

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. 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.

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.
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:

. 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.

. 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.

. Regulatory Risk. There is generally less government regulation of foreign
markets, companies and securities dealers than in the U.S.

8
<PAGE>
A Detailed Look at International Select Equity

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.