Deutsche Asset Management



                                                                   Mutual Fund
                                                                      Prospectus
                                                               December 29, 2000
                                                    as revised February 28, 2001


                                                             Institutional Class


Global Equity Fund

[Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commmission 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.]


                                                   [LOGO OF DEUTSCHE BANK GROUP]



Overview
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of the Global Equity Fund--Institutional Class

Goal: The Fund invests for long-term capital appreciation.
Core Strategy: The Fund invests primarily in the stocks and other equity
securities of companies in developed countries, both inside and outside the
United States.

INVESTMENT POLICIES AND STRATEGIES

The Fund seeks to achieve its goal by investing primarily in the stocks and
other equity securities of companies in developed countries, both inside and
outside the United States. In managing the Fund, 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.
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Global Equity Fund--Institutional Class

Overview of the Global Equity Fund

                                                                          
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..............................................   5



A Detailed Look at the Global Equity Fund

                                                                          
Objective...................................................................   6
Strategy....................................................................   6
Principal Investments.......................................................   6
Investment Process..........................................................   6
Prior Performance of a Model Portfolio......................................   7
Risks.......................................................................   7
Management of the Fund......................................................   9
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........................................................  13


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                                       3



Overview of the Global Equity Fund--Institutional Class

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 we have 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:

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

 . accounting and financial reporting standards differ from those in the US and
  could convey incomplete information when compared to information typically
  provided by US companies;

 . the currency of a country in which the Fund invests may decrease in value
  relative to the US dollar, which could affect the value of the investment to
  US investors; or

 . foreign securities markets are often smaller and less liquid than the US
  market, which may cause the Fund to have more difficulty or higher costs
  buying and selling securities in those markets.

These risks are higher for securities of issuers located in the emerging
markets in which the Fund invests.
WHO SHOULD CONSIDER INVESTING IN THE FUND

Global Equity Fund--Institutional Class requires a minimum investment of
$250,000. You should consider investing in the Fund if you are seeking long-
term capital appreciation. There is, of course, no guarantee that the Fund will
realize its goal. Moreover, you should be willing to accept greater short-term
fluctuation in the value of your investment than you would typically experience
investing in bond or money market funds.

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

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

An investment in the Global Equity Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
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                                       4



                    Overview of the Global Equity Fund--Institutional Class


TOTAL RETURNS, AFTER FEES AND EXPENSES

Because the Fund shares are newly offered, the Fund does not have a full
calendar year of annual operating performance to report. However, the Fund has
an investment objective and policies that are substantially similar to those of
a model of portfolio securities which has been actively managed by the Adviser.
See "Prior Performance of a Model Portfolio.'

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

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

You may use this hypothetical example to compare the Fund's expense history
with other funds. Your actual costs may be higher or lower.
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/1/Information is based on estimated amounts for the current fiscal year.

/2/The investment adviser and administrator have agreed, for the 14-month
period from the effective date of December 29, 2000, to waive their fees and
reimburse expenses so that total expenses will not exceed 1.15%.

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

 Annual Fees and Expenses/1/



                                                     Percentage of Average
                                                          Daily Net Assets
                                                  
  Management Fees                                                    0.60%
 ------------------------------------------------------------------------------
  Distribution and Service (12b-1) Fees
                                                                      None
 ------------------------------------------------------------------------------
  Other Expenses                                                     1.77%
 ------------------------------------------------------------------------------
  Total Fund Operating Expenses                                      2.37%
 ------------------------------------------------------------------------------
  Less: Fee Waivers or Expense  Reimbursements                      (1.22%)/2/
 ------------------------------------------------------------------------------
  Net Expenses                                                       1.15%
 ------------------------------------------------------------------------------


 Expense Example



     1 Year/3/                                                         3 Years
                                                                    
      $117                                                               $622
 ------------------------------------------------------------------------------

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                                       5


A detailed look
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at the Global Equity Fund--Institutional Class

OBJECTIVE

The Fund seeks long-term capital appreciation, not income; any dividend or
interest income is incidental to the pursuit of that goal. While we give
priority to capital appreciation, we cannot offer any assurance of achieving
this goal. The Fund's goal is not a fundamental policy. We must notify
shareholders before we change it, but we do not require their approval to do
so.

STRATEGY

The Fund invests for the long term. We employ a strategy of growth at a
reasonable price. We seek to identify companies both within and outside the
United States 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 global peers. In evaluating stocks, we
consider factors such as earnings per share and replacement value--the cost of
replacing their physical assets at current prices. We further consider the
relationship between these and other quantitative factors. Together, we believe
these indicators of growth and value identify companies with improving
prospects before the market in general has taken notice.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests at least 65% of its total assets
in the stocks and other equity securities of companies in developing countries,
located both inside and outside the United States.

The Fund will invest in stocks and equity securities issued primarily in
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, United Kingdom and the United States.

OTHER INVESTMENTS

The Fund may also invest a portion of its assets in companies based in the
emerging markets of Latin America, the Middle East, Europe, Asia and Africa if
we believe that their return potential more than compensates for the extra
risks associated with these markets. Under normal market conditions we do not
consider this a central element of the Fund's strategy.

INVESTMENT PROCESS

Company research lies at the heart of our investment process, as it does with
many stock mutual funds. But 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, who challenge, refine and
amplify each other's ideas. Their close collaboration is a critical element of
our investment process.

We believe strongly in fundamental analysis as a starting point to valuing a
company. Emphasis is placed on visiting companies and 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. Our analysis of trends and
possible breaks with traditional patterns allows for the identification of
investments that may not be appropriately priced by the market due to changes
in legislation, technological developments, industry rationalization or other
structural shifts that have created potential opportunities that the market has
not yet discovered.

In choosing the stocks, we consider a number of factors, including:

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

 . valuation relative to other US and international companies and market
  averages;

 . the impact of currency on company earnings prospects;

 . merger and acquisition trends; and

 . trends related to the impact of the European currency, the euro, on the
  financial, marketing and distribution strategies of European companies.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
stock market events. We may invest up to 100% of the Fund's assets in US or
foreign government money market investments, or other 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 appreciation.
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                                       6



             A Detailed Look at the Global Equity Fund--Institutional Class

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

PRIOR PERFORMANCE OF A MODEL PORTFOLIO

The information provided here presents the performance of global portfolio
management ("GPM'), a model portfolio of securities. The information presented
herein is model performance and is not presented in accordance with the
Performance Presentation Standards ("PPS') of the Association for Investment
Management and Research ("AIMR'). The information presented herein is to be
considered solely as supplemental information for purposes of the AIMR PPS and
should be considered only in conjunction with the performance information of
one or more actual composites, including the Global Equity Fund's composite.
Information about the AIMR compliant composites can be obtained by calling the
Service Center at 1-800-730-1313.

Since 1993 the portfolio manager has reviewed GPM and has revised its
"holdings' as if it were actively managed. Our decision to establish the Fund
was supported by the results of this model strategy over the 1993-2000 period.
In managing the Fund, we will employ substantially the same investment
objectives, policies and strategies that we employed in managing GPM. However,
there will be some differences:

 . Investments in emerging markets are not currently part of GPM's core
  strategy. While also not a core strategy for the Fund they may make up
  between 0-10% of the Fund's assets.

 . GPM uses a top-down approach to determine US and non-US allocations if the
  allocations are determined prior to stock selection. The Fund will use a
  combination of top-down and bottom-up analysis where stock selection will be
  an important driver of the US and non-US allocations. While different
  approaches, we expect each to derive similar US/non-US allocation
  percentages.

 . The Fund is subject to certain legal, tax and other rules and regulations
  (eg, limits on the percentage of assets invested in securities of issuers in
  a single industry and requirements on distributing income to shareholders)
  that do not apply to GPM.

 . The continuous offering of the Fund's shares and the Fund's obligation to
  redeem its shares will likely cause the Fund to experience cash flows that
  may be different from those of GPM.

All of these factors may affect the performance of the Fund and cause its
performance to differ from that of GPM. Certain of
these factors may positively affect the Fund's performance while other factors
may adversely affect the Fund's performance.

Unlike a fund, a model does not incur management fees and other expenses and
costs associated with an actively managed portfolio. Accordingly, we have
adjusted the performance results of GPM to reflect an overall expense ratio of
1.15%, which is the same as the expected expense ratio of the Fund. Returns of
GPM are compared to the Morgan Stanley Capital International (MSCI) World
Index. Unlike GPM's performance, which we have adjusted for expected expenses,
the MSCI World Index does not reflect the deduction of fees and expenses. The
returns of both GPM and the MSCI World Index reflect the reinvestment of
dividends and distributions. The GPM Model Global Portfolio price returns are
converted into total returns by adding the MSCI World Index dividend yield. The
performance data represents the prior performance of GPM, not the prior
performance of the Fund, and should not be considered an indication of future
performance of the Fund.

 Year-by-Year Returns


                              MSCI World
  Year   GPM Total Returns Total Returns Difference

                                
  1994               3.56%         5.08%     (1.52%)
 ---------------------------------------------------
  1995              18.88%        20.72%     (1.84%)
 ---------------------------------------------------
  1996              19.35%        13.48%      5.87%
 ---------------------------------------------------
  1997              25.39%        15.76%      9.63%
 ---------------------------------------------------
  1998              30.44%        24.34%      6.10%
 ---------------------------------------------------
  1999              39.09%        24.93%     14.16%
 ---------------------------------------------------


 Performance for Periods Ended September 30, 2000



                                    Average Annual Returns
                                           Since Inception
                    1 Year 3 Years 5 Years  (July 31 1993)
                               
  GPM Total
   Returns          28.51% 19.03%  21.12%      19.75%
 ---------------------------------------------------------
  MSCI World
   Total Returns     8.16% 11.93%  14.62%      13.77%
 ---------------------------------------------------------
  Difference        20.35%  7.10%   6.50%       5.98%
 ---------------------------------------------------------


RISKS

Below we set forth some of the prominent risks associated with international
investing, as well as investing in general. Although we attempt to assess the
likelihood that these risks may actually occur and to limit them, we make no
guarantee that we will succeed.

Primary Risks

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.
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The MSCI World Index is a broad-based market index of foreign equity
securities.
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                                       7



A Detailed Look at the Global Equity Fund--Institutional Class


Stock Selection Risk. A risk that pervades all investing is the risk that the
securities an investor has selected will not perform to expectations. To
minimize this risk, we monitor each of the stocks in the Fund according to
three basic quantitative criteria. We subject a stock to intensive review if:

 . its rate of price appreciation begins to trail that of its national stock
  index;

 . the financial analysts who follow the stock reduce their estimates of the
  stock's future earnings; or

 . the stock's price approaches the downside target, which is adjusted to keep
  pace with changes in company, industry and market circumstances.

In our review, we seek to determine if the deteriorating performance accurately
reflects deteriorating prospects or if, in our view, it merely reflects
investor overreaction to temporary circumstances.

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 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, we analyze countries and regions to try to anticipate these
  risks.

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

 . Liquidity Risk. Stocks that trade infrequently 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 US market. This can make
  buying and selling certain shares more difficult and costly. 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. Some foreign governments regulate their exchanges less
  stringently, and the rights of shareholders may not be as firmly established.

In an effort to reduce these foreign stock market risks, the Fund diversifies
its investments, just as you may spread your investments among a range of
securities so that a setback in one need not overwhelm your entire strategy. In
this way, a reversal in one market or stock need not undermine the pursuit of
long-term capital appreciation.

Currency Risk. The Fund invests in foreign securities denominated in foreign
currencies. This creates the possibility that changes in foreign exchange rates
will affect the value of foreign securities or the US dollar amount of income
or gain received on these securities. We seek to minimize this risk through
Currency Management activities that limit Fund exposure by the use of hedging
strategies for currencies that are likely to decline.

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

Secondary Risks

Small Company Risk. Although the Fund generally invests in the shares of
larger, well-established companies, it may occasionally take advantage of
exceptional opportunities presented by smaller companies. Such opportunities
pose unique risks, which we take into account in considering an investment.
Small company stocks tend to experience steeper price fluctuations--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 additional risk. Industrywide reversals have had 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. When circumstances adversely change, it is harder to find a
buyer for a small company's shares.
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Currency Management is used 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 work and
they could cause losses to the Fund.
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                                       8



             A Detailed Look at the Global Equity Fund--Institutional Class


Pricing Risk. When price quotations for 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, the risk that our prices are higher or lower than the
prices that the securities might actually command if we sold them. If we
overestimate the value of the securities, you may end up paying too much when
you purchase Fund shares. If we underestimate their price, you may not receive
the full market value for your Fund shares when you sell.

Futures and Options Risk. Although not one of its principal investment
strategies, the Fund may invest in futures contracts, options and options on
futures contracts. These investments, when made, are generally for hedging
purposes. If the Fund invests in futures contracts, options 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, options and options on futures contracts used for non-hedging
purposes involve greater risks than stock investments.

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

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

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

 . adverse effects on the business or other 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 in the US for the asset
management activities of Deutsche Bank AG, Deutsche Fund Management, Inc.,
Deutsche Banc Alex. Brown, Inc., Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.
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Futures contracts, options and options on futures contracts are used as a low
cost method of gaining exposure to a particular securities market without
investing directly in those securities.

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. ("DeAM, Inc.') with headquarters at 130 Liberty Street,
New York, New York, acts as the investment adviser for the Fund. As investment
adviser, DeAM, Inc. makes the Fund's investment decisions. It buys and sells
securities for the Fund and conducts the research that leads to 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 will receive 0.60% of the Fund's average daily
net assets for its services in a fiscal year. The investment adviser may
reimburse a portion of its fee during the period.

DeAM, Inc. provides a full range of international investment advisory services
to institutional and retail clients, and as of November 30, 2000, managed
approximately $16 billion in assets. It serves as investment adviser to eleven
other investment companies and as sub-adviser to five other investment
companies.

DeAM, Inc. is an indirect wholly owned subsidiary of Deutsche Bank AG. Deutsche
Bank AG is a major global banking institution that is engaged in a wide range
of financial services, including investment management, mutual funds, retail
and commercial banking, investment banking and insurance.

Portfolio Managers

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

Robert Reiner, Managing Director of Deutsche Asset Management and Lead Manager
of the Fund.

 . Joined Bankers Trust in 1994.

 . Specializes in Japanese and European stock and market analysis.

 . 19 years of investment industry experience, including nine years with
  Standard & Poor's.

 . Degrees from the University of Southern California and Harvard University.

Michael Levy, Managing Director of Deutsche Asset Management and Co-Manager of
the Fund.

 . Joined the investment adviser in 1993.

 . Head of international equities, New York, responsible for overseeing the
  management of more than $7 billion of international and global equities.
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                                       9



A Detailed Look at the Global Equity Fund--Institutional Class

 . 30 years of business experience, 19 as an investment professional.

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

Clare Brody, CFA, Director of Deutsche Asset Management and Co-Manager of the
Fund.

 . Joined the investment adviser in 1993.

 . Nine years of investment industry experience.

 . Global telecommunications services/equipment and pulp and paper analyst.

Vijay Kumar Chopra, CFA, Director of Deutsche Asset Management and Co-Manager
of the Fund.

 . Joined the investment adviser in 1994.

 . Quantitative portfolio manager focusing on valuation models and top-down
  analysis.

 . Ten years of investment industry experience.

 . Prior experience as portfolio manager at State Street Global Advisors and
  senior research analyst at Frank Russell Company.

 . BTech from Indian Institute of Technology; MBA and PhD in finance from
  Vanderbilt University.

Julie Wang, Director of Deutsche Asset Management and Co-Manager of the Fund.

 . Joined the investment adviser in 1994.

 . 14 years of investment industry experience.

 . Generalist portfolio manager with prior experience in Asia-Pacific, emerging
  markets and U.S. investment analysis.

 . BA in economics from Yale University, MBA from The Wharton School, University
  of Pennsylvania.

Organizational Structure. The Fund is organized as a series of an open-end
investment company, which is organized as a Massachusetts business trust. The
Fund currently invests its assets directly in securities. In the future, upon
approval by a majority vote of the Board of Trustees, the Fund may be
reorganized into a master-feeder structure. The Fund would then become a
"feeder fund' investing all of its assets in a corresponding "Master
Portfolio.' Should the Trustees approve a reorganization, the Fund and the
Master Portfolio would have the same investment objective.

Other Services. Bankers Trust provides administrative services for the Fund. In
addition, either Bankers Trust 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.

Service agents include brokers, financial advisors or any other bank, broker-
dealer or other institution that has a subshareholder servicing agreement with
the Fund. Service agents may charge additional fees to investors for those
services not otherwise included in their subdistribution or servicing
agreements. These services include cash management or special trust or
retirement-investment reporting.

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 New York Stock Exchange is open for business.

The formula calls for deducting all of the Fund's liabilities from the total
value of its assets--the market value of the securities it holds, plus its cash
reserves--and dividing the result by the number of shares outstanding. Prices
for securities that trade on foreign exchanges can change significantly on days
when the New York Stock Exchange is closed and you cannot buy or sell Fund
shares. Such price changes in the securities the Fund owns may ultimately
affect the price of Fund shares when the New York Stock Exchange re-opens.

The Fund uses a forward pricing procedure. Therefore, the price at which you
buy or sell shares is based on the next calculation of the NAV after the order
is received by the Fund or your service agent, provided that your service agent
forwards your order to the Fund in a timely manner.
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The New York Stock Exchange is open every week, Monday through Friday, except
when the following holidays are celebrated: New Year's Day, Martin Luther King,
Jr. Day (the third Monday in January), Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), Independence
Day, Labor Day (the first Monday in September), Thanksgiving Day (the fourth
Thursday in November) and Christmas Day.
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                                       10



             A Detailed Look at the Global Equity Fund--Institutional Class

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their current worth in the judgment of the Board of
Trustees. You can find the Fund's daily share price in the mutual fund listings
of most major newspapers.

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 substantially all of that taxable
income and capital gain at least annually. The Fund also may pay dividends and
capital gains distributions at other times if necessary for the Fund to avoid
federal income or excise tax. If you invest in a Fund close to the time that
the Fund makes a capital gains distribution, generally you will pay taxes on
the amount of the distribution whether you reinvest the distribution or receive
it as cash. We automatically reinvest all dividends and any capital gains,
unless you elect to receive your distributions in cash.

TAX CONSIDERATIONS

The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based on the amount of capital gains distributions and
dividends paid out by the Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:



  Transaction                 Tax Status
                           
  Income dividends            Ordinary income
 --------------------------------------------
  Short-term capital gains
  distributions               Ordinary income
 --------------------------------------------
  Long-term capital gains
  distributions               Capital gains
 --------------------------------------------

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



  Transaction          Tax Status
                    
  Your sale of shares  Capital gains or
  owned more than one  losses
  year
 ---------------------------------------
  Your sale of shares  Ordinary income
  owned for one year
  or less
 ---------------------------------------
  Long-term capital    Gains treated as
  gains distributions  ordinary income;
                       losses subject to
                       special rules
 ---------------------------------------


You must provide your social security number or other taxpayer identification
number to the Fund along with the certifications required by the Internal
Revenue Service when you open an account. If you do not or if the Fund is
otherwise legally required to do so, it will withhold 31% "backup withholding'
tax from your dividends, distributions, sales proceeds and any other payments
to you.

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

Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult with 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            P.O. Box 219210
                   Kansas City, MO 64121-9210
By overnight mail  210 West 10th Street, 8th
                   floor
                   Kansas City, MO 64105-1716



Our representatives are available to assist you personally Monday through
Friday, 9:00 am to 7:00 pm, 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



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

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

                                       11



A Detailed Look at the Global Equity Fund--Institutional Class

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 Global Equity--
         Institutional Class--1733 to the
         Service Center. The addresses are
         shown under "Contacting the Mutual
         Fund Service Center of Deutsche
         Asset Management.'
By wire  Call the Service Center to set up
         a wire account.



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

Two Ways to Buy and Sell Shares in Your Account

MAIL:

Buying: Send your check, payable to the Fund you have selected, to the Service
Center. The addresses are shown 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 cash, starter checks or third-party checks. If you are
investing in more than one fund, make your check payable to "Deutsche Asset
Management (Mutual 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 invested in your account to keep it open. Unless exchanging into
another Deutsche Asset Management mutual 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 pm Eastern
time the next business day.

          
Routing No:  021001033
Attn:        Deutsche Asset Management/
             Mutual Funds
DDA No:      00-226-296
FBO:         (Account name)
             (Account number)
Credit:      Global Equity--
             Institutional Class--1733



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 pm 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 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 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 pm 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 may 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.

 . We accept payment for shares only in US dollars by check, bank or Federal
  Funds wire transfer, or by electronic bank transfer. Please note that we
  cannot accept cash, starter checks or third-party checks.

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

                                       12



             A Detailed Look at the Global Equity Fund--Institutional Class

 . 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 US 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.

 . You may have difficulty contacting the Service Center by telephone during
  times of market volatility or disruption in telephone service. On New York
  Stock Exchange holidays or on days when the exchange closes early, the
  Service Center will adjust its hours accordingly. If you are unable to reach
  the Service Center by telephone, you should make your request by mail.

 . We reserve the right to reject purchases of Fund shares (including exchanges)
  for any reason.

 . Your purchase order may not be accepted if the sale of Fund shares has been
  suspended or if the Fund determines that your purchase would be detrimental
  to the interests of its shareholders. The Fund specifically reserves the
  right to refuse your order if it is part of multiple purchase or exchange
  requests that the Fund, in its sole discretion, deems to involve excessive
  trading or to be part of a market timing strategy. In making its
  determination the Fund may consider orders you have placed individually as
  well as orders placed in combination with a group of shareholders or commonly
  controlled accounts and orders placed by your dealer. For these purposes, the
  Fund may consider, among other factors, your trading history in this or any
  affiliated funds, the funds involved, the amount of your investment and your
  background and the background of any other investors or dealers involved.

 . 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 of
certain other Deutsche Asset Management mutual funds up to four times a
calendar year. 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. You will receive a written confirmation of each transaction from the
Service Center or your service agent.

Please note the following conditions:

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

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

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

 . Your exchange must meet the minimum investment amount for the class of shares
  being purchased.

FINANCIAL HIGHLIGHTS

The Fund does not have a full calendar year of annual operating performance to
report.
- --------------------------------------------------------------------------------

                                       13


                       This page intentionally left blank




Additional information about the Fund's investments and performance will be
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 December 29, 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, or if you have questions about
investing in the Fund, write to us at:

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

You can find reports and other information about the Fund on the EDGAR
Database on the SEC's website (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by electronic
request at publicinfo@sec.gov 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 202-942-8090.


Global Equity--Institutional Class                              CUSIP #055922587
BT Investment Funds                                             1733PRO (02/01)
                                                                811-4760

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


                                             STATEMENT OF ADDITIONAL INFORMATION

                                                               December 29, 2000

                                                    As Revised February 28, 2001


BT Investment Funds

Global Equity Fund - Institutional Class

BT Investment Funds (the "Trust") is an open-end management investment company
(mutual fund) which consists of a number of separate investment funds.  Global
Equity Fund (the "Fund") is described herein.

Shares of the Fund are sold by ICC Distributors, Inc. ("ICC Distributors"), the
Trust's Distributor, to clients and customers (including affiliates and
correspondents) of Deutsche Asset Management, Inc. ("DeAM, Inc."), the Fund's
investment adviser ("Adviser"), and to clients and customers of other
organizations.  As appropriate, references to the Adviser herein apply to any
sub-adviser which may have day-to-day investment management responsibility for
the Fund.

The Trust's Prospectus for the Fund is dated December 29, 2000, as revised
February 28, 2001. The Prospectus provides the basic information investors
should know before investing. This Statement of Additional Information ("SAI"),
which is not a Prospectus, is intended to provide additional information
regarding the activities and operations of the Trust and should be read in
conjunction with the Fund's Prospectus. You may request a copy of a Prospectus
or a paper copy of this SAI, if you have received it electronically, free of
charge by calling the Trust at 1-800-730-1313 or by contacting any Service Agent
(which is any broker, financial advisor, bank, dealer or other institution or
financial intermediary that has a sub-shareholder servicing agreement with the
Fund's transfer agent). This SAI is not an offer of the Fund for any investor
who has not received a Prospectus. Capitalized terms not otherwise defined in
this SAI have the meanings accorded to them in the Fund's Prospectus.

                        DEUTSCHE ASSET MANAGEMENT, INC.
                        Investment Adviser of the Fund

                            ICC DISTRIBUTORS, INC.
                                  Distributor
                              Two Portland Square
                             Portland, Maine 04101


                               TABLE OF CONTENTS

                                                                         
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS..........................   3
 Investment Objectives....................................................   3
 Investment Policies......................................................   3
 Futures Contracts and Options on Futures Contracts.......................  17
 Additional Risk Factors..................................................  21
 Investment Restrictions..................................................  25
 Fund Transactions and Brokerage Commissions..............................  27
PERFORMANCE INFORMATION...................................................  29
 Standard Performance Information.........................................  29
 Comparison of Fund Performance...........................................  30
 Economic and Market Information..........................................  31
VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN-KIND................  31
 Valuation of Securities..................................................  31
 Purchases of Shares......................................................  32
 Redemption of Shares.....................................................  33
 Redemptions and Purchases In-Kind........................................  34
 Trading in Foreign Securities............................................  35
MANAGEMENT OF THE TRUST...................................................  35
 Trustees of the Trust....................................................  36
 Officers of the Trusts...................................................  37
 Trustee Compensation Table...............................................  38
 Code of Ethics...........................................................  38
 Investment Adviser.......................................................  39
 Administrator............................................................  40
 Distributor..............................................................  40
 Service Agent............................................................  40
 Custodian and Transfer Agent.............................................  41
 Banking Regulatory Matters...............................................  41
 Counsel and Independent Auditors.........................................  42
ORGANIZATION OF THE TRUST.................................................  42
TAXATION..................................................................  43
 Dividends and Distributions..............................................  43
 Taxation of the Fund.....................................................  44
 Foreign Securities.......................................................  44
 Sale of Shares...........................................................  45
 Foreign Withholding Taxes................................................  45
 Backup Withholding.......................................................  46
 Foreign Shareholders.....................................................  46
 Other Taxation...........................................................  46
FINANCIAL STATEMENTS......................................................  46
APPENDIX..................................................................  47



                                       2


               INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

                             Investment Objectives


Global Equity's investment objective is long-term capital appreciation. Under
normal circumstances, the Fund invests at least 65% of its total assets in the
stocks and other securities with equity characteristics of companies based
primarily in developed countries, both inside and outside the United States.
There can, of course, be no assurance that the Fund will achieve its investment
objective.

                              Investment Policies

The Fund seeks to achieve its investment objective by investing primarily in
companies in developed countries, both inside and outside the United States. The
Fund invests for capital appreciation, not income; any dividend or interest
income is incidental to the pursuit of that goal. While the adviser gives
priority to capital appreciation, the adviser cannot offer any assurance of
achieving this goal. The Fund's goal is not a fundamental policy. The Fund must
notify shareholders before changing it, but do not require their approval to do
so. In managing the Fund, the Adviser looks for global investments that may not
be appropriately priced by the market. In selecting investments, the adviser
attempts 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 may  invest in emerging market securities and securities of issuers in
underdeveloped countries. Investments in these countries will be based on what
the Adviser believes to be an acceptable degree of risk in anticipation of
superior returns.

The Fund's investments will generally be diversified among several geographic
regions and countries. Criteria for determining the appropriate distribution of
investments among various countries and regions include the prospects for
relative growth among  countries, expected levels of inflation, government
policies influencing business conditions, the outlook for currency relationships
and the range of alternative opportunities available to  investors.

In countries and regions with well-developed capital markets where more
information is available, the Adviser will seek to select individual investments
for the Fund. Criteria for selection of individual securities include the
issuer's competitive position, prospects for growth, managerial strength,
earnings quality, underlying asset value, relative market value and overall
marketability. The Fund may invest in securities of companies having various
levels of net worth, including smaller companies whose securities may be more
volatile than securities offered by larger companies with higher levels of net
worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Fund may choose to
invest only at the market level.

Here, the Fund may seek to achieve country exposure through use of options or
futures based on

                                       3


an established local index. Similarly, country exposure may also be achieved
through investments in other registered investment companies.

The remainder of the Fund's assets will be invested in dollar and non-dollar
denominated short-term instruments. These investments are subject to the
conditions described in "Short-Term Instruments" below.

Equity Investments. The Fund invests primarily in common stocks and other
securities with equity characteristics. For purposes of the Fund's policy of
investing at least 65% of the value of its total assets in stocks and other
securities with equity characteristics. "Equity characteristics" are defined as
common stock, preferred stock, trust or limited partnership interests, rights
and warrants, and convertible securities (consisting of debt securities or
preferred stock that may be converted into common stock or that carry the right
to purchase common stock). The Fund invests in securities listed on foreign or
domestic securities exchanges and securities traded in foreign or domestic over-
the-counter markets, in addition to investment in restricted or unlisted
securities.

Foreign Securities. The Fund will, under normal market conditions, invest a
significant portion of its assets in foreign securities.  Although the Fund
intends to invest primarily in securities of established companies based in
developed countries, investors should realize that the value of the Fund's
investments may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Fund's operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. In general, less information is publicly available with respect to
foreign issuers than is available with respect to U.S. companies. Most foreign
companies are also not subject to the uniform accounting and financial reporting
requirements applicable to issuers in the United States. Any foreign investments
made by the Fund must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Fund holds various foreign currencies
from time to time, the value of the net assets of the Fund as measured in U.S.
dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the Fund's currency exchange transactions will be conducted on a spot
(i.e., cash) basis at the spot rate prevailing in the currency exchange market.
The cost of the Fund's currency exchange transactions will generally be the
difference between the bid and offer spot rate of the currency being purchased
or sold. In order to protect against uncertainty in the level of future foreign
currency exchange, the Fund is authorized to enter into certain foreign currency
exchange transactions.

                                       4


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

Warrants. Warrants are instruments which entitle the holder to buy underlying
equity securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. In addition, changes
in the value of a warrant do not necessarily correspond to changes in the value
of its underlying securities.

ADRs, GDRs and EDRs. American Depositary Receipts ("ADRs"), Global Depositary
Receipts ("GDRs"), and European Depositary Receipts ("EDRs") are certificates
evidencing ownership of shares of a foreign-based issuer held in trust by a bank
or similar financial institution. Designed for use in U.S., international and
European securities markets, respectively, ADRs, GDRs and EDRs are alternatives
to the purchase of the underlying securities in their national markets and
currencies. ADRs, GDRs and EDRs are subject to the same risks as the foreign
securities to which they relate.

Certificates of Deposit and Bankers' Acceptances. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.

Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the

                                       5


lender may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix.

Short-Term Instruments. The Fund intends to stay invested in equity securities
to the extent practical in light of its objective and long-term investment
perspective. However, up to 35% of the Fund's assets may be invested in short-
term instruments with remaining maturities of 397 days or less or in money
market mutual funds: to meet anticipated redemptions and expenses; for day-to-
day operating purposes; and when the Fund experiences large cash inflows through
the sale of securities and desirable equity securities that are consistent with
the Fund's investment objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments for a limited time
pending availability of such equity securities. In addition, when in the
Adviser's opinion, it is advisable to adopt a temporary defensive position
because of unusual and adverse conditions affecting the equity markets, up to
100% of the Fund's assets may be invested in such short-term instruments. Short-
term instruments consist of U.S. and non U.S.: (i) short-term obligations of
sovereign governments, their agencies, instrumentalities, authorities or
political subdivisions; (ii) other short-term debt securities rated AA or higher
by Standard & Poor's Ratings Group ("S&P") or Aa or higher by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, are of comparable quality in the
opinion of the Adviser; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. At the time the Fund invests in commercial paper,
bank obligations or repurchase agreements, the issuer or the issuer's parent
must have outstanding debt rated AA or higher by S&P or Aa or higher by Moody's
or outstanding commercial paper or bank obligations rated A-1 by S&P or Prime-1
by Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Adviser. These instruments may be
denominated in U.S. dollars or in foreign currencies.

Derivatives. The Fund may invest in various instruments that are commonly known
as "derivatives." Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset or market
index. Some derivatives such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There is also a range of risks associated with those uses. Futures and
options are commonly used for traditional hedging purposes to attempt to protect
the Fund from exposure to changing interest rates, securities prices or currency
exchange rates and for cash management purposes as a low cost method of gaining
exposure to a particular securities market without investing directly in those
securities. However, some derivatives are used for leverage, which tends to
magnify the effects of an instrument's price changes as market conditions
change. Leverage involves the use of a small amount of money to control a large
amount of financial assets and can, in some circumstances, lead to significant
losses. DeAM, Inc., as the Fund's Adviser will use derivatives only in
circumstances where the Adviser believes they offer the most economic means of
improving the risk/reward profile of the Fund. Derivatives will not be used to
increase portfolio risk above the level that could be achieved using only
traditional investment securities or to acquire exposure to changes in the value
of assets or indices that by

                                       6


themselves would not be purchased for the Fund. The use of derivatives for non-
hedging purposes may be considered speculative.

Convertible Securities and Preferred Stock.  Subject to its investment policies,
the Fund may invest in convertible securities, which may include corporate notes
or preferred stock but are ordinarily long-term debt obligations of the issuer
convertible at a stated exchange rate into common stock of the issuer.  As with
all fixed income securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, to increase as interest
rates decline.  Convertible securities generally offer lower interest or
dividend yields than non-convertible securities of similar quality.  However,
when the market price of the common stock underlying a convertible security
exceeds the conversion price, the price of the convertible security tends to
reflect the value of the underlying common stock.  As the market price of the
underlying common stock declines, the convertible security tends to trade
increasingly on a yield basis, and thus may not depreciate to the same extent as
the underlying common stock.   Convertible securities generally rank senior to
common stocks in an issuer's capital structure and are consequently of higher
quality and entail less risk than the issuer's common stock.  However, the
extent to which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income security.
In evaluating a convertible security, the Adviser will give primary emphasis to
the attractiveness of the underlying common stock.  The convertible debt
securities in which the Fund may invest are subject to the same rating criteria
as the Fund's investments in non-convertible securities.

The Fund, subject to its investment objectives, may purchase preferred stock.
Preferred stocks are equity securities, but possess certain attributes of debt
securities and are generally considered fixed income securities.  Holders of
preferred stocks normally have the right to receive dividends at a fixed rate
when and as declared by the issuer's board of directors, but do not participate
in other amounts available for distribution by the issuing corporation.
Dividends on the preferred stock may be cumulative, and in such cases all
cumulative dividends usually must be paid prior to dividend payments to common
stockholders.  Because of this preference, preferred stocks generally entail
less risk than common stocks.  Upon liquidation, preferred stocks are entitled
to a specified liquidation preference, which is generally the same as the par or
stated value, and are senior in right of payment to common stocks.  However,
preferred stocks are equity securities in that they do not represent a liability
of the issuer and therefore do not offer as great a degree of protection of
capital or assurance of continued income as investments in corporate debt
securities.  In addition, preferred stocks are subordinated in right of payment
to all debt obligations and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the same issuer.

Illiquid Securities. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a remaining maturity of longer than seven days. Securities which have not
been registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of

                                       7


the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities. In recent years, however, a large
institutional market has developed for certain securities that are not
registered under the 1933 Act, including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or legal restrictions
on resale of such investments to the general public or to certain institutions
may not be indicative of their liquidity.

The Securities and Exchange Commission (the "SEC") has adopted Rule 144A, which
allows a broader institutional trading market for securities otherwise subject
to restriction on their resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the 1933 Act of resales of
certain securities to qualified institutional buyers. The Adviser anticipates
that the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.

The Fund may purchase securities in the United States that are not registered
for sale under federal securities laws but which can be resold to institutions
under the SEC Rule 144A. Provided that a dealer or institutional trading market
in such securities exists, these restricted securities are treated as exempt
from the Fund's 15% limit on illiquid securities.

The Adviser will monitor the liquidity of Rule 144A securities in the Fund's
holdings under the supervision of the Fund's Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security and (4) the nature of
the security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer). If institutional trading in restricted securities were to decline,
the liquidity of the Fund could be adversely affected.

When-Issued and Delayed Delivery Securities. The Fund may purchase securities on
a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take place as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Fund until
settlement takes place. The Fund identifies, as part of a segregated account,
cash or liquid securities in an amount at least equal to these commitments. When
entering into a when-issued or delayed delivery transaction, the Fund will rely
on the other party to consummate the transaction; if the other party fails to do
so, the Fund may be disadvantaged.

                                       8


Lending of Securities. The Fund has the authority to lend up to 30% of the total
value of its portfolio securities to brokers, dealers and other financial
organizations. These loans must be secured continuously by cash or securities
issued or guaranteed by the United States government, its agencies or
instrumentalities or by a letter of credit at least equal to the market value of
the securities loaned plus accrued income. The Fund will not lend securities to
the Adviser, ICC Distributors or their affiliates. By lending its securities,
the Fund can increase its income by continuing to receive interest on the loaned
securities as well as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the borrower when
U.S. government obligations are used as collateral. During the term of the loan,
the Fund continues to bear the risk of fluctuations in the price of the loaned
securities. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. The Fund will
adhere to the following conditions whenever its securities are loaned: (i) the
Fund must receive at least 100 % cash collateral or equivalent securities from
the borrower; (ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest rises above the level
of the collateral; (iii) the Fund must be able to terminate the loan at any
time; (iv) the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Fund may pay only reasonable custodian fees in
connection with the loan; and (vi) voting rights on the loaned securities may
pass to the borrower; provided, however, that if a material event adversely
affecting the investment occurs, the Board of Trustees must terminate the loan
and regain the right to vote the securities. Cash collateral may be invested in
a money market fund managed by Bankers Trust (or its affiliates) and Bankers
Trust may serve as the Fund's lending agent and may share in revenue received
from securities lending transactions as compensation for this service.

U.S. Government Securities.  The Fund may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. Government, its
agencies, instrumentalities or sponsored enterprises ("U.S. Government
securities").  Some U.S. Government securities, such as U.S. Treasury bills,
notes and bonds, are supported by the full faith and credit of the United
States.  Others, such as obligations issued or guaranteed by U.S. Government
agencies or instrumentalities are supported either by (i) the full faith and
credit of the U.S. Government (such as securities of the Small Business
Administration), (ii) the right of the issuer to borrow from the U.S. Treasury
(such as securities of the Federal Home Loan Banks), (iii) the discretionary
authority of the U.S. Government to purchase the agency's obligations (such as
securities of the Federal National Mortgage Association ("FNMA")), or (iv) only
the credit of the issuer.  No assurance can be given that the U.S. Government
will provide financial support to U.S. Government agencies or instrumentalities
in the future.

The Fund may also invest in separately traded principal and interest components
of U.S. Government securities if such components are traded independently under
the Separate Trading of Registered Interest and Principal of Securities program
("STRIPS") or any similar program sponsored by the U.S. Government.

Repurchase Agreements. In a repurchase agreement the Fund buys a security and

                                       9


simultaneously agrees to sell it back at a higher price at a future date. In the
event of the bankruptcy of the other party to either a repurchase agreement or a
securities loan, the Fund could experience delays in recovering either its cash
or the securities it lent. To the extent that, in the meantime, the value of the
securities repurchased or lent had changed, the Fund could experience a loss. In
all cases, the Adviser must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is considered a collateralized
loan under the Investment Company Act of 1940, as amended ("1940 Act").

Investment Companies. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by the Fund may be
made through investment in other investment companies that in turn are
authorized to invest in the securities of such countries. Investment in other
investment companies may also be made for other purposes, such as noted herein
under "Short-Term Instruments", and are limited in amount by the 1940 Act,
(unless permitted to exceed these limitations by an exemptive order of the SEC,
will involve the indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies and may result in a
duplication of fees and expenses.

Options on Securities. The Fund may write (sell) covered call and put options to
a limited extent on its portfolio securities ("covered options") in an attempt
to increase income. However, the Fund may forgo the benefits of appreciation on
securities sold or may pay more than the market price on securities acquired
pursuant to call and put options written by the Fund.

When the Fund writes a covered call option, it gives the purchaser of the option
the right to buy the security at the price specified in the option (the
"exercise price") by exercising the option at any time during the option period.
If the option expires unexercised, the Fund will realize income in an amount
equal to the premium received for writing the option. If the option is
exercised, a decision over which the Fund has no control, the Fund must sell the
security to the option holder at the exercise price. By writing a covered call
option, the Fund forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an increase
in the market value of the underlying security above the exercise price. In
addition the Fund may continue to hold a stock which might otherwise have been
sold to protect against depreciation in the market price of the stock.

A put option sold by the Fund is covered when, among other things, cash or
securities acceptable to the broker are placed in a segregated account to
fulfill the obligations undertaken. When the Fund writes a covered put option,
it gives the purchaser of the option the right to sell the underlying security
to the Fund at the specified exercise price at any time during the option
period. If the option expires unexercised, the Fund will realize income in the
amount of the premium received for writing the option. If the put option is
exercised, a decision over which the Fund has no control, the Fund must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Fund, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Fund will only write put options involving
securities for which a determination is made at the time the option is written
that the Fund wishes to acquire the securities at the exercise price.

                                       10


The Fund may terminate its obligation as the writer of a call or put option by
purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." The Fund will realize a profit or loss from a closing purchase
transaction if the amount paid to purchase an option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Fund, may make a "closing sale
transaction" which involves liquidating the Fund's position by selling the
option previously purchased. Where the Fund cannot effect a closing purchase
transaction, it may be forced to incur brokerage commissions or dealer spreads
in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.

When the Fund writes an option, an amount equal to the net premium received by
the Fund is included in the liability section of the Fund's Statement of Assets
and Liabilities as a deferred credit. The amount of the deferred credit will be
subsequently marked to market to reflect the current market value of the option
written. The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the closing bid and asked price. If
an option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, the Fund will realize a gain (or loss if the cost
of a closing purchase transaction exceeds the premium received when the option
was sold), and the deferred credit related to such option will be eliminated. If
a call option is exercised, the Fund will realize a gain or loss from the sale
of the underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Fund.

The Fund may purchase call and put options on any securities in which it may
invest. The Fund would normally purchase a call option in anticipation of an
increase in the market value of such securities. The purchase of a call option
would entitle the Fund, in exchange for the premium paid, to purchase a security
at a specified price during the option period. The Fund would ordinarily have a
gain if the value of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if the value of the
securities remained at or below the exercise price during the option period.

The Fund would normally purchase put options in anticipation of a decline in the
market value of securities in its portfolio ("protective puts") or securities of
the type in which it is permitted to invest. The purchase of a put option would
entitle the Fund, in exchange for the premium paid, to sell a security, which
may or may not be held in the Fund's holdings, at a specified price during the
option period. The purchase of protective puts is designed merely to offset or
hedge against a decline in the market value of the Fund's holdings. Put options
also may be purchased by the Fund for the purpose of affirmatively benefiting
from a decline in the price of securities, which the Fund does not own. The Fund
would ordinarily recognize a gain if the value of the securities decreased below
the exercise price sufficiently to cover the premium and would recognize a loss
if the value of the securities remained at or above the exercise price. Gains
and losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value

                                       11


of underlying portfolio securities.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

The Fund may engage in over-the-counter options transactions with broker-dealers
who make markets in these options. The ability to terminate over-the-counter
option positions is more limited than with exchange-traded option positions
because the predominant market is the issuing broker rather than an exchange,
and may involve the risk that broker-dealers participating in such transactions
will not fulfill their obligations. To reduce this risk, the Fund will purchase
such options only from broker-dealers who are primary government securities
dealers recognized by the Federal Reserve Bank of New York and who agree to (and
are expected to be capable of) entering into closing transactions, although
there can be no guarantee that any such option will be liquidated at a favorable
price prior to expiration. The Adviser will monitor the creditworthiness of
dealers with which the Fund enters into such options transactions under the
general supervision of the Fund's Trustees. The Fund intends to treat OTC
Options purchased and the assets used to "cover" OTC Options written as not
readily marketable and therefore subject to the limitations described in
"Investment Restrictions." Unless the Trustees conclude otherwise, the Fund
intends to treat OTC options as not readily marketable and therefore subject to
the Fund's 15% limitation on investment in illiquid securities.

Options on Securities Indices. In addition to options on securities, the Fund
may also purchase and write (sell) call and put options on securities indices.
Such options give the holder the right to receive a cash settlement during the
term of the option based upon the difference between the exercise price and the
value of the index. Such options will be used for the purposes described above
under "Options on Securities."

The Fund may, to the extent allowed by Federal and state securities laws, invest
in securities indices instead of investing directly in individual foreign
securities.

Options on securities indices entail risks in addition to the risks of options
on securities. The absence of a liquid secondary market to close out options
positions on securities indices is more likely to occur, although the Fund
generally will only purchase or write such an option if the Adviser believes the
option can be closed out.

Use of options on securities indices also entails the risk that trading in such
options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not purchase such options unless the Adviser
believes the market is sufficiently developed such that the risk of trading in
such options is no greater than the risk of trading in options on securities.

Price movements in the Fund's holdings may not correlate precisely with
movements in the level

                                       12


of an index and, therefore, the use of options on indices cannot serve as a
complete hedge. Because options on securities indices require settlement in
cash, the Adviser may be forced to liquidate portfolio securities to meet
settlement obligations.

Options on Foreign Securities Indices. The Fund may purchase and write put and
call options on foreign stock indices listed on domestic and foreign stock
exchanges. The Fund may also purchase and write OTC Options on foreign stock
indices. These OTC Options would be subject to the same liquidity and credit
risks noted above with respect to OTC Options on foreign currencies. A stock
index fluctuates with changes in the market values of the stocks included in the
index.

OTC Options are purchased from or sold to securities dealers, financial
institutions or other parties (collectively referred to as "Counterparties" and
individually referred to as a "Counterparty") through direct bilateral agreement
with the Counterparty. In contrast to exchange listed options, which generally
have standardized terms and performance mechanics, all of the terms of an OTC
Option, including such terms as method of settlement, term, exercise price,
premium, guaranties and security, are set by negotiation of the parties.

Unless the parties provide for it, no central clearing or guaranty function is
involved in an OTC Option. As a result, if a Counterparty fails to make or take
delivery of the security, currency or other instrument underlying an OTC Option
it has entered into with the Fund or fails to make a cash settlement payment due
in accordance with the terms of that option, the Fund will lose any premium it
paid for the option as well as any anticipated benefit of the transaction. Thus,
the Adviser must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to determine the
likelihood that the terms of the OTC Option will be met.

Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars or
a foreign currency, as the case may be, times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock index options prior
to expiration by entering into a closing transaction on an exchange or the
option may expire unexercised.

To the extent permitted by U.S. federal or state securities laws, the Fund may
invest in options on foreign stock indices in lieu of direct investment in
foreign securities. The Fund may also use foreign stock index options for
hedging purposes.

                                       13


Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will realize
a gain or loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular stock. Accordingly, successful use by the Fund of
options on stock indices will be subject to the Adviser's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.

Currency Exchange Transactions. Because the Fund buys and sells securities
denominated in currencies other than the U.S. dollar and receives interest,
dividends and sale proceeds in currencies other than the U.S. dollar, the Fund
from time to time may enter into currency exchange transactions to convert to
and from different foreign currencies and to convert foreign currencies to and
from the U.S. dollar. The Fund either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or uses forward contracts to purchase or sell foreign currencies.

Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation by the Fund to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract. Forward
foreign currency exchange contracts establish an exchange rate at a future date.
These contracts are transferable in the interbank market conducted directly
between currency traders (usually large commercial banks and brokerages) and
their customers. A forward currency exchange contract may not have a deposit
requirement and may be traded at a net price without commission. The Fund
maintains with its custodian a segregated account of cash or liquid securities
in an amount at least equal to its obligations under each forward foreign
currency exchange contract. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the Fund's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

The Fund may enter into currency hedging transactions in an attempt to protect
against changes in currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in currency exchange rates
that would adversely affect the Fund position or an anticipated investment
position. Since consideration of the prospect for currency parities will be
incorporated into the Adviser's long-term investment decisions, the Fund will
not routinely enter into currency hedging transactions with respect to security
transactions; however, the Adviser believes that it is important to have the
flexibility to enter into currency hedging transactions when it determines that
the transactions would be in the Fund's best interest. Although these
transactions tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of the hedged currency increase. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward contract
is entered into and the date it

                                       14


matures. The projection of currency market movements is extremely difficult, and
the successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the Commodity Futures
Trading Commission ("CFTC,") the CFTC may in the future assert authority to
regulate forward contracts. In such event the Fund's ability to utilize forward
contracts may be restricted. Forward contracts may reduce the potential gain
from a positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such contracts.
The use of foreign currency forward contracts may not eliminate fluctuations in
the underlying U.S. dollar equivalent value of the prices of or rates of return
on the Fund's foreign currency denominated portfolio securities and the use of
such techniques will subject the Fund to certain risks.

The matching of the increase in value of a forward contract and the decline in
the U.S. dollar equivalent value of the foreign currency denominated asset that
is the subject of the hedge generally will not be precise. In addition, the Fund
may not always be able to enter into foreign currency forward contracts at
attractive prices and this will limit the Fund's ability to use such contracts
to hedge or cross-hedge its assets. Also, with regard to the Fund's use of
cross-hedges, there can be no assurance that historical correlations between the
movement of certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time a poor correlation may exist between movements in
the exchange rates of the foreign currencies underlying the Fund's cross-hedges
and the movements in the exchange rates of the foreign currencies in which the
Fund's assets that are the subject of such cross-hedges are denominated.

Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in which
futures contracts on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.

The purchase of an option on foreign currency may be used to hedge against
fluctuations in

                                       15


exchange rates although, in the event of exchange rate movements adverse to the
Fund's position, it may forfeit the entire amount of the premium plus related
transaction costs. In addition, the Fund may purchase call options on a foreign
currency when the Adviser anticipates that the currency will appreciate in
value.

The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, where the Fund anticipates a decline in the dollar value
of foreign currency denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call option
on the relevant currency. If the expected decline occurs, the options will most
likely not be exercised, and the diminution in value of portfolio securities
will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, the Fund could write a
put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a partial
hedge up to the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on foreign currencies, the Fund also may be required to forego all or a portion
of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

The Fund may write covered call options on foreign currencies. A call option
written on a foreign currency by the Fund is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by its Custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if the Fund has a call on the same foreign currency
and in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or liquid securities in a
segregated account with its custodian.

The Fund also may write call options on foreign currencies that are not covered
for cross-hedging purposes. A call option on a foreign currency is for cross-
hedging purposes if it is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option due to an adverse change in the exchange rate. In such circumstances, the
Fund collateralizes the option by maintaining in a segregated account with its
custodian, cash or liquid securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked to market daily.

There is no assurance that a liquid secondary market will exist for any
particular option, or at any

                                       16


particular time. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying currency or dispose of assets held in a segregated account
until the options expire or are exercised. Similarly, if the Fund is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying currency. The Fund
pays brokerage commissions or spreads in connection with its options
transactions.

As in the case of forward contracts, certain options on foreign currencies are
traded over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded currency options. In some circumstances,
the Fund's ability to terminate over-the-counter options ("OTC Options") may be
more limited than with exchange-traded options. It is also possible that broker-
dealers participating in OTC Options transactions will not fulfill their
obligations. The Fund intends to treat OTC Options as not readily marketable and
therefore subject to the Fund's 15% limit on illiquid securities.

Futures Contracts and Options on Futures Contracts

General. The successful use of futures contracts and options thereon draws upon
the Adviser's skill and experience with respect to such instruments and usually
depends on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize losses and thus will be
in a worse position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options on
futures contracts and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.

Futures Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  U.S. futures contracts have been designed by exchanges which
have been designated "contracts markets" by the CFTC, and must be executed
through a futures commission merchant, or brokerage firm, which is a member of
the relevant contract market. Futures contracts trade on a number of exchanges,
and clear through their clearing corporations.  The Fund may enter into
contracts for the purchase or sale for future delivery of fixed-income
securities, foreign currencies, or financial indices including any index of U.S.
government securities, foreign government securities or corporate debt
securities. The Fund may enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. government,
such as long-term U.S. Treasury Bonds, Treasury Notes, Government National
Mortgage Association modified pass-through mortgage-backed securities and three-
month U.S. Treasury Bills. The Fund may also enter into futures contracts which
are based on bonds issued by governments other than the U.S. government. Futures
contracts on foreign currencies may be used to hedge against securities that are
denominated in foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or securities as a

                                       17


deposit payment. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.

Although futures contracts (other than those that settle in cash such as index
futures) by their terms call for the actual delivery or acquisition of the
instrument underlying the contract, in most cases the contractual obligation is
fulfilled by offset before the date of the contract without having to make or
take delivery of the instrument underlying the contract. The offsetting of a
contractual obligation is accomplished by entering into an opposite position in
the identical futures contract on the commodities exchange on which the futures
contract was entered into (or a linked exchange).  Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the instrument underlying the contract. Since all transactions in
the futures market are made, offset or fulfilled through a clearinghouse
associated with the exchange on which the contracts are traded, the Fund will
incur brokerage fees when it enters into futures contracts.

The assets in the segregated asset account maintained to cover the Fund's
obligations with respect to such futures contracts will consist of cash or
securities acceptable to the broker from its portfolio in an amount equal to the
difference between the fluctuating market value of such futures contracts and
the aggregate value of the initial and variation margin payments made by the
Fund with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial and variation
margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on most
participants entering into offsetting transactions rather than making or taking
delivery. To the extent that many participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin lending requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct forecast of general interest rate or currency exchange
rate trends by the Adviser may still not result in a successful transaction.

In addition, futures contracts entail risks. Although the Adviser believes that
use of such contracts will benefit the Fund, if the Adviser's investment
judgment about the general direction of interest rates is incorrect, the Fund's
overall performance would be poorer than if it had not entered into any such
contract. For example, if the Fund has hedged against the possibility of an
increase in interest rates which would adversely affect the price of debt
securities held in its portfolio and interest rates decrease instead, the Fund
will lose part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell debt securities from its portfolio to meet daily
variation margin requirements. Such sales

                                       18


of bonds may be, but will not necessarily be, at increased prices which reflect
the rising market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.

Options on Futures Contracts. The Fund may purchase and write options on futures
contracts for hedging purposes. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security. For example, when the Fund is not fully invested it may
purchase a call option on an interest rate sensitive futures contract to hedge
against a potential price increase on debt securities due to declining interest
rates. The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may purchase a put option on an interest rate sensitive
futures contract to hedge its portfolio against the risk of a decline in the
prices of debt securities due to rising interest rates.

The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of portfolio securities which are the same as or
correlate with the security or currency which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is below
the exercise price, the Fund will retain the full amount of the option premium
which provides a partial hedge against any decline that may have occurred in the
Fund's portfolio holdings. The writing of a put option on a futures contract may
constitute a partial hedge against increasing prices of the security or foreign
currency which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The amount of risk the Fund assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

Futures Contracts on Domestic and Foreign Securities Indices. The Fund may enter
into futures contracts providing for cash settlement based upon changes in the
value of an index of domestic or foreign securities.  This investment technique
may be used as a low-cost method of gaining exposure to a particular securities
market without investing directly in those securities or to hedge against
anticipated future change in general market prices which otherwise might either
adversely affect the value of securities held by the Fund or adversely affect
the prices of securities which are intended to be purchased at a later date for
the Fund.

When used for hedging purposes, each transaction in futures contracts on a
securities index involves the establishment of a position which the Adviser
believes will move in a direction opposite to that of the investment being
hedged. If these hedging transactions are successful, the

                                       19


futures positions taken for the Fund will rise in value by an amount which
approximately offsets the decline in value of the portion of the Fund's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.

Although futures contracts on securities indices would be entered into for
hedging purposes only, such transactions do involve certain risks. These risks
include a lack of correlation between the futures contract and the foreign
equity market being hedged, and incorrect assessments of market trends which may
result in poorer overall performance than if a futures contract had not been
entered into.

Asset Coverage. To assure that the Fund's use of futures and related options, as
well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, the Fund
will cover such transactions, as required under applicable interpretations of
the SEC, either by owning the underlying securities or by segregating with the
Fund's Custodian or futures commission merchant cash or liquid securities in an
amount at all times equal to or exceeding the Fund's commitment with respect to
these instruments or contracts.

Investment Restrictions on Futures Transactions.  The Fund will not enter into
any futures contracts or options on futures contracts if immediately thereafter
the amount of margin deposits on all the futures contracts of the Fund and
premiums paid on outstanding options on futures contracts owned by the Fund
(other than those entered into for bona fide hedging purposes) would exceed 5%
of the Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts.

Fixed Income Securities

General.  In order to achieve their respective investment objectives, the Funds
may invest in a broad range of U.S. and non-U.S. fixed income securities.  In
periods of declining interest rates, a Fund's yield (its income from portfolio
investments over a stated period of time) may tend to be higher than prevailing
market rates, and in periods of rising interest rates, the yield of the Fund may
tend to be lower.  Also, when interest rates are falling, the inflow of net new
money to the  Fund from the continuous sale of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the yield of the Fund.  In periods of rising
interest rates, the opposite can be true.  To the extent a Fund invests in fixed
income securities, its net asset value can generally be expected to change as
general levels of interest rates fluctuate.  The value of fixed income
securities in a Fund's portfolio generally varies inversely with changes in
interest rates.  Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with shorter
effective maturities.  The Fixed Income Funds may invest up to 5% of their net
assets in inverse floating rate securities, which have greater volatility risk
than ordinary fixed income securities.

Foreign Government Securities.  The foreign government securities in which the
Fund may invest generally consist of debt obligations issued or guaranteed by
national, state or provincial

                                       20


governments or similar political subdivisions. Foreign government securities
also include debt obligations of supranational or quasi-governmental entities.
Quasi-governmental and supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the "World Bank"), the Japanese Development
Bank, the Asian Development Bank and the InterAmerican Development Bank. Foreign
government securities also include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies.

                            Additional Risk Factors

In addition to the risks discussed above, the Fund's investments may be subject
to the following risk factors:


Emerging Markets. The world's industrialized markets generally include but are
not limited to the following: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States; the world's emerging
markets generally include but are not limited to the following: Argentina,
Botswana, Bolivia, Brazil, Bulgaria, Chile, China, Colombia, Costa Rica, the
Czech Republic, Ecuador, Egypt, Greece, Hungary, India, Indonesia, Israel, the
Ivory Coast, Jordan, Korea, Malaysia, Mexico, Morocco, Nicaragua, Nigeria,
Pakistan, Peru, Philippines, Poland, Romania, Russia, Slovakia, Slovenia, South
Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Uruguay, Venezuela,
Vietnam and Zimbabwe.

Investment in securities of issuers based in underdeveloped emerging markets
entails all of the risks of investing in securities of foreign issuers outlined
in the above section to a heightened degree. These heightened risks include: (i)
greater risks of expropriation, confiscatory taxation, nationalization, and less
social, political and economic stability; (ii) the smaller size of the market
for such securities and a low or nonexistent volume of trading, resulting in
lack of liquidity and in price volatility; and (iii) certain national policies
which may restrict the Fund's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests.

In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems could result
either in losses to the Fund due to subsequent declines in the value of the
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.

                                       21


Region and Country Investing. The Fund may focus its investments in a particular
region and/or in one or more foreign countries. Focusing a Fund's investments in
a particular region or country will subject the Fund, to a greater extent than
if its investments in such region or country were more limited, to the risks of
adverse securities markets, exchange rates and social, political or economic
developments which may occur in that region or country.

Options on Futures Contracts, Forward Contracts and Options on Foreign
Currencies. Unlike transactions entered into by the Fund in futures contracts,
options on foreign currencies and forward contracts are not traded on contract
markets regulated by the CFTC or (with the exception of certain foreign currency
options) by the SEC. To the contrary, such instruments are traded through
financial institutions acting as principals, although foreign currency options
are also traded on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments.

Forward Contracts and options on foreign currencies traded over-the-counter
involve liquidity and credit risks which may not be present in the case of
exchange-traded currency options. The Fund's ability to terminate over-the-
counter options will be more limited than with exchange-traded options. It is
also possible that broker-dealers participating in over-the-counter options
transactions will not fulfill their obligations. Until such time as the staff of
the SEC changes its position, the Fund will treat purchased over-the-counter
options and assets used to cover written over-the-counter options as illiquid
securities.

Options on foreign currencies traded on national securities exchanges are within
the jurisdiction of the SEC, as are other securities traded on such exchanges.
As a result, many of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation (the "OCC"), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established

                                       22


banking relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental restrictions or
taxes would prevent the orderly settlement of foreign currency option exercises,
or would result in undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.

In addition, futures contracts, options on futures contracts, forward contracts
and options on foreign currencies may be traded on foreign exchanges. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during non-
business hours in the United States; (iv) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the United
States; and (v) lesser trading volume.

Risks of Investing in Medium- and Small-Capitalization Stocks. Historically,
medium- and small-capitalization stocks have been more volatile in price than
larger-capitalization stocks. Among the reasons for the greater price volatility
of these securities are the less certain growth prospects of smaller firms, the
lower degree of liquidity in the markets for such stocks, and the greater
sensitivity of medium- and small-size companies to changing economic conditions.
In addition to exhibiting greater volatility, medium- and small-size company
stocks may fluctuate independently of larger company stocks. Medium- and small-
size company stocks may decline in price as large company stocks rise, or rise
in prices as large company stocks decline.

Special Information Concerning Master-Feeder Fund Structure. The Fund currently
invests its assets directly in securities. In the future, upon approval by a
majority vote of the Board of Trustees, the Fund may be reorganized into a
master-feeder structure. The fund would then become a "feeder fund" investing
all of its assets in a corresponding "Master Portfolio." This section provides
additional information regarding this type of fund structure. Unlike other open-
end management investment companies (mutual funds) which directly acquire and
manage their own portfolio securities, a feeder fund seeks to achieve its
investment objective by investing all of its assets in the Master Portfolio, a
separate registered investment company with the same investment objective as the
feeder fund. Therefore, an investor's interest in the Master Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Master Portfolio may sell beneficial interests to other mutual funds,
investment vehicles or institutional investors. Such investors will invest in
the Master Portfolio on the same terms and conditions and will pay a
proportionate share of the Master Portfolio's expenses. However, the other
investors investing in the Master Portfolio are not required to sell their
shares at the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Master
Portfolio. Such differences in returns are also present in other mutual fund
structures. Information concerning other holders of interests in the Master
Portfolio would be available from the Service Center at 1-

                                       23


800-730-1313.

Smaller funds investing in a Master Portfolio may be materially affected by the
actions of larger funds investing in the Master Portfolio. For example, if a
large fund withdraws from the Master Portfolio, the remaining funds may
experience higher pro rata operating expenses, thereby producing lower returns
(however, this possibility exists as well for traditionally structured funds
which have large institutional investors). Additionally, the Master Portfolio
may become less diverse, resulting in increased portfolio risk. Also, funds with
a greater pro rata ownership in the Master Portfolio could have effective voting
control of the operations of the Master Portfolio. Except as permitted by the
SEC, whenever the Trust is requested to vote on matters pertaining to the Master
Portfolio, the Trust will hold a meeting of shareholders of the feeder fund and
will cast all of its votes in the same proportion as the votes of the feeder
fund's shareholders. Feeder fund shareholders who do not vote will not affect
the Trust's votes at the Portfolio meeting. The percentage of the Trust's votes
representing the feeder fund's shareholders not voting will be voted by the
Trustees or officers of the Trust in the same proportion as the feeder fund
shareholders who do, in fact, vote.

Certain changes in the Master Portfolio's investment objectives, policies or
restrictions may require the feeder fund to withdraw its interest in the Master
Portfolio. Any such withdrawal could result in a distribution "In-Kind" of
portfolio securities (as opposed to a cash distribution from the Master
Portfolio). If securities are distributed, the feeder fund could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution In-Kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the feeder fund.
Notwithstanding the above, there are other means for meeting redemption
requests, such as borrowing.

A feeder fund may withdraw its investment from the Master Portfolio at any time,
if the Board of Trustees of the Trust determines that it is in the best
interests of the shareholders of the feeder fund to do so. Upon any such
withdrawal, the Board of Trustees of the Trust would consider what action might
be taken, including the investment of all the assets of the feeder fund in
another pooled investment entity having the same investment objective as the
feeder fund or the retaining of an investment adviser to manage the feeder
fund's assets in accordance with the investment policies described herein with
respect to the Master Portfolio.

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to, but without the approval of, the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of a Master Portfolio may also not
be a fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Master Portfolio (if applicable).

Rating Services. The ratings of rating services represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial

                                       24


criterion for selection of portfolio investments, the Adviser also makes its own
evaluation of these securities, subject to review by the Board of Trustees.
After purchase by the Fund, an obligation may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event would require the Fund to eliminate the obligation from its portfolio, but
the Adviser will consider such an event in its determination of whether the Fund
should continue to hold the obligation. A description of the ratings used herein
and in the Fund's Prospectuses is set forth in the Appendix to this SAI.

                            Investment Restrictions

Fundamental Policies. The following investment restrictions are "fundamental
policies" of the Fund and may not be changed  without the approval of a
"majority of the outstanding voting securities" of the Fund. "Majority of the
outstanding voting securities" under the 1940 Act, and as used in this SAI,
means, the lesser of (i) 67% or more of the outstanding voting securities of the
Fund  present at a meeting, if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy or (ii) more
than 50% of the outstanding voting securities of the Fund.

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

(1)  borrow money or mortgage or hypothecate assets of the Fund, except that in
an amount not to exceed 1/3 of the current value of the Fund's net assets, it
may borrow money as a temporary measure for extraordinary or emergency purposes
and enter into reverse repurchase agreements or dollar roll transactions, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money would be borrowed
only from banks and only either to accommodate requests for the withdrawal of
beneficial interests (redemption of shares) while effecting an orderly
liquidation of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete the portfolio security transaction or other
similar situations) or reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "Additional Restrictions" below
(as an operating policy, the Fund may not engage in dollar-roll transactions);

(2)  underwrite securities issued by other persons except insofar as the  Fund
may technically be deemed an underwriter under the 1933 Act in selling a
portfolio security;

(3)  make loans to other persons except: (a) through the lending of the Fund's
portfolio securities and provided that any such loans not exceed 30% of the
Fund's total assets (taken at market value); (b) through the use of repurchase
agreements or the purchase of short-term obligations; or (c) by purchasing a
portion of an issue of debt securities of types distributed publicly or

                                       25


privately;

(4)  purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts (except futures
and option contracts) in the ordinary course of business (except that the Fund
may hold and sell, for the Fund's portfolio, real estate acquired as a result of
the Fund's ownership of securities);

(5)  concentrate its investments in any particular industry (excluding U.S.
government securities), but if it is deemed appropriate for the achievement of
the  Fund's investment objective(s), up to 25% of its total assets may be
invested in any one industry; and

(6)  issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered to be the issuance of a senior security for purposes of this
restriction.

(7)  with respect to 75% of the Fund's total assets, invest more than 5% of its
total assets in the securities of any one issuer (excluding cash and cash
equivalents, U.S. government securities and the securities of other investments
companies) or own more than 10% of the voting securities of any issuer.

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

(i)   borrow money (including through reverse repurchase or forward roll
transactions) for any purpose in excess of 5% of the Fund's total assets (taken
at cost), except that the Fund may borrow for temporary or emergency purposes up
to 1/3 of its total assets;

(ii)  pledge, mortgage or hypothecate for any purpose in excess of 10% of the
Fund's total assets (taken at market value), provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this restriction;

(iii) purchase any security or evidence of interest therein on margin, except
that such short-term credit as may be necessary for the clearance of purchases
and sales of securities may be obtained and except that deposits of initial
deposit and variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;

(iv)  invest for the purpose of exercising control or management of another
company;

(v)   purchase securities issued by any investment company except by purchase in
the open

                                       26


market where no commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan of merger or
consolidation; provided, however, that securities of any investment company will
not be purchased for the Fund if such purchase at the time thereof would cause:
(a) more than 10% of the Fund's total assets (taken at the greater of cost or
market value) to be invested in the securities of such issuers; (b) more than 5%
of the Fund's total assets (taken at the greater of cost or market value) to be
invested in any one investment company; or (c) more than 3% of the outstanding
voting securities of any such issuer to be held for the Fund unless permitted to
exceed these limitations by an exemptive order of the SEC; provided further
that, except in the case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company unless (1) the Fund's
investment adviser waives the investment advisory fee with respect to assets
invested in other open-end investment companies and (2) the Fund incurs no sales
charge in connection with the investment;

(vi) write puts and calls on securities unless each of the following conditions
are met: (a) the security underlying the put or call is within the investment
practices of the Fund and the option is issued by the OCC, except for put and
call options issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate value of the obligations underlying the
puts determined as of the date the options are sold shall not exceed 5% of the
Fund's net assets; (c) the securities subject to the exercise of the call
written by the Fund must be owned by the Fund at the time the call is sold and
must continue to be owned by the Fund until the call has been exercised, has
lapsed, or the Fund has purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Fund's obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is written, the Fund
establishes a segregated account with its custodian consisting of cash or liquid
securities equal in value to the amount the Fund will be obligated to pay upon
exercise of the put (this account must be maintained until the put is exercised,
has expired, or the Fund has purchased a closing put, which is a put of the same
series as the one previously written); and

(vii) buy and sell puts and calls on securities, stock index futures or options
on stock index futures, or financial futures or options on financial futures
unless such options are written by other persons and: (a) the options or futures
are offered through the facilities of a national securities association or are
listed on a national securities or commodities exchange, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such options which
are held at any time do not exceed 20% of the Fund's total net assets; and (c)
the aggregate margin deposits required on all such futures or options thereon
held at any time do not exceed 5% of the Fund's total assets.

There will be no violation of any investment restriction (except with respect to
fundamental investment restriction (1) above) if that restriction is complied
with at the time the relevant action is taken, notwithstanding a later change in
the market value of an investment, in net or total assets, or in the change of
securities rating of the investment, or any other later change.

                Portfolio Transactions and Brokerage Commissions

                                       27


The Adviser is responsible for decisions to buy and sell securities, futures
contracts and options on such securities and futures for the Fund, the selection
of brokers, dealers and futures commission merchants to effect transactions and
the negotiation of brokerage commissions, if any. Broker-dealers may receive
brokerage commissions on portfolio transactions, including options, futures and
options on futures transactions and the purchase and sale of underlying
securities upon the exercise of options. Orders may be directed to any broker-
dealer or futures commission merchant, including to the extent and in the manner
permitted by applicable law, DeAM, Inc. or its subsidiaries or affiliates.
Purchases and sales of certain portfolio securities on behalf of the Fund are
frequently placed by the Adviser with the issuer or a primary or secondary
market-maker for these securities on a net basis, without any brokerage
commission being paid by the Fund. Trading does, however, involve transaction
costs. Transactions with dealers serving as market-makers reflect the spread
between the bid and asked prices. Transaction costs may also include fees paid
to third parties for information as to potential purchasers or sellers of
securities. Purchases of underwritten issues may be made which will include an
underwriting fee paid to the underwriter.

The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the purchase
and sale of securities for the Fund taking into account such factors as price,
commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the Fund to
reported commissions paid by others. The Adviser reviews on a routine basis
commission rates, execution and settlement services performed, making internal
and external comparisons.

The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, when placing portfolio transactions for the Fund with a
broker to pay a brokerage commission (to the extent applicable) in excess of
that which another broker might have charged for effecting the same transaction
on account of the receipt of research, market or statistical information. The
term "research, market or statistical information" includes advice as to the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or purchasers or sellers of
securities; and furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts.

Consistent with the policy stated above, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Trustees
of the Fund may determine, the Adviser may consider sales of shares of the Trust
and of other investment company clients of DeAM, Inc. or its affiliates as a
factor in the selection of broker-dealers to execute portfolio transactions. The
Adviser will make such allocations if commissions are comparable to those
charged by nonaffiliated, qualified broker-dealers for similar services.

Higher commissions may be paid to firms that provide research services to the
extent permitted by law. The Adviser may use this research information in
managing the Fund's assets, as well as the assets of other clients.

                                       28


Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
otherwise.

Although certain research, market and statistical information from brokers and
dealers can be useful to the Fund and to the Adviser, it is the opinion of the
management of the Fund that such information is only supplementary to the
Adviser's own research effort, since the information must still be analyzed,
weighed and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Fund, and not all
such information is used by the Adviser in connection with the Fund. Conversely,
such information provided to the Adviser by brokers and dealers through whom
other clients of the Adviser effect securities transactions may be useful to the
Adviser in providing services to the Fund.

In certain instances there may be securities that are suitable for the Fund as
well as for one or more of the Adviser's other clients. Investment decisions for
the Fund and for the Adviser's other clients are made with a view to achieving
their respective investment objectives. It may develop that a particular
security is bought or sold for only one client even though it might be held by,
or bought or sold for, other clients. Likewise, a particular security may be
bought for one or more clients when one or more clients are selling that same
security. Some simultaneous transactions are inevitable when several clients
receive investment advice from the same investment adviser, particularly when
the same security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the purchase or
sale of the same security, the securities are allocated among clients in a
manner believed to be equitable to each. It is recognized that in some cases
this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. However, it is believed that the
ability of the Fund to participate in volume transactions will produce better
executions for the Fund.



                            PERFORMANCE INFORMATION

                       Standard Performance Information

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. For mutual funds,
performance is commonly measured as total return.  The Fund's performance is
affected by its expenses. These performance figures are calculated in the
following manner:

Total return: Total return is the change in value of an investment in the Fund
over a given period, assuming reinvestment of any dividends and capital gains. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a

                                       29


hypothetical rate of return that, if achieved annually, would have produced the
same cumulative total return if performance had been constant over the entire
period. Average annual total return calculations smooth out variations in
performance; they are not the same as actual year-by-year results. Average
annual total returns covering periods of less than one year assume that
performance will remain constant for the rest of the year. The Fund's average
annual total return is calculated for certain periods by determining the average
annual compounded rates of return over those periods that would cause an
investment of $1,000 (made at the maximum public offering price with all
distributions reinvested) to reach the value of that investment at the end of
the periods. The Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year performance.

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

                        Comparison of Fund Performance

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

In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. The Fund's performance may
be compared to the performance of various indices and investments for which
reliable 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. Evaluations of the Fund's performance made by
independent sources may also be used in advertisements concerning the Fund.
Sources for the Fund's performance information could include the following:
Asian Wall Street Journal, Barron's, Business Week, Changing Times, The
- -------------------------  --------  -------------  -------------------
Kiplinger Magazine, Consumer Digest, Financial Times, Financial World, Forbes,
- ------------------  ---------------  ---------------  ---------------  ------
Fortune, Global Investor, Investor's Business Daily, Lipper Analytical Services,
- -------  ---------------  -------------------------  ---------------------------
Inc.'s Mutual Fund Performance Analysis, Money, Morningstar Inc., New York
- ---------------------------------------  -----  ----------------  --------
Times, Personal Investing News, Personal Investor, Success, U.S. News and World
       -----------------------  -----------------  -------  -------------------
Report, ValueLine, Wall Street Journal, Weisenberger Investment Companies
- ------  ---------  -------------------  ---------------------------------
Services, Working Women and Worth.
- --------  -------------     -----

                                       30


                        Economic and Market Information

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

          VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN-KIND

                            Valuation of Securities

The net asset value ("NAV") per share is calculated once on each day the NYSE is
open ("Valuation Day") as of the close of regular trading on the NYSE, which is
currently 4:00 p.m., Eastern time or in the event that the NYSE closes early, at
the time of such early closing ("Valuation Time"). We calculate the daily price
of the Fund's shares 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 New York Stock Exchange is open for business.

The formula calls for deducting all of the Fund's liabilities from the total
value of its assets -- the market value of the securities it holds, plus its
cash reserves -- and dividing the result by the number of shares outstanding.
(Note that 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. Price changes in the securities the Fund owns may
ultimately affect the price of Fund shares the next time the NAV is calculated.)

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their current worth in the judgment of the Board of
Trustees.  You can find the Fund's daily share price in the mutual fund listings
of most major newspapers.

Equity and debt securities (other than short-term debt obligations maturing in
60 days or less), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. Such market valuations may represent
the last quoted price on the securities major trading exchange or may be
determined through use of matrix pricing. In matrix pricing, pricing services
may use various pricing models, involving comparable securities, historic
relative price movements, economic factors and dealer quotations. Over-the-
counter securities will normally be valued at the bid price. Short-term debt
obligations and money market securities maturing in 60 days or less are

                                       31


valued at amortized cost, which approximates market.

Securities for which market quotations are not readily available are valued by
the Adviser pursuant to procedures adopted by the Fund's Board of Trustees. It
is generally agreed that securities for which market quotations are not readily
available should not be valued at the same value as that carried by an
equivalent security which is readily marketable.

The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the: type of security involved, financial
statements, cost at date of purchase, size of holding, discount from market
value of unrestricted securities of the same class at the time of purchase,
special reports prepared by analysts, information as to any transactions or
offers with respect to the security, existence of merger proposals or tender
offers affecting the security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant matters.

To the extent that the Fund purchases securities which are restricted as to
resale or for which current market quotations are not readily available, the
Adviser of the Fund will value such securities based upon all relevant factors
as outlined in FRR 1.

                              Purchases of Shares

The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. Shares may be
available through Service Agents.

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

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

                                       32


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

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

If orders are placed through a financial intermediary, it is the responsibility
of the financial intermediary to transmit the order to buy shares to the
Transfer Agent before 4:00 p.m. Eastern time.

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

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

                             Redemption of Shares

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

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

                                       33


Redemption orders are processed without charge by the Trust. A Service Agent or
the Trust may on at least 30 days' notice involuntarily redeem a shareholder's
account with the Fund having a balance below the minimum, but not if an account
is below the minimum due to a change in market value.

To sell shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the Deutsche Asset Management
mutual funds, which can be requested by phone or in writing. For information on
retirement distributions, contact your Service Agent or call the Service Center
at 1-800-730-1313.

To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.

Certain requests must include a signature guarantee to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:

     .  Your account registration has changed within the last 30 days,

     .  The check is being mailed to a different address than the one on your
        account (record address),

     .  The check is being made payable to someone other than the account owner,

     .  The redemption proceeds are being transferred to the Fund account with a
        different registration, or

     .  You wish to have redemption proceeds wired to a non-predesignated bank
        account.

A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.

You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.

                       Redemptions and Purchases In-Kind

The Trust, on behalf of the Fund, reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for redemption or
withdrawal by making payment in whole or in part in readily marketable
securities chosen by the Trust, and valued as they are for purposes of computing
the Fund's net asset value, as the case may be (a redemption in-kind). If
payment is made to the Fund shareholder in securities, an investor, including
the Fund, may incur transaction expenses in converting these securities into
cash. The Trust, on behalf of the

                                       34


Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Fund is obligated to redeem shares or beneficial interests,
as the case may be, with respect to any one investor during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund , at the beginning of the period.


The Fund may, at its own option, accept securities in payment for shares. The
securities delivered in payment for shares are valued by the method described
under "Valuation of Securities" as of the day the Fund receives the securities.
This may be a taxable transaction to the shareholder. (Consult your tax adviser
for future tax guidance.) Securities may be accepted in payment for shares only
if they are, in the judgment of the Adviser, appropriate investments for the
Fund. In addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund; (ii) be acquired by the
applicable Fund for investment and not for resale ; (iii) be liquid securities
which are not restricted as to transfer either by law or liquidity of the
market; and (iv) if stock, have a value which is readily ascertainable as
evidenced by a listing on a stock exchange, over-the-counter market or by
readily available market quotations from a dealer in such securities. The Fund
reserves the right to accept or reject at its own option any and all securities
offered in payment for its shares.

The Fund reserves the right to redeem all of its shares, if the Board of
Trustees votes to liquidate the Fund.

                         Trading in Foreign Securities

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

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

                            MANAGEMENT OF THE TRUST

The Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the Funds  they
represent. In addition, the Trustees review contractual arrangements with
companies that provide services to the Funds and review the Funds' performance.

The Trustees and officers of the Trust , their birthdate and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period.

                                       35


                             Trustees of the Trust

CHARLES P. BIGGAR (birth date: October 13, 1930) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Fund Complex/1/;
Retired; former Vice President, International Business Machines ("IBM") and
President, National Services and the Field Engineering Divisions of IBM. His
address is 12 Hitching Post Lane, Chappaqua, New York 10514.

S. LELAND DILL (birth date: March 28, 1930) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Fund Complex; Retired; Director,
Coutts (U.S.A.) International; Trustee, Phoenix-Zweig Trust/2/ and Phoenix-
Euclid Market Neutral Fund2; former Partner, KPMG Peat Marwick; Director,
Vintners International Company Inc.; Director, Coutts Trust Holdings Ltd.,
Director, Coutts Group; General Partner, Pemco2. His address is 5070 North Ocean
Drive, Singer Island, Florida 33404.

MARTIN J. GRUBER (birth date: July 15, 1937) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Fund Complex; Nomura Professor of
Finance, Leonard N. Stern School of Business, New York University (since 1964);
Trustee, TIAA2; Trustee, SG Cowen Mutual Funds2; Trustee, Japan Equity Fund2;
Trustee, Taiwan Equity Fund2.  His address is 229 South Irving Street,
Ridgewood, New Jersey  07450.

RICHARD HALE* (birth date: July 17, 1945) -- President and Trustee of the Trust;
Trustee of each of the other investment companies in the Fund Complex; Managing
Director, Deutsche Asset Management; Director, Flag Investors Funds2; Managing
Director, Deutsche Banc Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp.  His address is 205 Woodbrook Lane, Baltimore,
Maryland 21212.

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


__________________
/1/ The "Fund Complex" consists of BT Investment Funds, BT Institutional Funds,
BT Pyramid Mutual Funds, BT Advisor Funds, Cash Management Portfolio,
Intermediate Tax Free Portfolio, Tax Free Money Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, Global Equity Portfolio, Equity 500 Index
Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio and BT
Investment Portfolios.

/2/ An investment company registered under the 1940, Act.

                                       36


BRUCE E. LANGTON (birth date: May 10, 1931) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Fund Complex; Retired; Trustee,
Allmerica Financial Mutual Funds (1992-present); Member, Pension and Thrift
Plans and Investment Committee, Unilever U.S. Corporation (1989 to present)/3/;
Director, TWA Pilots Directed Account Plan and 401(k) Plan (1988 to present)2.
His address is 99 Jordan Lane, Stamford, Connecticut 06903.

PHILIP SAUNDERS, JR. (birth date: October 11, 1935) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Fund Complex;
Principal, Philip Saunders Associates (Economic and Financial Analysis); former
Director, Financial Industry Consulting, Wolf & Company; President, John Hancock
Home Mortgage Corporation; Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc.  His address is 445
Glen Road, Weston, Massachusetts 02193.

HARRY VAN BENSCHOTEN (birth date: February 18, 1928) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Fund Complex; Retired;
Director, Canada Life Insurance Corporation of New York.  His address is 6581
Ridgewood Drive, Naples, Florida  34108.

* "Interested Person" within the meaning of Section 2(a)(19) of the 1940 Act.
Mr. Hale is a Managing Director of Deutsche Asset Management, the U.S. asset
management unit of Deutsche Bank and its affiliates.

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

                             Officers of the Trust

DANIEL O. HIRSCH (birth date:  March 27, 1954) -- Director, Deutsche Asset
Management since 1999; Director, Deutsche Banc Alex.Brown LLC since July 1998;
Secretary of the Trust  since 1998; Associate General Counsel, Office of the
General Counsel, United States Securities and Exchange Commission, 1993 to 1998.
His address is One South Street, Baltimore, Maryland 21202.

CHARLES A. RIZZO (birth date: August 5, 1958) Treasurer of the Trust; Vice
President and Department Head, Deutsche Asset Management since 1998; Senior
Manager, PricewaterhouseCoopers LLP from 1993 to 1998.  His address is One South
Street, Baltimore, MD 21202.

___________________

/3/ A publicly held company with securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended.

                                       37


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

No person who is an officer or director of DeAM, Inc. is an officer or Trustee
of the Trust.  No director, officer or employee of ICC Distributors, Inc. or any
of its affiliates will receive any compensation from the Trust for serving as an
officer or Trustee of the Trust.

                          Trustee Compensation Table



===============================================================
                           Aggregate        Total Compensation
                           Compensation     from
Trustee                    from Trust*      Fund Complex**
- ---------------------------------------------------------------
                                      
Charles P. Biggar          N/A              $43,750
- ---------------------------------------------------------------
S. Leland Dill             $17,104          $43,750
- ---------------------------------------------------------------
Martin Gruber              N/A              $45,000
- ---------------------------------------------------------------
Richard J. Herring         N/A              $43,750
- ---------------------------------------------------------------
Kelvin Lancaster           $18,567          $27,500
- ---------------------------------------------------------------
Bruce E. Langton           N/A              $43,750
- ---------------------------------------------------------------
Philip Saunders, Jr.       $17,645          $45,000
- ---------------------------------------------------------------
Harry Van Benschoten       N/A              $45,000
===============================================================


*The information provided is for the BT Investment Funds, which is comprised of
15 funds, for the year ended December 31, 2000.
** Aggregated information is furnished for the Fund Complex which consists of
the following: BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual
Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management Portfolio,
Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio,
Global Equity Portfolio, Intermediate Tax Free Portfolio, Asset Management
Portfolio, Equity 500 Index Portfolio and Capital Appreciation Portfolio for the
year ended December 31, 1999.

DeAM, Inc. and Bankers Trust as applicable, reimbursed the Funds  for a portion
of their Trustees fees for the period above.  See "Investment Adviser" and
"Administrator" below.

As of December 28, 2000, the Trustees and Officers of the Trust  owned in the
aggregate less than 1% of the shares of any Fund or the Trust (all series taken
together).

The Fund has not commenced operations as of the date of this SAI and therefore
does not have any shareholders of record.

                                Code of Ethics

The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act. The Fund's Code of Ethics permits Fund personnel to
invest in securities for their

                                       38


own accounts, but requires compliance with the Code's pre-clearance requirements
(with certain exceptions). In addition, the Fund's Code of Ethics provides for
trading "blackout periods" that prohibit trading by personnel within periods of
trading by the Fund in the same security. The Fund's Code of Ethics also
prohibits short term trading profits and personal investment in initial public
offerings. The Code requires prior approval with respect to purchases of
securities in private placements.

The Fund's adviser, DeAM, Inc., has also adopted a Code of Ethics. The Code of
Ethics allows personnel to invest in securities for their own accounts, but
require compliance with the Code's pre-clearance requirements and other
restrictions including "blackout periods" and minimum holding periods, subject
to limited exceptions. The Code prohibits purchases of securities in initial
public offerings (the prohibition is limited to U.S. public offerings) and
requires prior approval for purchases of securities in private placements.

The Fund's principal underwriter, ICC Distributors, Inc., ("ICCD") has adopted a
Code of Ethics applicable to ICCD's distribution services to registered
investment companies such as the Fund. The ICCD Code of Ethics prohibits
directors and officers of ICCD from executing trades on a day during which the
individual knows or should have known that the Fund in the individual's complex
has a pending "buy" or "sell" order in the same security, subject to certain
exceptions. The ICCD Code of Ethics also requires pre-clearance for purchases of
securities in an initial public offering or private placement.

                              Investment Adviser

Deutsche Asset Management, Inc. ("DeAM, Inc.") is the Fund's investment adviser.
DeAM, Inc. is a wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank is a
banking company with limited liability organized under the laws of the Federal
Republic of Germany. Deutsche Bank is the parent company of a group of a group
consisting of banks, capital markets companies, fund management companies,
mortgage banks, a property finance company, installments financing and leasing
companies, insurance companies, research and consultancy companies and other
domestic and foreign companies.

DeAM, Inc., may have deposit, loan and other commercial banking relationships
with the issuers of obligations which may be purchased on behalf of the Fund,
including outstanding loans to such issuers which could be repaid in whole or in
part with the proceeds of securities so purchased. Such affiliates deal, trade
and invest for their own accounts in such obligations and are among the leading
dealers of various types of such obligations. DeAM, Inc. has informed the Fund
that, in making its investment decisions, it does not obtain or use material
inside information in its possession or in the possession of any of its
affiliates. In making investment recommendations for the Fund, DeAM, Inc. will
not inquire or take into consideration whether an issuer of securities proposed
for purchase of sale by the Fund is a customer of DeAM, Inc., its parent or its
subsidiaries or affiliates. Also, in dealing with its customers, DeAM, Inc., its
parent , subsidiaries, and affiliates will not inquire or take into
consideration whether securities of such customers are held by any fund managed
by DeAM, Inc. or any such affiliate

                                       39


The Fund's Prospectus contains disclosure as to the amount of DeAM, Inc's
investment advisory and administration and services fees, including waivers for
the 14-month period from the effective date of December 29, 2000. . DeAM, Inc.
may not recoup any of its waived investment advisory or administration and
services fees.


                                 Administrator

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


Bankers Trust has agreed that if in any fiscal year the aggregate expenses of
any Fund  (including fees pursuant to the Advisory Agreement, but excluding
interest, taxes, brokerage and, if permitted by the relevant state securities
commissions, extraordinary expenses) exceed the expense limitation of any state
having jurisdiction over the Fund, Bankers Trust will reimburse the Fund for the
excess expense to the extent required by state law.

                                  Distributor

ICC Distributors is the principal distributor for shares of the Funds.  ICC
Distributors is a registered broker/dealer and is unaffiliated with Bankers
Trust.  The principal business address of ICC Distributors is Two Portland
Square, Portland, Maine 04101.

                                 Service Agent

All shareholders must be represented by a Service Agent.  Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The

                                       40


services provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions, arranging
for bank wires, performing shareholder sub-accounting, answering client
inquiries regarding the Trust, assisting clients in changing dividend options,
account designations and addresses, providing periodic statements showing the
client's account balance, transmitting proxy statements, periodic reports,
updated prospectuses and other communications to shareholders and, with respect
to meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a Service
Agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them directly.

                         Custodian and Transfer Agent

Bankers Trust, 130 Liberty Street, New York, New York 10006, serves as Custodian
for the Trust  pursuant to an administration and services agreement. As
Custodian, it holds the Fund's  assets. Bankers Trust will comply with the self-
custodian provisions of Rule 17f-2 under the 1940 Act.

Investment Company Capital Corp. ("ICCC"), One South Street, Baltimore,
Maryland, 21202, serves as transfer agent of the Trust  pursuant to a transfer
agency agreement. Under its transfer agency agreement with the Trust, ICCC
maintains the shareholder account records for the Fund, handles certain
communications between shareholders and the Trust and causes to be distributed
any dividends and distributions payable by the Trust. ICCC may be reimbursed by
the Fund  for its out-of-pocket expenses.


                          Banking Regulatory Matters

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

                                       41


necessary in the circumstances.

                      Counsel and Independent Accountants

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust. PricewaterhouseCoopers LLP, 250 West Pratt
Street, Baltimore, Maryland 21201, acts as Independent Accountants of the Trust.

                           ORGANIZATION OF THE TRUST

The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Trust is an entity commonly known as a "Massachusetts
business trust." The Fund is a mutual fund: an investment that pools
shareholders' money and invests it toward a specified goal. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The Trust currently consists of 20 separate series, including the Fund. The
shares of the other series of the Trust are offered through separate
prospectuses and SAIs. No series of shares has any preference over any other
series. The Trust reserves the right to add additional series in the future. The
Trust also reserves the right to issue more than one class of shares of the
Fund.

The Trust may hold special meetings and mail proxy materials. These meetings may
be called to elect or remove trustees, change fundamental policies, approve the
Fund's investment advisory agreement, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The Trust's Transfer
Agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
All series of the Trust will vote together on certain matters, such as electing
trustees. There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office, will call a shareholders' meeting for the election of Trustees.
Any Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
The Trust will also assist shareholders in communicating with one another as
provided for in the 1940 Act.

Shareholders of all of the series of the Trust will vote together to elect
Trustees of the Trust and for certain other matters. Under certain
circumstances, the shareholders of one or more series could control the outcome
of these votes.

Shares of the Trust do not have cumulative voting rights, which means that
holders of more than

                                       42


50% of the shares voting for the election of Trustees can elect all Trustees.
Shares are transferable but have no preemptive, conversion or subscription
rights. Shareholders generally vote by Fund, except with respect to the election
of Trustees.

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

The Trust was organized under the name BT Tax-Free Investment Trust and assumed
its current name of BT Investment Funds on May 16, 1988.


                                   TAXATION

                          Dividends and Distributions

The Fund distributes substantially all of its net income and capital gains to
shareholders each year. The Fund distributes capital gains annually. Unless a
shareholder instructs the Trust to pay such dividends and distributions in cash,
they will be automatically reinvested in additional shares of the Fund.

The Fund intends to qualify as a regulated investment company, as defined in the
Code. Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any federal
income or excise taxes.

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's capital gain distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in October, November or
December and paid as if paid in January are taxable on December 31. The Fund
will send each shareholder a tax statement by January 31 showing the tax status
of the distributions received during the past year.

On the ex-date for a distribution from capital gains, the Fund's share value is
reduced by the amount of the distribution. If you buy shares just before the ex-
date ("buying a dividend"), you

                                       43


will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.

                             Taxation of the Fund

As a regulated investment company, the Fund will not be subject to U.S. Federal
income tax on its investment company taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses), if
any, that it distributes to shareholders. The Fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains, and therefore does not anticipate
incurring Federal income tax liability.

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

The Fund's investment in Section 1256 contracts, such as regulated futures
contracts, most forward currency forward contracts traded in the interbank
market and options on most stock indices, are subject to special tax rules. All
section 1256 contracts held by the Fund at the end of its taxable year are
required to be marked to their market value, and any unrealized gain or loss on
those positions will be included in the Fund's income as if each position had
been sold for its fair market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain or loss realized by the
Fund from positions in section 1256 contracts closed during the taxable year.
Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as short-term capital gain or loss, regardless of the
period of time the positions were actually held by the Fund.

The Fund's shareholder will also receive, if appropriate, various written
notices after the close of the Fund's prior taxable year as to the Federal
income status of his dividends and distributions which were received from the
Fund during the Fund's prior taxable year. Shareholders should consult their tax
advisers as to any state and local taxes that may apply to these dividends and
distributions.

                              Foreign Securities

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

If the Fund is liable for foreign taxes, and if more than 50% of the value of
the Fund's total assets

                                       44


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

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


                                Sale of Shares

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

Because the tax treatment also depends on your purchase price and your personal
tax position, you should keep your regular account statements to use in
determining your tax.

On the ex-date for a distribution from capital gains, the Fund's share value is
reduced by the amount of the distribution. If you buy shares just before the ex-
date ("buying a dividend"), you will pay the full price for the shares and then
receive a portion of the price back as a taxable distribution.

                           Foreign Withholding Taxes

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

                                       45


                              Backup Withholding

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

                             Foreign Shareholders

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

                                Other Taxation

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

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


                             FINANCIAL STATEMENTS

The Fund does not have a full calendar year of annual operating performance to
report.

                                       46


                                  APPENDIX A
                     Description Of Ratings Categories of
                      Moody's Investors Service, Inc. and
                        Standard & Poor's Ratings Group

Moody's Investors Service, Inc. ("Moody's") describes classifications of fixed
income securities (not including commercial paper) as follows:

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

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

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

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

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future.

                                       47


Uncertainty of position characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Standard & Poor's Ratings Group ("Standard & Poor's") describes classifications
of fixed income securities (not including commercial paper) as follows:

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from the AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

Debt rated BB, B, CCC or CC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

                                       48


                                  APPENDIX B

                           Commercial Paper Ratings

S&P's Commercial Paper Ratings

A is the highest commercial paper rating category utilized by S&P, which uses
the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

Moody's Commercial Paper Ratings

Issuers rated Prime-1 (or related supporting institutions) have superior
capacities for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have strong
capacities for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have acceptable
capacities for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.



Fitch Investors Service and Duff & Phelps Commercial Paper Ratings

Commercial paper rated "Fitch- 1" is considered to be the highest grade paper
and is regarded as having the strongest degree of assurance for timely payment.
"Fitch-2" is considered very good grade paper and reflects an assurance of
timely payment only slightly less in degree than the strongest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the following

                                       49


characteristics: very high certainty of timely payment, excellent liquidity
factors supported by strong fundamental protection factors, and risk factors
which are very small. Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small risk factors,
and good access to capital markets.

                                      50


                                             STATEMENT OF ADDITIONAL INFORMATION
                                                               DECEMBER 29, 2000

Investment Adviser
DEUTSCHE ASSET MANAGEMENT, INC.
885 Third Avenue
New York, NY 10022

Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, ME 04101

Custodian
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006

Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street,
Baltimore, Maryland, 21202

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

Counsel
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, NY 10019-6099

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

CUSIPs      055922587
            055922595
1732/1733SAI (12/00)

                                       51