MORGAN GRENFELL INVESTMENT TRUST
497, 1996-11-12
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                        MORGAN GRENFELL INVESTMENT TRUST
                             No-Load Open-End Funds
                                885 Third Avenue
                            New York, New York 10022
                February 14, 1996, as revised November 12, 1996
    

    Morgan Grenfell Investment Trust (the "Trust") is an open-end management
investment company that includes eleven distinct investment portfolios that
focus on international investing (the "Funds"). Morgan Grenfell Investment
Services Limited (the "Adviser" or "MGIS"), based in London England, serves as
investment adviser to the Funds. The Funds are designed for long-term investors
seeking to participate in foreign securities markets.

    The investment objective of Morgan Grenfell International Equity Fund,
Morgan Grenfell Global Equity Fund, Morgan Grenfell European Equity Fund, Morgan
Grenfell Pacific Basin Equity Fund, Morgan Grenfell International Small Cap
Equity Fund, Morgan Grenfell Japanese Small Cap Equity Fund, Morgan Grenfell
European Small Cap Equity Fund and Morgan Grenfell Emerging Markets Equity Fund
(the "Equity Funds") is to maximize capital appreciation. The investment
objective of Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
(the "Fixed Income Funds") is to maximize total return.

    Information concerning investment portfolios of the Trust that focus on U.S.
investments is contained in a separate prospectus that may be obtained by
calling 1-800-814-3401.

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

    This Prospectus provides information about the Trust and each of the Funds
that investors should know before investing in the Funds. Investors should
carefully read this Prospectus and retain it for future reference. For investors
seeking more detailed information, the Statement of Additional Information dated
February 14, 1996, as amended or supplemented from time to time, is available
upon request without charge by calling the applicable telephone number listed on
the back cover or by writing SEI Financial Services Company, 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658. The Statement of Additional Information,
which is incorporated by reference into this Prospectus, has been filed with the
Securities and Exchange Commission. Not all of the Funds are available in
certain states. Please call 1-800-814-3401 to determine availability in a
particular state.

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

    INVESTMENTS IN EMERGING MARKETS CAN INVOLVE SIGNIFICANT RISKS, AND MORGAN
GRENFELL EMERGING MARKETS EQUITY FUND AND MORGAN GRENFELL EMERGING MARKETS DEBT
FUND ARE DESIGNED FOR AGGRESSIVE INVESTORS. IN ADDITION, MORGAN GRENFELL
EMERGING MARKETS DEBT FUND INVESTS IN LOWER-QUALITY DEBT SECURITIES (JUNK
BONDS), WHICH PRESENT HIGHER RISKS OF UNTIMELY INTEREST AND PRINCIPAL PAYMENTS,
DEFAULT, AND PRICE VOLATILITY THAN HIGHER-QUALITY SECURITIES, AND MAY PRESENT
LIQUIDITY AND VALUATION PROBLEMS.

    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

    Each Fund's primary investments are summarized below:

    Morgan Grenfell International Equity Fund invests primarily in equity and
equity-related securities of companies in countries other than the United
States.

    Morgan Grenfell Global Equity Fund invests primarily in equity and
equity-related securities of companies throughout the world.

    Morgan Grenfell European Equity Fund invests primarily in equity and
equity-related securities of companies in Europe.

    Morgan Grenfell Pacific Basin Equity Fund invests primarily in equity and
equity-related securities of companies in Pacific Basin countries.

    Morgan Grenfell International Small Cap Equity Fund invests primarily in
equity and equity-related securities of small capitalization companies in
countries other than the United States.

    Morgan Grenfell Japanese Small Cap Equity Fund invests primarily in equity
and equity-related securities of small capitalization companies in Japan.

    Morgan Grenfell European Small Cap Equity Fund invests primarily in equity
and equity-related securities of small capitalization companies in Europe.

    Morgan Grenfell Emerging Markets Equity Fund invests primarily in equity and
equity-related securities of companies in countries with emerging securities
markets.

    Morgan Grenfell Global Fixed Income Fund invests primarily in fixed income
securities of issuers throughout the world.

    Morgan Grenfell International Fixed Income Fund invests primarily in fixed
income securities of issuers in countries other than the United States.

    Morgan Grenfell Emerging Markets Debt Fund invests primarily in fixed income
securities of issuers in countries with emerging securities markets.

                               [GRAPHIC OMMITTED]


                                       ii
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

Expense Information .......................................................    1
Financial Highlights ......................................................    3
Introduction to the Funds .................................................    4
Investment Objectives and Policies ........................................    7
Description of Securities and Investment Techniques
  and Related Risks  ......................................................   13


Additional Investment Information .........................................   28
Management of the Funds ...................................................   29
Purchase of Shares ........................................................   32
Redemption of Shares ......................................................   34
Net Asset Value ...........................................................   35
Dividends, Distributions and Taxes ........................................   36
Organization and Shares of the Trust ......................................   38
Performance Information ...................................................   39
Appendix A ................................................................  A-1
Appendix B ................................................................  B-1
Appendix C ................................................................  C-1



                                   iii
<PAGE>

                              EXPENSE INFORMATION

<TABLE>
<CAPTION>

                                                                                            International  Japanese     European
    FUND NAME                        International    Global       European   Pacific Basin   Small Cap    Small Cap    Small Cap
                                      Equity Fund  Equity Fund*  Equity Fund*  Equity Fund*  Equity Fund  Equity Fund  Equity Fund
                                      -----------  ------------  ------------  ------------  -----------  -----------  -----------
<S>                                      <C>          <C>           <C>           <C>           <C>           <C>           <C>    
Shareholder Transaction
Expenses:

Maximum Sales Charge
Imposed on Purchases                      None         None          None          None          None          None          None

Maximum Sales Charge
Imposed on Reinvested
Dividends                                 None         None          None          None          None          None          None

Deferred Sales Charge
Imposed on Redemptions                    None         None          None          None          None          None          None

Exchange Fee                              None         None          None          None          None          None          None


Annual Fund Operating Expenses
(as a percentage of average net  
assets after reduction of 
advisory fee)

Advisory fees                             0.70%        0.70%         0.70%         0.70%         1.00%         1.00%         1.00%

Administration fees                       0.59%        0.15%         0.15%         0.15%         0.15%         0.15%         0.63%

Other Expenses                            0.44%        0.55%         0.55%         0.55%         0.33%         0.55%         0.61%

Reduction of Advisory Fee
and Expense Limitation by Adviser **     (0.83)%      (0.50)%       (0.50)%       (0.50)%       (0.23)%       (0.45)%       (0.99)%

Net Fund Operating
   Expenses                               0.90%        0.90%         0.90%         0.90%         1.25%         1.25%         1.25%

<PAGE>

<CAPTION>

                                    Emerging                   International    Emerging
            FUND NAME                Markets     Global Fixed     Fixed         Markets
                                   Equity Fund    Income Fund   Income Fund    Debt Fund
                                   -----------    -----------   -----------    ---------
<S>                                  <C>           <C>            <C>           <C>    
Shareholder Transaction
Expenses:

Maximum Sales Charge
Imposed on Purchases                  None           None          None          None
                                                   
Maximum Sales Charge                               
Imposed on Reinvested                              
Dividends                             None           None          None          None
                                                   
Deferred Sales Charge                              
Imposed on Redemptions                None           None          None          None
                                                   
Exchange Fee                          None           None          None          None
                                                   
                                                   
Annual Fund Operating Expenses                     
(as a percentage of average net                    
assets after reduction of                          
advisory fee)                                      
                                                   
Advisory fees                         1.00%         0.50%**        0.50%**       1.50%**
                                                   
Administration fees                   0.14%         0.12%          0.31%         0.14%
                                                   
Other Expenses                        0.41%         0.22%          0.31%         0.32%
                                                   
Reduction of Advisory Fee                          
and Expense Limitation                             
by Adviser ***                       (0.30)%       (0.09)%        (0.37)%       (0.46)%
                                                   
Net Fund Operating                                 
   Expenses                           1.25%         0.75%          0.75%         1.50%
                                                 
</TABLE>

*   Global Equity Fund, European Equity Fund, Pacific Basin Equity Fund and
    Japanese Small Cap Equity Fund were not operational during the fiscal year
    ended October 31, 1995.

**  Prior to April 3, 1995, the advisory fee rate for both Global Fixed Income
    Fund and International Fixed Income Fund was 0.60% of average daily net
    assets. Prior to September 6, 1995, the advisory fee rate for the Emerging
    Markets Debt Fund was 1.60% of average daily net assets.

*** The Advisor has agreed to reduce its advisory fee and to make arrangements
    to limit certain other expenses to the extent necessary to limit Fund
    Operating Expenses of each Fund, on an annual basis, to the specified
    percentage of each Fund's assets shown in the above table as Net Fund
    Operating Expenses. The above table and the following Example reflect this
    voluntary agreement. In its sole discretion, the Advisor may terminate or
    modify this voluntary agreement at any time although the Advisor has no
    present intention of doing so. The purpose of this voluntary agreement is to
    enhance a Fund's total return during the period when, because of its
    smaller size, fixed expenses have a more significant impact on total return.
    If the Advisor's voluntary agreement were not in effect, the Fund Operating
    Expenses for each Fund would be as follows: International Equity Fund,
    1.73%; Global Equity Fund, 1.40%; European Equity Fund, 1.40%; Pacific Basin
    Equity Fund, 1.40%; International Small Cap Equity Fund, 1.48%; Japanese
    Small Cap Equity Fund, 1.70%; European Small Cap Equity Fund, 2.24%;
    Emerging Markets Equity Fund, 1.55%; Global Fixed Income Fund, 0.84%;
    International Fixed Income Fund, 1.12% and Emerging Markets Debt Fund,
    1.96%.


                                       1
<PAGE>

Example:

    Investors would pay the following expenses on a $1,0001 investment assuming
(1) a 5% annual return and (2) redemption at the end of each time period:

                                                         1     3      5     10
                                                       Year  Years  Years  Years
                                                       ----  -----  -----  -----
                                                    
Morgan Grenfell International Small Cap Equity Fund    $13    $40    $69   $151
Morgan Grenfell European Small Cap Equity Fund         $13    $40    $69   $151
Morgan Grenfell Emerging Markets Equity Fund           $13    $40    $69   $151
Morgan Grenfell Global Fixed Income Fund               $ 8    $24    $42   $ 93
Morgan Grenfell International Fixed Income Fund        $ 8    $24    $42   $ 93
Morgan Grenfell Emerging Markets Debt Fund             $15    $47    $82   $179


                                                               1      3
                                                              Year  Years
                                                              ----  -----
Morgan Grenfell International Equity Fund                     $ 9    $29
Morgan Grenfell Global Equity Fund                            $ 9    $29
Morgan Grenfell European Equity Fund                          $ 9    $29
Morgan Grenfell Pacific Basin Equity Fund                     $ 9    $29
Morgan Grenfell Japanese Small Cap Equity Fund                $13    $40
                                                                

1   The minimum initial investment required for each Fund is $250,000. Exchanges
    may be made in amounts as low as $50,000. See "Purchase of Shares - Exchange
    Privilege".

    The purpose of the Expense Information Table and Example is to assist
investors in understanding the various direct and indirect costs and expenses
that an investment in a Fund will bear. For Morgan Grenfell European Small Cap
Equity Fund, Morgan Grenfell International Small Cap Equity Fund, Morgan
Grenfell Global Fixed Income Fund, Morgan Grenfell Emerging Markets Equity Fund,
Morgan Grenfell International Fixed Income Fund and Morgan Grenfell Emerging
Markets Debt Fund, "Other Expenses" included in the Expense Information Table
and Example are estimates for the fiscal year ending October 31, 1996 that are
based on actual expenses incurred during the fiscal period ended October 31,
1995 (except that the figures shown for Global Fixed Income Fund, International
Fixed Income Fund and Emerging Markets Debt Fund assume that these Funds'
current advisory fee rates were in effect throughout the year ended October 31,
1995). For the other Funds, "Other Expenses" are based solely on estimates for
the current fiscal year ending October 31, 1996 (assumes each Fund other than
International Equity Fund has average net assets of $25 million for such year;
assumes International Equity Fund has average net assets of $10 million for such
year). If the average net assets of any of these Funds exceeds the assumed
dollar amount for such year, then that Fund's "Other Expenses" (as a percentage
of average net assets) will be lower than the rate shown in the table.
Conversely, if any of these Funds' average net assets are lower than the assumed
dollar amount for such year, then that Fund's "Other Expenses (as a percentage
of net assets) will be higher than the rate shown in the table. The Example
assumes reinvestment of all dividends and distributions and that the percentage
amounts listed in the Expense Information Table remain the same each year. If
the Adviser were to discontinue its voluntary fee reductions, the expenses
contained in the Example could increase.

    The Example is designed for information purposes only, and should not be
considered a representation of future expenses or return for any Fund. Actual
expenses and return vary from year to year and may be higher or lower than those
shown. For further information regarding advisory and administration fees, and
other expenses of the Funds, see "Management of the Funds."


                                      -2-
<PAGE>

- --------------------------------------------------------------------------------
                              FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

        Set forth below are selected data for (1) an outstanding share of each
of Morgan Grenfell International Small Cap Equity Fund, Morgan Grenfell Emerging
Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund, Morgan Grenfell
International Fixed Income Fund and Morgan Grenfell Emerging Markets Debt Fund
for the year ended October 31, 1995; and (2) an outstanding share of Morgan
Grenfell European Small Cap Equity Fund, Morgan Grenfell International Equity
Fund during the period from their respective inception to October 31, 1995.
Selected data for an outstanding share of each of the above Funds (other than
European Small Cap Equity Fund and International Equity Fund) during the period
from its inception to October 31, 1994 are also set forth below. The data set
forth below has been audited by Price Waterhouse LLP, independent accountants,
whose report thereon was unqualified.

        The information set forth below should be read in conjunction with the
financial statements and notes thereto which appear in the Statement of
Additional Information. The Statement of Additional Information and the Trust's
annual report, which contains further information about the Funds' performance,
are available free of charge by calling 1-800-814-3401. No information is
presented below for the Funds that had not commenced operations by October 31,
1995.


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

For a Share Outstanding Throughout Each Period Ended October 31
<TABLE>
<CAPTION>

                                                 Net
               Net Asset         Net           Realized      Distributions     Distributions
                 Value       Investment          and            from Net       from Realized        Net Asset      
               Beginning      Income /        Unrealized       Investment         Capital           Value End         Total    
    Year       of Period        Loss         Gains/Losses      Income (8)          Gains            of Period        Return    
    ----       ---------        ----         ------------      ----------          -----            ---------        ------    
<C>              <C>            <C>             <C>              <C>               <C>                <C>                      
- ------------------------------------------------------------                                                                   
International Equity Fund                                                                                                      
- ------------------------------------------------------------                                                                   
1995 (1)*        $10.00        $ 0.08           $ 0.87             -                 -                $10.95          9.50%    
- ------------------------------------------------------------                                                                   
International Small Cap Equity Fund                                                                                            
- ------------------------------------------------------------                                                                   
1995             $10.35        $ 0.03           $(0.72)          (0.04)            (0.22)             $ 9.40         (6.67)%   
1994(2)*         $10.00        $ 0.02           $ 0.33             -                 -                $10.35          3.50%    
- ------------------------------------------------------------                                                                   
European Small Cap Equity Fund                                                                                                 
- ------------------------------------------------------------                                                                   
1995(3)          $10.00        $ 0.12           $ 1.44           (0.01)              -                $11.55         15.66%    
- ------------------------------------------------------------                                                                   
Emerging Markets Equity Fund                                                                                                   
- ------------------------------------------------------------                                                                   
1995             $11.00        $ 0.04           $(2.29)          (0.02)            (0.62)             $ 8.11        (21.00)%   
1994(4)*         $10.00        $(0.01)          $ 1.01             -                 -                $11.00         10.00%    
- ------------------------------------------------------------                                                                   
Global Fixed Income Fund                                                                                                       
- ------------------------------------------------------------                                                                   
1995             $ 9.85        $ 0.35           $ 0.99           (0.20)              -                $10.99         13.88%    
1994(5)*         $10.00        $ 0.25           $(0.40)            -                 -                $ 9.85         (1.50)%   
- ------------------------------------------------------------                                                                   
International Fixed Income Fund                                                                                                
- ------------------------------------------------------------                                                                   
1995             $ 9.94        $ 0.42           $ 1.03           (0.05)              -                $11.34         14.66%    
1994(6)*         $10.00        $ 0.29           $(0.35)            -                 -                $ 9.94         (0.60)%   
- ------------------------------------------------------------                                                                   
Emerging Markets Debt Fund                                                                                                     
- ------------------------------------------------------------                                                                   
1995             $10.19        $ 0.65           $(0.17)          (0.11)            (0.01)             $10.55          4.85%    
1994(7)*         $10.00        $ 0.13           $ 0.06             -                 -                $10.19          1.90%    
                                                                                                                               
- ------------------------------------------------------------------------------------------------------------------------------------


<PAGE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------
                                                                                     Ratio of Net 
For a Share Outstanding Throughout Each Period Ended October 31      Ratio of         Investment
                                                                     Expenses        Income(Loss)
                                                   Ratio of Net     to Average        to Average
                                   Ratio of         Investment      Net Assets        Net Assets
                Net Assets       Expenses to       Income(Loss)     (Excluding        (Excluding       Portfolio
                  End of           Average          to Average       Expense            Expense         Turnover
    Year       Period (000)       Net Assets        Net Assets     Limitations)      Limitations)         Rate
    ----       ------------       ----------        ----------     ------------      ------------         ----
<C>             <C>                <C>                <C>              <C>             <C>              <C> 
- ------------------------------------------------------------                    
International Equity Fund                                                       
- ------------------------------------------------------------                    
1995 (1)*       $  2,738           0.90%              1.55%            2.73%           (0.28)%           19%
- ------------------------------------------------------------                    
International Small Cap Equity Fund                                             
- ------------------------------------------------------------                    
1995            $ 90,917           1.25%              0.41%            1.48%            0.18%            62%
1994(2)*        $ 68,798           1.25%              0.34%            1.67%           (0.08)%           41%
- ------------------------------------------------------------                    
European Small Cap Equity Fund                                                  
- ------------------------------------------------------------                    
1995(3)         $  9,336           1.25%              1.25%            2.24%            0.26%            34%
- ------------------------------------------------------------                    
Emerging Markets Equity Fund                                                    
- ------------------------------------------------------------                    
1995            $ 93,288           1.25%              0.44%            1.55%            0.14%            49%
1994(4)*        $ 56,892           1.36%             (0.12)%           1.79%           (0.55)%           45%
- ------------------------------------------------------------                    
Global Fixed Income Fund                                                        
- ------------------------------------------------------------                    
1995            $139,337           0.78%              5.61%            0.87%            5.52%           147%
1994(5)*        $ 53,915           0.85%              5.71%            1.28%            5.28%           173%
- ------------------------------------------------------------                    
International Fixed Income Fund                                                 
- ------------------------------------------------------------                    
1995            $ 27,603           0.78%              5.51%            1.15%            5.14%           187%
1994(6)*        $ 15,238           0.85%              5.66%            1.42%            5.09%           130%
- ------------------------------------------------------------                    
Emerging Markets Debt Fund                                                      
- ------------------------------------------------------------                    
1995            $ 84,438           1.79%             10.97%            2.05%           10.71%           266%
1994(7)*        $ 16,248           1.90%              7.04%            2.60%            6.34%            52%
                                                                
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


- --------------------------------------------------------------------------------
(1) International Equity Fund commenced operations on 5/15/95.
(2) International Small Cap Equity Fund commenced operations on 1/3/94.
(3) European Small Cap Equity Fund commenced operations on 11/1/94.
(4) Emerging Markets Equity Fund commenced operations on 2/2/94.
(5) Global Fixed Income Fund commenced operations on 1/3/94.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(6) International Fixed Income Fund commenced operations on 3/15/94.
(7) Emerging Markets Debt Fund commenced operations on 8/4/94.
(8) Distributions from net investment income include distributions of certain
    foreign currency gains and losses
*   All ratios, excluding total return and portfolio turnover rate for the
    period, are annualized.
- --------------------------------------------------------------------------------


                                     Page 3
<PAGE>

                            INTRODUCTION TO THE FUNDS

    Morgan Grenfell Investment Trust (the "Trust") offers a number of mutual
funds, each of which is a separate series of the Trust. This Prospectus relates
solely to shares of the Funds. Information regarding the Trust's other mutual
funds (the "Domestic Funds"), which invest primarily in U.S. securities markets,
is contained in a separate prospectus that may be obtained by calling
1-800-814-3401.

    Under normal market conditions, the Funds will invest primarily in foreign
securities. Investing primarily in foreign securities and across international
borders presents growth opportunities and potentially higher returns than could
be achieved by investing solely in the United States. International investing
permits participation in the economies of countries with business cycles and
stock and bond market performance often different from that in the United States
and, with more than one-half of the world's stock and bond market value outside
the United States, it can help broaden the investments of a portfolio otherwise
solely invested in domestic securities. International investments also involve
certain risks not normally associated with domestic investments. The Funds are
designed for long-term investors comfortable with the special risk and return
characteristics of investing internationally. See "Description of Securities and
Investment Techniques and Related Risks."

    MGIS, a member of the London-based Morgan Grenfell Asset Management, which
is a fully owned subsidiary of Deutsche Morgan Grenfell Group, serves as the
investment adviser to each of the Funds. Morgan Grenfell Asset Management has
been managing international investments for over thirty years and now has over
US$ 95 billion of assets under management. Within the Deutsche Morgan Grenfell
Group, MGIS has specialized in delivering international investment management
services to U.S. investors in both equity and fixed income markets.

Geographic and Issuer Focus

    For purposes of each Fund's investment objective and policies, a company is
considered to be located in a particular country if it (1) is organized under
the laws of that country and has a principal place of business in that country
or (2) derives 50% or more of its total revenues from business in that country.

    European Equity Fund, Pacific Basin Equity Fund, Japanese Small Cap Equity
Fund and European Small Cap Equity Fund focus their respective investments in
the particular region or country reflected in their names. In contrast,
International Equity Fund, Global Equity Fund, International Small Cap Equity
Fund, Global Fixed Income Fund and International Fixed Income Fund may spread
their investments across world markets.

    International Small Cap Equity Fund, Japanese Small Cap Equity Fund and
European Small Cap Equity Fund focus their investments on equity securities of
companies with market capitalizations that are small relative to the market
capitalizations of other issuers in the same market. Each of these Funds has its
own policy regarding what constitutes a small capitalization company. See
"Investment Objective and Policies." Small capitalization companies may offer
greater opportunities for capital growth than


                                      -4-
<PAGE>

larger, more mature companies, but investments in small capitalization companies
also involve special risks. See "Description of Securities and Investment
Techniques and Related Risks--Small Capitalization Companies."

    Emerging Markets Equity Fund and Emerging Markets Debt Fund seek to attain
their objectives by focusing on what are, in the Adviser's view, the most
promising markets and companies in the world's rapidly developing countries.
While emerging markets are highly volatile and subject to change with political
or economic developments, they offer the opportunity for substantial stock
market growth.

    Each of the Fixed Income Funds is non-diversified under the Investment
Company Act of 1940 (the "1940 Act") and, therefore, may be more susceptible
than the Equity Funds to developments affecting any single issuer of portfolio
securities. See "Description of Securities and Investment Techniques and Related
Risks--Diversification." Each of the Equity Funds is diversified under the 1940
Act.

    Certain of the Funds have no operating history and there can be no assurance
that a Fund will achieve its investment objective.

Selection of Portfolio Securities

    Equity and Equity-Related Securities. Equity and equity-related securities
in which the Equity Funds may invest include common stock, preferred stock, and
warrants, purchased call options and other rights to acquire stocks. See
"Description of Securities and Investment Techniques and Related Risks." In
selecting equity and equity-related securities for the Equity Funds' portfolios,
the Adviser will focus on those companies which have earnings growth that, in
the Adviser's view, has not been sufficiently reflected in the market price of
the security. The Equity Funds may also invest in equity and equity-related
securities where the fundamental value of the issuer is believed to be greater
than its current market price. Fundamental value will be determined by taking
into account various factors including earnings per share, the ratio of book
value to market price, and the company's cash flow and dividend yield. While
individual security selection is an important part of the investment process,
macro-economic factors such as prospects for relative economic growth among
countries, regions or geographic areas, expected levels of inflation and
political policies influencing business conditions will also be considered.

    Fixed Income Securities. Fixed income securities in which the Equity Funds
and Fixed Income Funds may invest include U.S. and foreign government securities
and corporate fixed income securities. See "Description of Securities and
Investment Techniques and Related Risks--Fixed Income Securities." In managing
the Fixed Income Funds, the Adviser uses a top-down approach which gives primary
emphasis to the relative attractiveness of bond markets and currencies. Markets
are selected after consideration is given to their risk and return outlook under
various economic scenarios. Currencies are evaluated separately, and the
underlying currency mix of each Fund's position in fixed income securities
generally is designed to enhance returns during periods of relative U.S. dollar
weakness and to protect return during periods of relative U.S. dollar strength.
These investment decisions require consideration of macro-economic factors such
as inflation, interest rates, monetary and fiscal policies, taxation and
political climate. The Adviser also considers the characteristics of individual
securities and issuers.


                                      -5-
<PAGE>

    The fixed income securities in which each Fund may invest may have stated
maturities ranging from overnight to forty years. Each Fixed Income Fund's
weighted average maturity will vary based upon the Adviser's assessment of
economic and market conditions.

Investment Techniques and Related Risks

    Foreign Securities. Investing in the securities of foreign issuers and of
companies whose securities are principally traded outside the United States
involves considerations and potential risks not typically associated with
investing in the securities of U.S. issuers whose securities are principally
traded in the United States. For example, in many foreign countries, securities
markets are less liquid, more volatile and less subject to governmental
regulation than U.S. securities markets. Also, in many foreign countries, there
is less publicly available information about foreign issuers. Moreover, the
value of the securities of foreign issuers held in a Fund's portfolio will be
affected by changes in currency exchange rates, which may be incurred due to
either changes in securities prices expressed in local currencies or due to
movements in exchange rates, or both. See "Description of Securities and
Investment Techniques and Related Risks--Foreign Securities."

    Foreign Currency Transactions. To attempt to manage exposure to fluctuations
in currency exchange rates and, in some circumstances, to seek to profit from
exchange rate fluctuations, each Fund may employ certain currency management
techniques, including forward foreign currency exchange contracts, options and
futures on currencies and currency swaps. These transactions are considered
speculative when entered into for non-hedging purposes. In addition, each Fund
may also employ a variety of active investment management techniques, including
entering into options, futures, options on futures, interest rate swaps and
when-issued and forward commitment transactions in order to hedge its positions
against potential adverse changes in future foreign currency exchange rates and
for non-hedging purposes. Engaging in these transactions entails special risks.
See "Description of Securities and Investment Techniques and Related
Risks--Currency Management Techniques."

    Fixed Income Securities. The net asset value of the shares of the Funds
investing in fixed income securities will change in response to fluctuations in
interest rates and in currency exchange rates. When interest rates decline, the
value of fixed income securities generally can be expected to rise. Conversely,
when interest rates rise, the value of fixed income securities generally can be
expected to decline. The performance of investments in fixed income securities
denominated in a foreign currency generally can be expected to increase when the
value of the foreign currency appreciates. A rise in foreign interest rates or a
decline in the value of foreign currencies relative to the U.S. dollar generally
can be expected to depress the value of a Fund's investments in securities
denominated in a foreign currency. See "Description of Securities and Investment
Techniques and Related Risks--Fixed Income Securities."

    Lower Quality Fixed Income Securities. The Emerging Markets Debt Fund may
invest in fixed income securities which are unrated or rated in the lowest
rating categories by Standard & Poor's Ratings Group ("Standard & Poor's") or
Moody's Investors Service, Inc. ("Moody's") (i.e., ratings of BB or lower by
Standard & Poor's or Ba or lower by Moody's). Securities rated BB or Ba or below
(or comparable unrated securities) are considered speculative, and payments of
principal and interest thereon may be questionable. In some cases, these
securities may be highly speculative, have poor prospects for reaching
investment grade standing and be in default. See "Description of Securities and
Investment Techniques and Related Risks--Fixed Income Securities." A chart
showing the distribution of Emerging Markets Debt Fund's assets across the
various ratings categories is set forth in Appendix A.


                                      -6-
<PAGE>

    Temporary Defensive Investments. When market conditions warrant, in the
judgment of the Adviser, each Fund may, for temporary defensive purposes, invest
up to 100% of its total assets in U.S. or, subject to tax requirements, Canadian
dollars, U.S. Government securities maturing within one year (including
repurchase agreements collateralized by such securities) and commercial paper of
U.S. or foreign issuers, cash equivalents and certain high grade fixed income
securities. See "Description of Securities and Investment Techniques and Related
Risks--Temporary Defensive Investments."

INVESTMENT OBJECTIVES AND POLICIES

International Equity Fund

    The investment objective of the International Equity Fund is to maximize
capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of
companies located in countries other than the United States. The Fund will focus
on securities traded in equity markets of the countries represented in the
Morgan Stanley Capital International-Europe Australia Far East Index (the
"EAFE(R) Index") but may decide, on a stock-specific basis, to make investments
in other foreign markets. The EAFE(R) Index includes the equity markets of
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
equity and equity-related securities of companies in at least three foreign
countries.

    The Fund may invest more than 25% of its total assets in each of Japan and
the United Kingdom. The concentration of the Fund's investments in these
countries will cause the Fund to be particularly susceptible to the effects of
political and economic developments in these countries. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of issuers located in the United States.

Global Equity Fund

    The investment objective of the Global Equity Fund is to maximize capital
appreciation. Under normal circumstances, the Fund pursues this objective by
investing at least 65% of its total assets in equity and equity-related
securities (but not less than 60% directly in stocks) of companies in at least
three countries. These countries may include Austria, Belgium, Denmark, Finland,
France, Germany, Holland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain,
Sweden, Switzerland, the United Kingdom, the United States, Canada, Mexico,
Japan, Hong Kong, Singapore, Australia, Malaysia, Indonesia, the Philippines,
Thailand, and New Zealand. At the discretion of the Adviser, the Fund may invest
in equity and equity-related securities of companies located in other countries.


                                      -7-
<PAGE>

    The Fund may invest more than 25% of its total assets in each of Japan, the
United States and the United Kingdom. The concentration of the Fund's
investments in these countries will cause the Fund to be particularly
susceptible to the effects of political and economic developments in these
countries. See "Description of Securities and Investment Techniques and Related
Risks--Region and Country Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents and
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser) of issuers
located anywhere in the world.

European Equity Fund

    The investment objective of the European Equity Fund is to maximize capital
appreciation. Under normal circumstances, the Fund pursues this objective by
investing at least 65% of its total assets in equity and equity-related
securities (but not less than 60% directly in stocks) of companies located in
European countries, including Austria, Belgium, Denmark, Finland, France,
Germany, Holland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden,
Switzerland and the United Kingdom. At the discretion of the Adviser, the Fund
may invest in equity and equity-related securities of companies located in other
European countries.

      The Fund may invest more than 25% of its total assets in each of France,
Germany and the United Kingdom, reflecting the dominance of these countries'
stock markets in Europe. The concentration of the Fund's investments in these
countries will cause the Fund to be particularly susceptible to the effects of
political and economic developments in these countries. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of issuers located in non-European countries,
including the United States.

Pacific Basin Equity Fund

    The investment objective of the Pacific Basin Equity Fund is to maximize
capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of
companies located in Pacific Basin countries, including Japan, Australia,
Malaysia, Singapore, Hong Kong, Thailand, the Philippines, Indonesia, Taiwan,
South Korea and New Zealand. At the discretion of the Adviser, the Fund may
invest in other Pacific Basin countries.

      The Fund may invest more than 25% of its total assets in each of Japan and
Hong Kong, reflecting the dominance of these stock markets in the Pacific Basin.
The concentration of the Fund's investments in Japan and Hong Kong will cause
the Fund to be particularly susceptible to the effects of political and economic
developments in Japan, Hong Kong and China. See "Description of Securities and
Investment Techniques and Related Risks--Region and Country Concentration."


                                      -8-
<PAGE>

    Up to 35% of Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of issuers located in countries outside the Pacific
Basin, including the United States.

International Small Cap Equity Fund

    The investment objective of the International Small Cap Equity Fund is to
maximize capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of small
capitalization companies located in countries other than the United States.
Small capitalization companies are those ranked according to market
capitalization in the bottom 25% of issuers listed on a stock exchange and
companies listed on a secondary market (e.g., the Tokyo Stock Exchange Second
Section, the Singapore SESDAQ Market) or over-the-counter market.

    The Fund will focus on companies located in countries represented in the
NatWest Euro Pacific Index, but may decide, on a stock-specific basis, to make
investments in companies located outside of these countries. The Nat West Euro
Pacific Index includes the equity markets of Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malasia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland,
Thailand and the United Kingdom. Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity and equity-related securities
issued by small capitalization companies in at least three different foreign
countries.

    The Fund may invest more than 25% of its total assets in each of Japan and
the United Kingdom. The concentration of the Fund's investments in these
countries will cause the Fund to be particularly susceptible to the effects of
political and economic developments in these countries. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of large and medium capitalization companies located
outside the United States and companies of any size located in the United
States.

Japanese Small Cap Equity Fund

    The investment objective of the Japanese Small Cap Equity Fund is to
maximize capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of small
capitalization companies located in Japan. Small capitalization companies are
those ranked according to market capitalization in the bottom 20% of issuers
listed on the Tokyo Stock Exchange and companies listed on a Japanese secondary
market (e.g., the Tokyo Stock Exchange Second Section) or over-the-counter
market. The concentration of the Fund's investments in Japanese companies will
cause the Fund to be particularly susceptible to the effects of social,
political and economic events that occur in Japan. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."


                                      -9-
<PAGE>

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of large and medium capitalization companies located
in Japan and companies of any size located in countries other than Japan,
including the United States.

European Small Cap Equity Fund

    The investment objective of the European Small Cap Equity Fund is to
maximize capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of small
capitalization companies located in European countries, including Austria,
Belgium, Denmark, Finland, France, Germany, Holland, Ireland, Italy, Luxembourg,
Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. At the
discretion of the Adviser, the Fund may invest in other European countries.
Small capitalization companies are those ranked according to market
capitalization in the bottom 25% of issuers listed on a European stock exchange
and companies listed on a European secondary market or over-the-counter market.

    The Fund may invest more than 25% of its total assets in each of Germany,
France and the United Kingdom, reflecting the dominance of these countries'
stock markets in Europe. The concentration of the Fund's investments in these
countries will cause the Fund to be particularly susceptible to the effects of
political and economic developments in these countries. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of large and medium capitalization companies located
in European countries and companies of any size located in non-European
countries, including the United States.

Emerging Markets Equity Fund

    The investment objective of the Emerging Markets Equity Fund is to maximize
capital appreciation. Under normal circumstances, the Fund pursues this
objective by investing at least 65% of its total assets in equity and
equity-related securities (but not less than 60% directly in stocks) of
companies that are located in countries with emerging securities markets; that
is, countries with securities markets that are, in the opinion of the Adviser,
emerging as investment markets but that have yet to reach a level of maturity
associated with developed foreign stock markets, especially in terms of foreign
investor participation. Countries with emerging securities markets include:
Algeria, Argentina, Bangladesh, Brazil, Bulgaria, Chile, China, Colombia, Costa
Rica, Cyprus, Czech Republic, Ecuador, Egypt, Greece, Hungary, India, Indonesia,
Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Uruguay,
Venezuela and Vietnam. At the discretion of the Adviser, the Fund may invest in
other countries with emerging securities markets.

    Investments in securities of companies located in countries with emerging
securities markets may offer greater opportunities for capital growth than
investments in securities traded in developed markets. However, investing in
emerging securities markets also involves risks that are not present in


                                      -10-
<PAGE>

developed markets. See "Description of Securities and Investment Techniques and
Related Risks--Foreign Securities."

    The Fund may invest more than 25% of its total assets in each of Brazil,
Malaysia and Mexico. The concentration of the Fund's investments in these
countries will cause the Fund to be particularly susceptible to the effects of
political and economic developments in these countries. See "Description of
Securities and Investment Techniques and Related Risks--Region and Country
Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents,
investment grade fixed income securities (i.e., securities rated BBB, Baa, or
higher by Standard & Poor's, Moody's or comparable rating agency, or, if
unrated, determined to be of comparable quality by the Adviser), and equity and
equity-related securities of issuers traded in developed markets, including the
U.S. securities markets.

Global Fixed Income Fund

    The investment objective of the Global Fixed Income Fund is to maximize
total return, emphasizing current income and, to a lesser extent, providing
opportunities for capital growth consistent with reasonable investment risk.
Under normal circumstances, the Fund pursues this objective by investing at
least 65% of its total assets in fixed income securities of issuers in at least
three countries, which may include: Austria, Belgium, Denmark, Finland, France,
Germany, Holland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom, the United States, Canada, Japan, Australia and
New Zealand. At the discretion of the Adviser, the Fund may invest in fixed
income securities of issuers located in other countries.

    The fixed income securities in which the Fund invests consist primarily of
high grade debt obligations of foreign governments or their agencies,
instrumentalities, political subdivisions and authorities; debt obligations
issued or guaranteed by international or supranational entities; U.S. Government
securities and high grade fixed income securities of U.S. and foreign corporate
issuers. High grade securities include securities rated within the three highest
grades by Moody's (Aaa, Aa and A), Standard & Poor's (AAA, AA and A) or
comparable rating agency or, if unrated, determined to be of comparable quality
by the Adviser. The Fund may invest up to 10% of its total assets in
governmental and corporate fixed income securities that are rated in the fourth
highest grade by Moody's (Baa), Standard & Poor's (BBB) or comparable rating
agency or, if unrated, determined to be of comparable quality by the Adviser.
Securities rated in the fourth highest grade by any of the major rating agencies
have speculative characteristics. See "Description of Securities and Investment
Techniques and Related Risks--Fixed Income Securities" for a description of
these risks and Appendix A to this Prospectus for a description of the various
ratings categories.

    The Fund may invest more than 25% of its total assets in each of Japan, the
United States, Germany and the United Kingdom. The concentration of the Fund's
investments in these countries will cause the Fund to be particularly
susceptible to the effects of political and economic developments in these
countries, See "Description of Securities and Investment Techniques and Related
Risks--Region and Country Concentration."

    Up to 35% of the Fund's total assets may be invested in cash equivalents.


                                      -11-
<PAGE>

International Fixed Income Fund

    The investment objective of the International Fixed Income Fund is to
maximize total return, emphasizing current income and, to a lesser extent,
providing opportunities for capital growth consistent with reasonable investment
risk. Under normal circumstances, the Fund pursues this objective by investing
at least 65% of its total assets in fixed income securities of issuers in at
least three countries other than the United States, including Austria, Belgium,
Denmark, Finland, France, Germany, Holland, Ireland, Italy, Luxembourg, Norway,
Portugal, Spain, Sweden, Switzerland, the United Kingdom, Canada, Japan,
Australia, and New Zealand. At the discretion of the Adviser, the Fund may
invest in fixed income securities of issuers located in other foreign countries.

    The fixed income securities in which the Fund invests consist primarily of
high grade debt obligations of foreign governments or their agencies,
instrumentalities, political subdivisions and authorities; debt obligations
issued or guaranteed by international or supranational entities and high grade
fixed income securities of foreign corporate issuers. High grade securities
include securities rated within the three highest grades by Moody's (Aaa, Aa and
A), Standard & Poor's (AAA, AA and A) or comparable rating agency or, if
unrated, determined to be of comparable quality by the Adviser. The Fund may
invest up to 10% of its total assets in governmental and corporate fixed income
securities that are rated in the fourth highest grade by Moody's (Baa), Standard
& Poor's (BBB) or comparable rating agency or, if unrated, determined to be of
comparable quality by the Adviser. Securities rated in the fourth highest grade
by any of the major rating agencies have speculative characteristics. See
"Description of Securities and Investment Techniques and Related Risks--Fixed
Income Securities" for a description of these risks and Appendix A attached to
this Prospectus for a description of the various ratings categories.

    The Fund may invest more than 25% of its total assets in each of Germany,
France, Japan, Italy and the United Kingdom. The concentration of the Fund's
investments in these countries will cause the Fund to be particularly
susceptible to the effects of political and economic developments in these
countries. See "Description of Securities and Investment Techniques and Related
Risks--Region and Country Concentration."

    Up to 35% of the Fund's total assets may be invested in fixed income
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.

Emerging Markets Debt Fund

    The investment objective of the Emerging Markets Debt Fund is to maximize
total return. Under normal circumstances, the Fund pursues this objective by
investing at least 65% of its total assets in fixed income securities of issuers
located in countries with emerging securities markets, including Algeria,
Argentina, Bangladesh, Brazil, Bulgaria, Chile, China, Colombia, Costa Rica,
Cyprus, Czech Republic, Ecuador, Egypt, Greece, Hungary, India, Indonesia,
Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, Thailand, Turkey, Uruguay, Venezuela and Vietnam. At the
discretion of the Adviser, the Fund may invest in fixed income securities of
issuers in other countries that have emerging securities markets. Investments in
emerging securities markets may offer greater opportunities for total return
than investments in securities traded in developed markets.


                                      -12-
<PAGE>

However, investing in emerging securities markets also involves risks that are
not present in developed markets. See "Description of Securities and Investment
Techniques and Related Risks--Foreign Securities."

    Under normal market conditions, the Fund's investments in emerging
securities markets will consist principally of (i) loans, debt instruments and
fixed income securities issued or guaranteed by sovereign governments or their
agencies and instrumentalities, (ii) sub-participations in such loans, debt
instruments and fixed income securities and (iii) financial instruments, such as
call options, the value of which are dependent on the prices of such loans, debt
instruments and fixed income securities. The loans and debt instruments in which
the Fund may invest may be denominated in a major currency, such as the U.S.
dollar or the German Deutschemark, or in the local currency. The price of loans
and debt instruments denominated in a local currency may be linked to the value
of a major currency. The Fund's investments may include so-called "Brady Bonds,"
which recently have been issued by the governments of Argentina, Brazil,
Bulgaria, Costa Rica, Dominican Republic, Equador, Jordan, Mexico, Nigeria,
Poland, Philippines, Uruguay and Venezuela, as well as non-performing or
semi-performing instruments with potential to be converted into securities under
a Brady plan or otherwise to appreciate in value as debt servicing prospects
improve. See "Description of Securities and Investment Techniques and Related
Risks--Fixed Income Securities." The Fund's investments in emerging securities
markets may also include fixed income securities of companies located in
countries with emerging securities markets.

    Fixed income securities in which the Fund may invest may be of any credit
quality, including securities not paying interest currently, zero coupon bonds,
securities that pay interest in the form of other securities (i.e., "pay in
kind" or PIK securities) and securities in default. Fixed income securities
having low credit quality involve greater price volatility and risk of loss of
principal and income. For a description of these and other risks of investing in
lower quality fixed income securities, see "Description of Securities and
Investment Techniques and Related Risks--Fixed Income Securities." See Appendix
A to this Prospectus for a description of the various ratings categories of
Moody's and Standard & Poor's and a chart showing the distribution of the Fund's
assets across the various ratings categories.

    The Fund may invest more than 25% of its total assets in each of Mexico and
Brazil. The concentration of the Fund's investments in these countries will
cause the Fund to be particularly susceptible to the effects of political and
economic developments in these countries. See "Description of Securities and
Investment Techniques and Related Risks--Region and Country Concentration."

    Up to 35% of the Fund's total assets may be invested in fixed income
securities issued or guaranteed by the U.S. Government.

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES AND RELATED RISKS

Foreign Securities

    General. Subject to their respective investment objectives and policies, the
Funds may invest in securities of foreign issuers, including U.S.
dollar-denominated and non-dollar denominated foreign equity and fixed income
securities and in certificates of deposit issued by foreign banks and foreign
branches of U.S. banks. While investments in securities of foreign issuers and
non-U.S. dollar denominated securities may offer investment opportunities not
available in the United States, such investments also involve significant risks
not typically associated with investing in domestic securities.


                                      -13-
<PAGE>

In many foreign countries, there is less publicly available information about
foreign issuers, and there is less government regulation and supervision of
foreign stock exchanges, brokers and listed companies. Also in many foreign
countries, companies are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those applicable to domestic
issuers. Security trading practices and custody arrangements abroad may offer
less protection to the Funds' investments and there may be difficulty in
enforcing legal rights outside the United States. Settlement of transactions in
some foreign markets may be delayed or may be less frequent than in the United
States which could affect the liquidity of the Funds' portfolios. Additionally,
in some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of securities, property, or
other Fund assets, political or social instability or diplomatic developments
which could affect investments in foreign securities.

    To the extent the Funds' investments are denominated in foreign currencies,
the Funds' net asset values may be affected favorably or unfavorably by
fluctuations in currency exchange rates and by changes in exchange control
regulations. For example, if the Adviser increases a Fund's exposure to a
foreign currency, and that currency's value subsequently falls, the Adviser's
currency management may result in increased losses to the Fund. Similarly, if
the Adviser hedges a Fund's exposure to a foreign currency, and that currency's
value rises, the Fund will lose the opportunity to participate in the currency's
appreciation. The Funds will incur transaction costs in connection with
conversions between currencies.

    Investments in American, European, Global and International Depository
Receipts. The Funds may invest in foreign securities in the form of American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global
Depository Receipts ("GDRs") or International Depository Receipts ("IDRs"). ADRs
are receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs and
IDRs are receipts issued in Europe typically by non-U.S. banking and trust
companies that evidence ownership of either foreign or U.S. securities. GDRs are
receipts issued by either a U.S. or non-U.S. banking institution evidencing
ownership of the underlying foreign securities. Generally, ADRs, in registered
form, are designed for use in U.S. securities markets and EDRs, GDRs and IDRs,
in bearer form, are designed for use in European securities markets. An ADR,
EDR, GDR or IDR may be denominated in a currency different from the currency in
which the underlying foreign security is denominated.

    Investments in Emerging Markets. Each of the Funds may invest to varying
degrees in one or more countries with emerging securities markets. These
countries are generally located in Latin America, Europe, the Middle East,
Africa and Asia. Political and economic structures in many of these countries
may be undergoing significant evolution and rapid development, and these
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of these countries may have in the past
failed to recognize private property rights and, at times, may have nationalized
or expropriated the assets of private companies. As a result, these risks,
including the risk of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the value of a Fund's investments in these countries, as well as the
availability of additional investments in these countries. The small size and
inexperience of the securities markets in certain of these countries and the
limited volume of trading in securities in these countries may make the Funds'
investments in these countries illiquid and more volatile than investments in
most Western European countries, and the Funds may be required to establish
special custodial or other arrangements before making certain investments in
some of these countries. There may be little financial or accounting information
available with respect to issuers located in certain of these countries, and it
may be difficult as a result to assess the value or prospects of an investment
in these countries.


                                      -14-
<PAGE>

The laws of some foreign countries may limit the Funds' ability to invest in
securities of certain issuers located in those countries.

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

Currency Management Techniques

    General. The performance of foreign currencies relative to that of the U.S.
dollar is an important factor in each Fund's performance and the Adviser may
manage the Fund's exposure to various currencies to seek to take advantage of
the yield, risk and return characteristics that different currencies can
provide. Currency exchange rates may fluctuate significantly over short periods
of time causing, together with other factors, a Fund's net asset value to
fluctuate as well, notwithstanding the performance of a Fund's underlying
assets. Currency exchange rates generally are determined by the forces of supply
and demand in the foreign exchange markets and the relative merits of
investments in different countries, actual or anticipated changes in interest
rates and other complex factors, as seen from an international perspective.
Currency exchange rates also can be affected by intervention, or failure to
intervene, by U.S. or foreign governments or central banks, or by currency
controls or political developments in the United States or abroad. To the extent
that a substantial portion of a Fund's total assets, adjusted to reflect the
Fund's net position after giving effect to currency transactions, is denominated
in the currency of a foreign country, the Fund will be more susceptible to the
risk of adverse economic and political developments in that country.

    In an attempt to manage exposure to currency exchange rate fluctuations, the
Funds may enter into forward foreign currency exchange contracts or currency
swap agreements, purchase securities indexed to foreign currencies, and buy and
sell options and futures contracts relating to foreign currencies and options on
such futures contracts. See "Forward Foreign Currency Transactions," "Interest
Rate and Currency Swaps," "Options" and "Futures and Options on Futures" below.
The Funds may use currency hedging techniques in the normal course of business
to lock in an exchange rate in connection with purchases and sales of securities
denominated in foreign currencies. Other currency management strategies allow
the Adviser to hedge portfolio securities, to shift investment exposure from one
currency to another, or to attempt to profit from anticipated declines in the
value of a foreign currency relative to the U.S. dollar. There is no overall
limitation on the amount of assets that any of the Funds may commit to currency
management strategies. Although the Adviser may attempt to manage currency
exchange rate risks, there is no assurance that the Adviser will do so, or do so
at an appropriate time or that the Adviser will be able to predict exchange
rates accurately.

    Securities held by a Fund are generally denominated in the currency of the
foreign market in which the investment is made. However, securities held by a
Fund may be denominated in the currency of a country other than the country in
which the security's issuer is located. For example, Emerging Markets Debt Fund
often purchases foreign securities that are denominated in U.S. dollars. The
Funds may also invest in securities denominated in the European Currency Unit
("ECU"), which is a "basket" consisting of specified amounts of the currencies
of certain member countries of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of


                                      -15-
<PAGE>

Ministers of the European Community from time to time to reflect changes in
their relative values. In addition, the Fund may invest in securities
denominated in other currency "baskets."

    Forward Foreign Currency Transactions. Each of the Funds may conduct foreign
currency exchange transactions on a spot (i.e., cash) basis at the rate
prevailing in the foreign currency exchange market or by entering into forward
currency exchange contracts ("forward currency contracts") to purchase or sell
foreign currencies. A Fund may purchase or sell forward currency contracts for
hedging purposes and also for non-hedging purposes when the Adviser anticipates
that the foreign currency will appreciate or depreciate in value, but securities
denominated or quoted in that currency do not present attractive investment
opportunities and are not held in a Fund's portfolio. When purchased or sold for
non-hedging purposes, forward currency contracts are speculative.

    Each Fund may enter into forward currency contracts to purchase foreign
currency to protect against an anticipated rise in the U.S. dollar price of
securities that it intends to purchase. A Fund may enter into contracts to sell
foreign currency to protect against the decline in value of its foreign currency
denominated or quoted portfolio securities, or a decline in the value of
anticipated dividends from such securities, due to a decline in the value of the
foreign currency against the U.S. dollar. Contracts to sell foreign currency
could limit any potential gain which might be realized by a Fund if the value of
the hedged currency increased.

    A Fixed Income Fund may sell U.S. dollars and buy foreign currency forward
in order to gain exposure to a currency which is expected to appreciate against
the U.S. dollar. This speculative strategy allows a Fund to benefit from
currency appreciation potential without requiring it to purchase a local fixed
income instrument, for which prospects may be relatively unattractive. It is the
Adviser's intention that each Fund's net U.S. dollar currency exposure generally
will not fall below zero (i.e., that net short positions in the U.S. dollar
generally will not be taken).

    If a Fund enters into a forward currency contract to sell foreign currency
for non-hedging purposes or to buy foreign currency for any purpose, the forward
currency contract generally will not have a term greater than one year. The
forecasting of short-term currency market movements is extremely difficult and
there can be no assurance that short-term hedging strategies will be successful.

    When a Fund enters into a forward currency contract to sell foreign currency
for non-hedging purposes or to buy foreign currency for any purpose, the Fund
will be required to place cash, U.S. Government securities or liquid, high grade
debt securities in a segregated account, which will be marked to market daily,
in an amount equal to the value of the total assets committed to the
consummation of the forward currency contract. If the value of the securities
placed in the segregated account declines, additional cash or securities will be
placed in the account so that the value of the account will equal the amount of
the Fund's commitment with respect to the contract.

    Forward currency contracts are subject to the risk that the counterparty to
such contract will default on its obligations. Since a forward currency contract
is not guaranteed by an exchange or clearinghouse, a default on the contract
would deprive a Fund of unrealized profits, transaction costs or the benefits of
a currency hedge or force a Fund to cover its purchase or sale commitments, if
any, at the current market price. The Funds will not enter into forward currency
contracts unless the credit quality of the unsecured senior debt or the
claims-paying ability of the counterparty is determined to be investment grade
by the Adviser. The Adviser will monitor the claims-paying ability of the
counterparty on an ongoing basis.


                                      -16-
<PAGE>

    A Fund may also utilize forward foreign currency contracts to establish a
synthetic investment position designed to change the currency characteristics of
a particular security without the need to sell such security. For example, a
Fund wishing to acquire a particular security that is denominated in French
Francs, but wishing to seek exposure to a second currency and not the Franc, may
simultaneously enter into a forward contract to sell an equivalent value of
Francs in exchange for such foreign currency. Synthetic investment positions
will typically involve the purchase of U.S. dollar-denominated securities
together with a forward contract to purchase the currency to which the Fund
seeks exposure and to sell U.S. dollars. This may be done because the range of
highly liquid short-term instruments available in the U.S. may provide greater
liquidity to a Fund than actual purchases of foreign currency-denominated
securities in addition to providing superior returns in some cases. Depending on
(a) each Fund's liquidity needs, (b) the relative yields of securities
denominated in different currencies and (c) spot and forward currency rates, a
significant portion of a Fund's assets may be invested in synthetic investment
positions, subject to compliance with the tax requirements for qualification as
a regulated investment company. See "Taxes."

    There is a risk in adopting a synthetic investment position. It is
impossible to forecast with absolute precision what the market value of a
particular security will be at any given time. If the value of the U.S.
dollar-denominated security is not exactly matched with a Fund's obligation
under a forward currency contract on the date of maturity, the Fund may be
exposed to some risk of loss from fluctuations in the value of the U.S. dollar.
Although the Adviser will attempt to hold such mismatching to a minimum, there
can be no assurance that the Adviser will be able to do so.

    Cross-Hedging. At the discretion of the Adviser, each of the Fixed Income
Funds may employ the currency hedging strategy known as "cross-hedging" by using
forward currency contracts, currency options or a combination of both. When
engaging in cross-hedging, a Fund seeks to protect against a decline in the
value of a foreign currency in which certain of its portfolio securities are
denominated by selling that currency forward into a different foreign currency
for the purpose of diversifying the Fund's total currency exposure or gaining
exposure to a foreign currency that is expected to appreciate.

    For a description of the Funds' transactions in currency options, futures
and swaps, see "Options--Currency Options," "Futures Contracts and Options on
Futures Contracts" and "Interest Rate and Currency Swaps."

Small Capitalization Companies

    The Japanese Small Cap Equity Fund, the European Small Cap Equity Fund and
the International Small Cap Equity Fund each invests a significant portion of
its assets in smaller, lesser-known, foreign companies which the Adviser
believes offer greater growth potential than larger, more mature, better-known
companies. Investing in the securities of these companies, however, also
involves greater risk and the possibility of greater portfolio price volatility.
Among the reasons for the greater price volatility of these small companies and
unseasoned stocks are the less certain growth prospects of smaller firms, the
lower degree of liquidity in the markets for such stocks and the greater
sensitivity of small companies to changing economic conditions in their
geographic region. For example, securities of these companies involve higher
investment risk than that normally associated with larger firms due to the
greater business risks of small size and limited product lines, markets,
distribution channels and financial and managerial resources.


                                      -17-
<PAGE>

Options

    Written Options. Each Fund may write (sell) covered put and call options on
equity and fixed income securities and enter into related closing transactions.
A Fund may receive fees (referred to as "premiums") for granting the rights
evidenced by the options. However, in return for the premium, the Fund assumes
certain risks. For example, in the case of a written call option, the Fund
forfeits the right to any appreciation in the underlying security while the
option is outstanding. A put option gives to its purchaser the right to compel
the Fund to purchase an underlying security from the option holder at the
specified price at any time during the option period. In contrast, a call option
written by the Fund gives to its purchaser the right to compel the Fund to sell
an underlying security to the option holder at a specified price at any time
during the option period. Upon the exercise of a put option written by a Fund,
the Fund may suffer a loss equal to the difference between the price at which
the Fund is required to purchase the underlying security and its market value at
the time of the option exercise, less the premium received for writing the
option. All options written by a Fund are covered. In the case of a call option,
this means that the Fund will own the securities subject to the option or an
offsetting call option as long as the written option is outstanding, or will
have the absolute and immediate right to acquire the securities that are subject
to the written option. In the case of a put option, this means that the Fund
will deposit cash or cash equivalents or a combination of both in a segregated
account with the custodian with a value at least equal to the exercise price of
the put option.

    Purchased Options. The Funds may also purchase put and call options on
securities. The advantage to the purchaser of a call option is that it may hedge
against an increase in the price of portfolio securities it ultimately wishes to
buy. The advantage to the purchaser of a put option is that it may hedge against
a decrease in the price of portfolio securities it ultimately wishes to sell.

    Each Fund may enter into closing transactions in order to offset an open
option position prior to exercise or expiration by selling an option it has
purchased or by entering into an offsetting option. If a Fund cannot effect
closing transactions, it may have to retain a security in its portfolio it would
otherwise sell or deliver a security it would otherwise retain. The Funds may
purchase and sell options traded on recognized foreign exchanges. The Funds may
also purchase and sell options traded on U.S. exchanges and, to the extent
permitted by law, options traded over-the-counter.

    Yield Curve Options. The Funds may enter into options on the yield spread,
or yield differential between two securities. These options are referred to as
yield curve options. In contrast to other types of options, a yield curve option
is based on the difference between the yields of designated securities, rather
than the prices of the individual securities, and is settled through cash
payments. Accordingly, a yield curve option is profitable to the holder if this
differential widens (in the case of a call) or narrows (in the case of a put),
regardless of whether the yields of the underlying securities increase or
decrease.

    Currency Options. The Funds may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or over-the-counter) to
manage portfolio exposure to changes in U.S. dollar exchange rates. Call options
on foreign currency written by a Fund will be covered, which means that the Fund
will own an equal amount of the underlying foreign currency. With respect to put
options on foreign currency written by a Fund, the Fund will deposit cash or
cash equivalents or a combination of both in a segregated account with the
custodian in an amount equal to the amount the Fund would be required to pay
upon exercise of the put option.


                                      -18-
<PAGE>

Stock Index Options

    The Funds may purchase and write exchange-listed put and call options on
stock indices to hedge against risks of market-wide price movements. A stock
index measures the movement of a certain group of stocks by assigning relative
values to the common stocks included in the index. Examples of well-known
foreign stock indices are the Toronto Stock Exchange Composite 100 and the
Financial Times Stock Exchange 100. Options on stock indices are similar to
options on securities. However, because options on stock indices do not involve
the delivery of an underlying security, the option represents the holder's right
to obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the exercise date.

    When a Fund writes an option on a stock index, it will cover the option by
depositing cash or cash equivalents or a combination of both in an amount equal
to the market value of the option, in a segregated account, which will be marked
to market daily, with the custodian, and will maintain the account while the
option is open. Alternatively, and only in the case of a written call option on
a stock index, the Fund may cover the written option by owning an offsetting
call option.

Futures Contracts and Options on Futures Contracts

    When deemed advisable by the Adviser, each of the Funds may enter into
futures contracts and purchase and write options on futures contracts to hedge
against changes in interest rates, securities prices or currency exchange rates
or for certain non-hedging purposes. The Funds may purchase and sell financial
futures contracts, including stock index futures, and purchase and write related
options. A Fund may engage in futures and related options transactions for
hedging and non-hedging purposes as defined in regulations of the Commodity
Futures Trading Commission. A Fund will not enter into futures contracts or
options thereon for non-hedging purposes, if immediately thereafter, the
aggregate initial margin and premiums required to establish non-hedging
positions in futures contracts and options on futures will exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. Transactions in futures
contracts and options on futures involve brokerage costs, require margin
deposits and, in the case of contracts and options obligating the Funds to
purchase securities or currencies, require the Funds to segregate assets with a
value equal to the amount of the Fund's obligations.

Limitations and Risks Associated With Transactions In Forward Foreign Currency
Exchange Contracts, Options, Futures Contracts and Options on Futures Contracts

    Each of the Funds' active management techniques involves (1) liquidity risk
that contractual positions cannot be easily closed out in the event of market
changes or generally in the absence of a liquid secondary market, (2)
correlation risk that changes in the value of hedging positions may not match
the securities market and foreign currency fluctuations intended to be hedged,
and (3) market risk that an incorrect prediction of securities prices or
exchange rates by the Adviser may cause a Fund to perform worse than if such
positions had not been taken. The ability to terminate over-the-counter options
is more limited than with exchange traded options and may involve the risk that
the counterparty to the option will not fulfill its obligations. In accordance
with a position taken by the Securities and Exchange Commission (the
"Commission"), each Fund will limit its investments in illiquid securities to
15% of the Fund's net assets and treat over-the-counter options as illiquid
securities subject to this


                                      -19-
<PAGE>

limitation. With respect to options written with primary dealers in U.S.
Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of the illiquid securities may be
calculated with reference to the formula price.

    The use of options, futures and forward currency contracts is a highly
specialized activity which involves investment techniques and risks that are
different from those associated with ordinary portfolio transactions. Gains and
losses on investments in options and futures depend on the Adviser's ability to
predict the direction of stock prices, interest rates, currency movements and
other economic factors. The loss that may be incurred by a Fund in entering into
futures contracts and written options thereon and forward currency contracts is
potentially unlimited. There is no assurance that higher than anticipated
trading activity or other unforeseen events might not, at times, render certain
facilities of an options clearing entity or other entity performing the
regulatory and liquidity functions of an options clearing entity inadequate, and
thereby result in the institution by an exchange of special procedures which may
interfere with the timely execution of customers' orders. Options and futures
traded on foreign exchanges generally are not regulated by U.S. authorities, and
may offer less liquidity and less protection to a Fund in the event of default
by the other party to the contract.

      Except as set forth above under "Futures Contracts and Options on Futures
Contracts" there is no limit on the percentage of a Fund's assets that may be
invested in futures contracts and related options or forward currency contracts.
A Fund may not invest more than 25% of its total assets in purchased protective
put options nor more than 5% of its total assets in purchased options other than
protective put options. A Fund's transactions in options, forward currency
contracts, futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes. See "Taxes" in the Statement of Additional Information.

Fixed Income Securities

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

    Risk Factors of Lower Quality Securities. The Emerging Markets Debt Fund may
invest in U.S. and foreign fixed income securities receiving a Standard & Poor's
rating of BBB or lower, a Moody's rating of Baa or lower, or an equivalent
rating. These securities are considered speculative and, while generally
providing greater income than investments in higher quality securities, involve
greater risk of loss of principal and income, including the possibility of
default or bankruptcy of the issuers of such securities, and have greater price
volatility, especially during periods of economic uncertainty or change.
Securities rated D by Standard & Poor's, Moody's or comparable rating agency are
in default.


                                      -20-
<PAGE>

These lower quality fixed income securities tend to be affected by economic
changes and short-term corporate and industry developments to a greater extent
than higher quality securities, which react primarily to fluctuations in the
general level of interest rates. To the extent the Fund invests in such lower
quality securities, the achievement of its investment objective may be more
dependent on the Adviser's own credit analysis. The market prices of zero coupon
and payment-in-kind bonds are affected to a greater extent by interest rate
changes, and therefore tend to be more volatile than securities which pay
interest periodically and in cash. Increasing rate note securities are typically
refinanced by the issuers within a short period of time. See "Taxes" in the
Statement of Additional Information for special tax considerations associated
with investing in high yield bonds structured as zero coupon, payment-in-kind,
or increasing rate securities.

    Lower quality fixed income securities will also be affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. In the past, economic downturns
or an increase in interest rates have, under certain circumstances, caused a
higher incidence of default by the issuers of these securities and may do so in
the future, especially in the case of highly leveraged issuers. The market for
these lower quality fixed income securities is generally less liquid than the
market for investment grade fixed income securities. Therefore, the Adviser's
judgment may at times play a greater role in valuing these securities than in
the case of investment grade fixed income securities, and it also may be more
difficult under certain adverse market conditions to sell these lower rated
securities to meet redemption requests, to respond to changes in the market, or
to determine accurately a Fund's net asset value.

    If a fixed income security, that at the time of purchase satisfied a Fund's
minimum rating criteria, is subsequently downgraded, the Fund will not be
required to dispose of the security. If such a downgrading occurs, however, the
Adviser will consider what action, including the sale of the security, is in the
best interest of the Fund. No Fund, other than the Emerging Markets Debt Fund,
will continue to hold fixed income securities that have been downgraded below
investment grade if more than 5% of that Fund's net assets would consist of such
securities.

    Foreign Government Securities. The foreign government securities in which
the Funds may invest generally consist of debt obligations issued or guaranteed
by national, state or provincial governments or similar political subdivisions.
Foreign government securities also 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. For a description of
the risks associated with all investments in foreign securities, see "Foreign
Securities" above.

    The Emerging Markets Debt Fund may also invest in so-called "Brady Bonds."
The Fund may invest in Brady Bonds and other sovereign debt securities of
countries that have restructured or are in the process of restructuring
sovereign debt pursuant to the Brady Plan. Brady Bonds are debt securities
issued under the framework of the Brady Plan, an initiative announced by U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations
to restructure their outstanding external indebtedness (generally, commercial
bank debt). In restructuring its external debt under the Brady Plan


                                      -21-
<PAGE>

framework, a debtor nation negotiates with its existing bank lenders as well as
multilateral institutions such as the World Bank and the International Monetary
Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates
the exchange of commercial bank debt for newly issued bonds (Brady Bonds). The
World Bank and/or the IMF support the restructuring by providing funds pursuant
to loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount. Under these arrangements with the World Bank and/or the IMF, debtor
nations have been required to agree to the implementation of certain domestic
monetary and fiscal reforms. Such reforms have included the liberalization of
trade and foreign investment, the privatization of state-owned enterprises and
the setting of targets for public spending and borrowing. These policies and
programs seek to promote the debtor country's ability to service its external
obligations and promote its economic growth and development. Investors should
recognize that the Brady Plan only sets forth general guiding principles for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
The Adviser believes that economic reforms undertaken by countries in connection
with the issuance of Brady Bonds make the debt of countries which have issued or
have announced plans to issue Brady Bonds an attractive opportunity for
investment.

    Brady Bonds have recently been issued by Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Equador, Jordan, Mexico, Nigeria, Poland, the
Philippines, Uruguay and Venezuela and may be issued by other countries. Over
$130 billion in principal amount of Brady Bonds have been issued to date, the
largest proportion having been issued by Argentina and Brazil. Brady Bonds may
involve a high degree of risk, may be in default or present the risk of default.
As of January 1, 1996, the Fund is not aware of the occurrence of any payment
defaults on Brady Bonds. Investors should recognize however, that Brady Bonds
have been issued only recently, and, accordingly, they do not have a long
payment history. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, bonds issued at a discount of face value of such debt, bonds
bearing an interest rate which increases over time and bonds issued in exchange
for the advancement of new money by existing lenders. Certain Brady Bonds have
been collateralized as to principal due at maturity by U.S. Treasury zero coupon
bonds with a maturity equal to the final maturity of such Brady Bonds, although
the collateral is not available to investors until the final maturity of the
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. In addition, the first two or three interest
payments on certain types of Brady Bonds may be collateralized by cash or
securities agreed upon by creditors. Although Brady Bonds may be collateralized
by U.S. Government securities, repayment of principal and interest is not
guaranteed by the U.S. Government.

    Registered Loans. The Emerging Markets Debt Fund may invest in loan
obligations issued or guaranteed by sovereign governments or their agencies and
instrumentalities. The ownership of these loans is registered in the books of an
agent bank and/or the borrower and transfers of ownership are effected by
assignment agreements. Documentation for these assignments includes a signed
notice of assignment, which is sent to the agent and/or borrower for
registration shortly after the execution of the assignment agreement. Prior to
the notice of assignment being registered with the agent and/or borrower, the
borrower or its agent will make any payments of principal and interest to the
last registered owner.


                                      -22-
<PAGE>

    Given the volume of secondary market trading in registered loans, the agent
and/or borrower's books may be out of date, making it difficult for the Fund to
establish independently whether the seller of a registered loan is the owner of
the loan. For this reason, the Fund will require a contractual warranty from the
seller to this effect. In addition, to assure the Fund's ability to receive
principal and interest owed to it but paid to a prior holder because of delays
in registration, the Fund will purchase registered loans only from parties that
agree to pay the amount of such principal and interest to the Fund upon demand
after the borrower's payment of such principal and interest to any prior holder
has been established.

    Generally, registered loans trade in the secondary market with interest
(i.e., the right to accrued but unpaid interest is transferred to purchasers).
Occasionally, however, the Fund may sell a registered loan and retain the right
to such interest ("sell a loan without interest"). To assure the Fund's ability
to receive such interest, the Fund will make such sales only to parties that
agree to pay the amount of such interest to the Fund upon demand after the
borrower's payment of such interest to any subsequent holder of the loan has
been established. In this rare situation, the Fund's ability to receive such
interest (and, therefore, the value of shareholders' investments in the Fund
attributable to such interest) will depend on the creditworthiness of both the
borrower and the party who purchased the loan from the Fund.

    To further assure the Fund's ability to receive interest and principal on
registered loans, the Fund will only purchase registered loans from, and sell
loans without interest to, parties determined to be creditworthy by the Adviser.
For purposes of the Fund's diversification and industry concentration policies,
the Fund will treat the underlying borrower of a registered loan as an issuer of
that loan. Where the Fund sells a loan without interest, it will treat both the
borrower and the purchaser of the loan as issuers for purposes of this policy.

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

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

Government.

    Custodial Receipts. Each Fund may acquire custodial receipts which are
typically issued by a custodian bank or investment brokerage firm. These
receipts represent unmatured interest coupons that have been separated
("stripped") by a custodian bank or investment brokerage firm, and evidence
ownership of future interest payments, principal payments or both on certain
notes or bonds issued by the U.S. Government or its agencies or
instrumentalities. For certain securities law purposes, custodial receipts are
not considered U.S. Government securities.


                                      -23-
<PAGE>

Mortgage-Backed and Asset-Backed Securities

    The Funds may invest in mortgage-backed securities, which represent direct
or indirect participations in, or are collateralized by and payable from,
mortgage loans secured by real property. These include collateralized mortgage
obligations ("CMOs") and various "stripped" mortgage-backed securities ("SMBS").
CMOs are issued in multiple classes, each with a specified fixed or adjustable
interest rate and final maturity date. Principal payments may be made to the
various classes in either a sequential order or simultaneously. SMBS typically
are issued in two classes, with one receiving only interest payments from a pool
of mortgage loans ("IOs") and the other receiving only principal payments
("POs"). The Funds may also invest in asset-backed securities, which represent
participations in, or are secured by and payable from, assets such as motor
vehicle installment sales, installment loan contracts, leases of various types
of real and personal property and receivables from revolving credit (credit
card) agreements and other categories of receivables. Such securities are
generally issued by trusts and special purpose corporations.

    Mortgage-backed and asset-backed securities are often subject to more rapid
repayment than their stated maturity date would indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During periods
of declining interest rates, prepayment of loans underlying mortgage-backed and
asset-backed securities can be expected to accelerate, and thus impair a Fund's
ability to reinvest the returns of principal at comparable yields. Accordingly,
the market values of such securities will vary with changes in market interest
rates generally and in yield differentials among various kinds of U.S.
Government securities and other mortgage-backed and asset-backed securities.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities because asset-backed securities generally do not have
the benefit of a security interest in collateral that is comparable to mortgage
assets. In addition, there is the possibility that, in some cases, recoveries on
repossessed collateral may not be available to support payments on these
securities.

Interest Rate, Mortgage and Currency Swaps and Interest Rate Caps and Floors

    The Fixed Income Funds may enter into interest rate, mortgage and currency
swaps for hedging and non-hedging purposes. The Funds may also enter into other
types of interest rate swap arrangements such as caps and floors. A Fund will
typically use interest rate swaps to adjust the effective duration of its
portfolio, to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities
the Fund anticipates purchasing at a future date. Interest rate swaps involve
the exchange by a Fund with another party of their respective commitments to pay
or receive interest, such as an exchange of fixed rate payments for floating
rate payments. Mortgage swaps are similar to interest rate swaps in that they
represent commitments to pay and receive interest. The principal amount,
however, is tied to a reference pool or pools of mortgages. Currency swaps
involve the exchange of rights to make or receive payments in specified
currencies. In a typical cap or floor arrangement, one party agrees to make
payments only under specified circumstances, usually in return for payment of a
fee by the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed upon level. Since interest rate and currency swaps and interest
rate caps and floors are individually negotiated, the Funds would enter into
such arrangements in the expectation of achieving an acceptable degree of
correlation between their hedged portfolio investments and their interest rate
and currency swap positions.


                                      -24-
<PAGE>

    The Funds will enter into interest rate and mortgage swaps only on a net
basis, which means that the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate and mortgage swaps do not involve the delivery of
securities, other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate and mortgage swaps is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate or mortgage swap defaults, a Fund's risk of loss
consists of the net amount of interest payments that the Fund is contractually
entitled to receive. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap,
mortgage swap, and interest rate caps and floors, will be accrued on a daily
basis, and an amount of cash or high grade debt securities having an aggregate
net asset value at least equal to such accrued excess will be maintained in a
segregated account, which will be marked to market daily, by the Fund's
custodian. In contrast, currency swaps usually involve the delivery of the
entire principal amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Funds will segregate, in an account
maintained by the Funds' custodian, an amount of cash or high grade debt
securities having an aggregate net asset value equal to the entire amount of the
Fund's obligation in a currency swap.

    The use of interest rate, mortgage and currency swaps and interest rate caps
and floors is a highly specialized activity which involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its forecasts of market values,
interest rates or currency exchange rates, the investment performance of a Fund
may be less favorable than it would have been if these investment techniques
were not used.

Convertible Securities and Preferred Stocks

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


                                      -25-
<PAGE>

Diversification

    Each of the Fixed Income Funds is "non-diversified" under the 1940 Act.
Accordingly, they are subject only to certain federal tax diversification
requirements and to the policies adopted by the Adviser. With respect to 50% of
its total assets, each Fixed Income Fund may invest up to 25% of its total
assets in the securities of any one issuer (except that this limitation does not
apply to U.S. Government securities). With respect to the remaining 50% of its
total assets, a Fixed Income Fund may not invest more than 5% of its total
assets in the securities of any one issuer (except U.S. Government securities)
nor acquire more than 10% of the outstanding voting securities of any issuer.
These federal tax diversification requirements (which also apply to the Equity
Funds) apply only at taxable quarter-ends and are subject to certain
qualifications and exceptions. To the extent that a Fixed Income Fund does not
meet standards for being "diversified" under the 1940 Act, it will be more
susceptible to developments affecting any single issuer of portfolio securities.

Temporary Defensive Investments

    For temporary defensive purposes, each of the Funds may invest all or part
of its portfolio in U.S. or, subject to tax requirements, Canadian currencies,
U.S. Government securities maturing within one year (including repurchase
agreements collateralized by such securities), commercial paper of U.S. or
foreign issuers, and cash equivalents.

    Commercial paper represents short-term unsecured promissory notes issued in
bearer form by U.S. or foreign corporations and finance companies. The
commercial paper purchased by the Funds consists of U.S. dollar-denominated
obligations of domestic or foreign issuers. Each Fund may also invest in
commercial paper which at the date of investment is rated at least A-2 by
Standard & Poor's or P-2 by Moody's, or their equivalent ratings, or, if not
rated, is issued or guaranteed as to payment of principal and interest by
companies which are rated, at the time of purchase, A or better by Standard &
Poor's or Moody's, or their equivalents, and other debt instruments, including
unrated instruments, not specifically described if such instruments are deemed
by the Adviser to be of comparable quality.

    Cash equivalents include obligations of banks which at the date of
investment have capital, surplus and undivided profits (as of the date of their
most recently published financial statements) in excess of US$ 100 million. Bank
obligations in which the Funds may invest include certificates of deposit,
bankers' acceptances and fixed time deposits. Bank obligations also include U.S.
dollar-denominated obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks, all of the same type as domestic bank obligations. A
Fund will invest in the obligations of foreign branches of U.S. banks or of U.S.
branches of foreign banks only when the Adviser determines that the credit risk
with respect to the instrument is minimal.

Additional Investment Techniques

    Mortgage Dollar Rolls. The Funds may enter into mortgage "dollar rolls" in
which a Fund sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, a
Fund forgoes principal and interest paid on the securities. A Fund is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") or fee
income as well as by the interest earned on the cash proceeds of the initial
sale. A


                                      -26-
<PAGE>

"covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward settlement date of the dollar roll transaction. The Funds
may enter into both covered and uncovered rolls. For financial reporting and tax
purposes, each Fund treats mortgage dollar rolls as two separate transactions:
one involving the purchase of a security and a separate transaction involving a
sale. The Funds do not currently intend to enter into mortgage dollar rolls that
are accounted for as a financing.

    When-Issued Securities and Forward Commitments. Each Fund may purchase
securities on a when-issued, delayed delivery or forward commitment basis. When
these transactions are negotiated, the price of the securities is fixed at the
time of the commitment, but delivery and payment may take place up to 90 days
after the date of the commitment to purchase. When-issued securities or forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. When a Fund purchases securities on a
forward commitment or when-issued basis, the Fund's custodian will maintain in a
segregated account liquid, high grade debt securities having a value (determined
daily) at least equal to the amount of the Fund's purchase commitment.

    Repurchase Agreements. Each Fund may enter into repurchase agreements. In a
repurchase agreement, a Fund buys a security subject to the right and obligation
to sell it back to the other party at the same price plus accrued interest.
These transactions must be fully collateralized at all times, but they involve
some credit risk to a Fund if the other party defaults on its obligations and
the Fund is delayed in or prevented from liquidating the collateral. A Fund will
enter into repurchase agreements only with U.S. or foreign banks having total
assets of at least US$ 100 million (or its foreign currency equivalent).

    Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements with banks and domestic broker-dealers. Reverse repurchase agreements
involve sales by a Fund of portfolio securities concurrently with an agreement
by the Fund to repurchase the same securities at a later date at a fixed price.
During the reverse repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Each Fund will deposit cash
or cash equivalents or a combination of both in a segregated account, which will
be marked to market daily, with its custodian equal in value to its obligations
with respect to reverse repurchase agreements. Reverse repurchase agreements are
considered borrowings, and as such are subject to the limitations on borrowings
by the Funds.

    Restricted and Illiquid Securities. Each Fund will not invest more than 15%
of its net assets in illiquid securities, which include repurchase agreements
and fixed time deposits maturing in more than seven days and securities that are
not readily marketable. In addition, each Fund will not invest more than 5% of
its net assets in securities that are subject to restrictions on resale because
they are not registered in reliance on the exemption for non-public offerings
("restricted securities") under the Securities Act of 1933 (the "1933 Act").
However, this restriction does not apply to restricted securities offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act or
to securities purchased in accordance with Regulation S under the 1933 Act.

    Lending Securities. For the purpose of realizing income, each Fund may lend
to broker-dealers portfolio securities amounting to not more than 33 1/3% of its
total assets taken at current value. These transactions must be fully
collateralized at all times but involve some credit risk to a Fund if the other
party should default on its obligation and the Fund is delayed in or prevented
from recovering the collateral. Voting rights with respect to a portfolio
security pass to the borrower when the security is


                                      -27-
<PAGE>

loaned by a Fund, but the Trustees (or the Adviser) are required to call the
loan if necessary to vote on a material event affecting the Fund's investment in
the loaned security.

    Other Investment Companies. Each Fund may invest up to 10% of its total
assets, calculated at the time of purchase, in the securities of other
investment companies. A Fund may not invest more than 5% of its total assets in
the securities of any one investment company or acquire more than 3% of the
voting securities of any other investment company. A Fund will indirectly bear
its proportionate share of any management or other fees paid by investment
companies in which it invests, in addition to its own fees.

                        ADDITIONAL INVESTMENT INFORMATION

Investment Restrictions

    Each Fund has adopted certain fundamental investment restrictions which are
described in detail in the Statement of Additional Information. Those investment
restrictions designated as fundamental in the Statement of Additional
Information can be changed only with shareholder approval. Each Fund's
investment objective and all other investment restrictions and policies are
nonfundamental and can be changed by the Board of Trustees of the Trust at any
time without shareholder approval.

    Each Fund has fundamental investment restrictions with respect to borrowing,
lending, diversification of investments, senior securities, pledging of assets,
underwriting, real estate investments and commodities. See "Investment
Restrictions" in the Statement of Additional Information.

Portfolio Transactions

    The Adviser is responsible for making specific decisions to buy and sell
portfolio securities for the Funds. The Adviser is also responsible for
selecting brokers and dealers to effect these transactions and negotiating, if
possible, brokerage commissions and dealers' charges. The Funds generally
purchase and sell foreign securities in foreign countries, since the best
available market for foreign securities is often on foreign markets. In
transactions on foreign markets, brokerage commissions generally are fixed and
are often higher than in the United States where commissions are negotiated. In
the over-the-counter markets, securities generally are traded on a net basis
with the dealers acting as principal for their own accounts without a stated
commission.

    The primary consideration in selecting broker-dealers to execute portfolio
security transactions is the execution of such portfolio transactions at the
most favorable prices. Consideration may also be given to the broker-dealer's
sale of shares of the Funds. Subject to this requirement and the provisions of
Section 28(e) of the Securities Exchange Act of 1934, as amended, securities may
be bought from or sold to broker-dealers who have furnished statistical,
research and other information or services to the Adviser. Higher commissions
may be paid to broker-dealers that provide research services. See "Portfolio
Transactions and Brokerage Commissions" in the Statement of Additional
Information for a more detailed discussion of portfolio transactions. The
Trustees will periodically review each Fund's portfolio transactions.

    Pursuant to procedures established by the Trustees, subject to applicable
regulations, and consistent with the above policy of obtaining the most
favorable overall price, the Adviser may place


                                      -28-
<PAGE>

securities transactions with brokers with whom it is affiliated. No Fund will
effect principal transactions with an affiliated broker or dealer.

Portfolio Turnover

    It is estimated that, under normal circumstances, the portfolio turnover
rate of each of the Equity Funds will not exceed 150%. It is estimated that,
under normal circumstances, the portfolio turnover rate of each of the Fixed
Income Funds will be approximately 200% or higher. A high rate of portfolio
turnover (i.e., 100% or higher) will result in correspondingly higher
transaction costs to a Fund. However, these costs generally are lower for funds
that invest in fixed income securities than for funds that invest in equity
securities. A high rate of portfolio turnover also may, under some
circumstances, make it more difficult for the Fund to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended. See
"Financial Highlights" for each Fund's portfolio turnover for the fiscal period
ended October 31, 1995.

                             MANAGEMENT OF THE FUNDS

    The Board of Trustees of the Trust is responsible for the overall
supervision and management of the Funds. The day-to-day operations of the Funds,
including investment decisions, have been delegated to the Adviser. The
Statement of Additional Information contains general background information
regarding each Trustee and executive officer of the Trust.

The Adviser

    MGIS, located at 20 Finsbury Circus, London, England, acts as investment
adviser to each Fund pursuant to the terms of an investment advisory contract
between the Trust, on behalf of each Fund, and MGIS (the "Advisory Contract").
MGIS is registered as an investment adviser with the Commission and provides a
full range of international investment advisory services to institutional
clients. All of the outstanding voting stock of MGIS is owned by Morgan Grenfell
Asset Management, Ltd. ("MGAM"), which is a wholly-owned subsidiary of Deutsche
Morgan Grenfell Group plc. Deutsche Morgan Grenfell Group plc is an indirect
wholly-owned subsidiary of Deutsche Bank AG, an international commercial and
investment banking group. As of December 31, 1995, MGIS managed approximately
$12.7 billion in assets.


                                      -29-
<PAGE>

    Under its Advisory Agreement with the Trust, the Adviser manages each Fund's
business and investment affairs. For these services, the Adviser is entitled to
a monthly fee at an annual rate of each Fund's average daily net assets as
follows:

                                                                   Annual Rate
                                                                   -----------

Morgan Grenfell International Equity Fund                            0.70%
Morgan Grenfell Global Equity Fund                                   0.70%
Morgan Grenfell European Equity Fund                                 0.70%
Morgan Grenfell Pacific Basin Equity Fund                            0.70%
Morgan Grenfell International Small Cap Equity Fund                  1.00%
Morgan Grenfell Japanese Small Cap Equity Fund                       1.00%
Morgan Grenfell European Small Cap Equity Fund                       1.00%
Morgan Grenfell Emerging Markets Equity Fund                         1.00%
Morgan Grenfell Global Fixed Income Fund                             0.50%
Morgan Grenfell International Fixed Income Fund                      0.50%
Morgan Grenfell Emerging Markets Debt Fund                           1.50%

    As further described in "Expense Information," the Adviser has voluntarily
agreed to reduce its advisory fee and to make arrangements to limit certain
other expenses of each Fund to the extent necessary to limit the Fund's
operating expenses to a specified percentage of its average net assets. For the
fiscal period ended October 31, 1995, this voluntary agreement was in effect,
and Morgan Grenfell International Equity Fund, Morgan Grenfell European Small
Cap Equity Fund, Morgan Grenfell International Small Cap Equity Fund, Morgan
Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed Income Fund,
Morgan Grenfell International Fixed Income Fund and Morgan Grenfell Emerging
Markets Debt Fund paid advisory fees equal to 0.00%, 0.01%, 0.77%, 0.70%, 0.44%,
0.17% and 1.33% of their respective average daily net assets during such period.
The advisory fees to which the Adviser is entitled for International Small Cap
Equity Fund, Japanese Small Cap Equity Fund, European Small Cap Equity Fund,
Emerging Markets Equity Fund and Emerging Markets Debt Fund are higher than
those for most mutual funds, but the Trustees believe that these fees are
warranted by the resources needed to evaluate and invest in the particular
markets on which these Funds focus.

   
    Each Fund is managed by a team of MGIS investment professionals with
expertise in the region(s) and types of investments in which the Fund invests.
For a description of the business experience and other credentials of each
investment professional involved in managing the Funds' portfolios, see Appendix
B to this Prospectus.
    

    The Trust, on behalf of each Fund, is responsible for all of the Fund's
expenses other than those expressly assumed by the Adviser under the terms of
the Advisory Agreement. The expenses borne by each Fund include the Fund's
advisory fee, transfer agent fee and taxes and its proportionate share of
custodian fees, expenses of issuing reports to shareholders, legal fees,
auditing and tax fees, blue sky fees, fees of the Commission, insurance expenses
and disinterested Trustees' fees. The Adviser has temporarily agreed, under
certain circumstances, to reduce or not impose its advisory fee as described
under "Expense Information." In the event that a Fund's expenses for any fiscal
year exceed the limits established by certain state securities administrators,
the Adviser will reduce its fee payable on behalf of such Fund by the amount of
such excess, but only to the extent of the Fund's advisory fee.


                                      -30-
<PAGE>

Administrator and Distributor

    The Trust has entered into an Administration Agreement with SEI Financial
Management Corporation ("SEI Financial Management" or the "Administrator"), 680
East Swedesford Road, Wayne, Pennsylvania 19087-1658. The Administrator
generally assists in all matters relating to the administration of the Funds,
including the coordination and monitoring of any third parties furnishing
services to the Funds, the preparation and maintenance of financial and
accounting records, and the provision of the necessary office space, equipment
and personnel to perform administrative and clerical functions.

    Pursuant to the Administration Agreement, SEI Financial Management receives
from all series of the Trust (i.e., the Funds and the Domestic Funds) an
aggregate monthly fee at the following annual rates of the aggregate average
daily net assets ("aggregate assets") of such series:

                 0.15% of aggregate assets under $300 million
                 0.12% of next $200 million of aggregate assets
                 0.10% of next $500 million of aggregate assets
                 0.08% of aggregate assets exceeding $1 billion

    Each Fund that offers its shares pays the Administrator a minimum annual fee
that equals (after a one-year phase-in period) $75,000 ($100,000 in the case of
Morgan Grenfell International Small Cap Equity Fund, Morgan Grenfell Japanese
Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity Fund, Morgan
Grenfell Emerging Markets Equity Fund and Morgan Grenfell Emerging Markets Debt
Fund).

    For the fiscal period ended October 31, 1995, the Administrator received
fees from Morgan Grenfell International Equity Fund, Morgan Grenfell
International Small Cap Equity Fund, Morgan Grenfell European Small Cap Equity
Fund, Morgan Grenfell Emerging Markets Equity Fund, Morgan Grenfell Global Fixed
Income Fund, Morgan Grenfell International Fixed Income Fund and Morgan Grenfell
Emerging Markets Debt Fund equal to 0.96%, 0.15%, 0.63%, 0.14%, 0.12%, 0.31% and
0.14% of their respective average daily net assets.

      SEI Financial Services Company (the "Distributor"), 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658, serves as the distributor of shares of the
Funds pursuant to a Distribution Agreement with the Trust and assists in the
sale of shares of the Funds.

Custodian and Transfer Agent

    The Trust has entered into a Custodian Agreement with The Northern Trust
Company ("Northern Trust" or the "Custodian"), pursuant to which Northern Trust
serves as custodian of the Funds' assets. The Custodian is located at Fifty
South LaSalle Street, Chicago, Illinois 60675.

    DST Systems, Inc. (the "Transfer Agent"), 210 W. 10th Street, Kansas City ,
Missouri 64105, serves as the transfer agent of the Funds. The Transfer Agent
maintains the records of each shareholder's account, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and performs other shareholder servicing functions.


                                      -31-
<PAGE>

    Additional information regarding the services performed by the
Administrator, Distributor, Custodian and Transfer Agent is provided in the
Statement of Additional Information.

                               PURCHASE OF SHARES

    Shares of any Fund may be purchased on any Business Day at the net asset
value next determined after receipt of the order in good order by the Transfer
Agent. A "Business Day" means any day on which the New York Stock Exchange (the
"NYSE") is open. Shareholders will be entitled to dividends payable with respect
their shares of a Fund if they are shareholders of the Fund on the record date
for such dividend. There is no sales charge in connection with purchases of
shares. The Trust reserves the right, in its sole discretion, to reject any
purchase offer and to suspend the offering of shares.

    Payments for Fund shares must be denominated in U.S. dollars. The minimum
initial investment for any record shareholder account with a Fund is US$250,000
and subsequent investments will be accepted in any amount. The Trust reserves
the right to vary the initial investment minimum and to establish minimums for
additional investments at any time. In addition, the Trust may waive the minimum
initial investment requirement for any investor. The Trust does not issue share
certificates.

Purchases by Mail

    Shares may be purchased initially by completing the Account Application
accompanying this Prospectus and mailing it, together with a check in the amount
of $250,000 or more drawn on a U.S. bank payable to the appropriate Fund for
each account an investor wishes to open, to:

<TABLE>
<CAPTION>

By Regular Mail:                    By Overnight Mail:
- ----------------                    ------------------

<S>                                 <C>

Morgan Grenfell Investment Trust    Morgan Grenfell Investment Trust
P.O. Box 419165                     c/o DST Systems, Inc. (SEI Division CT-7 Tower)
Kansas City, MO  64141-6165         210 W. 10th Street
                                    Kansas City, MO 64105
</TABLE>

Third party checks, credit card checks and cash will not be accepted.

    Subsequent investments in an existing account in any Fund may be made at any
time by sending to the Transfer Agent, at the above address, a check payable to
the appropriate Fund, along with either (i) a subsequent order form which may be
obtained from the Transfer Agent or (ii) a letter stating the amount of the
investment, the name of the Fund and the account number in which the investment
is to be made. Investors should indicate the name of the appropriate Fund and
account number on all correspondence.

Purchases by Wire

    Investors having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of any Fund by requesting their bank
to transmit funds by wire to:


                                      -32-
<PAGE>

                  United Missouri Bank of Kansas City, N.A.
                  ABA No. 10-10-00695
                  For:  Account Number 98-7052-395-7
                  Further Credit:  [appropriate Fund name]

The investor's name and account number must be specified in the wire. In
addition, investors should be aware that some banks may charge wire fees.

    Initial Purchases: Before making an initial investment by wire, an investor
must first telephone 1-800-407-7301 to be assigned an account number. The
investor may then transmit funds by wire through the wire procedures described
above. The investor's name, account number, taxpayer identification or social
security number, and address must be specified in the wire. In addition,
investors making initial investments by wire must promptly complete the Account
Application accompanying this Prospectus and forward it to the Transfer Agent
at:

<TABLE>
<CAPTION>

By Regular Mail:                    By Overnight Mail:
- ----------------                    ------------------
<S>                                 <C>

Morgan Grenfell Investment Trust    Morgan Grenfell Investment Trust
P.O. Box 419165                     c/o DST Systems, Inc. (SEI Division CT-7 Tower)
Kansas City, MO   64141-6165        210 W. 10th Street
                                    Kansas City, MO 64105

</TABLE>

    Subsequent Purchases: Additional investments may be made at any time through
the wire procedures described above, which must include the investor's name and
account number.

Reports to Shareholders and Confirmations

    Shareholders of each Fund receive an annual report containing audited
financial statements and a semiannual report. All transactions in shares of a
Fund and dividends and distributions paid by a Fund are reflected in
confirmations issued by the Transfer Agent at the time of the transaction and/or
in monthly statements issued by the Transfer Agent. A year-to-date statement
will be provided by the Transfer Agent. Shareholders with inquiries regarding a
Fund may call Morgan Grenfell Investment Trust at 1-800-814-3401 or write to
Morgan Grenfell Investment Trust at P.O. Box 419165, Kansas City, MO 64141-6165.

Exchange Privilege

    The Funds provide a telephone exchange privilege and a written exchange
privilege. Shares of a Fund may be exchanged in amounts as low as $50,000 for
shares of any other Fund or any Domestic Fund. A shareholder should obtain and
read the prospectus relating to a Domestic Fund and consider its investment
objective, policies and fees before making an exchange into that Fund. Exchanges
will be permitted only in those states in which the relevant fund is available
for sale. If a shareholder elects the telephone exchange privilege on the
Account Application, the shareholder will be able to effect the exchange of
shares in its account in one Fund for shares in any other Fund described in this
Prospectus by telephone, as long as all accounts are identically registered. A
shareholder can exchange shares by telephone by calling 1-800-407-7301 before
4:00 p.m., Eastern time, on any Business Day. Shares exchanged will be valued at
their respective net asset values next determined after the telephone exchange
request is received. Neither the Funds nor their agents will be liable for any
loss incurred by a


                                      -33-
<PAGE>

shareholder as a result of following instructions communicated by telephone that
they reasonably believe to be genuine. To confirm that telephone exchange
requests are genuine, the Funds will employ reasonable procedures such as
providing written confirmation of telephone exchange transactions and tape
recording of telephone exchange requests. If a Fund does not employ such
reasonable procedures, it may be liable for any loss incurred by a shareholder
due to a fraudulent or other unauthorized telephone exchange request. The Funds
reserve the right to refuse any request made by any shareholder.

    In addition to using the telephone exchange privilege, shareholders in any
of the Funds may exchange their shares for shares in any other Fund by
submitting a written request, in proper form, to the Transfer Agent. Shares
exchanged in this manner will be valued at their respective net asset values
next determined after the receipt of the written exchange request.

    An exchange is treated as a sale of the shares exchanged and, therefore, may
produce a gain or loss to the shareholder that is recognizable for tax purposes.
Investors will receive 60 days written notice prior to any change in a Fund's
exchange procedures.

                             REDEMPTION OF SHARES

How To Redeem

    Shareholders may redeem shares of a Fund without charge upon request on any
Business Day by placing redemption requests with the Transfer Agent prior to
4:00 p.m., Eastern Time. Shares are redeemed at the net asset value next
determined after receipt of the redemption request by the Transfer Agent. Shares
subject to a redemption request will earn any dividends for which the record
date is the day the request is received.

    Redemption requests may be made by telephoning Morgan Grenfell Investment
Trust at 1-800-407-7301 or by a written request addressed to the Transfer Agent
in accordance with the procedures set forth below. A written request must
specify the number of shares to be redeemed, the Fund from which shares are
being redeemed, the account number, payment instructions and the exact
registration on the account. Signatures must be guaranteed in accordance with
the procedures set forth below under "Payment of Redemption Proceeds." A
shareholder may request redemptions by telephone if the optional telephone
redemption privilege is elected on the Account Application. In order to verify
the authenticity of telephone redemption requests, the Transfer Agent's
telephone representatives will request that the caller provide certain
information unique to the account. If the caller is unable to provide this
information, telephone redemption requests will not be processed and the
redemption will have to be completed by mail. As long as the Transfer Agent's
telephone representatives comply with the procedures described above, neither
the Trust nor the Transfer Agent will be liable for any losses due to fraudulent
or unauthorized transactions. Finally, it may be difficult to implement
telephone redemptions in times of drastic economic or market changes.

Payment of Redemption Proceeds

    Redemption proceeds ordinarily will be wired to the bank account designated
on the Account Application, unless payment by check has been requested. For
redemption requests received by the Transfer Agent by 4:00 p.m., Eastern time,
redemption proceeds often will be wired the next Business Day. Normally,
redemption proceeds will be wired within seven days after the Transfer Agent
receives


                                      -34-
<PAGE>

the appropriate redemption request documents, including any additional
documentation that may be required by the Transfer Agent in order to establish
that a redemption request has been properly authorized. In addition, the payment
of redemption proceeds for shares of a Fund recently purchased by check may be
delayed for up to 15 calendar days or until the check clears, whichever occurs
first. After a wire has been initiated by the Transfer Agent, neither the
Transfer Agent nor the Trust assumes any further responsibility for the
performance of intermediaries or the shareholder's bank in the transfer process.
If a problem with such performance arises, the shareholder should deal directly
with such intermediaries or bank.

    Shareholders may request that redemption payments be made by Federal Reserve
wire or Automated Clearing House (ACH) wire. The custodian may deduct a wire
charge (currently $10) from redemption payments made by Federal Reserve wire.
Shareholders cannot redeem shares of any Fund by Federal Reserve wire on Federal
holidays restricting wire transfers. There is no charge for ACH wire
transactions; however, such transactions will not be posted to a shareholder's
bank account until the second Business Day following the transaction.

    A shareholder may change the bank designated to receive redemption proceeds
by providing written notice to the Transfer Agent which has been signed by the
shareholder or its authorized representative. This signature must be guaranteed
by a bank, a securities broker or dealer, a credit union having authority to
issue signature guarantees, a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association, a
national securities exchange, a registered securities association or a clearing
agency, provided that such institution satisfies standards established by the
Transfer Agent. The Transfer Agent may also require additional documentation in
connection with a request to change a designated bank.

    If the Board of Trustees determines that it is appropriate in order to
protect the best interests of a Fund and its shareholders, the Fund, under the
limited circumstances described below, may satisfy all or part of a redemption
request by delivering portfolio securities to a redeeming investor. However, the
Trust, on behalf of each Fund, has elected, pursuant to Rule 18f-1 under the
1940 Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Fund during any 90-day period for any one
shareholder. Only redemptions in excess of this limit may be paid in kind.
In-kind payments would not have to constitute a cross-section of a Fund's
portfolio. Investors receiving redemption payment in portfolio securities will
not have eliminated their investment exposure by their redemption as would
investors receiving their redemption payment in cash. Instead these investors
will be subject to risks inherent in owning such securities, including market
value and currency fluctuations, difficulties in selling securities in
particular markets and repatriating the sales proceeds, and the political and
other risks described under "Description of Securities and Investment Techniques
and Related Risks - Foreign Securities." In addition, a shareholder generally
will incur additional expenses, such as brokerage commissions and currency
conversion fees or expenses, on the sale or other disposition of securities
received from a Fund. Any portfolio securities paid or distributed to a
redeeming shareholder would be valued as described under "Net Asset Value."

                               NET ASSET VALUE

    The net asset value per share of each Fund is normally calculated as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on each
Business Day. The net asset value of each Fund's shares is determined by adding
the value of all securities, cash and other assets of the Fund,


                                      -35-
<PAGE>

subtracting liabilities (including accrued expenses and dividends payable) and
dividing the result by the total number of outstanding shares of the Fund.

    For purposes of calculating each Fund's net asset value per share, equity
securities traded on a recognized foreign or U.S. securities exchange are valued
at their last sale price on the principal exchange on which they are traded on
the valuation day prior to the time of valuation or, if no sale prior to the
time of valuation occurs, at the bid price. Unlisted equity securities for which
current market quotations are readily available are valued at their most recent
bid price prior to the time of valuation. Debt securities and other fixed-income
investments owned by the Funds are valued at prices supplied by independent
pricing agents, which prices reflect broker-dealer supplied valuations and
electronic data processing techniques. Short-term obligations maturing in sixty
days or less may be valued at amortized cost, which does not take into account
unrealized gains or losses on portfolio securities. Amortized cost valuation
involves initially valuing a security at its cost, and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the security's market value. While this
method provides certainty in valuation, it may result in periods in which the
value of the security, as determined by the amortized cost method, may be higher
or lower than the price a Fund would receive if the Fund sold the security.
Other assets and assets whose market value does not, in the opinion of the
Adviser, reflect fair value are valued at fair value using methods determined in
good faith by the Board of Trustees.

    Certain portfolio securities held by each Fund are listed on foreign
exchanges which trade at times and on days when the NYSE is closed. As a result,
the net asset value of each Fund may be significantly affected by such trading
at times and on days when shareholders have no ability to redeem shares of the
Fund.

                      DIVIDENDS, DISTRIBUTIONS AND TAXES

    Each Fund declares and pays dividends from net investment income, if any,
and distributes net short-term capital gain, if any, at least annually. Each
Fund also distributes at least annually substantially all of the realized net
long-term capital gain, if any, which it realizes for each taxable year and may
make distributions at any other times when necessary to satisfy applicable tax
requirements. Capital losses, including any capital loss carryovers from prior
years, are taken into account in determining the amounts of short-term and
long-term capital gains to be distributed. From time to time, a portion of a
Fund's distributions may constitute a return of capital for tax purposes.
Dividends and distributions are made in additional shares of the same Fund or,
at the shareholder's election, in cash. The election to reinvest dividends and
distributions or receive them in cash may be changed at any time upon written
notice to the Transfer Agent. If no election is made, all dividends and capital
gain distributions will be reinvested.

Taxes

    Each Fund is treated as a separate entity for federal income tax purposes
and has elected or intends to elect to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and to qualify for such treatment for each taxable year. To qualify as
a regulated investment company, each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders. As a regulated investment company, a
Fund will not be subject to federal income or excise tax on any net


                                      -36-
<PAGE>

investment income or net realized capital gain that is distributed to its
shareholders in accordance with certain timing requirements of the Code.

    Dividends paid by a Fund from its net investment income, certain net
realized foreign exchange gains, the excess of net short-term capital gain over
net long-term capital loss and original issue discount or market discount income
will be taxable to shareholders as ordinary income. Dividends paid by a Fund
from any excess of net long-term capital gain over net short-term capital loss
will be taxable to a shareholder as long-term capital gain regardless of how
long the shareholder has held its shares. These tax consequences will apply
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions declared in October, November or December and paid
in January of the following year are taxable to shareholders as if received on
December 31 of the year in which they are declared. Shareholders will be
informed annually about the amount and character of distributions received from
a Fund for federal income tax purposes and foreign taxes, if any, passed through
to shareholders, as described below.

    Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on dividends, redemptions and exchanges
if they fail to furnish their correct taxpayer identification number and certain
certifications or if they are otherwise subject to backup withholding.
Individuals, corporations and other shareholders that are not U.S. persons under
the Code are subject to different tax rules and may be subject to non-resident
alien withholding at the rate of 30% (or a lower rate provided by an applicable
tax treaty) on amounts treated as ordinary dividends from a Fund and, unless a
current IRS Form W-8 or acceptable substitute is on file, to backup withholding
on certain other payments from a Fund.

    Because each Fund invests in foreign securities, it may be subject to
foreign withholding or other foreign taxes on income earned on such securities
(possibly including, in some cases, capital gains). In any year in which any of
the Funds qualifies, it may make an election that would generally permit its
shareholders to take a credit or a deduction for their proportionate shares of
qualified foreign income taxes paid by such Fund, subject to applicable
restrictions or limitations under the Code. Each such shareholder would then
treat as additional income (in addition to actual distributions) his or her
proportionate share of the amount of qualified foreign income taxes paid by such
Fund. For some years, a Fund may be unable or may not elect to pass such taxes
and foreign tax credits and deductions with respect to such taxes through to its
shareholders.

    Investors should consider the tax implications of buying shares immediately
prior to a distribution. Investors who purchase shares shortly before the record
date for a distribution will pay a per share price that includes the value of
the anticipated distribution and will be taxed on any taxable distribution even
though the distribution represents a return of a portion of the purchase price.

    Redemptions and exchanges of shares are taxable events on which a
shareholder may recognize a gain or loss.

    In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on dividends, capital gain distributions, or the proceeds of
redemptions or exchanges. A state income (and possibly local income and/or
intangible property) tax exemption is generally available to the extent
distributions of a Fund are derived from interest on (or, in the case of
intangibles taxes, the value of its assets is attributable to) certain U.S.
Government Securities provided in some states that certain thresholds for
holdings of U.S. Government Securities and/or reporting requirements are
satisfied. The


                                      -37-
<PAGE>

Funds may not satisfy such requirements in some states or localities.
Shareholders should consult their tax advisors regarding specific questions
about federal, state, local or foreign taxes and special rules that may be
applicable to certain classes of investors, such as retirement plans, financial
institutions, tax-exempt entities, insurance companies and non-U.S. persons.

                     ORGANIZATION AND SHARES OF THE TRUST

    The Trust was formed as a business trust under the laws of the State of
Delaware on September 13, 1993, and commenced investment operations on January
3, 1994. The Board of Trustees of the Trust is responsible for the overall
management and supervision of the affairs of the Trust. The Declaration of Trust
authorizes the Board of Trustees to create separate investment series or
portfolios of shares. As of the date hereof, the Trustees have established the
eleven Funds described in this Prospectus and six additional series. The
Declaration of Trust further authorizes the Trust to classify or reclassify any
series or portfolio of shares into one or more classes.

    As of January 31, 1996, the Allied Signal Inc. Master Pension Trust owned
beneficially 27.93% of the outstanding shares of the International Small Cap
Equity Fund, the Archdiocese of Detroit owned beneficially 33.45% of the
outstanding shares of the International Fixed Income Fund, TRW Master Trust
Retirement Plan owned beneficially 75.07% of the outstanding shares of the
European Small Cap Equity Fund, the Public Employees' Retirement Association
owned beneficially 29.98% of the outstanding shares of the Emerging Markets
Equity Fund and Morgan Grenfell Capital Management, Inc. owned beneficially
99.95% of the outstanding shares of the International Equity Fund.

    Each share of a Fund represents an equal proportionate interest in the
assets belonging to that Fund. When issued, shares of the Funds are fully paid
and nonassessable. In the event of liquidation, shareholders are entitled to
share pro rata in the net assets of the applicable Fund available for
distribution to shareholders. Shares of the Funds entitle their holders to one
vote per share, are freely transferable and have no preemptive, subscription or
conversion rights.

    Shares of a Fund will be voted separately with respect to matters pertaining
to that Fund except for the election of Trustees and the ratification of
independent accountants. For example, shareholders of each Fund are required to
approve the adoption of any investment advisory agreement relating to such Fund
and any change in the fundamental investment restrictions of such Fund. Approval
by the shareholders of one Fund is effective only as to that Fund. The Trust
does not intend to hold shareholder meetings, except as may be required by the
1940 Act. The Trust's Declaration of Trust provides that special meetings of
shareholders shall be called for any purpose, including the removal of a
Trustee, upon written request of shareholders entitled to vote at least 10% of
the outstanding shares of the Trust,or Fund, as the case may be. In addition, if
ten or more shareholders of record who have held shares for at least six months
and who hold in the aggregate either shares having a net asset value of $25,000
or 1% of the outstanding shares, whichever is less, seek to call a meeting for
the purpose of removing a Trustee, the Trust has agreed to provide certain
information to such shareholders and generally to assist their efforts.

    Certain of the Trustees and officers of the Trust reside outside the United
States, and substantially all the assets of these persons are located outside
the United States. It may not be possible, therefore, for investors to effect
service of process within the United States upon these persons or to enforce
against them, in United States courts or foreign courts, judgments obtained in
United States


                                      -38-
<PAGE>

courts predicated upon the civil liability provisions of the federal securities
laws of the United States or the laws of the State of Delaware. In addition, it
is not certain that a foreign court would enforce, in original actions or in
actions to enforce judgments obtained in the United States, liabilities against
these Trustees and officers predicated solely upon the federal securities laws.
See "Trustees and Officers" in the Statement of Additional Information.

    As of the date of this Prospectus, the Administrator owned 100% of the
outstanding shares of each Fund other than International Small Cap Equity Fund,
Global Fixed Income Fund, Emerging Markets Equity Fund, International Fixed
Income Fund, Emerging Markets Debt Fund, European Small Cap Equity Fund and
International Equity Fund.

                           PERFORMANCE INFORMATION

    From time to time, performance information, such as total return and yield
for a Fund, may be quoted in advertisements or in communications to
shareholders. A Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change per
year in value of an investment in a Fund. Aggregate total return reflects the
total percentage change over the stated period. In calculating total return,
dividends and capital gain distributions made by the Fund during the period are
assumed to be reinvested in the Fund's shares. A Fund's yield reflects a Fund's
overall rate of income on portfolio investments as a percentage of the share
price. Yield is computed by annualizing the result of dividing the net
investment income per share over a 30-day period by the net asset value per
share on the last day of that period.

    To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding the Fund may discuss
performance as reported by various financial publications. The performance of a
Fund may be compared in publications to the performance of various indices and
investments for which reliable performance data is available. In addition, the
performance of a Fund may be compared in publications to averages, performance
rankings or other information prepared by recognized mutual fund statistical
services.

    Performance quotations of a Fund represent the Fund's past performance and,
consequently, should not be considered representative of the future performance
of the Fund. The value of Fund shares, when redeemed, may be more or less than
the original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in shares of
a Fund are not at the direction or within the control of the Funds and will not
be included in the Funds' calculations of total return.

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


                                      -39-
<PAGE>

                                   APPENDIX A

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

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

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

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

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

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

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

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

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


                                      A-1
<PAGE>

    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.


                                      A-2
<PAGE>

Quality Distribution for Emerging Markets Debt Fund

    During the fiscal year ended October 31, 1995, the percentages of Morgan
Grenfell Emerging Market Debt Fund's assets invested in unrated debt securities
and securities rated in particular rating categories by Standard & Poor's were,
on a weighted average basis, as follows*:

                                                            Percentage of
Standard & Poor's (Moody's) Ratings                       Total Investments
- -----------------------------------                       -----------------

Not Rated ..............................................          22% **

Rated by Standard & Poor's (Moody's):

BB+, BB, BB-, (Ba) .....................................          41%

B+, B, B- (B) ..........................................          25%

Total Investments in Debt Securities ...................          88%
                                                                  ---

*   Based on the average of month-end portfolio holdings during the fiscal year
    ended October 31, 1995. Asset composition does not represent actual holdings
    on October 31, 1995; nor does it imply that the overall quality of portfolio
    holdings is fixed.

**  Of this amount, the following percentages of the Fund's assets represent
    quality standards attributed by the Adviser to such unrated securities at
    the time of purchase: 14%, B+, B, B- (B); and 8%, CCC+, CCC, CCC- (Caa).


                                      A-3
<PAGE>

                                  APPENDIX B

                        PORTFOLIO MANAGER INFORMATION

Funds                                                 Portfolio Managers
- -----                                                 ------------------

Morgan Grenfell International Equity Fund             Patrick Disney
                                                      Richard Wilson

Morgan Grenfell Global Equity Fund                    Patrick Disney
                                                      William Thomas

Morgan Grenfell European Equity Fund                  Julian Johnston
                                                      Jeremy Lodwick

Morgan Grenfell Pacific Basin Equity Fund             William Thomas
                                                      Graham Bamping

Morgan Grenfell International Small Cap Equity Fund   Graham Bamping
                                                      Jonathan Wild

Morgan Grenfell Japanese Small Cap Equity Fund        James Pulsford

Morgan Grenfell European Small Cap Equity Fund        Julian Johnston
                                                      Jonathan Wild

Morgan Grenfell Emerging Markets Equity Fund          Richard Lamb
                                                      Christopher Getley

   
Morgan Grenfell Global Fixed Income Fund              Ian Kelson
                                                      Neil Jenkins
                                                      Annette Fraser

Morgan Grenfell International Fixed Income Fund       Ian Kelson
                                                      Neil Jenkins
                                                      Annette Fraser

Morgan Grenfell Emerging Markets Debt Fund            Ian Kelson
                                                      Simon Treacher
    


                                       B-1

<PAGE>

Portfolio Manager          Expertise                 Professional Experience
- -----------------          ---------                 -----------------------

Graham Bamping             Pacific Basin Equity      Director, Morgan
                           Markets                   Grenfell Investment
                                                     Services ("MGIS") (since
                                                     1987); Portfolio
                                                     Manager, Pacific Basin
                                                     (since 1989); Portfolio
                                                     Manager, Singapore
                                                     (1981-83); Research, Far
                                                     East (1980-81);
                                                     Research, UK (1978-80)

Patrick Disney             EAFE(R) Markets           Managing Director, MGIS
                                                     (since 1988); Director,
                                                     MGIS (1987-88); EAFE(R)
                                                     Team (since 1981).

   
Annette Fraser             Global Fixed Income       Fund Manager, Fixed
                                                     Income Team MGIS (since
                                                     1992);  Fund Manager,
                                                     Morgan Grenfell
                                                     International Funds
                                                     Management Ltd. a
                                                     company incorporated in
                                                     England and Wales (since
                                                     1990)
    

Christopher Getley         Latin American Equity     MGIS (since 1987);
                           Markets                   Mexican, Portfolio
                                                     Manager Brazilian and
                                                     Argentinian Team (since
                                                     1989); Australian and
                                                     Canadian Team (1987-89).

   
Neil Jenkins, CFA          Fixed Income              Global and Emerging
                                                     Markets Fixed Income
                                                     Portfolio Manager,
                                                     MGIS;  Director MGIS
                                                     (since 1996) and MGIFM
                                                     (since 1995), Vice
                                                     President MGIT (since
                                                     1993); Director MGCM
                                                     (1991-1996); Morgan
                                                     Grenfell, Moscow Office
                                                     (1988-1990); Morgan
                                                     Grenfell & Company Ltd
                                                     (since 1985).
    

                                       B-2

<PAGE>

Portfolio Manager          Expertise                 Professional Experience
- -----------------          ---------                 -----------------------

Julian Johnston            European Equity Markets   Director, MGIS (since
                                                     1988); Fidelity
                                                     International (1984-88);
                                                     James Capel & Co.
                                                     (1979-84).

Ian Kelson                 Fixed Income Markets      Director, MGIS (since
                                                     1988); Chief Investment
                                                     Officer, MGIS Fixed
                                                     Income (since 1989);
                                                     Portfolio Manager, Bank
                                                     of America
                                                     (multi-currency
                                                     accounts) (1981-85).

Richard Lamb               Latin American Markets    MGIS (since 1993);
                                                     Rothschild Asset
                                                     Management (The Chile
                                                     Fund and Five Arrows
                                                     Fund) (1988-93);
                                                     Portfolio Manager,
                                                     Berkeley Govett and
                                                     Samual Montagu (1981-88).

Jeremy Lodwick             European Equity Markets   Director MGIS (since
                                                     1994); Portfolio Manager
                                                     MGIS (1992-1994); Vice
                                                     President MGCM
                                                     (1986-1991); MIM
                                                     Britannia Ltd
                                                     (1985-1986); Samuel
                                                     Montagu & Co.
                                                     (1984-1985).

James Pulsford             Japanese Markets          Portfolio Manager,
                                                     Japanese Markets, MGIS
                                                     (since 1987); UK
                                                     research (since 1984).

William Thomas             Japanese Markets          Director, MGIS (since
                                                     1988); Portfolio
                                                     Manager, MGIS
                                                     (technology investments)
                                                     (1984-88); Director,
                                                     Extel (UK computing
                                                     services company)
                                                     (1971-79).


                                       B-3

<PAGE>

Portfolio Manager          Expertise                 Professional Experience
- -----------------          ---------                 -----------------------

Simon Treacher             Emerging Markets          MGIS (since 1994);
                                                     Portfolio Manager,
                                                     Prudential Portfolio
                                                     Managers (1992-1993);
                                                     Portfolio Manager,
                                                     Worldinvest Ltd.
                                                     (1978-1992); Portfolio
                                                     Manager, Bankers Trust
                                                     Co. (1984-1987);
                                                     National Westminster
                                                     Bank (1980-1984)


Jonathan Wild              International Equity      Portfolio Manager, MGIS
                           Markets,                  (since 1996); Portfolio
                           Small Capitalization      Manager, Finsbury Asset
                           Companies                 Management (1993-1995);
                                                     Manager, Barclays De Zoette
                                                     Wedd (1991-1992);
                                                     Manager, KPMG Peat
                                                     Marwick (1986-1991).

Richard Wilson             International Equity      Portfolio Manager, MGIS
                           Markets                   (since 1993); Portfolio
                                                     Manager, James Capel
                                                     (1992-1993); Portfolio
                                                     Manager, Midland Montagu
                                                     (1988-1992).


                                       B-4

<PAGE>

                                  APPENDIX C
                        TAX CERTIFICATION INSTRUCTIONS

    Federal law requires that taxable distributions and proceeds of redemptions
and exchanges be reported to the IRS and that 31% be withheld if you fail to
provide your correct Taxpayer Identification Number (TIN) and the certifications
in Section H or you are otherwise subject to backup withholding. Amounts
withheld and forwarded to the IRS can be credited as a payment of tax when
completing your Federal income tax return.

    For most individual taxpayers, the TIN is the social security number.
Special rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minor's Act, the TIN of the minor should
be furnished. If you do not have a TIN, you may apply for one using forms
available at local offices of the Social Security Administration or the IRS.

    Recipients exempt from backup withholding, including corporations and
certain other entities, should provide their TIN and write "exempt" after their
signature in section H of the application to avoid possible erroneous
withholding. Non-resident aliens and foreign entities may be subject to
withholding of up to 30% on certain distributions received from the Funds and
must provide certain certifications on IRS Form W-8 to avoid backup withholding
with respect to other payments. For further information, see Internal Revenue
Code Sections 1441, and 1442 and 3406 and/or consult your tax adviser.


                                       C-1

<PAGE>


                       Morgan Grenfell Investment Trust
                               885 Third Avenue
                           New York, New York 10022

                              Investment Adviser
                 Morgan Grenfell Investment Services Limited
                              20 Finsbury Circus
                           London, England EC2M 1NB

                        Administrator and Shareholder
                               Servicing Agent
                     SEI Financial Management Corporation
                           680 East Swedesford Road
                        Wayne, Pennsylvania 19087-1658

                                 Distributor
                        SEI Financial Services Company
                           680 East Swedesford Road
                        Wayne, Pennsylvania 19087-1658

                                  Custodian
                          The Northern Trust Company
                          Fifty South LaSalle Street
                           Chicago, Illinois 60675

                                Transfer Agent
                              DST Systems, Inc.
                           SEI Division CT-7 Tower
                              210 W. 10th Street
                         Kansas City, Missouri 64105

                           Independent Accountants
                             Price Waterhouse LLP
                         1177 Avenue of the Americas
                           New York, New York 10036

                                Legal Counsel
                                Hale and Dorr
                               60 State Street
                         Boston, Massachusetts 02109

                             Service Information
                 Existing accounts, new accounts, prospectuses,
                      Statements of Additional Information
               applications, and service forms - 1-800-814-3401

                     Telephone Exchanges - 1-800-407-7301

                         Share Price and Performance
                         Information - 1-800-814-3401

<PAGE>

                        MORGAN GRENFELL INVESTMENT TRUST
                    Morgan Grenfell Global Fixed Income Fund
                 Morgan Grenfell International Fixed Income Fund
                   Morgan Grenfell Emerging Markets Debt Fund
                        --------------------------------

Supplement dated November 12, 1996 to Prospectus dated February 14, 1996 as
revised September 25, 1996.

     Martin Hall no longer serves as co-portfolio manager of the Morgan Grenfell
Global Fixed Income Fund or the Morgan Grenfell International Fixed Income Fund.
All references in the Prospectus to Mr. Hall should be replaced by references to
Annette Fraser and Neil Jenkins, the new co-portfolio managers of the Morgan
Grenfell Global Fixed Income Fund and the Morgan Grenfell International Fixed
Income Fund.

     Ian Kelson now serves as co-portfolio manager of the Morgan Grenfell
Emerging Markets Debt Fund as well as the Morgan Grenfell International Fixed
Income Fund and the Morgan Grenfell Global Fixed Income Fund.

     The area of expertise and professional experience of the new portfolio
managers are as follows:

Portfolio Manager   Expertise              Professional Experience
- -----------------   ---------              -----------------------


Annette Fraser      Global Fixed Income    Fund Manager, Fixed Income Team MGIS
                                           (since 1992); Fund Manager, Morgan
                                           Grenfell International Funds
                                           Management Ltd. a company
                                           incorporated in England and Wales
                                           (since 1990).

Neil Jenkins, CFA   Fixed Income           Global and Emerging Markets Fixed
                                           Income Portfolio Manager, MGIS;
                                           Director MGIS (since 1996) and MGIFM
                                           (since 1995), Vice President MGIT
                                           (since 1993); Director MGCM
                                           (1991-1996); Morgan Grenfell, Moscow
                                           Office (1988-1990); Morgan Grenfell &
                                           Company Ltd (since 1985).



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