<PAGE>
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
ANNUAL REPORT
OCTOBER 31, 1999
<PAGE>
EUROPEAN SMALL CAP EQUITY FUND
MARKET REVIEW
At the start of the fiscal year in early November 1998, international equity
investors were still reeling from the effects of the Russian devaluation,
ongoing difficulties in Asia and Latin America, and the subsequent ripple
effects into the more developed markets worldwide. Concerns at that time were
centered around the possibility of a deflationary spiral prompted by a
combination of faltering business and consumer confidence, higher interest
rates, and turbulence in world markets. However, a series of more positive data
helped underpin the view that, in the developed economies at least, the
environment for both economic growth and interest rates was actually benign.
Also, the specter of emerging market collapse, which led to broad market
downturns in the fall of 1998, dissipated with appropriate intervention by the
International Monetary Fund and individual nation's central banks.
Equity markets rallied strongly, led by Japan where, after years of stagnation,
early signs of stabilization in the economy began to emerge. Asian markets
produced stunning returns, even though it was coming from previously low levels.
European markets were more mixed, as uncertainties over the speed of the
recovery persisted. For example, the UK was a reasonably solid performer for the
fiscal year, but Germany remained weak.
Emerging markets experienced great volatility, but also staged a broad recovery
from the sharp losses of the previous year, outperforming most developed global
markets for the twelve months ended October 31, 1999. More specifically, Latin
American markets fared well, even though Brazil's currency devaluation in
January, Ecuador's eurobond default in the last fiscal quarter, and constant US
interest rate concerns did overhang the region. The region's strong performance
was led by Mexico's gains, as export and domestic demand improved, oil prices
and the peso firmed, and free elections bolstered investor demand south of the
border. Emerging Europe rebounded soundly off lows, led by Russia and Greece.
INVESTMENT REVIEW
Continental European small capitalization equity markets were both volatile and
exciting during the twelve months ended October 31, 1999. After a strong rebound
in the first quarter of the Fund's fiscal year driven by recovery of cyclical
stocks, markets were weaker throughout most of the second and third fiscal
quarters, as the probability of further interest rate cuts in Europe diminished.
The fourth quarter saw strong performance of technology stocks in Europe, driven
by high expectations for the Internet combined with the availability of an
unprecedented number of Initial Public Offerings in Europe related to the
technology sector.
In this environment, continental European small cap stocks outperformed large
caps for the twelve month period. As in the US, large companies were overvalued
relative to their smaller brethren. Furthermore, Europe's low interest rates in
effect for some time began to affect the returns on capital employed by large
companies because of lower hurdle rates for investments. Small cap companies'
growth continued to be driven by innovation, product
<PAGE>
leadership, and pricing power in contrast to large cap companies as a category,
which were still using restructuring as the main driver of their growth.
Within the UK, small cap stocks also outperformed large cap stocks for the
fiscal year, with absolute returns attractive in the context of low inflation
and GDP growth broadly in line with historic trends at slightly below 2%. Still,
volatility was high here, too. UK small caps underperformed during the first
fiscal quarter, due primarily to concerns over Far Eastern macroeconomics and,
consequently, downgraded domestic economic growth expectations. In the following
two quarters, these macroeconomic worries eased as central banks reduced
interest rates. Small cap stocks, in turn, strongly outperformed. The fourth
fiscal quarter rally in telecommunication and information technology stocks,
heavily weighted in large caps, produced sharp relative underperformance from
small caps.
The Fund was well positioned to take advantage of this market environment.
First, we remained focused on small caps, resisting the temptation that many
other traditional small cap investors have recently succumbed to--namely, to
move significant assets to medium sized companies. Second, we maintained our
long-term perspective, seeking to buy companies that we believe will be winners
in the future. The Fund continued to be overweight in the technology sector,
including many newly quoted European small companies with strong fundamentals
and strong technology platforms. The prudence of this strategy is evident in
Fund performance. With a return of 15.49% for the one year ended October 31,
1999, the Fund outperformed both its benchmark index (BT Alex Brown European
Small Cap Index) and its Lipper category average, which returned 12.79% and
10.72% for the same period, respectively.
Our outlook for European small capitalization equities remains positive. With
low and stable interest rates in Europe, we believe that these nations' domestic
economies should continue to grow in the year 2000. There are also indications
that the US economy remains strong, which bodes well for the European small cap
sector as well.
<PAGE>
EUROPEAN SMALL CAP EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN - 10/31/99
ANNUALIZED ANNUALIZED
1 YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE*
<S> <C> <C> <C>
European Small Cap Equity 15.49% 9.27% 10.68%
</TABLE>
<TABLE>
<CAPTION>
EUROPEAN SMALL CAP EQUITY FUND BT ALEX BROWN EUROPEAN SMALL CAP INDEX LIPPER EUROPEAN REGION FUNDS INDEX
<S> <C> <C> <C>
11/1/1994 250,000 250,000 250,000
Oct-9 250,000 250,000 250,000
Oct-9 250,000 250,000 250,000
Oct-9 250,000 250,000 250,000
Oct-95 289,162 263,971 273,050
Oct-96 318,261 306,141 322,308
Oct-97 313,592 347,502 395,956
Oct-98 357,927 380,195 456,656
Oct-99 413,370 428,822 533,282
</TABLE>
* Commencement of operations.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. THE FUND'S PERFORMANCE FIGURES
ASSUME THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
RETURNS WOULD HAVE BEEN LOWER DURING THE SPECIFIED PERIODS IF THE PAYMENT OF
CERTAIN FEES HAD NOT BEEN WAIVED OR REIMBURSED.
Indices are unmanaged, amd investments cannot be made in an index.
<PAGE>
STATEMENT OF ASSET AND LIABILITIES
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND - OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (cost $2,213) $ 2,859
Cash 1,961,558
Foreign Currency (cost $578,966) 578,859
Receivable for Securities Sold 224,108
Dividends Receivable 3,462
Receivable for Foreign Taxes Witheld 4,634
Prepaid Expenses and Other Assets 1,565
Due from Investment Adviser 18,218
------------------
Total Assets 2,795,263
------------------
LIABILITIES
Accrued Expenses and Other Liabilities 71,323
------------------
Total Liabilities 71,323
------------------
Net Assets $ 2,723,940
------------------
------------------
COMPOSITION OF NET ASSETS
Capital Shares of Institutional Shares (unlimited authorization; $0.001 par value)
Based on 2,546,412 Outstanding Shares of Beneficial Interest $ 2,201,412
Undistributed Net Investment Income 38,207
Accumulated Net Realized Gains from Securities,
Forward Currency Contracts and Foreign Currency Transactions 485,342
Net Unrealized Appreciation on Investments 646
Net Unrealized Appreciation (Depreciation) on Foreign
Currencies, Forward Currency Contracts and Other Assets and
Liabilities Denominated in Foreign Currencies (1,667)
------------------
NET ASSETS AT OCTOBER 31, 1999 $ 2,723,940
------------------
------------------
$ 1.07
NET ASSET VALUE PER SHARE ------------------
------------------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
For the Year Ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (Net of foreign withholding taxes of $5,995) $ 54,742
Interest 13,288
--------------------
68,030
--------------------
EXPENSES
Investment Advisory Fees 26,435
Administration Fees 7,931
Custody Fees 86,789
Registration & Filing Fees 44,655
Professional Fees 44,478
Printing Fees 29,566
Trustees' Fees and Expenses 11,738
Transfer Agent Out of Pocket Expenses 4,156
Miscellaneous Expenses 5,865
--------------------
Total Expenses 261,613
Less: Expenses Absorbed By Investment Adviser (228,662)
--------------------
Net Expenses 32,951
--------------------
NET INVESTMENT INCOME 35,079
--------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain(Loss) from:
Investment Transactions 518,414
Foreign Currency Transactions (15,284)
Net Change in Unrealized Appreciation/(Depreciation) on:
Investments (178,721)
Foreign Currency Transactions (947)
--------------------
Net Realized and Unrealized Gain/(Loss) on Investments
and Foreign Currency Related Transactions 323,462
--------------------
Net Increase in Net Assets from Operations $ 358,541
--------------------
--------------------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
October 31, October 31,
1999 1998
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 35,079 $ 19,938
Net Realized Gain(Loss) from:
Investment Transactions 518,414 2,476,805
Foreign Currency Transactions (15,284) 7,506
Net Change in Unrealized Appreciation/(Depreciation) on:
Investments (178,721) (1,295,633)
Foreign Currency Transactions (947) (2,720)
----------------- ----------------
Net Increase in Net Assets from Operations 358,541 1,205,896
----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from Net Investment Income (30,689) (33,989)
Distributions from Realized Gains (2,199,889) -
----------------- ----------------
Total Distributions to Shareholders (2,230,578) (33,989)
----------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net Proceeds from Shares Sold - 605,000
Net Proceeds from Distributions Reinvested 2,230,456 33,999
Net Cost of Shares Redeemed (564,330) (8,522,055)
----------------- ----------------
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions 1,666,126 (7,883,056)
----------------- ----------------
Total Decrease in Net Assets (205,911) (6,711,149)
NET ASSETS:
Beginning of year 2,929,851 9,641,000
----------------- ----------------
End of year (includes undistributed net investment income
of ($38,207 and $33,139, respectively) $ 2,723,940 $ 2,929,851
----------------- ----------------
----------------- ----------------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Morgan Grenfell European Small Cap Equity Fund - For the years/period ended October 31,
For a Share Outstanding Throughout each Period
1999 1998 1997 1996 1995*
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.48 $ 11.80 $ 12.54 $ 11.55 $ 10.00
Net investment Income 0.04 0.11 0.04 0.12 0.12
Net realized and unrealized gains (losses) 0.29 1.61 (0.22) 1.03 1.44
---------------------------------------------------------------
Total from investment operations 0.33 1.72 (0.18) 1.15 1.56
---------------------------------------------------------------
Less distributions from:
Net investment income (0.18) (0.04) (0.18) (0.12) (0.01)
Net realized gains (12.56) - (0.38) (0.04) -
---------------------------------------------------------------
Total distributions (12.74) (0.04) (0.56) (0.16) (0.01)
---------------------------------------------------------------
Net Asset Value, End of Period $ 1.07 $ 13.48 $ 11.80 $ 12.54 $ 11.55
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL INVESTMENT RETURN 15.49% 14.65% -1.47% 10.06% 15.66% **
NET ASSETS END OF PERIOD (000'S) $ 2,723 $ 2,930 $ 9,641 $ 9,856 $ 9,336
PORTFOLIO TURNOVER 87% 111% 44% 49% 34%
RATIOS TO AVERAGE NET ASSETS:
Ratio of Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25% 1.25% ***
Ratio of Net Investment Income to Average Net Assets 1.33% 0.34% 0.58% 0.96% 1.25% ***
RATIOS TO AVERAGE NET ASSETS EXCLUDING EXPENSE LIMITATIONS:
Ratio of Expenses to Average Net Assets 9.92% 2.96% 2.12% 2.50% 2.24% ***
Ratio of Net Investment Income (Loss) to Average Net Assets -7.34% -1.37% -0.29% -0.29% 0.26% ***
</TABLE>
* Commenced operations on 11/1/94. .
** Not annualized.
*** Annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
OCTOBER 31, 1999
1. Organization
Morgan Grenfell Investment Trust (the "Trust") was organized as a Delaware
business trust on September 13, 1993. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Trust currently consists of twenty-two separate investment
portfolios (collectively, the "Funds"). The accompanying financial statements
and notes thereto relate to the Morgan Grenfell European Small Cap Equity Fund
(the "Fund"). The Fund's prospectus provides a description of the Fund's
investment objectives, policies and strategies.
2. Significant Account Policies
The preparation of financial statements in accordance with generally accepted
accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
SECURITY VALUATION--Securities listed on a securities exchange for
which market quotations are readily available are valued at the last quoted
sales price on the principal exchange on which they are traded on the valuation
date or, if there is no such reported sale on the valuation date, at the most
recently quoted bid price. Unlisted securities for which market quotations are
readily available are valued at the most recently quoted bid price. Short-term
investments are valued at amortized cost which approximates market value. Other
securities for which market quotations are not readily available or securities
whose market quotations do not, in the opinion of the Investment Advisor,
reflect market value are valued at fair value using methods determined in good
faith by the valuation committee of the Board of Trustees.
INCOME TAXES--It is the intention of the Fund to continue to qualify as
a regulated investment company and to distribute all of its taxable income.
Accordingly, no provision for federal income taxes is considered necessary.
NET ASSET VALUE PER SHARE--The net asset value per share is calculated
on a daily basis by dividing the assets of the Fund, less its liabilities, by
the number of outstanding shares of the Fund.
REPURCHASE AGREEMENTS--Securities pledged as collateral for repurchase
agreements are held by the custodian banks until maturity of the repurchase
agreements. Provisions of the repurchase agreements and procedures adopted by
the Trust require that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty.
The Fund may also invest in tri-party repurchase agreements. Securities
held as collateral for tri-party repurchase agreements are maintained in a
segregated account by the broker's custodian bank until maturity of the
repurchase agreement. Provisions of the agreements require that the market value
of the collateral, including accrued interest thereon, is sufficient in the
event of default by the counterparty.
If the counterparty defaults and the value of the collateral declines
or if the counterparty enters an insolvency proceeding, realization of the
collateral by the Fund may be delayed or limited.
FOREIGN CURRENCY TRANSLATION - The books and records of the Fund are
<PAGE>
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: (I) market value of investment securities, other
assets and liabilities at the current rate of exchange; and (II) purchases and
sales of investment securities, income and expenses at the relevant rates of
exchange prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on
investments in equity securities which is due to changes in NOTES TO FINANCIAL
STATEMENTS MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND OCTOBER 31, 1999
the foreign exchange rates from that which is due to changes in market prices of
such securities. The Fund does isolate the effect of fluctuations in foreign
currency rates when determining the gain or loss upon sale or maturity of
foreign currency denominated debt obligations pursuant to the federal income tax
regulations. Such amounts are categorized as foreign currency gain or loss for
both financial reporting and income tax reporting purposes.
The Fund reports gains and losses on foreign currency related
transactions as realized and unrealized gains and losses for financial reporting
purposes, whereas such gains and losses, to the extent realized, are treated as
ordinary income or loss for federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS - The Fund may enter into forward
foreign currency contracts as hedges against portfolio positions as well as for
non-hedging purposes. The aggregate principal amounts of the contracts are not
recorded as the Fund does not intend to hold the contracts to maturity. All
commitments are "marked-to-market" daily at the applicable foreign exchange rate
and any resulting unrealized gains or losses are recorded currently. The Fund
realizes gains or losses at the time forward contracts are extinguished, except
that gains or losses on certain open contracts are required to be recognized for
U.S. federal income tax purposes at the close of the Fund's taxable year and are
generally treated as ordinary income or loss for such purposes
DISTRIBUTIONS--Distributions from net investment income and net
realized capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principles. These book/tax differences are either temporary
or permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in capital in the period that the difference arises.
At October 31, 1999 the Fund reclassified the following amounts:
<TABLE>
<CAPTION>
Undistributed Accumulated
Net Investment Net Realized
Paid-in
Income (Loss) Gains (Losses) Capital
--------------- -------------- -------
<S> <C> <C> <C>
$678 $(206,618) $205,940
</TABLE>
The above reclassification had no effect on the net assets or net asset value
per share of the Fund.
EXPENSES--Expenses that are directly related to the
Fund are charged directly to the Fund. Other operating expenses of the Trust are
prorated to the Fund on the basis of relative net assets. Deutsche Asset
Management, Inc. ("DAMI"), formerly Morgan Grenfell Inc., absorbed all expenses
of organizing the Trust.
OTHER--Security transactions are accounted for on the
date the security is purchased or sold (trade date). Costs used in determining
net realized capital gains and losses on the sale of investment securities are
those of the specific securities sold adjusted for the accretion and
<PAGE>
amortization of original issue discounts and purchase premiums during the
respective holding period. Dividend income is recognized on the ex-dividend date
and interest income is recognized using the accrual method.
3. Administrations, Investment Advisory Fee and Other Transactions with
Affiliates
By an agreement dated August 27, 1998, the Trust entered into an administration
agreement with DAMI (the "Administrator"), an affiliate of Deutsche Bank AG,
pursuant to which the Administrator will receive, on a monthly basis, a fee at
an annual rate of 0.30% based upon the average daily net assets of the Fund. The
Administrator generally assists in all matters relating to the administration of
the Fund, including the co-ordination and monitoring of any third parties
furnishing services to the Fund, preparation and maintenance of financial
accounting records, and the provision of necessary office space, equipment and
personnel to perform administrative and clerical functions. The Administrator is
also responsible for engaging an accounting agent,
NOTES TO FINANCIAL STATEMENTS
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
OCTOBER 31, 1999
custodian and transfer agent for the Fund's operations. Fees for services
rendered by the accounting agent and the transfer agent are paid by the
Administrator and not the Fund. At a meeting held on August 19, 1999, the Board
of Trustees of the Trust adopted a resolution to approve a transfer agent
agreement between ICCC Capital, Inc., an affiliate of Deutsche Bank AG, and the
Trust, replacing DST Systems, Inc.
effective November 22, 1999.
Prior to October 13, 1998, SEI Financial Management Corporation ("SEI")
served as the Fund's administrator and received an annual fee based on the
aggregate average daily net assets of all the Funds of the Trust as follows:
0.10% up to $1 billion; 0.07% from $1 billion to $1.5 billion; 0.05% from $1.5
billion to $2.5 billion; and 0.04% in excess of $2.5 billion. Each Fund also
paid SEI a minimum annual administration fee of $60,000. Services rendered by
SEI to the Fund were substantially the same as being rendered by the
Administrator, however, administration fees payable to SEI did not include fees
payable to Fund's transfer agent and SEI as accounting agent to the Fund.
Under the advisory agreement with the Trust, Deutsche Asset Management
Investment Services Limited ("DAMIS", formerly Morgan Grenfell Investment
Services Limited), an affiliate of Deutsche Bank AG, serves as the Investment
Adviser ("Investment Adviser") for the Fund. Under the advisory agreement, the
Investment Adviser receives, on a monthly basis, a fee at an annual rate of
1.00% of the Fund's average daily net assets.
The Investment Adviser has voluntarily agreed to reduce it's investment
advisory fees and/or reimburse the Fund to the extent necessary to limit the
Fund's operating expenses to 1.25% of the average daily net assets.
Certain officers and/or trustees of the Trust are affiliated with the
Administrator or the Investment Adviser.
SEI Investments Distributions Co. (the "Distributor") serves as the
distributor of shares of the Fund pursuant to a distribution
agreement with the Trust and assists in the sale of shares of the Fund. The
Investment
<PAGE>
Adviser, and not the Trust, is responsible for payment of any
expenses or fees incurred in the marketing and distribution of shares of the
Fund. At a meeting held on August 19, 1999, the Board of Trustees of the Trust
adopted a resolution to approve an a distribution agreement between ICC
Distributors Inc. and the Trust, replacing SEI Investments Distribution Co.,
effective November 1, 1999
During the year ended October 31, 1999, the Fund purchased securities
from and sold securities to other portfolios of the Trust or other accounts
managed by the Investment Adviser or its affiliates at market value.
4. Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds of
securities sold for the year ended October 31, 1999, excluding short-term
investments, were $2,042,975, and $5,321,516, respectively.
For federal income tax purposes, the cost of securities owned at
October 31, 1999, and the net realized gains or losses on securities sold for
the period then ended was not materially different from the amounts reported for
financial reporting purposes. The gross unrealized appreciation, gross
unrealized depreciation and net unrealized appreciation on Fund's investments at
October 31, 1999, were $1,237, $591, and $646, respectively.
5. Capital Share Transactions
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
1999 1998
Shares Shares
---------------------------
<S> <C> <C>
Institutional Shares
Shares Issued ----- 45,688
Shares Reinvested 2,372,898 2,939
Shares Repurchased (43,781) (648,608)
---------------------------
Increase (Decrease)
in
Capital Share 2,329,117 (599,981)
Transactions
---------------------------
---------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
MORGAN GRENFELL EUROPEAN SMALL CAP EQUITY FUND
OCTOBER 31, 1999
6. Borrowing Agreement
By an agreement dated November 2, 1998, certain Portfolios of the Trust
including the Fund entered into a Credit Agreement (the "Agreement") with
BankBoston, N.A. (the "Lender"). The maximum aggregate credit available to all
the participating portfolios under the Agreement, which expired on October 31,
1999, was $50,000,000. The Agreement has been extended for a period of three
months through January 30, 2000. Interest payments on borrowings are payable by
the borrowing Portfolios at the federal funds rate plus 0.50% per annum and the
borrowings are payable on demand. The participating Portfolios are also subject
to a commitment fee of 0.10% per annum of the unused portion of the maximum
aggregate credit available under the Agreement. During the year ended October
31, 1999, the Fund borrowed under the Agreement at different times. During the
year ended on October 31, 1999, the maximum and average amount of borrowings
under the Agreement by the Fund were $600,000 and $342,857, respectively, and
the weighted average interest rate and aggregate interest charges paid by the
Fund on such borrowings were 5.19% and $342, respectively. At October 31, 1999,
there were no borrowings outstanding under the Agreement.
7. Subsequent Event
On November 1, 1999, the sole shareholder in the Fund redeemed all of its
holdings of 2,546,412 shares in the Fund for $2,724,661, representing the net
asset value of the Fund as of that date of $1.07 per share. The Fund
<PAGE>
sold its investments and assets to its Investment Adviser and the Investment
Adviser assumed all of the liabilities of the Fund to enable the Fund to pay the
redemption proceeds to the redeeming shareholder. The Fund was effectively
liquidated as of November 1, 1999 and has no assets or liabilities.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees
Morgan Grenfell European Small Cap Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Morgan Grenfell European Small
Cap Equity Fund (the "Fund"), a series of Morgan Grenfell Investment Trust, at
October 31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. The financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As explained in Note 7 to the financial statements, the Fund has been liquidated
as of November 1, 1999 by redemption of all its shares outstanding at their net
asset value as of that date.
PriceWaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
December 20, 1999
<PAGE>
Morgan
Grenfell
Investment
TRUST - EUROPEAN SMALL CAP EQUITY FUND
Annual
Report
October 31, 1999
TRUSTEES AND OFFICERS
Richard T. Hale,
PRESIDENT
Paul K. Freeman, TRUSTEE
Graham E. Jones, TRUSTEE
Hugh G. Lynch, TRUSTEE
William N. Searcy, TRUSTEE
Edward T. Tokar, TRUSTEE
David W. Baldt,
VICE PRESIDENT
James H. Grifo,
VICE PRESIDENT
Neil P. Jenkins,
VICE PRESIDENT
Ian D. Kelson,
VICE PRESIDENT
Amy Olmert,
TREASURER, CHIEF FINANCIAL OFFICER
Daniel O. Hirsch,
SECRETARY
INVESTMENT ADVISER
Deutsche Asset Management Investment Services Limited
ADMINISTRATOR
Deutsche Asset Management, Inc.
DISTRIBUTOR
ICC Distributors Inc.
CUSTODIAN
Brown Brothers Harriman & Co.
TRANSFER AGENT
ICC Capital, Inc.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
LEGAL COUNSEL
Hale and Dorr LLP
THIS ANNUAL REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED
FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE TRUST AND MUST BE
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. INVESTORS SHOULD READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING. SHARES OF THE MORGAN GRENFELL INVESTMENT
TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. ICC DISTRIBUTORS INC., IS THE DISTRIBUTOR OF THE MORGAN GRENFELL
INVESTMENT TRUST
