DEUTSCHE ASSET MANAGEMENT, 485APOS, 2000-09-29

DEUTSCHE ASSET MANAGEMENT
485APOS, 2000-09-29

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As filed with the Securities and Exchange Commission on September 29, 2000

Form N-1A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. [27]

and/or

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

AMENDMENT NO. [29]
(Check appropriate box or boxes)

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

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

Registrant's Telephone Number, including Area Code: (410) 895-5000

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

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

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

X on November 30, 2000 pursuant to paragraph (b) of Rule 485
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Deutsche Asset Management

Mutual Fund
Prospectus
November 30, 2000

Premier Class

European Equity

[Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.]

Logo
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European Equity--Premier Class

Overview of European Equity

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

A Detailed Look at European Equity

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

Overview
of European Equity

Goal: The Fund invests for capital appreciation.

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

INVESTMENT POLICIES AND STRATEGIES

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

The Fund's investment team has a sell discipline which maintains upside and
downside target prices, which are adjusted to keep pace with changes in company,
industry and market circumstances.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

. stocks that the Investment Adviser has selected could perform poorly; or
. the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

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

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

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

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

WHO SHOULD CONSIDER INVESTING IN THE FUND

European Equity Premier Class requires a minimum investment of $5,000,000. You
should consider investing in European Equity if you are seeking capital
appreciation. There is, of course, no guarantee that the Fund will realize its
goal. Moreover, you should be willing to accept significantly greater short-term
fluctuation in the value of your investment than you would typically experience
investing in bond or money market funds.

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

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

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

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk of
investing in the Fund by showing changes in the Fund's performance year to year.
Because Premier Class shares are a newly offered class of shares with no
performance history, the following bar chart and table show the performance
history of the Fund's Institutional Class shares, which have been in existence
since the Fund's inception on September 3, 1996. The bar chart shows the actual
return of the Fund's Institutional Class for each full calendar year since the
Fund's inception. The table compares the average annual return of the Fund's
Institutional Class shares with that of the Morgan Stanley Capital International
(MSCI) Europe Index over the last one year and since inception. The Index is a
passive measure of combined national stock market returns. It does not factor in
the costs of buying, selling and holding stocks--costs which are reflected in
the Fund's results.
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The MSCI Europe Index of major markets in Europe is a widely accepted benchmark
of international stock performance. It is a model, not an actual portfolio. It
tracks stocks in Austria, Belgium, Denmark, Finland, France, Germany, Ireland,
Italy, Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom.

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

% % %
1997 1998 1999/2/

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

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999/3/
Since Inception
(9/3/96)/4/ 1 Year

European Equity--
Institutional Class _____% _____%
...........................................................................
MSCI Europe Index _____% _____%

________________________
1 Institutional Class performance is presented because Premier Class shares have
no performance history. Premier Class shares will have substantially similar
performance because the shares are invested in the same portfolio of securities.
The annual returns will differ only to the extent that Premier Class expenses
are lower than Institutional Class expenses. Institutional Class shares are
offered under a separate prospectus, which is available upon request.
/2/ Performance for the period December 31, 1999 to September 30, 2000 for the
Institutional Class was {__%}.
3 Effective December 23, 1999, Deutsche Asset Management, Inc. replaced Deutsche
Asset Management Investment Services Limited as the investment adviser to the
Fund.
4 MSCI Europe Index performance is calculated from August 30, 1996.
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Overview of European Equity

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

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

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual investment return and costs may be higher or lower.
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/1/Restated to reflect estimated Other Expenses for the current fiscal year.
Premier Class shares are a new class of shares with no operating history. For
the fiscal year ended October 31, 2000, Other Expenses and Total Annual Fund
Operating Expenses were 2.52% and 3.22%, respectively, of the average daily net
assets of the Institutional Class shares.

/2/The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end, October 31, 1999, to waive
their fees or reimburse expenses so that total expenses will not exceed 0.95%.

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

ANNUAL FEES AND EXPENSES/1/
Percentage of average
daily net assets

Management Fees 0.70%
Distribution and
Service (12b-1) Fees None
Other Expenses 2.52%/1/
Total Annual Fund
Operating Expenses 3.22%/1/
Less: Fee Waivers or
Expense Reimbursements (2.27%)/2/
------------------------------
Net Expenses 0.95%
------------------------------

EXPENSE EXAMPLE/2/
1 Year 3 Years 5 Years 10 Years

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A detailed look
at European Equity

OBJECTIVE

The Fund seeks capital appreciation. Any dividend and interest income is
incidental to the pursuit of its objective. While we seek capital appreciation,
we cannot offer any assurance of achieving this objective. The Fund's objective
is not a fundamental policy. We must notify shareholders before we change it,
but we do not require their approval to do so.

STRATEGY

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

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests at least 65% of its total assets in
stock and other securities with equity characteristics. Companies in which the
Fund invests are generally based in the developed countries of Europe, including
the countries that make up the MSCI Europe Index. The Fund may invest a portion
of its assets in companies based in the emerging markets of Eastern and Central
Europe and the Mediterranean region. Although the Fund intends to diversify its
investments across different countries, the Fund may invest a significant
portion of its assets in a single country.

The Fund may invest in companies of any market capitalization.

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

An emerging market is commonly defined as one that experienced comparatively
little industrialization or that has a relatively new stock market and a low
level of quoted market capitalization. Bulgaria, Croatia, Estonia and Lithuania
are examples of emerging markets from Eastern and Central Europe in which the
Fund may invest. Greece, Egypt, Morocco and Tunisia are examples of emerging
markets in the Mediterranean region in which the Fund may invest.

Market capitalization is determined by the market price of a company's issued
and outstanding common stock and is calculated by multiplying the number of
shares a company has outstanding by the current market price of the company's
shares.
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A detailed look
at European Equity

INVESTMENT PROCESS

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

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

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

. stock price relative to the company's rate of earnings growth;
. valuation relative to other European companies and market averages;
. valuation relative to global peers;
. merger and acquisition trends; and
. trends related to the impact of the introduction of the new European
currency, the "euro," on the finance, marketing and distribution strategies
of European companies.

The Fund's investment team has a sell discipline which maintains upside and
downside target prices, which are adjusted to keep pace with changes in company,
industry and market circumstances. Historically, the Fund has had a low
portfolio turnover rate.

--------------------------------------------------------------------------------
Portfolio Turnover. The portfolio turnover rate measures the frequency with
which the Fund sells and replaces its securities within a given period.
--------------------------------------------------------------------------------
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A Detailed Look at European Equity

OTHER INVESTMENTS

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

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

RISKS

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

Primary Risks

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

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities in the Fund's portfolio will decline in value.
--------------------------------------------------------------------------------
Futures and options may be used as low-cost methods for gaining or reducing
exposure to a particular securities or currency market without investing
directly in those securities.

A detailed look
at European Equity

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

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

. Information Risk. Financial reporting standards for companies based in
foreign markets differ from those in the United States and may present an
incomplete or misleading picture of a foreign company compared to U.S.
standards.

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

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

. Currency Risk. The Fund invests in foreign securities denominated in foreign
currencies. This creates the possibility that changes in foreign exchange
rates will affect the U.S. dollar value of foreign securities or the U.S.
dollar amount of income or gain received on these securities. We may seek to
minimize this risk by actively managing the currency exposure of the Fund,
which entails hedging or cross-hedging from time to time. There is no
guarantee that these currency management activities will be employed or that
they work, and their use could cause lower returns or even losses to the
Fund.

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

Emerging Markets Risk. To the extent that the Fund invests in emerging markets
to enhance overall returns, it may face higher political, information and stock
market risks. In addition, profound social change and business practices that
depart from developed countries' norms have hindered the orderly growth of
emerging economies and their stock markets in the past. High
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A Detailed Look at European Equity

levels of debt have tended to make emerging economies heavily reliant on foreign
capital and vulnerable to capital flight. The Fund may invest a portion of its
assets in companies based in the emerging markets of Eastern and Central Europe
and the Mediterranean region.

Secondary Risks

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

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options, which are types of derivatives.
Risks associated with derivatives include:

. the derivative is not well correlated with the security, index or currency
for which it is acting as a substitute;
. derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and
. the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.

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

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

. changes in the relative strength and value of the U.S. dollar or other major
currencies;
. Adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio; and
. unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.
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A detailed look at European Equity

MANAGEMENT OF THE FUNDS

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

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

Investment Advisers. Under the supervision of the Board of Trustees, Deutsche
Asset Management, Inc. (DeAM, Inc.) with headquarters at 885 Third Avenue, New
York, New York, acts as the investment adviser for the Fund. The Fund's
investment adviser makes the Fund's investment decisions. The Fund's investment
adviser buys and sells securities for the Fund and conducts the research that
leads to the purchase and sale decisions. The Fund's investment adviser is also
responsible for selecting brokers and dealers and for negotiating brokerage
commissions and dealer charges. The investment adviser/1/ received a fee of
0.70% of the average daily net assets for its services in the last fiscal year.
The investment adviser reimbursed a portion of its fee during the period.

/1/ Deutsche Asset Management Investment Services Limited (DeAMIS) was the
Fund's investment adviser until December 23, 1999.

DeAM, Inc. provides a full range of international investment advisory services
to institutional clients, and as of October 31, 2000, managed approximately
__________ in assets.

DeAM, Inc. is an indirect wholly owned subsidiaries of Deutsche Bank AG.
Deutsche Bank AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual fund,
retail and commercial banking, investment banking and insurance.
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A detailed look
at European Equity

PORTFOLIO MANAGERS

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

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

. Joined the investment adviser in 1993.
. Head of international equities, New York, responsible for overseeing the
management of over $7 billion of international and global equities.
. 29 years of business experience, 18 of them as an investment professional.
. Degrees in mathematics and geophysics from the University of Michigan.

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

. Joined the investment adviser in 1999.
. Previously, portfolio manager, Clay Finlay from 1987 to 1999.
. Financial services analyst with an emphasis on Europe and Japan.
. 14 years of investment industry experience.
. MBA from Columbia University.

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

. Joined the investment adviser in 1993.
. 9 years of investment industry experience.
. Global telecommunication services/equipment and pulp and paper analyst.

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

. Joined the investment adviser in 1995.
. 5 years of investment industry experience.
. Global engineering, construction, utility and automotive analyst.

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

Other Services. DeAM, Inc. provides administrative services for the Funds. In
addition, DeAM, Inc.--or your broker or financial advisor--performs the
functions necessary to establish and
<PAGE>

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

. keeping accurate, up-to-date records for your individual Fund account;
. implementing any changes you wish to make in your account information;
. processing your requests for cash dividends and distributions from the Fund;
. answering your questions on the Fund's investment performance or
administration;
. sending proxy reports and updated prospectus information to you; and
. collecting your executed proxies.

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

CALCULATING A FUND'S SHARE PRICE

We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual fund
shares at the close of regular trading on the New York Stock Exchange every day
the New York Stock Exchange is open for business.

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

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

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

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

The New York Stock Exchange is open every week, Monday through Friday, except
when the following holidays are celebrated: New Year's Day, Martin Luther King,
Jr. Day (the third Monday in January), Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the fourth Thursday in
November) and Christmas Day.

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A detailed look at European Equity

PERFORMANCE INFORMATION

The Fund's performance can be used in advertisements that appear in various
publications. It may be compared to the performance of various indexes and
investments for which reliable performance data is available. The Fund's
performance may also be compared to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.

DIVIDENDS AND DISTRIBUTIONS

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

TAX CONSIDERATIONS

The Fund does not ordinarily pay any U.S. federal income tax. If you are a
taxable shareholder, you and other shareholders pay taxes on the income or
capital gains earned and distributed by the Fund. Your taxes will vary from year
to year, based on the amount of capital gains distributions and dividends paid
out by the Fund. You owe the taxes whether you receive cash or choose to have
distributions and dividends reinvested. Distributions and dividends usually have
the following tax character:

TRANSACTION TAX STATUS

-----------------------------------------------------------------------
Income Dividends Ordinary Income
-----------------------------------------------------------------------
Short-term capital gains Ordinary Income
distributions
-----------------------------------------------------------------------
Long-term capital gains Capital Gains
distributions
-----------------------------------------------------------------------

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

TRANSACTION TAX STATUS

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

The tax considerations for tax deferred accounts or non-taxable entities will be
different.
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A detailed look
at European Equity

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

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Deutsche Asset Management Mutual Fund Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail Deutsche Asset Management Mutual Fund Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

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

Minimum Account Investments
---------------------------------------------------
To open an account $5,000,000
---------------------------------------------------
To add to an account $1,000,000
---------------------------------------------------
Minimum account balance $1,000,000
---------------------------------------------------

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

How to Open Your Fund Account

By mail Complete and sign the account application that accompanies
this prospectus. (You may obtain additional applications by
calling the Service Center.) Mail the completed application
along with a check payable to Deutsche European Equity--
Premier Class to the Service Center. The addresses are shown
under "Contacting the Deutsche Asset Management Funds."

By wire Call the Service Center to set up a wire account.
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A detailed look
at European Equity

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

Two Ways to Buy and Sell Shares in Your Account

MAIL:

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

Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$1,000,000 worth of shares in your account to keep it open. Unless exchanging
into another Deutsche Asset Management fund, you must submit a written
authorization to sell shares in a retirement account.

WIRE:

Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your service agent must call the Service Center at 1-
800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a trade
confirmation number. Instruct your bank to send payment by wire using the wire
instructions noted below. All wires must be received by 4:00 p.m. Eastern time
the next business day.

Routing No: 1010 00695
Attn: Deutsche Asset Management/ Mutual Funds
DDA No: 98-7052-395-7
FBO: (Account name)
(Account number)

Credit: European Equity--Premier Class {Fund number}

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

Selling: You may sell shares by wire only if your account is authorized to do
so. For your protection, you may not change the destination bank account over
the phone. To sell by wire, contact your service agent or the Service Center at
1-800-730-1313. Inform the Service Center representative of the amount of your
redemption and receive a trade confirmation number. The minimum redemption by
wire is $1,000. We must receive your order by 4:00 p.m. Eastern time to wire
your account the next business day.

Important Information about Buying and Selling Shares

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

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

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

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

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

. We process all sales orders free of charge.

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

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

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

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

. We do not issue share certificates.

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

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

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

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

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

. Exchange Privilege. You can exchange all or part of your shares for shares in
another Deutsche Asset Management mutual fund up to four times a year (from
the date of the first exchange). When you exchange shares, you are selling
shares in one fund to purchase shares in another. Before buying shares
through an exchange, you should obtain a copy of that fund's prospectus and
read it carefully. You may order exchanges over the phone only if your
account is authorized to do so.

Please note the following conditions:

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

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

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

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

A detailed look at European Equity

Institutional Class performance is presented because Premier Class shares are a
newly offered class of shares with no performance history. Premier Class shares
will have different performance. The table below helps you understand the
financial performance of the Institutional Class shares of the Fund for the past
four fiscal periods. Certain information selected reflects financial results for
a single Institutional Class share of the Fund. The total returns in the table
represent the rate of return that an investor would have earned on an investment
in the Institutional shares of the Fund, assuming reinvestment of all dividends
and distributions. This information (except as noted) has been audited by
__________________, whose report, along with the Fund's financial statements, is
included in the Fund's annual report. The annual and semi-annual reports are
available free of charge by calling the Service Center at 1-800-730-1313.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS For the six For the years ended October 31, For the period
months ended ended October 31,
April 30, 1996/1/
2000
(Unaudited) 1999 1997 1998
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For a Share Outstanding Throughout
each Period:
Net Asset Value, Beginning of
Period
---------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income
---------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses)
---------------------------------------------------------------------------------------------------------------
Total From Investment Operations
---------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
---------------------------------------------------------------------------------------------------------------
Net Investment Income
---------------------------------------------------------------------------------------------------------------
Net Realized Gains
---------------------------------------------------------------------------------------------------------------
Total Distributions
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
---------------------------------------------------------------------------------------------------------------
Total Investment Return +
---------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period
(000s omitted)
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income (Loss)
---------------------------------------------------------------------------------------------------------------
Expenses
---------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense /3/
Ratio Due to Absorbtion of Expenses by
DeAMIS/2/
---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
---------------------------------------------------------------------------------------------------------------
</TABLE>

___________________

/1/ The Fund's inception was September 3, 1996.
/2/ DeAMIS-Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser until December 23, 1999.
/3/ Annualized.
+ Return is for the period indicated and has not been annualized.
<PAGE>

This page intentionally left blank.
<PAGE>

Additional information about the Fund's investments and performance is available
in the Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year.

You can find more detailed information about the Fund in the current Statement
of Additional Information, dated November 30, 2000, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference. To receive your free copy of the Statement of
Additional Information, the annual or semi-annual report, or if you have
questions about investing in a Fund, write to us at:

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

You can find reports and other information about the Fund on the EDGAR database
on the SEC website (http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by writing an electronic
request to [email protected] or by writing to the Public Reference Section of
the SEC, Washington, D.C. 20549-0102. Information about the Fund, including its
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the SEC at 1-202-942-8090.

European Equity--Premier Class
Morgan Grenfell Investment Trust

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

CUSIP#

811-8006
Deutsche Asset Management
<PAGE>

Deutsche Asset Management

Mutual Fund
Prospectus

November 30, 2000

L Class

International Select Equity

European Equity

[Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.]

Logo
<PAGE>

<TABLE>
Table of Contents
-----------------

<S> <C>
International Select Equity................................................
European Equity............................................................
Information Concerning the Funds...........................................
Management of the Funds....................................................
Calculating a Fund's Share Price...........................................
Performance Information....................................................
Dividends and Distributions................................................
Tax Considerations.........................................................
Buying and Selling Fund Shares.............................................
</TABLE>

--------------------------------------------------------------------------------
<PAGE>

Overview
of International Select Equity

Goal: The Fund invests for capital appreciation.

Core Strategy: The Fund invests primarily in stocks and other securities with
equity characteristics of companies located in the developed countries that make
up the MSCI EAFE Index.

INVESTMENT POLICIES AND STRATEGIES
The Fund seeks to achieve its investment objective by investing in a focused
list of approximately 30 to 40 stocks offering, in our opinion, the greatest
upside potential on a 12 month view. We use an entirely bottom-up approach, with
no active allocation between countries, regions or industries.

The Fund follows a strict buy and sell strategy. We begin with a broad universe
of equity securities that show long-term prospects for growth. We set for each
security a target price objective. The price objective represents our opinion of
the intrinsic value of the security. We rank each security based on these target
price objectives and purchase the top 30 to 40 securities in the ranking. Stocks
are sold when they meet their target price objectives or when we revise price
objectives downward.

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

International Select Equity--L Class

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

A Detailed Look at International Select Equity
Objective.....................................................
Strategy......................................................
Principal Investments.........................................
Investment Process............................................
Other Investments.............................................
Risks.........................................................
Portfolio Managers............................................
Financial Highlights..........................................
<PAGE>

Overview of International Select Equity

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

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

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

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

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

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

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

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

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

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

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

Overview of International Select Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

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

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

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

10.31% 0.51% 23.49% 88.85%
1996 1997 1998 1999/2/

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

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999

Since Inception
1 Year 5 Year (5/15/95)/3/
International Select
Equity--Institutional Class -----% -----% -----%
-----------------------------------------------------------------------
EAFE Index -----% -----% -----%

_______________________

/1/ Institutional Class performance is presented because L Class shares have no
performance history. L Class shares will have substantially similar performance
because the shares are invested in the same portfolio of securities. The bar
chart and table do not reflect 12b-1 fees at an aggregate annual rate of up to
0.25% of the Fund's average daily net assets for its L Class shares.
Institutional Class shares are offered under a separate prospectus, which is
available upon request.
/2/ The year-to-date performance as of September 30, 2000 for the Institutional
Class was {__%}.
/3/ EAFE Index performance is calculated from May 30, 1995.
<PAGE>

Overview of International Select Equity

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

Expense Example. The example below illustrates the expenses you will incur on a
$10,000 investment in L Class shares of the Fund. The numbers assume that the
Fund earned an annual return of 5% over the periods shown, the Fund's operating
expenses remained the same and you sold your shares at the end of the period.

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

/1/ Restated to reflect estimated Other Expenses for the current fiscal year. L
Class shares are a new class of shares with no operating history. For the
fiscal year ended October 31, 2000, Other Expenses and Total Annual Fund
Operating Expenses were 0.69% and 1.39%, respectively, of the average daily net
assets of the Investment Class shares. Investment Class shares are used for
this comparison because their expenses are more similar to the L Class shares.
Expenses for the Investment Class shares do not reflect 12b-1 fees paid by the L
Class shares but they do reflect services fees paid by Investment Class which
like the 12b-1 fees are at an aggregate annual rate of up to 0.25% of the
average daily net assets of that class.

/2/ The investment adviser and administrator have contractually agreed, for the
period from the Fund's inception date (November 30, 2000) to February 28, 2002,
to waive their fees or reimburse expenses so that total expenses will not exceed
1.50%.

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

ANNUAL FEES AND EXPENSES
Percentage of Average
Daily Net Assets
Management Fees 0.70%
Distribution and/or
Service (12b-1) Fees 0.25%
Other Expenses 0.44%/1/
Total Annual Fund
Operating Expenses 1.39%/1/
Less: Fee Waivers or
Expense Reimbursements 0.00%/2/
Net Expenses 1.39%
<PAGE>

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------
$142 $440 $761 $1,669
--------------------------------------------------------------------
<PAGE>

A detailed look
at International Select Equity

OBJECTIVE

STRATEGY

We seek to identify a focused list of approximately 30 to 40 companies that
offer, in our opinion, the greatest upside potential on a rolling 12 month view.
We use an entirely bottom-up approach, with no active allocation between
countries, regions or industries.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests primarily in stocks and other
securities with equity characteristics located in the countries that make up the
MSCI (Morgan Stanley Capital International) EAFE Index. The MSCI EAFE Index
tracks stocks in Australia, Austria, Belgium, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
majority of securities in which the Fund invests are represented in the MSCI
EAFE Index. However, the Fund may invest up to 50% of its total assets in non-
MSCI EAFE Index securities of companies located in the countries that make up
the MSCI EAFE Index. The MSCI EAFE Index has a median market capitalization of
over $2.7 billion.

Under normal market conditions, the Fund invests in securities of issuers with a
minimum market capitalization of $500 million.

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

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

INVESTMENT PROCESS

The Fund's process begins with a broad universe of equity securities of issuers
located in the countries that make up the MSCI EAFE Index. The universe includes
all securities in the MSCI EAFE Index and a large number of securities not
included in the MSCI EAFE Index but whose issuers are located in the countries
that make up the MSCI EAFE Index.

Teams of analysts worldwide screen the companies in the universe to identify
those with high and sustainable return on capital and long-term prospects for
growth. We focus on companies with real cash flow on investment rather than
published earnings. The research teams rely on information gleaned from a
variety of sources and perspectives, including broad trends such as lifestyle
and
<PAGE>

technological changes, industry cycles and regulatory changes, quantitative
screening and individual company analysis.

Based on this fundamental research, we set for each security, a target price
objective (our opinion of the intrinsic value of the security) and rank the
securities based on these target price objectives. We apply a strict buy and
sell strategy. The top 30 to 40 stocks in the ranking are purchased for the
Fund. Stocks are sold when they meet their target price objectives or when we
revise price objectives downward. In implementing this strategy, the Fund may
experience a high portfolio turnover rate.

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

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

OTHER INVESTMENTS

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

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

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

Forward currency transactions involve the purchase or sale of a foreign currency
at an exchange rate established currently, but with payment and delivery at a
specified future time. Forward currency transactions may be used in an attempt
to hedge against losses, or, where possible, to add to investment returns. There
is no guarantee that these currency management activities will be employed or
that they work, and their use could cause lower returns or even losses to the
Fund.

--------------------------------------------------------------------------------
<PAGE>

A Detailed Look at International Select Equity

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

RISKS

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

Primary Risks

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

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

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

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

Secondary Risks

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

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

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options, which are types of derivatives.
Risks associated with derivatives include:

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

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

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

If the Fund invests in futures contracts and options on futures contracts for
non-hedging purposes, the margin and premiums required to make those investments
will not exceed 5% of the Fund's net asset value after taking into account
unrealized profits and losses on the contracts. The use of futures and options
for non-hedging purposes involve greater risks than stock investments.
<PAGE>

A Detailed Look at International Select Equity

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

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

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

. unpredictable effects on trade and commerce generally.

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

PORTFOLIO MANAGERS

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

Alexander Tedder, Director--Equities, Deutsche Asset Management Investment
Services Limited and Lead Manager of the Fund

. Joined the investment adviser in 1994.
. 11 years of investment industry experience.
. Head of EAFE equities.
. European portfolio manager/analyst.
. Masters in Economics and Business Administration, Freiburg University.

Richard Wilson, Director--Equities, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund

. Joined the investment adviser in 1993. Prior to that, managed UK pension
funds at HSBC Asset Management from 1988 to 1993.
. 12 years of investment industry experience.
. Head of Pan European Equity Product.
. UK portfolio manager/analyst.
<PAGE>

A Detailed Look at International Select Equity

James Pulsford, Director--Equities, Deutsche Asset Management Investment
Services Limited and Co-Manager of the Fund

. Joined the investment adviser in 1984.
. 16 years investment experience, 12 year resident of Japan.
. Head of Japan Equity desk.
. Fluent Japanese speaker.

Stuart Kirk, Portfolio Manager, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund

. Joined the investment adviser in 1995.
. 5 years of investment industry experience.
. Asia-Pacific portfolio manager/analyst.

Amy Low, Portfolio Manager, Deutsche Asset Management Investment Services
Limited and Co-Manager of the Fund

. Joined the investment adviser in 1997. Prior to that, credit analyst at OCBC
Group from 1994 to 1997.
. 6 years of investment industry experience.
. Singapore and Hong Kong portfolio manager/analyst.
<PAGE>

A Detailed Look at International Select Equity

Institutional Class performance is presented because L Class shares are a newly
offered class of shares with no performance history. L Class shares will have
different performance. The table below helps you understand the financial
performance of the Institutional Class shares of the Fund for the six months
ended April 30, 2000 and the past five fiscal periods. Certain information
selected reflects financial results for a single Institutional Class share of
the Fund. The total returns in the table represent the rate of return that an
investor would have earned on an investment in the Institutional Class shares of
the Fund, assuming reinvestment of all dividends and distributions. This
information (except as noted) has been audited by ----------------------, whose
report, along with the Fund's financial statements, is included in the Fund's
annual report. The annual report and semi-annual report are available free of
charge by calling the Service Center at 1-800-730-1313.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
For the six For the years ended October 31, For the
months ended period ended
April 30, October 31,
2000 1999 1998 1997 1996 1995/1/
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For a Share Outstanding
Throughout each Period:
Net Asset Value, Beginning of
Period
--------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income
--------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses)
--------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations
--------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
--------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
--------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
--------------------------------------------------------------------------------------------------------------------------------
Total Distributions
--------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
--------------------------------------------------------------------------------------------------------------------------------
Total Investment Return T
--------------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
--------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s omitted)
--------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net Investment Income (Loss)
--------------------------------------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense /3/
Ratio Due to Absorbtion of Expenses by
DAMIS/2/
--------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

__________________________________
/1/ The Fund's Inception was May 15, 1995.
/2/ DAMIS-Deutsche Asset Management Investment Services Limited, the Fund's
investment adviser.
/3/ Annualized.

t Return is for the period indicated and has not been annualized.
<PAGE>

Overview
of European Equity

Goal: The Fund invests for capital appreciation.

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

INVESTMENT POLICIES AND STRATEGIES

The Fund's investment team has a sell discipline which maintains upside and
downside target prices, which are adjusted to keep pace with changes in company,
industry and market circumstances.

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

European Equity--L Class

Overview of European Equity

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

A Detailed Look at European Equity

Objective..............................................
Strategy...............................................
Principal Investments..................................
Investment Process.....................................
Other Investments......................................
Risks..................................................
Portfolio Managers.....................................
Financial Highlights...................................
<PAGE>

Overview of European Equity

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

. stocks that the Investment Adviser has selected could perform poorly; or
. the stock market could perform poorly in one or more of the countries in
which the Fund has invested.

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

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

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

WHO SHOULD CONSIDER INVESTING IN THE FUND

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

Overview of European Equity

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk of
investing in the Fund by showing changes in the Fund's performance year to year.
Because the L Class shares are a newly offered class of shares with no
performance history, the following bar chart and table show the performance
history of the Fund's Institutional Class shares, which have been in existence
since the Fund's inception on September 3, 1996. The table compares the average
annual return of the Fund's Institutional Class shares with that of the Morgan
Stanley Capital International (MSCI) Europe Index over the last one year and
since inception. The Index is a passive measure of combined national stock
market returns. It does not factor in the costs of buying, selling and holding
stocks--costs which are reflected in the Fund's results.
-------------------------------------------------------------------------------
The MSCI Europe Index of major markets in Europe is a widely accepted benchmark
of international stock performance. It is a model, not an actual portfolio. It
tracks stocks in Austria, Belgium, Denmark, Finland, France, Germany, Ireland,
Italy, Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom.

YEAR-BY-YEAR RETURNS
Institutional Class/1/
(each full calendar year since inception)

15.54% 22.89% 45.43%
1997 1998 1999/2/

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

PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999/3/
Since Inception
1 Year (9/3/96)/4/

European Equity--
Institutional Class _____% _____%
......................................
MSCI Europe Index _____% _____%

__________________________
1 Institutional Class performance is presented because L Class shares have no
performance history. L Class shares will have substantially similar performance
because the shares are invested in the same portfolio or securities. The chart
does not reflect 12b-1 fees at an aggregate annual rate of 0.25% of the Fund's
average daily net assets for its L Class shares. Institutional Class shares are
offered under a separate prospectus, which is available upon request.
2 The year-to-date performance as of September 30, 2000 for the Institutional
Class was {%}.
3 Effective December 23, 1999, Deutsche Asset Management, Inc. replaced
Deutsche Asset Management Investment Services Limited as the investment adviser
to the Fund.
/4/ MSCI Europe Index performance is calculated from August 30, 1996.
<PAGE>

Overview of European Equity

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

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

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

You may use this hypothetical example to compare the Fund's expense history with
other funds. Your actual investment return and costs may be higher or lower.
-------------------------------------------------------------------------------
/1/The 2.00% short-term redemption fee applies to shares purchased on or after
October 2, 2000 and redeemed (either by selling or exchanging into another fund)
within 60 days of purchase (approximately two months). The fee is withheld from
redemption proceeds and retained by the fund.

/2/Restated to reflect estimated Other Expenses and estimated net assets for
the current fiscal year. L Class shares are a new class of shares with no
operating history. For the fiscal year ended October 31, 2000, Other Expenses
and Total Annual Fund Operating Expenses were 2.77% and 3.47%, respectively, of
the average daily net assets of the Investment Class shares. Investment Class
shares are used for this comparison because their expenses are more similar to
the L Class shares. Expenses for the Investment Class shares do not reflect 12b-
1 fees paid by the L Class but they do reflect service fees paid by the
Investment Class which like the 12b-1 fees are at an aggregate annual rate of up
to 0.25% of the average daily net assets of that Class.

/3/The investment adviser and administrator have contractually agreed, for the
period from the Fund's inception date (November 30, 2000) to February 28, 2002
to waive their fees or reimburse expenses so that total expenses will not exceed
1.50%.

/4/For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

Shareholder Fees
(fees paid directly from your investment)

Maximum Sales Charge Imposed on Purchases None
Maximum Sales Charge on Reinvested Dividends None
Maximum Short-Term Redemption Fee (as a 2.00%/1/
Percentage of amount redeemed, as applicable)

_________________________
<PAGE>

ANNUAL FEES AND EXPENSES/1/
Percentage of average
daily net assets

Management Fees 0.70%
Distribution and
Service (12b-1) Fees 0.25%
Other Expenses 2.52%/2/
Total Annual Fund
Operating Expenses 3.47%/2/
Less: Fee Waivers or
Expense Reimbursements (1.97%)/3/
----------------------------------------
Net Expenses 1.50%
----------------------------------------

EXPENSE EXAMPLE/4/
1 Year 3 Years 5 Years 10 Years
$153 $882 $1,634 $3,616
<PAGE>

A detailed look
at European Equity

OBJECTIVE

STRATEGY

PRINCIPAL INVESTMENTS

The Fund may invest in companies of any market capitalization.

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

INVESTMENT PROCESS

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

A Detailed Look at European Equity

OTHER INVESTMENTS

RISKS

Primary Risks

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

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

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

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

A Detailed Look at European Equity

Secondary Risks

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

Futures and Options. Although not one of its principal investment strategies,
the Fund may invest in futures and options, which are types of derivatives.
Risks associated with derivatives include:

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

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

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

If the Fund invests in futures contracts and options for non-hedging purposes,
the margin and premiums required to make those investments will not exceed 5% of
the Fund's net asset value after taking into account unrealized profits and
losses on the contracts. The Fund may invest a portion of its assets in
companies based in the emerging markets of Eastern and Central Europe and the
Mediterranean region.

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

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

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

. unpredictable effects on trade and commerce generally.
<PAGE>

A Detailed Look at European Equity

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

PORTFOLIO MANAGERS

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

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

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

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

. Joined the investment adviser in 1993.
. 9 years of investment industry experience.
. Global telecommunication services/equipment and pulp and paper analyst.

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

. Joined the investment adviser in 1995.
. 5 years of investment industry experience.
. Global engineering, construction, utility and automotive analyst.
--------------------------------------------------------------------
<PAGE>

A Detailed Look at European Equity

Institutional Class performance is presented because L Class shares are a newly
offered class of shares with no performance history. L Class shares will have
different performance. The table below helps you understand the financial
performance of the Institutional Class shares of the Fund for the past four
fiscal periods and the six months ended April 30, 2000. Certain information
selected reflects financial results for a single Institutional Class share of
the Fund. The total returns in the table represent the rate of return that an
investor would have earned on an investment in the Institutional shares of the
Fund, assuming reinvestment of all dividends and distributions. This information
(except as noted) has been audited by-------------------------, whose report,
along with the Fund's financial statements, is included in the Fund's annual
report. The annual and semi-annual reports are available free of charge by
calling the Service Center at 1-800-730-1313.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS For the six For the years ended October 31, For the period
months ended ended October 31,
April 30, 1996/1/
2000 1999 1998 1997
(Unaudited)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For a Share Outstanding Throughout each
Period:
Net Asset Value, Beginning of Period
--------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income
--------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses)
--------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations
--------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
--------------------------------------------------------------------------------------------------------------------------
Net Investment Income
--------------------------------------------------------------------------------------------------------------------------
Net Realized Gains
--------------------------------------------------------------------------------------------------------------------------
Total Distributions
--------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period
--------------------------------------------------------------------------------------------------------------------------
Total Investment Return +
--------------------------------------------------------------------------------------------------------------------------
Supplemental Data and Ratios:
--------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s
omitted)
--------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
--------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)
--------------------------------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------------------------------
Decrease Reflected in Above Expense /3/
Ratio Due to Absorbtion of Expenses by
the Fund's investment addviser/2/
--------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

/1/ The Fund's inception was September 3, 1996.
/2/ Deutsche Asset Management Inc. became the Fund's investment adviser on
December 23,1999. Prior to that date, Deutsche Asset Management Investment
Services Limited was the Fund's investment adviser.
/3/ Annualized.
+ Return is for the period indicated and has not been annualized.
<PAGE>

Information
Concerning the Funds

MANAGEMENT OF THE FUNDS

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

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

Investment Advisers. Under the supervision of the Board of Trustees, Deutsche
Asset Management Investment Services Limited (DeAMIS) with headquarters at One
Appold Street, London, England, acts as investment adviser for International
Select Equity. Deutsche Asset Management, Inc. (DeAM, Inc.) with headquarters at
885 Third Avenue, New York, New York, acts as the investment adviser for
European Equity. Each Fund's investment adviser makes each Fund's investment
decisions. Each Fund's investment adviser buys and sells securities for the Fund
and conducts the research that leads to the purchase and sale decisions. Each
Fund's investment adviser is also responsible for selecting brokers and dealers
and for negotiating brokerage commissions and dealer charges. Each investment
adviser received the following fees as a percentage of the average daily net
assets for each Fund for its services in the last fiscal year. Each investment
adviser reimbursed a portion of its fee during the period.

Percentage of Average Daily
Fund Net Assets
----------------------------------------------------------------
International Select Equity Fund 0.70%
----------------------------------------------------------------
European Equity Fund /1/ 0.70%
----------------------------------------------------------------

/1/DeAMIS was the Fund's investment adviser until December 23, 1999.

DeAMIS and DeAM, Inc. provide a full range of international investment advisory
services to institutional clients, and as of October 31, 2000, managed
approximately $_________ and $_______, respectively, in assets.

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

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

Other Services. DeAM, Inc. provides administrative services for the Funds. In
addition, DAMI--or your broker or financial advisor--performs the functions
necessary to establish and maintain your account. In addition to setting up the
account and processing your purchase and sale orders, these functions include:

CALCULATING A FUND'S SHARE PRICE

We calculate the daily price of each Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual fund
shares at the close of regular trading on the New York Stock Exchange every day
the New York Stock Exchange is open for business.

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

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

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

--------------------------------------------------------
<PAGE>

Information Concerning the Funds

PERFORMANCE INFORMATION

DIVIDENDS AND DISTRIBUTIONS

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

TAX CONSIDERATIONS

A Fund does not ordinarily pay any U.S. federal income tax. If you are a taxable
shareholder, you and other shareholders pay taxes on the income or capital gains
earned and distributed by the Fund. Your taxes will vary from year to year,
based on the amount of capital gains distributions and dividends paid out by the
Fund. You owe the taxes whether you receive cash or choose to have distributions
and dividends reinvested. Distributions and dividends usually have the following
tax character:

TRANSACTION TAX STATUS

-------------------------------------------------------------------
Income Dividends Ordinary Income
-------------------------------------------------------------------
Short-term capital gains Ordinary Income
distributions
-------------------------------------------------------------------
Long-term capital gains Long-term capital gains
distributions
-------------------------------------------------------------------

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

TRANSACTION TAX STATUS

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

Information Concerning the Funds

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

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

BUYING AND SELLING FUND SHARES

Contacting the Mutual Fund Service Center of Deutsche Asset Management

By phone 1-800-730-1313

By mail Deutsche Asset Management Mutual Fund Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

By overnight mail Deutsche Asset Management Mutual Fund Service Center
210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

Minimum Account Investments

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

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

How to Open Your Fund Account

By mail Complete and sign the account application that accompanies this
prospectus. (You may obtain additional applications by calling the Service
Center.) Mail the completed application along with a check payable to the
Deutsche Asset Management fund you have selected to the Service Center.
The addresses are shown under "Contacting the Mutual Fund Service Center
of Deutsche Asset Management."

By wire Call the Service Center to set up a wire account.
<PAGE>

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

Two Ways to Buy and Sell Shares in Your Account

MAIL:

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

Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at
least$1,000 worth of shares in your account to keep it open. Unless exchanging
into another Deutsche Asset Management fund, you must submit a written
authorization to sell shares in a retirement account.

WIRE:

Routing No: 1010 00695
Attn: Deutsche Asset Management/ Mutual Funds
DDA No: 98-7052-395-7
FBO: (Account name)
(Account number)

Credit: [Fund name and Fund number]

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

minimum redemption by wire is$1,000. We must receive your order by 4:00 p.m.
Eastern time to wire your account the next business day.

Short-Term Redemption Fee

European Equity--L Class may charge a short-term redemption fee of 2.00% on the
value of the shares redeemed (either by selling or exchanging into another fund)
within 60 days (approximately two months) of purchase. This fee will compensate
the Fund for expenses directly related to short-term shareholder trading and
will facilitate portfolio management. The short-term redemption fee is withheld
from redemption proceeds and retained by the Fund.

The short-term redemption fee does not apply to:
. exchanges into another class of shares of the Fund;
. shares acquired through reinvestment of dividends and other distributions;
. shares of the Fund in an account which is closed by us because it fails to
meet minimum balance requirements; and
. shares held in an account of certain retirement plans or profit sharing
plans.

The fee may apply to shares held through omnibus accounts. You should consult
with your retirement plan administrator or service agent to determine whether a
redemption fee is applicable to your shares. This fee is not a deferred sales
charge and is not a commission. The fee is paid to the Fund.

The Fund will use the "first-in, first out" method to determine your holding
period. Under this method, the date of redemption or exchange will be compared
with the earliest purchase date of shares held in your account. If your holding
period is less than 60 days, the short-term redemption fee will be assessed on
the current net asset value of those shares. For purposes of computing the
redemption fee, any shares bought through reinvestment of distributions will be
redeemed first without charging the fee, followed by the shares held longest.

Important Information about Buying and Selling Shares

. Each Fund has adopted plans under Rule 12b-1 that allow the Fund to pay your
securities dealer or shareholder servicing agent distribution and other fees
for the sale of its shares and for shareholder service. L Class shares pay an
annual distribution fee equal to 0.25% of average daily net assets. Because
these fees are paid out of net assets on an on-going basis, they will, over
time, increase the cost of your investment and may cost you more than paying
other types of sales charges.

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

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

. We process all sales orders free of charge.

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

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

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

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

. We do not issue share certificates.

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

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

Please note the following conditions:

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

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

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

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

This page intentionally left blank
<PAGE>

Additional information about each Fund's investments and performance is
available in the Fund's annual and semi-annual reports to shareholders. In the
Fund's annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year.

You can find more detailed information about each Fund in the current Statement
of Additional Information, dated November 30, 2000, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference. To receive your free copy the Statement of Additional
Information, the annual or semi-annual report, or if you have questions about
investing in a Fund, write to us at:

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

You can find reports and other information about each Fund on the EDGAR database
on the SEC website (http://www.sec.gov), or you can get copies of this
information, after payment of a duplicating fee, by writing an electronic
request to [email protected] or by writing to the Public Reference Section of
the SEC, Washington, D.C. 20549-0102. Information about each Fund, including its
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the at 1-202-942-8090.

International Select Equity--L Class
European Equity--L Class

Morgan Grenfell Investment Trust

Distributed by:
ICC Distributors, Inc.
One South Street
Baltimore, Maryland 21202

CUSIP#

811-8006
Deutsche Asset Management
<PAGE>

MORGAN GRENFELL INVESTMENT TRUST
No-Load Open-End Funds
One South Street
Baltimore, Maryland 21202

STATEMENT OF ADDITIONAL INFORMATION
November 30, 2000

Morgan Grenfell Investment Trust (the "Trust") is an open-end, management
investment company consisting of twenty-two investment portfolios, each having
separate and distinct investment objectives and policies. This Statement of
Additional Information ("SAI") provides supplementary information pertaining to
the following seven separate investment portfolios of the Trust (the "Funds"):

- International Select Equity, previously Morgan Grenfell International
Select Equity Fund

- European Equity, previously Morgan Grenfell European Equity Growth Fund

- International Small Cap Equity, previously Morgan Grenfell International
Small Cap Equity Fund

- Emerging Markets Equity, previously Morgan Grenfell Emerging Markets
Equity Fund

- Global Fixed Income, previously Morgan Grenfell Global Fixed Income Fund

- International Fixed Income, previously Morgan Grenfell International
Fixed Income Fund

- Emerging Markets Debt, previously Morgan Grenfell Emerging Markets Debt
Fund

This Statement of Additional Information is not a prospectus, and should be read
only in conjunction with the Funds' Premier, Institutional or Investment Class
shares Prospectuses dated February 28, 2000 or Premier or L Class shares
Prospectus dated November 30, 2000, as applicable (each, a "Prospectus" and
collectively, the "Prospectuses"). The audited financial statements for each
Fund are included in the Funds' annual reports, which we have filed
electronically with the Securities and Exchange Commission and which along with
the Fund's semi-annual reports are incorporated by reference into this Statement
of Additional Information. A copy of each Prospectus, Annual Report and Semi-
annual report may be obtained without charge from Deutsche Asset Management,
Inc., the Trust's Administrator, by calling 1-800-730-1313 or writing to Morgan
Grenfell Investment Trust, P.O. Box 219210, Kansas City, MO 64121.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION............................................................................................................... 3
ADDITIONAL INFORMATION ON FUND INVESTMENTS AND STRATEGIES AND RELATED RISKS................................................ 4
INVESTMENT RESTRICTIONS.................................................................................................... 32
TRUSTEES AND OFFICERS...................................................................................................... 35
INVESTMENT ADVISORY AND OTHER SERVICES..................................................................................... 37
DISTRIBUTION OF FUND SHARES................................................................................................ 39
SERVICE PLAN............................................................................................................... 44
PORTFOLIO TRANSACTIONS..................................................................................................... 45
PURCHASE AND REDEMPTION OF SHARES.......................................................................................... 49
PERFORMANCE INFORMATION.................................................................................................... 51
TAXES...................................................................................................................... 54
GENERAL INFORMATION ABOUT THE TRUST........................................................................................ 61
ADDITIONAL INFORMATION..................................................................................................... 64
FINANCIAL STATEMENTS....................................................................................................... 64
APPENDIX A DESCRIPTION OF RATINGS CATEGORIES OF MOODY'S INVESTORS SERVICE, INC. AND STANDARD & POOR'S RATINGS GROUP........ 66
APPENDIX B QUALITY DISTRIBUTION FOR EMERGING MARKETS DEBT.................................................................. 68
</TABLE>

No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectuses in connection with the offering made by the Prospectuses and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its Distributor. None of the Prospectuses
constitute an offering by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made. Shares of the Funds are not
available in certain states. Please call 1-800-730-1313 to determine
availability in your state.

-2-
<PAGE>

INTRODUCTION

The Trust is an open-end, management investment company that currently consists
of fifteen separate investment series, including the following seven series (the
"Funds"):

International Select Equity
European Equity
International Small Cap Equity
Emerging Markets Equity
(collectively, the "Equity Funds")

Global Fixed Income
International Fixed Income
Emerging Markets Debt
(collectively, the "Fixed Income Funds").

Each of the Fixed Income Funds is "non-diversified" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"). Each of the Equity
Funds is "diversified" within the meaning of the 1940 Act.

Deutsche Asset Management Investment Services Limited (the "Adviser" or
"DeAMIS") serves as investment adviser to the Funds other than European Equity.
Deutsche Asset Management, Inc. ("DeAM, Inc.") serves as investment adviser to
European Equity. ICC Distributors, Inc. (the "Distributor") serves as the Funds'
principal underwriter and distributor.

The information contained in this Statement of Additional Information generally
supplements the information contained in the Prospectus. No investor should
invest in shares of a Fund without first reading the Prospectus. Capitalized
terms used herein and not otherwise defined have the same meaning ascribed to
them in the Prospectus.

-3-
<PAGE>

ADDITIONAL INFORMATION ON FUND INVESTMENTS
AND STRATEGIES AND RELATED RISKS

The following supplements the information contained in the Prospectuses
concerning the investment objectives and policies of each Fund.

International Select Equity
---------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of foreign companies located in the
countries that make up the MSCI EAFE Index. Up to 35% of the Fund's total assets
may include cash equivalents, U.S. investment grade fixed income securities
(rated in one of the four highest categories by one of the major independent
rating agencies, or in unrated securities that the adviser considers of
comparable quality), and equity and equity related securities of U.S. issuers.

The Fund may use derivatives, including futures, options and foreign currency
transactions to lessen its exposure to changing currency rates, security prices,
interest rates and other factors that affect security values.

European Equity
---------------

Under normal conditions, the Fund invests at least 65% of its assets in the
equity and equity related securities of European companies. Up to 35% of the
Fund's total assets may include cash equivalents, investment grade fixed income
securities (rated in one of the four highest categories by one of the major
independent rating agencies, or in unrated securities that the adviser considers
of comparable quality), and securities of non-European issuers (including the
U.S.). The Fund may invest a significant portion of its assets in a single
country.

International Small Cap Equity
------------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of small capitalization companies
located in countries other than the United States. Small capitalization
companies are: (i) companies ranked according to market capitalization in the
bottom 25% of issuers listed on a stock exchange, (ii) companies listed on a
secondary market (such as an inter-dealer market) or (iii) companies whose
securities are not listed on a stock exchange or trading in a secondary market.
Up to 35% of the Fund's total assets may include cash equivalents, investment
grade fixed income securities (rated in one of the four highest categories by
one of the major independent rating agencies, or in unrated securities that the
adviser considers of comparable quality) and equity securities of large and
medium capitalization companies located outside the U.S. and companies of any
size located in the U.S. The Fund may invest more than 25% of its assets in
securities of small cap companies located in each of Japan and the United
Kingdom. The Fund may use derivatives, including futures, options and foreign
currency transactions to lessen its exposure to changing currency exchange
rates, security prices, interest rates and other factors that affect security
values.

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<PAGE>

Emerging Markets Equity
-----------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the equity and equity related securities of growth-oriented companies located in
emerging securities markets. Up to 35% of the Fund's total assets may include
cash equivalents, investment grade fixed income securities (rated in one of the
four highest categories by one of the major independent rating agencies, or in
unrated securities that the adviser considers of comparable quality) and equity
and equity related securities traded in developed markets (including the U.S.).
The Fund may invest more than 25% of its assets in securities of Mexican,
Brazilian and Taiwanese companies. The Fund may use derivatives, including
futures, options and foreign currency transactions to lessen its exposure to
changing currency exchange rates, security prices, interest rates and other
factors that affect security values.

Global Fixed Income
-------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
investment grade fixed income securities of issuers located throughout the
world. The Fund invests primarily in investment grade fixed income securities
that, at the time of purchase, are either rated in one of the four highest
categories by a major independent rating agency, or in unrated securities that
the adviser considers of comparable quality. The Fund may invest up to 15% of
its total assets in fixed income securities rated below investment grade (high
yield/high risk bonds), including the securities of issuers in emerging
securities markets. Up to 35% of the Fund's total assets may be invested in
domestic and foreign cash equivalents. The Fund may invest more than 25% of its
total assets in securities denominated in the euro, as well as in the securities
of companies located in each of Japan, the United States, and the United
Kingdom. The Fund uses derivatives, including forward contracts and currency
options to control volatility and achieve desired currency weightings in a cost-
effective manner.

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<PAGE>

International Fixed Income
--------------------------

Under normal conditions, the Fund invests at least 65% of its total assets in
the fixed income securities of foreign issuers. The Fund invests in investment
grade fixed income securities that, at the time of purchase, are rated in one of
the three highest categories by a major independent rating agency, or in unrated
securities the adviser considers of comparable quality. The Fund may invest up
to 10% of its total assets in investment grade fixed income securities rated in
the fourth highest category. Up to 35% of the Fund's total assets may be
invested in domestic and foreign cash equivalents and in U.S. fixed income
securities. The Fund may invest more than 25% of its total assets in securities
denominated in the euro, as well as in the securities of companies located in
each of Japan and the United Kingdom. The Fund uses derivatives, including
forward contracts and currency options to control volatility and achieve desired
currency weightings in a cost-effective manner.

Emerging Markets Debt
---------------------

Under normal circumstances, the Fund invests at least 65% of its total assets in
the (high yield/high risk) fixed income securities of issuers located in
countries with new or emerging securities markets. These include performing and
non-performing loans, Eurobonds, Brady Bonds (dollar denominated securities used
to refinance foreign government bank loans) and other fixed income securities of
foreign governments and their agencies as well as some corporate debt
instruments. Up to 35% of the Fund's total assets may be invested in domestic
and foreign cash equivalents and U.S. investment grade fixed income securities.
The Fund may invest more than 25% of its total assets in the sovereign debt
securities of companies located in each of Argentina, Brazil and Mexico. Fixed
income securities in which the Fund may invest may be of any credit quality,
including securities not paying interest currently, zero coupon bonds, pay-in-
kind securities and securities in default. The loans and debt instruments in
which the Fund may invest may be denominated in the currency of a developed
country or in a local currency.

FOREIGN SECURITIES

GENERAL. Subject to their respective investment objectives and policies, the
Funds may invest in securities of foreign issuers, including U.S. dollar-
denominated and non-dollar denominated foreign equity and fixed income
securities and in certificates of deposit issued by foreign banks and foreign
branches of U.S. banks. While investments in securities of foreign issuers and
non-U.S. dollar denominated securities may offer investment opportunities not
available in the United States, such investments also involve significant risks
not typically associated with investing in domestic securities. In many foreign
countries, there is less publicly available information about foreign issuers,
and there is less government regulation and supervision of foreign stock
exchanges, brokers and listed companies. Also in many foreign countries,
companies are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic issuers. Security
trading practices and custody arrangements abroad may offer less protection to
the Funds' investments and there may be difficulty in enforcing legal rights
outside the United States. Settlement of transactions in some foreign markets
may be delayed or may be less frequent than in the United States which could
affect the liquidity of the Funds' portfolios. Additionally, in some foreign
countries, there is the possibility of

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<PAGE>

expropriation or confiscatory taxation, limitations on the removal of
securities, property, or other Fund assets, political or social instability or
diplomatic developments which could affect investments in foreign securities.
For purposes of each Fund's investment objective, a company is considered to be
located in a particular country if it (1) is organized under the laws of that
country and has a principal place of business in that country or (2) derives 50%
or more of its total revenues from business in that country. Each of the
international equity funds intends to invest in at least three foreign
countries. Each of the global Equity Funds intends to invest in at least three
countries (including the U.S.). Each of the Equity Funds intends to invest at
least 60% of its total assets directly in stocks.

To the extent the Funds' investments are denominated in foreign currencies, the
Funds' net asset values may be affected favorably or unfavorably by fluctuations
in currency exchange rates and by changes in exchange control regulations. For
example, if the Adviser increases a Fund's exposure to a foreign currency, and
that currency's value subsequently falls, the Adviser's currency management may
result in increased losses to the Fund. Similarly, if the 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

-7-
<PAGE>

these countries. There may be little financial or accounting information
available with respect to issuers located in certain of these countries, and it
may be difficult as a result to assess the value or prospects of an investment
in these countries. The laws of some foreign countries may limit the Funds'
ability to invest in securities of certain issuers located in those countries.

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

CURRENCY MANAGEMENT TECHNIQUES

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

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

Securities held by a Fund are generally denominated in the currency of the
foreign market in which the investment is made. However, securities held by a
Fund may be denominated in the currency of a country other than the country in
which the security's issuer is located.

-8-
<PAGE>

FOREIGN CURRENCY EXCHANGE CONTRACTS. Each of the Funds will exchange currencies
in the normal course of managing its investments and may incur costs in doing so
because a foreign exchange dealer will charge a fee for conversion. A Fund may
conduct foreign currency exchange transactions on a "spot" basis (i.e., for
cash, for prompt delivery and settlement) at the prevailing spot rate for
purchasing or selling currency in the foreign currency exchange market. A Fund
also may enter into forward currency exchange contracts ("forward currency
contracts") or other contracts to purchase and sell currencies for settlement at
a future date. A foreign exchange dealer, in that situation, will expect to
realize a profit based on the difference between the price at which a foreign
currency is sold to the Fund and the price at which the dealer will cover the
purchase in the foreign currency market. Foreign exchange transactions are
entered into at prices quoted by dealers, which may include a mark-up over the
price that the dealer must pay for the currency. Contracts to sell foreign
currency could limit any potential gain which might be realized by a Fund if the
value of the hedged currency increased.

A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are generally charged at any stage for trades, but currency dealers
seek to obtain a "spread" or profit on each transaction.

At the maturity of a forward contract a Fund may either accept or make delivery
of the currency specified in the contract or, at or prior to maturity, enter
into a closing purchase transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract.

The Funds may enter into forward currency contracts in several circumstances for
both hedging and non-hedging purposes, although Emerging Market Debt does not
expect generally to enter into such contracts for hedging purposes. When
purchase or sold for non-hedging purposes, forward currency contracts are
speculative. First, when a Fund enters into a contract for the purchase or sale
of a security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividend or interest payments on such a
security which it holds, the Fund may desire to "lock in" the U.S. dollar price
of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, a Fund will attempt to protect
itself against an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
security is purchased or sold, or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.

Additionally, when management of a Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved

-9-
<PAGE>

will not generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date on which the contract is entered into and
the date it matures. Using forward currency contracts in an attempt to protect
the value of a Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange which a Fund can achieve at
some future point in time. The precise projection of short-term currency market
movements is not possible, and short-term hedging provides a means of fixing the
dollar value of only a portion of a Fund's foreign assets.

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

Each Fund may also utilize forward foreign currency contracts to establish a
synthetic investment position designed to change the currency characteristics of
a particular security without the need to sell such security. Synthetic
investment positions will typically involve the purchase of U.S. dollar-
denominated securities together with a forward contract to purchase the currency
to which the Fund seeks exposure and to sell U.S. dollars. This may be done
because the range of highly liquid short-term instruments available in the U.S.
may provide greater liquidity to a Fund than actual purchases of foreign
currency-denominated securities in addition to providing superior returns in
some cases. Depending on (a) each Fund's liquidity needs, (b) the relative
yields of securities denominated in different currencies and (c) spot and
forward currency rates, a significant portion of a Fund's assets may be invested
in synthetic investment positions, subject to compliance with the tax
requirements for qualification as a regulated investment company. See "Taxes."

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

A Fund's custodian will place cash or liquid securities into a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward currency contracts requiring the Fund
to purchase foreign currencies or forward contracts entered into for non-hedging
purposes. If the value of the securities placed in the segregated account
declines, additional cash or liquid securities will be placed in the account on
a daily basis so that the value of the account will equal the amount of a Fund's
commitments with respect to such contracts. The segregated account will be
marked-to-market on a daily basis. Although the contracts are not presently
regulated by the Commodity Futures Trading Commission (the "CFTC"), the CFTC may
in the future assert authority to regulate these

-10-
<PAGE>

contracts. In such event, the Funds' ability to utilize forward currency
contracts may be restricted.

A Fund generally will not enter into a forward currency contract with a term of
greater than one year. The forecasting of short-term currency market movements
is extremely difficult and there can be no assurance that short-term hedging
strategies will be successful.

While the Funds may enter into forward currency contracts in an attempt to
reduce currency exchange rate risks, transactions in currency contracts involve
certain other risks. Thus, while the Funds may benefit from currency
transactions, unanticipated changes in currency prices may result in a poorer
overall performance for a Fund than if it had not engaged in any such
transactions. Moreover, there may be an imperfect correlation between a Fund's
portfolio holdings of securities denominated in a particular currency and
forward contracts entered into by the Fund. Such imperfect correlation may cause
a Fund to sustain losses which will prevent the Fund from achieving a complete
hedge or expose the Fund to risk of foreign exchange loss.

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

A Fund's activities in forward currency exchange contracts, currency options and
currency futures contracts and related options (see below) may be limited by the
requirements of subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.

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

OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES

Each of the Funds may write covered put and call options and purchase put and
call options. Such options may relate to particular U.S. or non-U.S. securities,
to various U.S. or non-U.S. stock indices or to U.S. or non-U.S. currencies. The
Funds may write put and call options which are issued by the Options Clearing
Corporation (the "OCC") or which are traded on U.S. and non-U.S. exchanges and
over-the-counter.

WRITTEN OPTIONS. The Funds may write (sell) covered put and call options on
equity and fixed income securities and enter into related closing transactions.
A Fund may receive fees

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<PAGE>

(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 liquid securities or a combination of both in a segregated account with the
custodian with a value at least equal to the exercise price of the put option.

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

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

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

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

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<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.

OTHER CONSIDERATIONS. An option on a securities index provides the holder with
the right to receive a cash payment upon exercise of the option if the market
value of the underlying index exceeds (in case of a call option), or is less
than (in the case of a put option), the option's exercise price. The amount of
this payment will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
U.S. dollars or a foreign currency, times a specified multiple. A put option on
a currency gives its holder the right to sell an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration. Conversely, a call option on a
currency gives its holder the right to purchase an amount (specified in units of
the underlying currency) of the underlying currency at the stated exercise price
at any time prior to the option's expiration.

The Funds will engage in over-the-counter ("OTC") options only with broker-
dealers deemed creditworthy by the Adviser. Closing transactions in certain
options are usually effected directly with the same broker-dealer that effected
the original option transaction. A Fund bears the risk that the broker-dealer
may fail to meet its obligations. There is no assurance that a Fund will be able
to close an unlisted option position. Furthermore, unlisted options are not
subject to the protections afforded purchasers of listed options by the OCC,
which performs the obligations of its members who fail to do so in connection
with the purchase or sale of options.

A Fund will write call options only if they are "covered." In the case of a call
option on a security, the option is "covered" if a portfolio owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, cash or liquid securities in such amount are held in
a segregated account by the Fund's custodian) upon conversion or exchange of
other securities held by it. For a call option on an index, the option is
covered if the Fund maintains with the Fund's custodian cash or liquid
securities equal to the contract value. A call option on a security or an index
is also covered if the Fund holds a call on the same security or index as the
call written by the Fund where the exercise price of the call held is (i) equal
to or less than the exercise price of the call written, or (ii) greater than the
exercise price of the call written provided the difference is maintained by the
Fund in cash or liquid securities in a segregated account with the Fund's
custodian. A call option on currency written by a Fund is covered if the Fund
owns an equal amount of the underlying currency.

When a Fund purchases a put option, the premium paid by it is recorded as an
asset of the Fund. When the Fund writes an option, an amount equal to the net
premium (the premium less the

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<PAGE>

commission paid by the Fund) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of this asset or deferred credit will be marked-to-market on an
ongoing basis to reflect the current value of the option purchased or written.
The current value of a traded option is the last sale price or, in the absence
of a sale, the average of the closing bid and asked prices. If an option
purchased by the Fund expires unexercised, the Fund realizes a loss equal to the
premium paid. If the Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium received by the
Fund on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by the Fund expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option written
by the Fund is exercised, the proceeds to the Fund from the exercise will be
increased by the net premium originally received, and the Fund will realize a
gain or loss.

There are several risks associated with transactions in options on securities,
securities indices and currencies. For example, there are significant
differences between the securities markets, currency markets and the
corresponding options markets that could result in imperfect correlations,
causing a given option transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded OTC or on a U.S.
or non-U.S. securities exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or the OCC may not at all times be
adequate to handle current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options that had been
issued by the OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

The hours of trading for options may not conform to the hours during which the
underlying securities and currencies are traded. To the extent that the options
markets close before the markets for the underlying securities and currencies,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the options markets. The purchase of options is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio transactions. The risks
described above also apply to options on futures, which are discussed below.

FUTURES CONTRACTS AND RELATED OPTIONS

To hedge against changes in interest rates or securities prices and for certain
non-hedging purposes, the Funds may purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts. The Funds may also enter into closing purchase and sale transactions
with respect to any of such contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities),

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securities indices, currencies and other financial instruments, currencies and
indices. The Funds will engage in futures and related options transactions only
for bona fide hedging or other non-hedging purposes as defined in regulations
promulgated by the CFTC. All futures contracts entered into by the Funds are
traded on U.S. exchanges or boards of trade that are licensed and regulated by
the CFTC or on foreign exchanges approved by the CFTC.

FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell a particular financial instrument for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract). Futures contracts
obligate the long or short holder to take or make delivery of a specified
quantity of a commodity or financial instrument, such as a security or the cash
value of a securities index, during a specified future period at a specified
price.

When interest rates are rising or securities prices are falling, a Fund can seek
to offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Funds may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures on securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.

HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to establish
with more certainty the effective price and rate of return on portfolio
securities and securities that a Fund proposes to acquire. The Funds may, for
example, take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in interest rates or a
decline in market prices that would adversely affect the value of a Fund's
portfolio securities. Futures contracts that a Fund may use for hedging purposes
include contracts for the future delivery of securities held by the Fund or
securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of the Adviser, there is a sufficient degree of
correlation between price trends for a Fund's portfolio securities and futures
contracts based on other financial instruments, securities indices or other
indices, a Fund may also enter into such futures contracts as part of its
hedging strategy. Although under some circumstances prices of securities in a
Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting a
Fund's securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.

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<PAGE>

On other occasions, the Funds may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available.

OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures
contracts will give the Funds the right (but not the obligation) for a specified
price to sell or to purchase, respectively, the underlying futures contract at
any time during the option period. As the purchaser of an option on a futures
contract, a Fund obtains the benefit of the futures position if prices move in a
favorable direction but limits its risk of loss in the event of an unfavorable
price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract (if the option is exercised), which may have a value higher than the
exercise price. Conversely, the writing of a put option on a futures contract
generates a premium which may partially offset an increase in the price of
securities that a Fund intends to purchase. However, a Fund becomes obligated to
purchase a futures contract (if the option is exercised), which may have a value
lower than the exercise price. Thus, the loss incurred by a Fund in writing
options on futures is potentially unlimited and may exceed the amount of the
premium received. The Funds will incur transaction costs in connection with the
writing of options on futures.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. The Funds'
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

OTHER CONSIDERATIONS. The Funds will engage in futures and related options
transactions only for hedging or non-hedging purposes as permitted by CFTC
regulations which permit principals of an investment company registered under
the 1940 Act to engage in such transactions without registering as commodity
pool operators. A Fund will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities or instruments held by the Fund or
securities or instruments which they expect to purchase. Except as stated below
for all the Funds, the Funds' futures transactions will be entered into for
traditional hedging purposes--i.e., futures contracts will be sold to protect
against a decline in the price of securities (or the currency in which they are
denominated) that a Fund owns or futures contracts will be purchased to protect
a Fund against an increase in the price of securities (or the currency in which
they are denominated) that a Fund intends to purchase. As evidence of this
hedging intent, each Fund expects that, on 75% or more of the occasions on which
it takes a long futures or option position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities (or assets denominated in
the related currency) in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it is economically
advantageous for a Fund to do so, a long futures position may be terminated or
an option may expire without the corresponding purchase of securities or other
assets.

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<PAGE>

As an alternative to compliance with the hedging definition, a CFTC regulation
now permits a Fund to elect to comply with a different test under which the
aggregate initial margin and premiums required to establish non-hedging
positions in futures contracts and options on futures will not exceed 5% of the
net asset value of a Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase. A Fund will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Code for maintaining
its qualification as a regulated investment company for federal income tax
purposes. See "Taxes."

A Fund will be required, in connection with transactions in futures contracts
and the writing of options on futures contracts, to make margin deposits, which
will be held by the Trust's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures contracts and option
transactions. These transactions involve brokerage costs, require margin
deposits and, in the case of futures contracts and options obligating a Fund to
purchase securities, require a Fund to segregate cash or liquid securities in an
account maintained with the Trust's custodian to cover such contracts and
options.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions. The other risks associated with the
use of futures contracts and options thereon are (i) imperfect correlation
between the change in market value of the securities held by a Fund and the
prices of the futures and options and (ii) the possible absence of a liquid
secondary market for a futures contract or option and the resulting inability to
close a futures or option position prior to its maturity or expiration date.

In the event of an imperfect correlation between a futures or options position
and the portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of loss. The
risk of imperfect correlation may be minimized by investing in contracts whose
price behavior is expected to resemble that of a Fund's underlying portfolio
securities. The risk that the Funds will be unable to close out a futures or
related options position will be minimized by entering into such transactions on
a national exchange with an active and liquid secondary market.

LIMITATIONS AND RISKS ASSOCIATED WITH TRANSACTIONS IN FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS, OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Each of the Funds' active management techniques involves (1) liquidity risk that
contractual positions cannot be easily closed out in the event of market changes
or generally in the absence of a liquid secondary market, (2) correlation risk
that changes in the value of hedging positions may not match the securities
market and foreign currency fluctuations intended to be hedged, and (3) market
risk that an incorrect prediction of securities prices or exchange rates by the
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.

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<PAGE>

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

Except as set forth above under "Futures Contracts and Related Options--Other
Considerations", there is no limit on the percentage of a Fund's assets that may
be invested in futures contracts and related options or forward currency
contracts. A Fund may not invest more than 25% of its total assets in purchased
protective put options. A Fund's transactions in options, forward currency
contracts, futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes.

FIXED INCOME SECURITIES

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

FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which the
Funds may invest generally consist of debt obligations issued or guaranteed by
national, state or provincial governments or similar political subdivisions.
Foreign government securities also 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

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<PAGE>

Asian Development Bank and the InterAmerican Development Bank. Foreign
government securities also include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies.

BRADY BONDS. Each Fund may invest in so-called "Brady Bonds," which have
recently been issued by Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Panama, the Philippines, Poland,
Uruguay and Venezuela and which may be issued by other countries. Brady Bonds
are issued as part of a debt restructuring in which the bonds are issued in
exchange for cash and certain of the country's outstanding commercial bank
loans. Brady Bonds may be collateralized or uncollateralized, are issued in
various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market. U.S. dollar denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds that
have the same maturity as the stated bonds. Interest payments on such bonds
generally are collateralized by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
the time and is adjusted at regular intervals thereafter.

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

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

Generally, registered loans trade in the secondary market with interest (i.e.,
the right to accrued but unpaid interest is transferred to purchasers).
Occasionally, however, the Fund may sell a registered loan and retain the right
to such interest ("sell a loan without interest"). To assure the Fund's ability
to receive such interest, the Fund will make such sales only to parties that
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.

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<PAGE>

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

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

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

VARIABLE AND FLOATING RATE INSTRUMENTS. Debt instruments purchased by a Fund may
be structured to have variable or floating interest rates. These instruments may
include variable amount master demand notes that permit the indebtedness to vary
in addition to providing for periodic adjustments in the interest rates. The
Adviser will consider the earning power, cash flows and other liquidity ratios
of the issuers and guarantors of such instruments and, if the instrument is
subject to a demand feature, will continuously monitor their financial ability
to meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument is equivalent to the quality standards applicable to a Fund's
fixed income investments, the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend. Any bank providing such a bank letter, line of
credit, guarantee or loan commitment will meet the Fund's investment quality
standards relating to investments in bank obligations. The Adviser will
continuously monitor the creditworthiness of issuers of such instruments to
determine whether a Fund should continue to hold the investments.

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments, and a Fund could
suffer a loss if the issuer defaults or during periods in which a Fund is not
entitled to exercise its demand rights.

Variable and floating rate instruments held by a Fund will be subject to the
Fund's 15% limitation on investments in illiquid securities when a reliable
trading market for the instruments

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<PAGE>

does not exist and the Fund may not demand payment of the principal amount of
such instruments within seven days.

YIELDS AND RATINGS. The yields on certain obligations, including the money
market instruments in which each Fund may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the obligation,
the financial condition of the issuer, the size of the offering, the maturity of
the obligation and the ratings of the issue. The ratings of Standard and Poor's,
Moody's and other nationally and internationally recognized rating organizations
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality or value.

Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. See Appendix A for a description of the ratings
provided by recognized statistical ratings organizations.

INTEREST RATE, MORTGAGE AND CURRENCY SWAPS AND INTEREST RATE CAPS AND FLOORS.
The Funds may enter into interest rate, mortgage and currency swaps and interest
rate caps and floors for hedging purposes and non-hedging purposes, provided
that the Emerging Local Currency Debt Fund does not expect generally to use
these instruments to attempt to hedge against potential adverse changes in
currency exchange rates. Inasmuch as transactions in swaps, caps and floors are
entered into for good faith hedging purposes or are offset by a segregated
account, the Funds and the Adviser believe that such obligations do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Funds' borrowing restrictions.

A Fund will not enter into any interest rate, mortgage, or currency swap or
interest rate cap or floor transaction unless the unsecured commercial paper,
senior debt or the claims-paying ability of the other party thereto is
considered to be investment grade by the Adviser. If there is a default by the
other party to such a transaction, a Fund will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market. However, the staff of the Securities and Exchange
Commission (the "Commission") takes the position that swaps, caps and floors are
illiquid investments that are subject to the Funds' 15% limitation on such
investments.

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

INVERSE FLOATING RATE SECURITIES. The Funds may invest up to 5% of their net
assets in inverse floating rate securities. The interest rate on an inverse
floater resets in the opposite

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<PAGE>

direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.

ZERO COUPON AND DEFERRED INTEREST BONDS. The Funds may invest in zero coupon
bonds and deferred interest bonds. Zero coupon and deferred interest bonds are
debt obligations which are issued at a significant discount from face value. The
original discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first interest accrual
date at a rate of interest reflecting the market rate of the security at the
time of issuance. While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds generally provide for a period of delay before
the regular payment of interest begins. Although this period of delay is
different for each deferred interest bond, a typical period is approximately
one-third of the bond's term to maturity. Such investments benefit the issuer by
mitigating its initial need for cash to meet debt service, but some also provide
a higher rate of return to attract investors who are willing to defer receipt of
such cash. Zero coupon and deferred interest bonds are more volatile than
instruments that pay interest regularly. The Funds will accrue income on such
investments for tax and accounting purposes, as required, which is distributable
to shareholders and which, because no cash is generally received at the time of
accrual, may require the liquidation of other portfolio securities to satisfy
the Funds' distribution obligations. See "Taxes."

RISK FACTORS OF LOWER QUALITY SECURITIES "JUNK BONDS". Emerging Markets Debt may
invest without limit in rated and unrated fixed income securities of any credit
quality, including securities in default. In addition, the Global Fixed Income
Fund may invest up to 15% of its total assets in fixed income securities that
are rated less than Baa by Moody's Investor Service, Inc. ("Moody's") or BBB by
Standard & Poor's or, if unrated, determined to be of comparable quality by the
Adviser. Securities rated BB or lower by Standard & Poor's or Ba or lower by
Moody's and comparable unrated securities are considered speculative and, while
generally offering greater income than investments in higher quality securities,
involve greater risk of loss of principal and income, including the possibility
of default or bankruptcy of the issuers of such securities, and have greater
price volatility, especially during periods of economic uncertainty or change.
These lower quality fixed income securities tend to be affected by economic
changes and short-term corporate and industry developments to a greater extent
than higher quality securities, which react primarily to fluctuations in the
general level of interest rates. To the extent a Fund invests in such lower
quality securities, the achievement of its investment objective may be more
dependent on the Adviser's own credit analysis. The market prices of zero coupon
and payment-in-kind bonds are affected to a greater extent by interest rate
changes, and therefore tend to be more volatile than securities which pay
interest periodically and in cash. Increasing rate note securities are typically
refinanced by the issuers within a short period of time. See "Taxes."

Lower quality fixed income securities will also be affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. In the past, economic downturns
or an increase in interest rates have, under certain circumstances, caused a
higher incidence of default by the issuers of these securities and may do so in
the future, especially in the case of highly leveraged issuers. The market for
these lower

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<PAGE>

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 Global Fixed Income and Emerging
Markets Debt will continue to hold fixed income securities that have been
downgraded below investment grade if more than 5% of that Fund's net assets
would consist of such securities.

CONVERTIBLE SECURITIES AND PREFERRED STOCK

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

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

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offer as great a degree of protection of capital or assurance of continued
income as investments in corporate debt securities. In addition, preferred
stocks are subordinated in right of payment to all debt obligations and
creditors of the issuer, and convertible preferred stocks may be subordinated to
other preferred stock of the same issuer.

WARRANTS

Each of the Equity Funds may purchase warrants, which are privileges issued by
corporations enabling the owners to subscribe to and purchase a specified number
of shares of the corporation at a specified price during a specified period of
time. The purchase of warrants involves a risk that a Fund could lose the
purchase value of a warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

The Funds may invest in mortgage-backed securities. Mortgage-backed securities
represent direct or indirect participations in or obligations collateralized by
and payable from mortgage loans secured by real property. Each mortgage pool
underlying mortgage-backed securities will consist of mortgage loans evidenced
by promissory notes secured by first mortgages or first deeds of trust or other
similar security instruments creating a first lien on owner and non-owner
occupied one-unit to four-unit residential properties, multifamily residential
properties, agricultural properties, commercial properties and mixed use
properties.

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

AGENCY MORTGAGE SECURITIES. The Funds may invest in mortgage-backed securities
issued or guaranteed by the U.S. Government, foreign governments or any of their
agencies, instrumentalities or sponsored enterprises. Agencies,
instrumentalities or sponsored enterprises of the U.S. Government include but
are not limited to the Government National Mortgage Association, ("Ginnie Mae"),
Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Ginnie Mae securities are backed by the
full faith and credit of the U.S. Government, which means that the U.S.
Government guarantees that the interest and principal will be paid when due.
Fannie Mae securities and

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<PAGE>

Freddie Mac securities are not backed by the full faith and credit of the U.S.
Government; however, these enterprises have the ability to obtain financing from
the U.S. Treasury. There are several types of agency mortgage securities
currently available, including, but not limited to, guaranteed mortgage pass-
through certificates and multiple class securities.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Funds may also invest in
mortgage-backed securities issued by trusts or other entities formed or
sponsored by private originators of and institutional investors in mortgage
loans and other foreign or domestic non-governmental entities (or representing
custodial arrangements administered by such institutions). These private
originators and institutions include domestic and foreign savings and loan
associations, mortgage bankers, commercial banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing. Privately
issued mortgage-backed securities are generally backed by pools of conventional
(i.e., non-government guaranteed or insured) mortgage loans. Since such
mortgage-backed securities are not guaranteed by an entity having the credit
standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high
quality rating, they normally are structured with one or more types of "credit
enhancement." Such credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting after default
by a borrower and liquidation of the collateral. Liquidity protection refers to
the providing of cash advances to holders of mortgage-backed securities when a
borrower on an underlying mortgage fails to make its monthly payment on time.

Protection against losses resulting after default and liquidation is designed to
cover losses resulting when, for example, the proceeds of a foreclosure sale are
insufficient to cover the outstanding amount on the mortgage. Such protection
may be provided through guarantees, insurance policies or letters of credit,
through various means of structuring the transaction or through a combination of
such approaches.

MORTGAGE PASS-THROUGH SECURITIES. The Funds may invest in mortgage pass-through
securities, which are fixed or adjustable rate mortgage-backed securities that
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees or other amounts paid to
any guarantor, administrator and/or servicers of the underlying mortgage loans.

MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. The Funds may invest in collateralized mortgage obligations
("CMOs"), which are multiple class mortgage-backed securities. CMOs provide an
investor with a specified interest in the cash flow from a pool of underlying
mortgages or of other mortgage-backed securities. CMOs are issued in multiple
classes, each with a specified fixed or adjustable interest rate and a final
distribution date. In most cases, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no principal
payments will be made on a CMO class until all other classes having an earlier
stated maturity date are paid in full. Sometimes, however, CMO classes are
"parallel pay" (i.e., payments of principal are made to two or more classes
concurrently).

STRIPPED MORTGAGE-BACKED SECURITIES. The Funds may also invest in stripped
mortgage-backed securities ("SMBS"), which are derivative multiple class
mortgage-backed

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<PAGE>

securities. SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of mortgage
loans. If the underlying mortgage loans experience greater than anticipated
prepayments of principal, a Fund may fail to fully recoup its initial investment
in these securities.

A common type of SMBS will have one class receiving all of the interest from a
pool of mortgage loans ("IOs"), while the other class will receive all of the
principal ("POs"). The market value of POs generally is unusually volatile in
response to changes in interest rates. The yields on IOs are generally higher
than prevailing market yields on other mortgage-backed securities because the
cash flow patterns of IOs are more volatile and there is a greater risk that the
initial investment will not be fully recouped. Because an investment in an IO
consists entirely of a right to an interest income stream and prepayments of
mortgage loan principal amounts can reduce or eliminate such income stream, the
value of IO's can be severely adversely affected by significant prepayments of
underlying mortgage loans. In accordance with a requirement imposed by the
staff of the Commission, the Adviser will consider privately-issued fixed rate
IOs and POs to be illiquid securities for purposes of the Funds' limitation on
investments in illiquid securities. Unless the Adviser, acting pursuant to
guidelines and standards established by the Board of Trustees, determines that a
particular government-issued fixed rate IO or PO is liquid, it will also
consider these IOs and POs to be illiquid.

ASSET-BACKED SECURITIES. The Funds may invest in asset-backed securities, which
represent participations in, or are secured by and payable from, pools of assets
such as motor vehicle installment sale contracts, installment loan contracts,
leases of various types of real and personal property, receivables from
revolving credit (credit card) agreements and other categories of receivables.
Such asset pools are securitized through the use of privately-formed trusts or
special purpose corporations. Payments or distributions of principal and
interest may be guaranteed up to certain amounts and for a certain time period
by a letter of credit or a pool insurance policy issued by a financial
institution unaffiliated with the trust or corporation, or other credit
enhancements may be present.

SMALL CAPITALIZATION COMPANIES

International Small Cap Equity 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.

CUSTODIAL RECEIPTS

Each of the Funds may acquire U.S. Government securities and their unmatured
interest coupons that have been separated ("stripped") by their holder,
typically a custodian bank or investment

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<PAGE>

brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government securities, the holder will resell the stripped
securities in custodial receipt programs with a number of different names,
including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
generally held in book-entry form at a Federal Reserve Bank. Counsel to the
underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government securities for federal tax and securities purposes.
In the case of CATS and TIGRS, the Internal Revenue Service ("IRS") has reached
this conclusion for the purpose of applying the tax diversification requirements
applicable to regulated investment companies such as the Funds. CATS and TIGRS
are not considered U.S. Government securities by the Staff of the Commission,
however. Further, the IRS conclusion is contained only in a general counsel
memorandum, which is an internal document of no precedential value or binding
effect, and a private letter ruling, which also may not be relied upon by the
Funds. The Trust is not aware of any binding legislative, judicial or
administrative authority on this issue.

REPURCHASE AGREEMENTS

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

For purposes of the 1940 Act and, generally, for tax purposes, a repurchase
agreement is considered to be a loan from the Fund to the seller of the
obligation. For certain other purposes, it is not clear whether a court would
consider such an obligation as being owned by the Fund or as being collateral
for a loan by the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
obligation before its repurchase, under the repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Such
delays may result in a loss of interest or decline in price of the obligation.
If the court characterizes the transaction as a loan and the Fund has not
perfected a security interest in the obligation, the Fund may be treated as an
unsecured creditor of the seller and required to return the obligation to the
seller's estate. As an unsecured creditor, the Fund would be at risk of losing
some or all of the principal and income involved in the transaction. As with
any unsecured debt instrument purchased for the Funds, the Adviser seeks to
minimize the risk of loss from repurchase agreements by analyzing the
creditworthiness of the obligor, in this case, the seller of the obligation. In
addition to the risk of bankruptcy or insolvency proceedings, there is the risk
that the seller may fail to repurchase the security. However, if the market
value of the obligation falls below the repurchase price (including accrued
interest), the seller of the obligation will be required to deliver additional
securities so

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<PAGE>

that the market value of all securities subject to the repurchase agreement
equals or exceeds the repurchase price.

MORTGAGE DOLLAR ROLLS

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

"WHEN-ISSUED" PURCHASES AND FORWARD COMMITMENTS (DELAYED DELIVERY)

Each Fund may purchase securities on a when-issued, delayed delivery or forward
commitment basis. These transactions, which involve a commitment by a Fund to
purchase or sell particular securities with payment and delivery taking place at
a future date (perhaps one or two months later), permit the Fund to lock in a
price or yield on a security, regardless of future changes in interest rates. A
Fund will purchase securities on a "when-issued" or forward commitment basis
only with the intention of completing the transaction and actually purchasing
the securities. If deemed appropriate by the Adviser, however, a Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases the Fund may realize a gain or
loss.

When a Fund agrees to purchase securities on a "when-issued" or forward
commitment basis, the Fund's custodian will set aside cash or liquid securities
equal to the amount of the commitment in a separate account. Normally, the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to place additional
assets in the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitments. The market value of a
Fund's net assets may fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
Because a Fund's liquidity and ability to manage its portfolio might be affected
when it sets aside cash or portfolio securities to cover such purchase
commitments, each Fund expects that its commitments to purchase when-issued
securities and forward commitments will not exceed 33% of the value of its total
assets absent unusual market conditions. When a Fund engages in "when-issued"
and forward commitment transactions, it relies on the other party to the
transaction to consummate the trade. Failure of such party to do so may result
in the Fund incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.

The market value of the securities underlying a "when-issued" purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are

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<PAGE>

taken into account when determining the market value of a Fund starting on the
day the Fund agrees to purchase the securities. The Fund does not earn interest
or dividends on the securities it has committed to purchase until the settlement
date.

REVERSE REPURCHASE AGREEMENTS

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

ILLIQUID SECURITIES

Each Fund will not invest more than 15% of its net assets in illiquid
securities, which include repurchase agreements and time deposits maturing in
more than seven days and securities that are not readily marketable.

BORROWINGS

Each Fund may borrow for temporary or emergency purposes. This borrowing may be
unsecured. Among the forms of borrowing in which each Fund may engage is
entering into reverse repurchase agreements. The 1940 Act requires a Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If
the asset coverage should decline below 300% as a result of market fluctuations
or for other reasons, a Fund is required to sell some of its portfolio
securities within three days to reduce its borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. To avoid the potential leveraging effects of a
Fund's borrowings, investments will not be made while borrowings (including
reverse repurchase agreements and dollar rolls) are in excess of 5% of a Fund's
total assets. Borrowing may exaggerate the effect on net asset value of any
increase or decrease in the market value of the portfolio. Money borrowed will
be subject to interest costs which may or may not be recovered by appreciation
of the securities purchased. A Fund also may be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate. See "Investment
Restrictions."

LENDING PORTFOLIO SECURITIES

Each Fund may lend portfolio securities to brokers, dealers and other financial
organizations. These loans, if and when made, may not exceed 33 1/3% of the
value of the Fund's total assets. A Fund's loans of securities will be
collateralized by cash, cash equivalents or U.S. Government securities. The
cash or instruments collateralizing the Fund's loans of securities will be
maintained at all times in a segregated account with the Trust's custodian, in
an amount at least

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equal to the current market value of the loaned securities. From time to time, a
Fund may pay a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party that is
unaffiliated with the Fund and is acting as a "placing broker." No fee will be
paid to affiliated persons of the Fund. The Board of Trustees will make a
determination that the fee paid to the placing broker is reasonable.

By lending portfolio securities, a Fund can increase its income by continuing to
receive amounts equal to the interest or dividends on the loaned securities as
well as by either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when U.S.
Government securities are used as collateral. A Fund will comply with the
following conditions whenever it loans securities: (i) the Fund must receive at
least 100% cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral; (iii) the Fund must
be able to terminate the loan at any time; (iv) the Fund must receive reasonable
interest on the loan, as well as amounts equal to the dividends, interest or
other distributions on the loaned securities, and any increase in market value;
(v) the Fund may pay only reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass to the borrower except
that, if a material event will occur affecting the investment in the loaned
securities, the Fund must terminate the loan in time to vote the securities on
such event.

DIVERSIFICATION

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

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<PAGE>

Standard & Poor's or P-2 by Moody's, or their equivalent ratings, or, if not
rated, is issued or guaranteed as to payment of principal and interest by
companies which are rated, at the time of purchase, A or better by Standard &
Poor's or Moody's, or their equivalents, and other debt instruments, including
unrated instruments, not specifically described if such instruments are deemed
by the Adviser to be of comparable quality.

A Fund may also invest in variable rate master demand notes which typically are
issued by large corporate borrowers providing for variable amounts of principal
indebtedness and periodic adjustments in the interest rate according to the
terms of the instrument.

Demand notes are direct lending arrangements between a Fund and an issuer, and
are not normally traded in a secondary market. A Fund, however, may demand
payment of principal and accrued interest at any time. In addition, while
demand notes generally are not rated, their issuers must satisfy the same
criteria as those for issuers of commercial paper. The Adviser will consider
the earning power, cash flow and other liquidity ratios of issuers of demand
notes and continually will monitor their financial ability to meet payment on
demand. See also "Fixed Income Securities--Variable and Floating Rate
Instruments."

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

BANK OBLIGATIONS. Certificates of Deposit ("CDs") are short-term negotiable
obligations of commercial banks. Time Deposits ("TDs") are non-negotiable
deposits maintained in banking institutions for specified periods of time at
stated interest rates. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.

U.S. commercial banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal Deposit Insurance Corporation
(the "FDIC"). U.S. banks organized under state law are supervised and examined
by state banking authorities but are members of the Federal Reserve System only
if they elect to join. Most state banks are insured by the FDIC (although such
insurance may not be of material benefit to a Fund, depending upon the principal
amount of CDs of each bank held by the Fund) and are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of governmental regulations, U.S. branches of U.S. banks, among other
things, generally are required to maintain specified levels of reserves, and are
subject to other supervision and regulation designed to promote financial
soundness.

U.S. savings and loan associations, the CDs of which may be purchased by the
Funds, are supervised and subject to examination by the Office of Thrift
Supervision. U.S. savings and loan

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<PAGE>

associations are insured by the Savings Association Insurance Fund which is
administered by the FDIC and backed by the full faith and credit of the U.S.
Government.

Non-U.S. bank obligations include Eurodollar Certificates of Deposit ("ECDs"),
which are U.S. dollar-denominated certificates of deposit issued by offices of
non-U.S. and U.S. banks located outside the United States; Eurodollar Time
Deposits ("ETDs"), which are U.S. dollar-denominated deposits in a non-U.S.
branch of a U.S. bank or a non-U.S. bank; Canadian Time Deposits ("CTDs"), which
are essentially the same as ETDs except they are issued by Canadian offices of
major Canadian banks; Yankee Certificates of Deposit ("Yankee CDs"), which are
U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a
non-U.S. bank and held in the United States; and Yankee Bankers' Acceptances
("Yankee BAs"), which are U.S. dollar-denominated bankers' acceptances issued by
a U.S. branch of a non-U.S. bank and held in the United States.

OTHER INVESTMENT COMPANIES

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

INVESTMENT RESTRICTIONS

The fundamental investment restrictions set forth below may not be changed with
respect to a Fund without the approval of a "majority" (as defined in the 1940
Act) of the outstanding shares of that Fund. For the purposes of the 1940 Act,
"majority" means the lesser of (a) 67% or more of the shares of the Fund present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the shares of
the Fund.

Investment restrictions that involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by or on behalf of, a Fund
with the exception of borrowings permitted by fundamental investment restriction
(2) listed below.

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<PAGE>

FUNDAMENTAL INVESTMENT RESTRICTIONS

The Trust may not, on behalf of a Fund:

(1) Issue senior securities, except as permitted by paragraphs (2), (6) and (7)
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Fund's
investment policy, and the pledge, mortgage or hypothecation of the Fund's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.

(2) Borrow money (i) except from banks as a temporary measure for extraordinary
emergency purposes and (ii) except that the Fund may enter into reverse
repurchase agreements and dollar rolls with banks, broker-dealers and other
parties; provided that, in each case, the Fund is required to maintain asset
coverage of at least 300% for all borrowings. For the purposes of this
investment restriction, short sales, transactions in currency, forward
contracts, swaps, options, futures contracts and options on futures
contracts, and forward commitment transactions shall not constitute
borrowing.

(3) Pledge, mortgage, or hypothecate its assets, except to secure indebtedness
permitted by paragraph (2) above and to the extent related to the
segregation of assets in connection with the writing of covered put and call
options and the purchase of securities or currencies on a forward commitment
or delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to forward contracts, options, futures contracts
and options on futures contracts.

(4) Act as an underwriter, except to the extent that, in connection with the
disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the Securities Act of 1933.

(5) Purchase or sell real estate, or any interest therein, and real estate
mortgage loans, except that the Fund may invest in securities of corporate
or governmental entities secured by real estate or marketable interests
therein or securities issued by companies (other than real estate limited
partnerships) that invest in real estate or interests therein.

(6) Make loans, except that the Fund may lend portfolio securities in accordance
with the Fund's investment policies and may purchase or invest in repurchase
agreements, bank certificates of deposit, all or a portion of an issue of
bonds, bank loan participation agreements, bankers' acceptances, debentures
or other securities, whether or not the purchase is made upon the original
issuance of the securities.

(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward foreign
currency exchange contracts, forward commitments, securities index put or
call warrants and repurchase agreements entered into in accordance with the
Fund's investment policies.

-33-
<PAGE>

(8) Invest 25% or more of the value of the Fund's total assets in the securities
of one or more issuers conducting their principal business activities in the
same industry or group of industries. This restriction does not apply to
investments in obligations of the U.S. Government or any of its agencies or
instrumentalities.

In addition, each Equity Fund will adhere to the following fundamental
investment restriction:

With respect to 75% of its total assets, an Equity Fund may not purchase
securities of an issuer (other than the U.S. Government, or any of its
agencies or instrumentalities, or other investment companies), if (a) such
purchase would cause more than 5% of the Fund's total assets taken at market
value to be invested in the securities of such issuer, or (b) such purchase
would at the time result in more than 10% of the outstanding voting securities
of such issuer being held by the Fund.

In addition, European Equity will adhere to the following fundamental investment
restriction:

Notwithstanding the investment policies and restrictions of the Fund, upon
approval of the Board of Trustees, the Fund may invest all or part of its
investable assets in a management investment company with substantially the same
investment objective, policies and restrictions as the Fund.

NONFUNDAMENTAL INVESTMENT RESTRICTIONS

In addition to the fundamental policies mentioned above, the Board of Trustees
of the Trust has adopted the following nonfundamental policies that may be
changed or amended by action of the Board of Trustees without shareholder
approval.

The Trust may not, on behalf of a Fund:

(a) Participate on a joint-and-several basis in any securities trading account.
The "bunching" of orders for the sale or purchase of marketable portfolio
securities with other accounts under the management of the Adviser to save
commissions or to average prices among them is not deemed to result in a
securities trading account.

(b) Purchase securities of other investment companies, except as permitted by
the Investment Company Act of 1940 and the rules, regulations and any
applicable exemptive order issued thereunder.

(d) Purchase any security, including any repurchase agreement maturing in more
than seven days, which is illiquid, if more than 15% of the net assets of
the Fund, taken at market value, would be invested in such securities.

The staff of the Commission has taken the position that fixed time deposits
maturing in more than seven days that cannot be traded on a secondary market and
participation interests in loans

-34-
<PAGE>

are illiquid. Until such time (if any) as this position changes, the Trust, on
behalf of each Fund, will include such investments in determining compliance
with the 15% limitation on investments in illiquid securities. Restricted
securities (including commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933) which the Board of Trustees has determined are readily
marketable will not be deemed to be illiquid for purposes of such restriction.

"Value" for the purposes of the foregoing investment restrictions shall mean the
market value used in determining each Fund's net asset value.

TRUSTEES AND OFFICERS

Information pertaining to the Trustees and officers of the Trust is set forth
below. An asterisk (*) indicates those Trustees deemed to be "interested
persons" of the Trust for purposes of the 1940 Act.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address Positions with Trust Principal Occupation During Past Five Years
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paul K. Freeman (2) Trustee Project Leader,
7257 South Tucson Way International Institute for Applied Systems
Englewood, CO 80112 (age 48) Analysis (since 1998); Chief Executive
Officer, The Eric Group Inc. (environmental
insurance) (1986-1998).
-------------------------------------------------------------------------------------------------------------------
Graham E. Jones (2) Trustee Senior Vice President, BGK Realty Inc. (since
330 Garfield Street 1995); Financial Manager, Practice Management
Santa Fe, NM 87501 Systems (medical information services)
(age 65) (1988-95); Director, 11 closed-end funds
managed by Morgan Stanley Asset Management;
Trustee, 9 open-end mutual funds managed by
Weiss, Peck & Greer; Trustee of 10 open-end
mutual funds managed by Sun Capital Advisers,
Inc.
-------------------------------------------------------------------------------------------------------------------
William N. Searcy (2) Trustee Pension & Savings Trust Officer, Sprint
2330 Shawnee Mission Pkwy Corporation (telecommunications) (since
Westwood, KS 66205 1989); Trustee of six open-end mutual funds
(age 53) managed by Sun Capital Advisers, Inc.
-------------------------------------------------------------------------------------------------------------------
Hugh G. Lynch Trustee Retired, former Managing Director,
767 Fifth Avenue International Investments, General Motors
New York, NY 10153 Investment Management Corporation
(age 62) Director, Emerging Markets Growth Fund
managed by Capital International, Inc. (since
December
-------------------------------------------------------------------------------------------------------------------
</TABLE>

-35-
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name and Address Positions with Trust Principal Occupation During Past Five Years
-------------------------------------------------------------------------------------------------------------------
1994)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward T. Tokar Trustee Vice President-Investments, Honeywell
101 Columbia Road International, Inc. (advanced technology and
Morristown, NJ 07962 manufacturer) (since 1985).
(age 52)
-------------------------------------------------------------------------------------------------------------------
Richard T. Hale President Trustee of each of the investment companies
One South Street within the Deutsche Asset Management mutual
Baltimore, MD 21202 fund complex;
Managing Director, Deutsche Asset Management;
Managing Director, DB Alex Brown, LLC;
Director and President, Investment Company
Capital Corp.
-------------------------------------------------------------------------------------------------------------------
David W. Baldt Vice President Managing Director of Active Fixed Income,
150 S. Independence Sq. DeAM, Inc. (since 1989).
W. Philadelphia, PA 19106
(age 50)
-------------------------------------------------------------------------------------------------------------------
James H. Grifo Vice President Managing Director and Executive Vice
150 S. Independence Sq. President, DeAM, Inc. (since 1996); Senior
W. Philadelphia, PA 19106 Vice President, GT Global Financial (1990 -
(age 48) 1996).
-------------------------------------------------------------------------------------------------------------------
Amy M. Olmert (1)(3) Treasurer, Chief Vice President, Deutsche Asset Management
One South Street Financial Officer Americas (since 1999); Vice President, BT
Baltimore, MD 21202 Alex. Brown Inc. (1997-1999); Senior Manager,
(age 36) PricewaterhouseCoopers LLP (1988-1997).
-------------------------------------------------------------------------------------------------------------------
Daniel O. Hirsch Secretary Principal, Deutsche Asset Management Americas
One South Street (since 1999); Director, DB Alex Brown, LLC
Baltimore, MD 21202 and Investment Company Capital Corp. (since
(age 45) 1998); Assistant General Counsel, Office of
the General Counsel, United States Securities
and Exchange Commission (1993-1998).
-------------------------------------------------------------------------------------------------------------------
</TABLE>

_________________

1 Member of the Trust's Pricing Committee.

2 Member of the Trust's Audit Committee.

3 Member of the Trust's Dividend Committee.

Messrs. Jones, Freeman, and Searcy are members of the Audit Committee of the
Board of Trustees. The Audit Committee's functions include making
recommendations to the Trustees

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<PAGE>

regarding the selection of independent accountants, and reviewing with such
accountants and the Treasurer of the Trust matters relating to accounting and
auditing practices and procedures, accounting records, internal accounting
controls and the functions performed by the Trust's custodian, administrator and
transfer agent.

As of -----------, the Trustees and officers of the Trust owned, as a group,
less than one percent of the outstanding shares of each Fund.

COMPENSATION OF TRUSTEES

The Trust pays each Trustee who is not affiliated with the Adviser an annual fee
of $15,000 provided that they attend each regular Board meeting during the year.
Members of the Audit Committee also receive $1,000 for each Audit Committee
meeting attended. The Chairman of the Audit Committee, currently Mr. Searcy,
receives an additional $1,000 per Audit Committee meeting attended. The
Trustees are also reimbursed for out-of-pocket expenses incurred by them in
connection with their duties as Trustees.

The following table sets forth the compensation paid by the Trust to the
Trustees for the fiscal year of the Trust ended October 31, 1999:

<TABLE>
<CAPTION>
Pension or Retirement
Benefits Accrued as Part of Aggregate Compensation from
Name of Trustees Fund Expenses the Trust/Complex*
----------------------------- --------------------------- ---------------------------
<S> <C> <C>
Paul K. Freeman $ 0 $ 22,750
Graham E. Jones $ 0 $ 24,750
William N. Searcy $ 0 $ 25,750
Hugh G. Lynch $ 0 $ 21,750
Edward T. Tokar $ 0 $ 21,750
</TABLE>

__________

* The Trustees listed above do not serve on the Board of any other investment
company that may be considered to belong to the same complex as the Trust.

INVESTMENT ADVISORY AND OTHER SERVICES

THE ADVISER

DeAMIS of London, England acts as investment adviser to each Fund, except
European Equity. Deutsche Asset Management, Inc. acts as investment adviser to
European Equity. Effective October 6, 1999, Morgan Grenfell Investment Services
Limited, the adviser to each Fund, changed its name to Deutsche Asset Management
Investment Services Limited. On December 2, 1999, a majority of the shareholders
of European Equity approved a change of the Fund's investment adviser from
DeAMIS to Deutsche Asset Management, Inc. ("DeAM, Inc.") (formerly Morgan
Grenfell Inc.). This change became effective on December 23, 1999. Each of
DeAMIS and DeAM, Inc. are referred to individually as an "Adviser" and
collectively as the "Advisers."

-37-
<PAGE>

DeAMIS acts as investment adviser to each Fund, except European Equity Fund,
pursuant to the terms of two Management Contracts between the Trust and DeAMIS.
DeAM, Inc. acts as investment adviser to European Equity pursuant to the terms
of a Management Contract between the Trust and DeAM, Inc.

Pursuant to the Management Contracts, each Adviser supervises and assists in the
management of the assets of each Fund and furnishes each Fund with research,
statistical, advisory and managerial services. Each Adviser determines on a
continuous basis, the allocation of each Fund's investments among countries.
Each Adviser is responsible for the ordinary expenses of offices, if any, for
the Trust and the compensation, if any, of all officers and employees of the
Trust and all Trustees who are "interested persons" (as defined in the 1940 Act)
of the Adviser.

Under the Management Contracts, the Trust, on behalf of each Fund, is obligated
to pay the Adviser a monthly fee at an annual rate of each Fund's average daily
net assets as follows:

Annual Rate
-----------
International Select Equity 0.70%
European Equity 0.70%
International Small Cap Equity 1.00%
Emerging Markets Equity 1.00%
Global Fixed Income 0.50%
International Fixed Income 0.50%
Emerging Markets Debt 1.00%

The advisory fees are paid monthly and will be prorated if the Adviser shall not
have acted as a Fund's investment adviser during the entire monthly period.

The Adviser and the Administrator have contractually agreed, for the 16-month
period from each Fund's most recently completed fiscal year, except for
European--Equity Premier Class and European Equity--L Class and International
Select Equity--L Class in which the Adviser and the Administrator have
contractually agreed, for the 15-month period from each class' inception date,
November 30, 2000, to waive their fees and reimburse expenses so that total
expenses will not exceed those set forth in the Fund's Prospectus. These
contractual fee waivers may only be changed by the Funds' Board of Trustees.

For the fiscal period ended October 31, 1997, International Select Equity,
European Equity, International Small Cap Equity, Emerging Markets Equity, Global
Fixed Income, International Fixed Income and Emerging Markets Debt paid advisory
fees of $0, $137,269, $794,548, $804,930, $444,411, $21,976 and $1,398,207,
respectively. For the fiscal period ended October 31, 1998, International Select
Equity, European Equity, International Small Cap Equity, Emerging Markets
Equity, Global Fixed Income, International Fixed Income and Emerging Markets
Debt paid net advisory fees of $0, $215,268, $302,152, $594,742, $262,756,
$13,051, and $1,035,966, respectively. For the fiscal period ended October 31,
1999, International Select Equity Fund, European Equity Fund, International
Small Cap Equity Fund, Emerging Markets Equity Fund, Global Fixed Income,
International Fixed Income and Emerging Markets Debt

-38-
<PAGE>

paid advisory fees of $138,068, $312,589, $229,335, $1,086,185, $279,603,
$166,062, $113,859, and $2,822,307, respectively. The foregoing advisory fee
payments and non-payments reflect expense limitations that were in effect during
the indicated periods. The Funds not listed in this paragraph were not in
operation during the relevant periods and, accordingly, paid no advisory fees
for such periods.

The Management Contracts were last approved on November 18, 1999 by a vote of
the Trust's Board of Trustees, including a majority of those Trustees who were
not parties to either Management Contract or "interested persons" of such
parties. Each Management Contract will continue in effect with respect to each
Fund that it covers only if such continuance is specifically approved annually
by the Trustees, including a majority of the Trustees who are not parties to the
Management Contract or "interested persons" (as such term is defined in the 1940
Act) of such parties, or by a vote of a majority of the outstanding shares of
such Fund. Each Management Contract is terminable by vote of the Board of
Trustees, or, with respect to a Fund, by the holders of a majority of the
outstanding shares of the affected Fund, at any time without penalty on 60 days'
written notice to the Adviser. Termination of a Management Contract with
respect to a Fund will not terminate or otherwise invalidate any provision of
the Management Contract between the Adviser and any other Fund. The Adviser may
terminate a Management Contract at any time without penalty on 60 days' written
notice to the Trust. Each Management Contract terminates automatically in the
event of its assignment (as such term is defined in the 1940 Act).

Each Management Contract provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust or any
Fund in connection with the performance of the Adviser's obligations under the
Management Contract with the Trust, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties or from reckless disregard of its duties and
obligations thereunder.

In the management of the Funds and its other accounts, the Adviser and its
subsidiaries allocate investment opportunities to all accounts for which they
are appropriate subject to the availability of cash in any particular account
and the final decision of the individual or individuals in charge of such
accounts. Where market supply is inadequate for a distribution to all such
accounts, securities are allocated based on a Fund's pro rata portion of the
amount ordered. In some cases their procedure may have an adverse effect on the
price or volume of the security as far as a Fund is concerned. However, it is
the judgment of the Board that the desirability of continuing the Trust's
advisory arrangement with the Adviser outweighs any disadvantages that may
result from contemporaneous transactions.

DeAMIS is registered with the Commission as an investment adviser and provides a
full range of international investment advisory services to individual and
institutional clients. DeAM, Inc. is registered with the Commission as an
investment adviser and provides a full range of investment advisory services to
institutional clients. DeAM, Inc. serves as investment adviser to 11 other
investment companies and as sub-adviser to five other investment companies.
Both DeAMIS and DeAM, Inc. are each an indirect wholly-owned subsidiary of
Deutsche Bank A.G., an international commercial and investment banking group.
As of __________, DeAMIS managed approximately ${} billion in assets for various
individual and institutional accounts, including the following registered
investment company to which it acts as a subadviser: RSI International

-39-
<PAGE>

Equity Fund. As of __________, DeAM, Inc. managed approximately $ {} billion in
assets for various individual and institutional accounts, including the Morgan
Grenfell SMALLCap Fund, a registered investment company for which it acts as an
investment adviser.

PORTFOLIO MANAGEMENT

The person or persons who are primarily responsible for the day-to-day
management of each Fund's portfolio and his or her relevant experience is
described in the Fund's Prospectus.

PORTFOLIO TURNOVER

The Funds do not expect to trade in securities for short-term gain. Each Fund's
portfolio turnover rate is calculated by dividing the lesser of the dollar
amount of sales or purchases of portfolio securities by the average monthly
value of a Fund's portfolio securities, excluding securities having a maturity
at the date of purchase of one year or less. For the fiscal period ended October
31, 1998, the portfolio turnover rates for International Select Equity, European
Equity, International Small Cap Equity, Emerging Markets Equity, Global Fixed
Income, International Fixed Income and Emerging Markets Debt were 127%, 49%,
106%, 85%, 182%, 181% and 638%, respectively. For the fiscal period ended
October 31, 1999, the portfolio turnover rates for International Select Equity,
European Equity, International Small Cap Equity, Emerging Markets Equity, Global
Fixed Income, International Fixed Income and Emerging Markets Debt were 239%,
80%, 86%, 70%, 161%, 140% and 397%, respectively.

THE ADMINISTRATOR

Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Administrator"), One South
Street, Baltimore, Maryland 21202, serves as the Trust's administrator pursuant
to an Administration Agreement dated August 27, 1998. Pursuant to the
Administration Agreement, the Administrator has agreed to furnish statistical
and research data, clerical services, and stationery and office supplies;
prepare and file various reports with the appropriate regulatory agencies
including the Commission and state securities commissions; and provide
accounting and bookkeeping services for the Funds, including the computation of
each Fund's net asset value, net investment income and net realized capital
gains, if any.

For its services under the Administration Agreement, the Administrator receives
a monthly fee at the following annual rates of the aggregate average daily net
assets of such Fund: 0.25% for the International Fixed Income Funds; 0.30% for
the International Equity Funds. The Administrator will pay Accounting Agency
and Transfer Agency fees out of the Administration fee. Previously, these fees
were charged directly to the Funds. Net Fund Operating Expenses will remain
unchanged since the Adviser has agreed to reduce its advisory fee and to make
arrangements to limit certain other expenses to the extent necessary to limit
Fund Operating Expenses of each Fund to the specified percentage of each Fund's
net assets as demonstrated in the Expenses Information tables in the prospectus.
In its sole discretion the Adviser may terminate or modify this voluntary
agreement at any time.

For the fiscal period ended October 31, 1999, International Select Equity,
European Equity, International Small Cap Equity, Emerging Markets Equity, Global
Fixed Income, International

-40-
<PAGE>

Fixed Income and Emerging Markets Debt paid the Administrator administration
fees of $59,172, $133,967, $68,801, $325,855, $139,802, $56,929 and $705,369,
respectively. Prior to November 1, 1998, SEI Financial Management Company was
the Administrator for the funds. For the fiscal year ended October 31, 1997,
International Select Equity, European Equity, International Small Cap Equity,
Emerging Markets Equity, Global Fixed Income, International Fixed Income and
Emerging Markets Debt paid the Administrator administration fees of $60,000,
$38,843, $90,975, $99,601, $119,264, $60,000 and $139,420, respectively. For the
fiscal year ended October 31, 1998, International Select Equity Fund, European
Equity, International Small Cap Equity, Emerging Markets Equity, Global Fixed
Income, International Fixed Income and Emerging Markets Debt paid the
Administrator administration fees of $60,177, $60,177, $60,177, $70,980,
$68,216, $60,177, and $116,281 respectively. The administration fees described
in this paragraph were paid pursuant to a fee schedule that is different from
the one currently in effect (described above).

The Administration Agreement provides that the Administrator shall not be liable
under the Administration Agreement except for bad faith or gross negligence in
the performance of its duties or from the reckless disregard by it of its duties
and obligations thereunder.

EXPENSES OF THE TRUST

The expenses borne by the Fund include: (i) fees and expenses of any investment
adviser and any administrator of the Funds; (ii) fees and expenses incurred by
the Funds in connection with membership in investment company organizations;
(iii) brokers' commissions; (iv) payment for portfolio pricing services to a
pricing agent, if any; (v) legal expenses (vi) interest, insurance premiums,
taxes or governmental fees; (vii) clerical expenses of issue, redemption or
repurchase of shares of the Funds; (viii) the expenses of and fees for
registering or qualifying shares of the Funds for sale and of maintaining the
registration of the Funds and registering the Funds as a broker or a dealer;
(ix) the fees and expenses of Trustees who are not affiliated with the Adviser;
(x) the fees or disbursements of custodians of the Funds' assets, including
expenses incurred in the performance of any obligations enumerated by the
Declaration of Trust or By-Laws of the Trust insofar as they govern agreements
with any such custodian; (xi) costs in connection with annual or special
meetings of shareholders, including proxy material preparation printing and
mailing; (xii) charges and expenses of the Trust's auditor; (xiii) litigation
and indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Funds' business; and (xiv) expenses of an
extraordinary and nonrecurring nature.

TRANSFER AGENT

Investment Company Capital Corp. ("ICCC") One South Street, Baltimore, Maryland
21202, has been retained as the transfer and dividend disbursing agent for the
Funds pursuant to a transfer agency agreement (the "Transfer Agency Agreement"),
under which the Transfer Agent (i) maintains record shareholder accounts, and
(ii) makes periodic reports to the Trust's Board of Trustees concerning the
operations of each Fund.

-41-
<PAGE>

DISTRIBUTION OF FUND SHARES

The Trust, on behalf of the Funds, has entered into a distribution agreement
(the "Distribution Agreement") pursuant to which ICC Distributors, Inc., Two
Portland Square, Portland Maine 04101 (the "Distributor"), as agent, serves as
principal underwriter for the continuous offering of shares of each Fund. The
Distributor has agreed to use its best efforts to solicit orders for the
purchase of shares of each Fund, although it is not obligated to sell any
particular amount of shares.

The Distribution Agreement will remain in effect for one year from its effective
date and will continue in effect thereafter only if such continuance is
specifically approved annually by the Trustees, including a majority of the
Trustees who are not parties to the Distribution Agreement or "interested
persons" (as such term is defined in the 1940 Act) of such parties. The
Distribution Agreement was most recently approved on August 17, 2000 by a vote
of the Trust's Board of Trustees, including a majority of those Trustees who
were not parties to the Distribution Agreement or "interested persons" of such
parties. The Distribution Agreement is terminable, as to a Fund, by vote of the
Board of Trustees, or by the holders of a majority of the outstanding shares of
the Fund, at any time without penalty on 60 days' written notice to the
Distributor.

The Distributor and certain broker-dealers ("Participating Dealers") may enter
into Sub-Distribution Agreements under which such Participating Dealers have
agreed to process investor purchase and redemption orders and respond to
inquiries from Fund shareholders concerning the status of their accounts and the
operations of the Fund. Any Sub-Distribution Agreement may be terminated in the
same manner as the Distribution Agreement.

12B-1 PLAN
(L Class SHARES ONLY)

As compensation for providing distribution services with respect to the L Class
shares, the International Select Equity--L Class and European Equity--L Class
will pay the Distributor, an annual fee, paid monthly equal to 0.25% of the
average daily net assets of L Class Shares. ICC Distributors expects to
allocate up to all of its fee to Participating Dealers and other servicing
agents. The Distributor does not receive compensation for distributing Premier,
Institutional and Investment Shares.

Pursuant to Rule 12b-1 under the 1940 Act, which provides that investment
companies may pay distribution expenses, directly or indirectly, only pursuant
to a plan adopted by the investment company's board of directors and approved by
its shareholders, International Select Equity and European Equity have adopted
a Plan of Distribution for L Class Shares (the "12b-1 Plan"). Under the 12b-1
Plans, each Fund pays a fee to the Distributor for distribution and other
shareholder servicing assistance as set forth in the Distribution Agreement, and
the Distributor is authorized to make payments out of its fees to Participating
Dealers and servicing agents. The 12b-1 Plans remain in effect from year to
year thereafter as specifically approved (a) at least annually by each Fund's
Board of Trustees and (b) by the affirmative vote of a majority of the
Independent Trustees, by votes cast in person at a meeting called for such
purpose.

-42-
<PAGE>

In approving the 12b-1 Plans, the Trustees concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
12b-1 Plans would benefit each Fund and its shareholders. The 12b-1 Plans will
be renewed only if the Trustees make a similar determination in each subsequent
year. The 12b-1 Plans may not be amended to increase materially the fee to be
paid pursuant to the Distribution Agreement without the approval of the
shareholders of the Fund. The 12b-1 Plans may be terminated at any time upon
sixty days' notice, in either case without penalty, by the vote of a majority of
the Independent Trustees or by a vote of a majority of the outstanding Shares of
the related class.

During the continuance of the 12b-1 Plans, the Fund's Board of Trustees will be
provided for their review, at least quarterly, a written report concerning the
payments made under the 12b-1 Plans to the Distributor pursuant to the
Distribution Agreement and to broker-dealers pursuant to any Sub-Distribution
Agreements. Such reports shall be made by the persons authorized to make such
payments. In addition, during the continuance of the 12b-1 Plans, the selection
and nomination of the Fund's Independent Trustees shall be committed to the
discretion of the Independent Trustees then in office.

If any of the 12b-1 Plans are terminated in accordance with their terms, the
obligation of each Fund to make payments to the Distributor pursuant to the Plan
will cease and no Fund will be required to make any payments past the date the
Distribution Agreement terminates with respect to that class. In return for
payments received pursuant to the 12b-1 Plans for the L Class the distributor
may pay the distribution related expenses for expenses including but not limited
to printing and mailing of prospectuses to other than current shareholders;
compensation to dealers and sales personnel; and interest, carrying, or other
financing charges.

CUSTODIAN

Brown Brothers Harriman and Co. (the "Custodian"), 40 Water Street, Boston,
Massachusetts 02109, serves as the Trust's custodian pursuant to a Custodian
Agreement. Under the Custodian Agreement, the Custodian (i) maintains a
separate account in the name of each Fund, (ii) holds and transfers portfolio
securities on account of each Fund, (iii) accepts receipts and makes
disbursements of money on behalf of each Fund, (iv) collects and receives all
income and other payments and distributions on account of each Fund's portfolio
securities and (v) makes periodic reports to the Trust's Board of Trustees
concerning each Fund's operations. The Custodian is authorized to select one or
more foreign or domestic banks or companies to serve as sub-custodian on behalf
of the Trust.

-43-
<PAGE>

SERVICE PLAN
(INVESTMENT SHARES ONLY)

Each Fund has adopted a service plan (the "Plan") with respect to its Investment
shares which authorizes it to compensate Service Organizations whose customers
invest in Investment shares of the Funds for providing certain personal, account
administration and/or shareholder liaison services. Pursuant to the Plans, the
Funds may enter into agreements with Service Organizations ("Service
Agreements"). Under such Service Agreements or otherwise, the Service
Organizations may perform some or all of the following services: (i) acting as
record holder and nominee of all Investment shares beneficially owned by their
customers; (ii) establishing and maintaining individual accounts and records
with respect to the Investment shares owned by each customer; (iii) providing
facilities to answer inquiries and respond to correspondence from customers
about the status of their accounts or about other aspects of the Trust or
applicable Fund; (iv) processing and issuing confirmations concerning customer
orders to purchase, redeem and exchange Investment shares; (v) receiving and
transmitting funds representing the purchase price or redemption proceeds of
such Investment shares; (vi) participant level recordkeeping, sub-accounting,
and other administrative services in connection with the entry of purchase and
redemption orders for the Plan; (vii) withholding sums required by applicable
authorities; (viii) providing daily violation services to the Plans; (ix) paying
and filing of all withholding and documentation required by appropriate
government agencies; (x) provision of reports, refunds and other documents
required by tax laws and the Employee Retirement Income Security Act of 1974
("ERISA"); and (xi) providing prospectuses, proxy materials and other documents
of the Funds to participants as may be required by law. If your service plan is
terminated, your shares will be converted to Institutional shares of the same
Fund.

As compensation for such services, each Service Organization of the Funds is
entitled to approve a service fee in an amount up to 0.25% (on an annualized
basis) of the average daily net assets of the Fund's Investment shares
attributable to customers of such Service Organization. Service Organizations
may from time to time be required to meet certain other criteria in order to
receive service fees.

Pursuant to the Plans, Investment shares of a Fund that are beneficially owned
by customers of a Service Organization will convert automatically to
institutional shares of the same Fund in the event that such Service
Organization's Service Agreement expires or is terminated. Customers of a
Service Organization will receive advance notice of any such conversion, and any
such conversion will be effected on the basis of the relative net asset values
of the two classes of shares involved.

In accordance with the terms of the Service Plans, the officers of the Trust
provide to the Trust's Board of Trustees for their review periodically a written
report of the services performed by and fees paid to each Service Organization
under the Service Agreements and Service Plans.

Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974 ("ERISA")) may apply to a Service Organization's receipt
of compensation paid by a Fund in connection with the investment of fiduciary
assets in Investment shares of the Fund. Service Organizations that are subject
to the jurisdiction of the SEC, the Department of Labor or state

-44-
<PAGE>

securities commissions are urged to consult their own legal advisers before
investing fiduciary assets in Investment shares and receiving service fees.

The Trust believes that fiduciaries of ERISA plans may properly receive fees
under a Service Plan if the plan fiduciary otherwise properly discharges its
fiduciary duties, including (if applicable) those under ERISA. Under ERISA, a
plan fiduciary, such as a trustee or investment manager, must meet the fiduciary
responsibility standard set forth in part 4 of Title I of ERISA. These
standards are designed to help ensure that the fiduciary's decisions are made in
the best interests of the plan and are not colored by self-interest.

Section 403 (c) (1) of ERISA provides, in part, that the assets of a plan shall
be held for the exclusive purpose of providing benefits to the plan's
participants and their beneficiaries and defraying reasonable expenses of
administering the plan. Section 404 (a) sets forth a similar requirement on how
a plan fiduciary must discharge his or her duties with respect to the plan, and
provides further that such fiduciary must act prudently and solely in the
interest of the participants and beneficiaries. These basic provisions are
supplemented by the per se prohibitions of certain classes of transactions set
forth in Section 406 of ERISA.

Section 406 (a) (1) (D) of ERISA prohibits a fiduciary of an ERISA plan from
causing that plan to engage in a transaction if he knows or should know that the
transaction would constitute a direct or indirect transfer to, or use by or for
the benefit of, a party in interest, of any assets of that plan. Section 3 (14)
includes within the definition of "party in interest" with respect to a plan any
fiduciary with respect to that plan. Thus, Section 406 (a) (1) (D) would not
only prohibit a fiduciary from causing the plan to engage in a transaction which
would benefit a third person who is a party in interest, but it also would
prohibit the fiduciary from similarly benefiting himself. In addition, Section
406 (b) (1) specifically prohibits a fiduciary with respect to a plan from
dealing with the assets of that plan in his own interest or for his own account.

Section 406 (b) (3) supplements these provisions by prohibiting a plan fiduciary
from receiving any consideration for his own personal account from any party
dealing with the plan in connection with a transaction involving the assets of
the plan.

In accordance with the foregoing, however, a fiduciary of an ERISA plan may
properly receive service fees under a Service Plan if the fees are used for the
exclusive purpose of providing benefits to the plan's participants and their
beneficiaries or for defraying reasonable expenses of administering the plan for
which the plan would otherwise be liable. See, e.g., Department of Labor ERISA
Technical Release No. 86-1 (stating a violation of ERISA would not occur where a
broker-dealer rebates commission dollars to a plan fiduciary who, in turn,
reduces its fees for which the plan is otherwise responsible for paying). Thus,
the fiduciary duty issues involved in a plan fiduciary's receipt of the service
fee must be assessed on a case-by-case basis by the relevant plan fiduciary.

PORTFOLIO TRANSACTIONS

Subject to the general supervision of the Board of Trustees, the Adviser makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Funds. In executing portfolio transactions, the
Adviser seeks to obtain the best net results for the Funds,

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taking into account such factors as price (including the applicable brokerage
commission or dealer spread), size of the order, difficulty of execution and
operational facilities of the firm involved. Commission rates, being a component
of price, are considered together with such factors. Where transactions are
effected on a foreign securities exchange, the Funds employ brokers, generally
at fixed commission rates. Commissions on transactions on U.S. securities
exchanges are subject to negotiation. Where transactions are effected in the
over-the-counter market or third market, the Funds deal with the primary market
makers unless a more favorable result is obtainable elsewhere. Fixed income
securities purchased or sold on behalf of the Funds normally will be traded in
the over-the-counter market on a net basis (i.e. without a commission) through
dealers acting for their own account and not as brokers or otherwise through
transactions directly with the issuer of the instrument. Some fixed income
securities are purchased and sold on an exchange or in over-the-counter
transactions conducted on an agency basis involving a commission.

Pursuant to the Management Contracts, the Adviser agrees to select broker-
dealers in accordance with guidelines established by the Trust's Board of
Trustees from time to time and in accordance with Section 28(e) of the
Securities Exchange Act of 1934, as amended. In assessing the terms available
for any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consideration may also be given to the broker-dealer's
sale of shares of the Funds. In addition, the Management Contracts authorize
the Adviser, subject to the periodic review of the Trust's Board of Trustees, to
cause a Fund to pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another broker-
dealer for effecting the same transaction, provided that the Adviser determines
in good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Adviser to the Fund. Such brokerage and research services may consist of
pricing information, reports and statistics on specific companies or industries,
general summaries of groups of bonds and their comparative earnings and yields,
or broad overviews of the securities markets and the economy.

Supplemental research information utilized by the Adviser is in addition to, and
not in lieu of, services required to be performed by the Adviser and does not
reduce the advisory fees payable to the Adviser. The Trustees will periodically
review the commissions paid by the Funds to consider whether the commissions
paid over representative periods of time appear to be reasonable in relation to
the benefits inuring to the Funds. It is possible that certain of the
supplemental research or other services received will primarily benefit one or
more other investment companies or other accounts of the Adviser for which
investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company. During the
fiscal period ended October 31, 1999, the Adviser paid the following brokerage
commissions for research services: for the Emerging Markets Equity $26,515,
for the European Equity $6,289, for the International Select Equity $81,711 and
for the International Small Cap Equity $6,122.

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<PAGE>

Investment decisions for each Fund and for other investment accounts managed by
the Adviser are made independently of each other in the light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then averaged as to price and allocated as to amount in a
manner deemed equitable to each such account. While in some cases this practice
could have a detrimental effect on the price or value of the security as far as
a Fund is concerned, in other cases it is believed to be beneficial to a Fund.
To the extent permitted by law, the Adviser may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for other
investment companies or accounts in executing transactions.

Pursuant to procedures determined by the Trustees and subject to the general
policies of the Funds and Section 17(e) of the 1940 Act, the Adviser may place
securities transactions with brokers with whom it is affiliated ("Affiliated
Brokers"). These brokers may include but are not limited to Morgan Grenfell Asia
and Morgan Grenfell Debt Arbitrage Trading.

Section 17(e) of the 1940 Act limits to "the usual and customary broker's
commission" the amount which can be paid by the Funds to an Affiliated Broker
acting as broker in connection with transactions effected on a securities
exchange. The Board, including a majority of the Trustees who are not
"interested persons" of the Trust or the Adviser, has adopted procedures
designed to comply with the requirements of Section 17(e) of the 1940 Act and
Rule 17e-1 promulgated thereunder to ensure that the broker's commission is
"reasonable and fair compared to the commission, fee or other remuneration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time...."

A transaction would not be placed with an Affiliated Broker if a Fund would have
to pay a commission rate less favorable than their contemporaneous charges for
comparable transactions for their other most favored, but unaffiliated,
customers except for accounts for which they act as a clearing broker, and any
of their customers determined, by a majority of the Trustees who are not
"interested persons" of the Fund or the Adviser, not to be comparable to the
Fund. With regard to comparable customers, in isolated situations, subject to
the approval of a majority of the Trustees who are not "interested persons" of
the Trust or the Adviser, exceptions may be made. Since the Adviser, as
investment adviser to the Funds, has the obligation to provide management, which
includes elements of research and related skills, such research and related
skills will not be used by them as a basis for negotiating commissions at a rate
higher than that determined in accordance with the above criteria. The Funds
will not engage in principal transactions with Affiliated Brokers. When
appropriate, however, orders for the account of the Funds placed by Affiliated
Brokers are combined with orders of their respective clients, in order to obtain
a more favorable commission rate. When the same security is purchased for two or
more funds or customers on the same day, each fund or customer pays the average
price and commissions paid are allocated in direct proportion to the number of
shares purchased.

Affiliated Brokers furnish to the Trust at least annually a statement setting
forth the total amount of all compensation retained by them or any associated
person of them in connection with effecting transactions for the account of the
Funds, and the Board reviews and approves all such portfolio transactions on a
quarterly basis and the compensation received by Affiliated Brokers in
connection therewith. During the fiscal year ended October 31, 1997, no Fund
paid any

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<PAGE>

brokerage commissions to any Affiliated Broker. For the fiscal period ended
October 31, 1998, the European Equity Fund paid brokerage commissions in the
amount of $54 to Deutsche Morgan Grenfell London, an Affiliated Broker. This
represents 1% of the aggregate brokerage commissions paid by the Fund in the
fiscal year and 1% of the aggregate dollar amount of transactions effected by
the Fund in the fiscal year.

For the fiscal period ended October 31, 1999, the Emerging Markets Equity paid
brokerage commissions in the amount of $3,729 to Bankers Trust Company, an
Affiliated Broker. This represents 0% of the aggregate brokerage commissions
paid by the Fund in the fiscal year and 1% of the aggregate dollar amount of
transactions effected by the Fund in the fiscal year.

For the fiscal period ended October 31, 1999, the European Equity paid brokerage
commissions in the amount of $3,212 to Bankers Trust Company, an Affiliated
Broker. This represents 2% of the aggregate brokerage commissions paid by the
Fund in the fiscal year and 2% of the aggregate dollar amount of transactions
effected by the Fund in the fiscal year.

For the fiscal period ended October 31, 1999, the International Select Equity
paid brokerage commissions in the amount of $2,192 to Bankers Trust Company, an
Affiliated Broker. This represents 1% of the aggregate brokerage commissions
paid by the Fund in the fiscal year and 1% of the aggregate dollar amount of
transactions effected by the Fund in the fiscal year.

For the fiscal period ended October 31, 1999, the International Small Cap Equity
paid brokerage commissions in the amount of $182 to Bankers Trust Company, an
Affiliated Broker. This represents 0% of the aggregate brokerage commissions
paid by the Fund in the fiscal year and 0% of the aggregate dollar amount of
transactions effected by the Fund in the fiscal year. For the fiscal period
ended October 31, 1999, the International Small Cap Equity paid brokerage
commissions in the amount of $104 to Deutsche Morgan Grenfell London, an
Affiliated Broker. This represents 0% of the aggregate brokerage commissions
paid by the Fund in the fiscal year and 0% of the aggregate dollar amount of
transactions effected by the Fund in the fiscal year.

Affiliated Brokers do not knowingly participate in commissions paid by the Funds
to other brokers or dealers and do not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event that an
Affiliated Broker learns at any time that it has knowingly received reciprocal
business, it will so inform the Board.

For the fiscal year ended October 31, 1997, International Select Equity,
European Equity, International Small Cap Equity, Emerging Markets Equity, Global
Fixed Income, International Fixed Income Fund and Emerging Markets Debt paid
aggregate brokerage commissions of $15,439.06, $78,071.14, $503,504.08,
$868,715.91, $0, $0 and $0, respectively. For the fiscal year ended October 31,
1998, International Select Equity, European Equity, International Small Cap
Equity, Emerging Markets Equity, Global Fixed Income, International Fixed Income
and Emerging Markets Debt Fund paid aggregate brokerage commissions of
$23,210.14, $99,051.25, $289,584.88, $623,475.42, $0, $0, $0, respectively. For
the fiscal period ended October 31, 1999, International Select Equity, European
Equity, International Small Cap Equity, Emerging Markets Equity, Global Fixed
Income, International Fixed Income Fund and Emerging Markets Debt Fund paid
aggregate brokerage commissions of $252,586, $176,478, $142,724, $880,921, $0,
$0 and $0, respectively.

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<PAGE>

As of October 31, 1999, none of the Funds held securities of its regular broker-
dealers.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Funds are distributed by ICC Distributors, Inc., the Distributor.
The Funds offer four classes of shares, Premier, Institutional, Investment
shares and L Class shares. General information on how to buy shares of the Funds
is set forth in "Buying and Selling Fund Shares" in each Fund's Prospectus. The
following supplements that information.

Investors may invest in Premier, Institutional and L Class shares by
establishing a shareholder account with the Trust. In order to make an initial
investment in Investment shares of a Fund, an investor must establish an account
with a service organization. Additionally, each Fund has authorized brokers and
other service organizations to accept purchase and redemption orders for
Premier, Institutional, Investment and L Class shares for each Fund. Brokers,
including authorized agents of service organizations, are, in turn, authorized
to designate other intermediaries to accept purchase and redemption orders on a
Fund's behalf. Investors who invest through brokers, service organizations or
their designated intermediaries may be subject to minimums established by their
broker, service organization or designated intermediary.

Investors who establish shareholder accounts with the Trust should submit
purchase and redemption orders to the Transfer Agent as described in the
Prospectus. Investors who invest through authorized brokers, service
organizations or their designated intermediaries should submit purchase and
redemption orders directly to their broker, service organization or designated
intermediary. The broker or intermediary may charge you a transaction fee. A
Fund will be deemed to have received a purchase or redemption order when an
authorized broker, service organization or, if applicable, an authorized
designee, accepts the order. Shares of any Fund may be purchased or redeemed on
any Business Day at the net asset value next determined after receipt of the
order, in good order, by the Transfer Agent, the service organization, broker or
designated intermediary. A "Business Day" means any day on which the New York
Stock Exchange (the "NYSE") is open. For an investor who has a shareholder
account with the Trust, the Transfer Agent must receive the investor's purchase
or redemption order before the close of regular trading on the NYSE for the
investor to receive that day's net asset value. For an investor who invests
through a mutual fund marketplace, the investor's authorized broker or
designated intermediary must receive the investor's purchase or redemption order
before the close of regular trading on the NYSE (generally 4:00 p.m., Eastern
Time) and promptly forward such order to the Transfer Agent for the investor to
receive that day's net asset value. Service organizations, brokers and
designated intermediaries are responsible for promptly forwarding such
investors' purchase or redemption orders to the Transfer Agent.

European Equity--L Class, Investment Class and Institutional Class may charge a
short-term redemption fee of 2.00% on the value of the shares redeemed (either
by selling or exchanging into another fund) within 60 days (approximately two
months) of purchases. The redemption fee is deemed necessary to assist the
portfolio management team in efficiently running the Fund and to protect the
Fund's shareholders from the cost of excessive trading activity.

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<PAGE>

NET ASSET VALUE

Under the 1940 Act, the Board of Trustees of the Trust is responsible for
determining in good faith the fair value of the securities of each Fund. In
accordance with procedures adopted by the Board of Trustees, the net asset value
per share of each class of each Fund is calculated by determining the net worth
of the Fund attributable to the class (assets, including securities at value,
minus liabilities) divided by the number of shares of such class outstanding.
Each Fund computes net asset value for each class of its shares at the close of
such regular trading, which is generally 4:00 p.m. Eastern time, on each day on
which the New York Stock Exchange ("NYSE") is open (a "Business Day"). If the
NYSE closes early, the fund will accelerate the calculation of the NAV and
transaction deadlines to the actual closing time. The NYSE is closed on
Saturdays and Sundays as well as the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

For purposes of calculating net asset value for each class of its shares, equity
securities traded on a recognized U.S. or foreign securities exchange or the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
are valued at their last sale price on the principal exchange on which they are
traded or NASDAQ (if NASDAQ is the principal market for such securities) on the
valuation day or, if no sale occurs, at the bid price. Unlisted equity
securities for which market quotations are readily available are valued at the
most recent bid price prior to the time of valuation.

Debt securities and other fixed income investments of the Funds are valued at
prices supplied by independent pricing agents, which prices reflect broker-
dealer supplied valuations and electronic data processing techniques. Short-term
obligations maturing in sixty days or less may be valued at amortized cost,
which method does not take into account unrealized gains or losses on such
portfolio securities. Amortized cost valuation involves initially valuing a
security at its cost, and thereafter, assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods in which the value of the
security, as determined by amortized cost, may be higher or lower than the price
the Fund would receive if the Fund sold the security.

Other assets and assets for which market quotations are not readily available
are valued at fair value using methods determined in good faith by the Board of
Trustees.

Trading in securities on European and Far Eastern securities exchanges and over-
the-counter markets is normally completed well before the 4:00 P.M. (Eastern
time) close of business on each Business Day. In addition, European or Far
Eastern securities trading generally or in a particular country or countries may
not take place on all Business Days. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days
which are not Business Days in New York and on which the Funds' net asset values
are not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the regular
trading on the NYSE will not be reflected in the Funds' calculation of net

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<PAGE>

asset values unless the Adviser deems that the particular event would materially
affect net asset value, in which case an adjustment will be made.

PERFORMANCE INFORMATION

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

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

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

YIELD

From time to time, the Fixed Income Funds may advertise their yield. Yield is
calculated separately for premier shares, investment shares and institutional
shares of a Fund. Each type of share is subject to differing yields for the same
period. The yield of a class of shares of a Fund refers to the annualized income
generated by an investment in the class of shares of the Fund over a specified
30-day period. The yield is calculated by assuming that the income generated by
the investment during that period is generated for each like period over one
year and is shown as a percentage of the investment. In particular, yield will
be calculated according to the following formula:

a-b
YIELD = 2 [ ( ---- + 1 ) 6 - 1 ]
cd

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<PAGE>

Where: a = dividends and interest earned by the Fund during the period;

b = net expenses accrued for the period;

c = average daily number of shares outstanding during the period
entitled to receive dividends; and

d = maximum offering price per share on the last day of the period.

Actual yields will depend on such variables as asset quality, average asset
maturity, the type of instruments a Fund invests in, changes in interest rates
on money market instruments, changes in the expenses of the Fund and other
factors.

Yields are one basis upon which investors may compare the Funds with other
mutual funds; however, yields of other mutual funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.

For the 30-day period ended October 31, 1999, the yields of institutional shares
of Emerging Markets Debt, Global Fixed Income and International Fixed Income
Fund were 12.92%, 5.02%, and 4.11% respectively. If the expense limitations for
these Funds had not been in effect during this period, the yields of
institutional shares of Emerging Markets Debt, Global Fixed Income and
International Fixed Income would have been 12.89%, 4.98% and 4.02%,
respectively.

For the 30-day period ended October 31, 1999, the yield of Investment shares of
Emerging Markets Debt was 12.71%. If the expense limitation for the fund had not
been in effect during this period, the yield of Investment shares of Emerging
Markets Debt would have been 12.68%.

For the 30-day period ended April 30, 2000, the yields of institutional shares
of Emerging Markets Debt, Global Fixed Income and International Fixed Income
Fund were 9.07%, 5.01%, and 3.90% respectively. If the expense limitations for
these Funds had not been in effect during this period, the yields of
institutional shares of Emerging Markets Debt, Global Fixed Income and
International Fixed Income would have been ___%, ___% and ___%, respectively.

For the 30-day period ended April 30, 2000, the yield of Investment shares of
Emerging Markets Debt was ___%. If the expense limitation for the fund had not
been in effect during this period, the yield of Investment shares of Emerging
Markets Debt would have been ___%.

TOTAL RETURN

Average annual total return is calculated separately for Premier, Institutional,
Investment and L Class shares of a Fund. Each class of share is subject to
different fees and expenses and, consequently, may have differing average annual
total returns for the same period. Each Fund that advertises "average annual
total return" for a class of its shares computes such return by determining the
average annual compounded rate of return during specified periods that equates
the initial amount invested to the ending redeemable value of such investment
according to the following formula:

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ERV
T = [ ( --- ) 1/n - 1 ]
P
Where: T = average annual total return,

ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year (or other) periods at the end of the
applicable period (or a fractional portion
thereof);

P = Hypothetical initial payment of $1,000; and

n = Period covered by the computation, expressed in
years.

Each Fund that advertises "aggregate total return" for a class of its shares
computes such returns by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:

ERV
Aggregate Total Return = [ ( --- ) - 1 ]
P

The above calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

For the six months ended April 30, 2000, the average annual total return of
institutional shares of International Select Equity Fund, European Equity,
International Small Cap Equity, Emerging Markets Equity, Global Fixed Income,
International Fixed Income and Emerging Markets Debt were 5.91%, 97.39%,
-0.29%, -8.98%, -0.80%, -2.57% and 12.13% respectively. For the fiscal year
ended October 31, 1999, the average annual total return of institutional shares
of International Select Equity Fund, European Equity, International Small Cap
Equity, Emerging Markets Equity, Global Fixed Income, International Fixed Income
and Emerging Markets Debt were 59.39%, 21.18%, 38.49%, 39.02%, -3.91%, -3.53%
and 17.86% respectively. For the five year period ended October 31, 1999, the
average annual total return of institutional shares of International Small Cap
Equity Fund, Emerging Markets Equity Fund, Global Fixed Income Fund,
International Fixed Income Fund and Emerging Markets Debt Fund were 4.65%, -
6.10%, 5.92%, 5.91% and 5.94%, respectively. For their respective periods from
commencement of operations to October 31, 1999, the average annual total returns
for institutional shares of International Select Equity, European Equity,
International Small Cap Equity, Emerging Markets

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Equity, Global Fixed Income, International Fixed Income and Emerging Markets
Debt were 19.64%, 20.76%, 4.59%, -3.75%, 4.79%, 5.12% and 6.04%, respectively.

For the six months ended April 30, 2000, the average annual total returns of
investment shares of International Select Equity Fund, European Equity were
5.07% and 87.77%, respectively.

For the fiscal year ended October 31, 1999, the average annual total returns for
investment shares of Emerging Markets Debt was 17.40%. From its commencement of
operations to October 31, 1999, the average annual total returns for investment
shares of Emerging Markets Debt was -15.10%. If the expense limitations
described in the Prospectus for the above Funds had not been in effect during
the indicated periods, the total returns for institutional shares of these Funds
for such periods would have been lower than the total return figures shown in
this paragraph.

The Funds may from time to time advertise comparative performance as measured by
various publications, including, but not limited to, Barron's, The Wall Street
Journal, Weisenberger Investment Companies Service, Dow Jones Investment
Adviser, Dow Jones Asset Management, Business Week, Changing Times, Financial
World, Forbes, Fortune and Money. In addition, a Fund may from time to time
advertise its performance relative to certain indices and benchmark investments,
including: (a) the Lipper Analytical Services, Inc. Mutual Fund Performance
Analysis, Fixed Income Analysis and Mutual Fund Indices (which measure total
return and average current yield for the mutual fund industry and rank mutual
fund performance); (b) the CDA Mutual Fund Report published by CDA Investment
Technologies, Inc. (which analyzes price, risk and various measures of return
for the mutual fund industry); (c) the Consumer Price Index published by the
U.S. Bureau of Labor Statistics (which measures changes in the price of goods
and services); (d) Stocks, Bonds, Bills and Inflation published by Ibbotson
Associates (which provides historical performance figures for stocks, government
securities and inflation); (e) the Lehman Brothers Aggregate Bond Index or its
component indices (the Aggregate Bond Index measures the performance of
Treasury, U.S. Government agency, corporate, mortgage and Yankee bonds); (f) the
Standard & Poor's Bond Indices (which measure yield and price of corporate,
municipal and U.S. Government bonds); and (g) historical investment data
supplied by the research departments of Goldman Sachs, Lehman Brothers, Inc.,
Credit Suisse, First Boston Corporation, Morgan Stanley Dean Witter, Salomon
Smith Barney, Merrill Lynch, Donaldson Lufkin and Jenrette or other providers of
such data. The composition of the investments in such indices and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of any Fund's portfolio. These indices and
averages are generally unmanaged and the items included in the calculations of
such indices and averages may not be identical to the formulas used by a Fund to
calculate its performance figures.

TAXES

The following is a summary of the principal U.S. federal income, and certain
state and local tax considerations regarding the purchase, ownership and
disposition of shares in the Funds. This summary does not address special tax
rules applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Each prospective shareholder is
urged to consult his own tax adviser with respect to the specific federal,
state, local and foreign

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<PAGE>

tax consequences of investing in the Funds. The summary is based on the laws in
effect on the date of this Statement of Additional Information, which are
subject to change.

GENERAL

Each Fund is a separate taxable entity. Each Fund has elected or intends to
elect to be treated, and intends to qualify for each taxable year, as a
regulated investment company under Subchapter M of the Code.

Qualification of a Fund as a regulated investment company under the Code
requires, among other things, that (a) the Fund derive at least 90% of its gross
income for its taxable year from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stocks or
securities or foreign currencies, or other income (including but not limited to
gains from options, futures, and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% gross
income test"); and (b) the Fund diversify its holdings so that, at the close of
each quarter of its taxable year, (i) at least 50% of the market value of its
total (gross) assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses. Future
Treasury regulations could provide that qualifying income under the 90% gross
income test will not include gains from foreign currency transactions or
derivatives that are not directly related to a Fund's principal business of
investing in stock or securities or options and futures with respect to stock or
securities. Using foreign currency positions or entering into foreign currency
options, futures or forward contracts for purposes other than hedging currency
risk with respect to securities in a Fund's portfolio or anticipated to be
acquired may not qualify as "directly-related" under such regulations.

If a Fund complies with such provisions, then in any taxable year in which the
Fund distributes at least 90% of its "investment company taxable income" (which
includes dividends, interest, accrued original issue discount and recognized
market discount income, income from securities lending, any net short-term
capital gain in excess of net long-term capital loss and certain net realized
foreign exchange gains and is reduced by deductible expenses), the Fund (but not
its shareholders) will be relieved of federal income tax on any income of the
Fund, including long-term capital gains, distributed to shareholders. However,
if a Fund retains any investment company taxable income or net capital gain (the
excess of net long-term capital gain over net short-term capital loss), it will
be subject to federal income tax at regular corporate rates on the amount
retained.

If a Fund retains any net capital gain, the Fund may designate the retained
amount as undistributed capital gains in a notice to its shareholders who, if
subject to U.S. federal income tax on long-term capital gains, (i) will be
required to include in income for federal income tax purposes, as long-term
capital gain, their shares of such undistributed amount, and (ii) will be

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<PAGE>

entitled to credit their proportionate shares of the tax paid by the Fund
against their U.S. federal income tax liabilities, if any, and to claim refunds
to the extent the credit exceeds such liabilities.

For U.S. federal income tax purposes, the tax basis of shares owned by a
shareholder of a Fund will be increased by an amount equal under current law to
65% of the amount of undistributed net capital gain included in the
shareholder's gross income. Each Fund intends to distribute at least annually to
its shareholders all or substantially all of its investment company taxable
income and net capital gain. Exchange control or other foreign laws, regulations
or practices may restrict repatriation of investment income, capital, or the
proceeds of sales of securities by foreign investors such as the Funds and may
therefore make it more difficult for the Funds to satisfy the distribution
requirements described above, as well as the excise tax distribution
requirements described below. However, the Funds generally expect to be able to
obtain sufficient cash to satisfy such requirements from new investors, the sale
of securities or other sources. If for any taxable year a Fund does not qualify
as a regulated investment company, it will be taxed on all of its investment
company taxable income and net capital gain at corporate rates, and its
distributions to shareholders will be taxable as ordinary dividends to the
extent of its current and accumulated earnings and profits.

In order to avoid a 4% federal excise tax, each Fund must distribute (or be
deemed to have distributed) by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
capital gains over its capital losses (generally computed on the basis of the
one-year period ending on October 31 of such year), and all taxable ordinary
income and the excess of capital gains over capital losses for the previous year
that were not distributed in such year and on which no federal income tax was
paid by the Fund. For federal income tax purposes, dividends declared by a Fund
in October, November or December to shareholders of record on a specified date
in such a month and paid during January of the following year are taxable to
such shareholders as if received on December 31 of the year declared.

Gains and losses on the sale, lapse, or other termination of options and futures
contracts, options thereon and certain forward contracts (except certain foreign
currency options, forward contracts and futures contracts) will generally be
treated as capital gains and losses. Certain futures contracts, forward
contracts and options held by the Funds will be required to be "marked-to-
market" for federal income tax purposes, that is, treated as having been sold at
their fair market value on the last day of the Funds' taxable year. As a result,
a Fund may be required to recognize income or gain without a concurrent receipt
of cash. Additionally, a Fund may be required to recognize gain if an option,
future, forward contract, short sale, or other transaction that is not subject
to these mark to market rules is treated as a "constructive sale" of an
"appreciated financial position" held by the Fund under Section 1259 of the
Code. Any gain or loss recognized on actual or deemed sales of futures
contracts, forward contracts, or options that are subject to the mark to market
rules, but not the constructive sales rules, (except for certain foreign
currency options, forward contracts, and futures contracts) will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. As a
result of certain hedging transactions entered into by a Fund, such Fund may be
required to defer the recognition of losses on futures or forward contracts and
options or underlying securities or foreign currencies to the extent of any
unrecognized gains on related positions and the characterization of gains or
losses as long-term or short-term may be changed. The tax provisions described
above applicable to

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<PAGE>

options, futures, forward contracts and constructive sales may affect the
amount, timing and character of a Fund's distributions to shareholders. Certain
tax elections may be available to the Funds to mitigate some of the unfavorable
consequences described in this paragraph.

Section 988 of the Code contains special tax rules applicable to certain foreign
currency transactions and instruments that may affect the amount, timing and
character of income, gain or loss recognized by the Funds. Under these rules,
foreign exchange gain or loss realized with respect to foreign currencies and
certain futures and options thereon, foreign currency-denominated debt
instruments, foreign currency forward contracts, and foreign currency-
denominated payables and receivables will generally be treated as ordinary
income or loss, although in some cases elections may be available that would
alter this treatment. If a net foreign exchange loss treated as ordinary loss
under Section 988 of the Code were to exceed a Fund's investment company taxable
income (computed without regard to such loss) for a taxable year, the resulting
loss would not be deductible by the Fund or its shareholders in future years.
Net loss, if any, from certain foreign currency transactions or instruments
could exceed net investment income otherwise calculated for accounting purposes
with the result that either no dividends are paid or a portion of the Fund's
dividends is treated as a return of capital, which is nontaxable to the extent
of a shareholder's tax basis in his shares and, once such basis is exhausted,
generally gives rise to capital gains.

Each Fund's investments in zero coupon securities, deferred interest securities,
increasing-rate securities, pay-in-kind securities or other securities bearing
original issue discount or, if the Fund elects to include market discount in
income currently, market discount will generally cause it to realize income
prior to the receipt of cash payments with respect to these securities.
Transactions or instruments subject to the mark to market or constructive sale
rules described above may have the same result in some circumstances. In order
to obtain cash to distribute this income or gain, maintain its qualification as
a regulated investment company, and avoid federal income or excise taxes, a Fund
may be required to liquidate portfolio securities that it might otherwise have
continued to hold.

The Funds anticipate that they will be subject to foreign withholding or other
foreign taxes on certain income they derive from foreign securities, possibly
including, in some cases, capital gains from the sale of such securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. If more than 50% of a Fund's total assets at the close of
any taxable year consists of stock or securities of foreign corporations, a Fund
may file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends and distributions they actually
receive) their pro rata shares of qualified foreign taxes paid by the Fund (not
in excess of its actual tax liability) even though not actually received by the
shareholders, and (ii) treat such respective pro rata portions as foreign taxes
paid by them. If a Fund makes this election, shareholders may then deduct such
pro rata portions of qualified foreign taxes in computing their taxable incomes,
or, alternatively, use them as foreign tax credits, subject to satisfaction of
certain holding period requirements and to other applicable limitations, against
their U.S. federal income taxes. Shareholders who do not itemize deductions for
federal income tax purposes will not, however, be able to deduct their pro rata
portion of qualified foreign taxes paid by a Fund, although such shareholders
will be required to include their shares of such taxes in gross income if the
Fund makes the election referred to above.

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<PAGE>

If a shareholder chooses to take a credit for the qualified foreign taxes deemed
paid by such shareholder as a result of any such election by a Fund, the amount
of the credit that may be claimed in any year may not exceed the same proportion
of the U.S. tax against which such credit is taken which the shareholder's
taxable income from foreign sources (but not in excess of the shareholder's
entire taxable income) bears to his entire taxable income. For this purpose,
distributions from long-term and short-term capital gains or foreign currency
gains by a Fund will generally not be treated as income from foreign sources.
This foreign tax credit limitation may also be applied separately to certain
specific categories of foreign-source income and the related foreign taxes. As
a result of these rules, which have different effects depending upon each
shareholder's particular tax situation, certain shareholders of a Fund that
makes the election described above may not be able to claim a credit for the
full amount of their proportionate shares of the foreign taxes paid by the Fund.
Tax-exempt shareholders will ordinarily not benefit from this election. Each
year that a Fund files the election described above, its shareholders will be
notified of the amount of (i) each shareholder's pro rata share of qualified
foreign taxes paid by the Fund and (ii) the portion of Fund dividends which
represents income from each foreign country. If a Fund does not make this
election or otherwise pays foreign taxes that cannot be passed through to
shareholders, it generally may deduct such taxes in computing its investment
company taxable income.

If a Fund acquires stock (including, under proposed regulations, an option to
acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties, or capital
gains) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. Certain
elections may, if available, ameliorate these adverse tax consequences, but any
such election could require the Fund to recognize taxable income or gain without
the concurrent receipt of cash. Investments in passive foreign investment
companies may also produce ordinary income rather than capital gains, and the
deductibility of losses is subject to certain limitations. Each Fund may limit
and/or manage its holdings in passive foreign investment companies or make an
available election to minimize its tax liability or maximize its return from
these investments.

The federal income tax rules applicable to currency and interest rate swaps,
mortgage dollar rolls, certain structured securities and interest rate floors
and caps are unclear in certain respects, and the Funds may be required to
account for these transactions or instruments under tax rules in a manner that
may affect the amount, timing and character of income, gain or loss therefrom
and that may, under certain circumstances, limit the extent to which the Funds
engage in these transactions or acquire these instruments.

Each of the Fixed Income Funds other than the International Fixed Income may
invest in debt obligations that are in the lowest rating categories or are
unrated, including debt obligations of issuers not currently paying interest as
well as issuers who are in default. Investments in debt obligations that are at
risk of or in default present special tax issues for these Funds. Tax rules are
not entirely clear about issues such as when a Fund may cease to accrue
interest, original

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<PAGE>

issue discount, or market discount, when and to what extent deductions may be
taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by these Funds, to the extent they invest in
such securities, in order to reduce the risk of their distributing insufficient
income to preserve their status as regulated investment companies and seek to
avoid having to pay federal income or excise tax.

For federal income tax purposes, each Fund is permitted to carry forward a net
capital loss in any year to offset its own capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent years'
capital gains are offset by such losses, they would not result in federal income
tax liability to the applicable Fund and, accordingly, would generally not be
distributed to shareholders.

At October 31, 1999 the following Funds had available realized capital losses to
offset future net capital gains:

Expiration
Date
------------------
Emerging Markets Equity $18,865,462 10/31/2006
Global Fixed Income 986,396 10/31/2007
Core Global Fixed Income 132,397 10/31/2007
International Fixed Income 54,851 10/31/2007
Emerging Markets Debt 58,247,275 10/31/2006

U.S. SHAREHOLDERS--DISTRIBUTIONS

For U.S. federal income tax purposes, distributions by the Funds, whether
reinvested in additional shares or paid in cash, generally will be taxable to
shareholders who are subject to tax. Shareholders receiving a distribution in
the form of newly issued shares will be treated for U.S. federal income tax
purposes as receiving a distribution in an amount equal to the amount of cash
they would have received had they elected to receive cash and will have a cost
basis in each share received equal to such amount divided by the number of
shares received. Distributions from investment company taxable income of any
Fund for the year will be taxable as ordinary income. Distributions to
corporate shareholders designated as derived from a Fund's dividend income, if
any, that would be eligible for the dividends received deduction if the Fund
were not a regulated investment company will be eligible, subject to certain
holding period requirements and debt-financing restrictions, for the 70%
dividends received deduction for corporations. Because eligible dividends are
limited to those received by a Fund from U.S. domestic corporations, it is
unlikely that any significant portion of any Fund's distributions will qualify
for the dividends received deduction. The dividends-received deduction, if
available, is reduced to the extent the shares with respect to which the
dividends are received are treated as debt financed under the Code and is
eliminated if the shares are deemed to have been held for less than a minimum
period, generally 46 days, extending before and after each such dividend. The
entire dividend, including the deducted amount, is considered in determining the
excess, if any, of a corporate shareholder's adjusted current earnings over its
alternative minimum taxable income, which may increase its liability for the
federal alternative minimum tax. The dividend may, if it

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<PAGE>

is treated as an "extraordinary dividend" under the Code, reduce such
shareholder's tax basis in its shares of a Fund and, to the extent such basis
would be reduced below zero, require the current recognition of income. Capital
gain dividends (i.e., dividends from net capital gain), if designated as such in
a written notice to shareholders mailed not later than 60 days after a Fund's
taxable year closes, will be taxed to shareholders as long-term capital gain
regardless of how long shares have been held by shareholders, but are not
eligible for the dividends received deduction for corporations.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.

U.S. SHAREHOLDERS--SALE OF SHARES

When a shareholder's shares are sold, redeemed or otherwise disposed of in a
transaction that is treated as a sale for tax purposes, the shareholder will
generally recognize gain or loss equal to the difference between the
shareholder's adjusted tax basis in the shares and the cash, or fair market
value of any property, received. Assuming the shareholder holds the shares as a
capital asset at the time of such sale or other disposition, such gain or loss
should be capital in character. Any loss realized on the sale, redemption or
other disposition of the shares of any Fund with a tax holding period of six
months or less, to the extent such loss is not disallowed under any other tax
rule, will be treated as a long-term capital loss to the extent of any capital
gain dividend with respect to such shares. Additionally, any loss realized on a
sale, redemption or other disposition of shares of a Fund may be disallowed
under "wash sale" rules to the extent the shares disposed of are replaced with
shares of the same Fund within a period of 61 days beginning 30 days before and
ending 30 days after the shares are disposed of, such as pursuant to a dividend
reinvestment in shares of the Fund. If disallowed, the loss will be reflected
in an adjustment to the basis of the shares acquired. Shareholders should
consult their own tax advisers regarding their particular circumstances to
determine whether a disposition of Fund shares is properly treated as a sale for
tax purposes, as is assumed in the foregoing discussion.

The Funds may be required to withhold, as "backup withholding," federal income
tax at a rate of 31% from dividends (including distributions from a Fund's net
long-term capital gains) and share redemption and exchange proceeds to
individuals and other non-exempt shareholders who fail to furnish the Funds with
a correct taxpayer identification number ("TIN") certified under penalties of
perjury, or if the Internal Revenue Service or a broker notifies the Funds that
the payee has failed to properly report interest or dividend income to the
Internal Revenue Service or that the TIN furnished by the payee to the Funds is
incorrect, or if (when required to do so) the payee fails to certify under
penalties of perjury that it is not subject to backup withholding. Any amounts
withheld may be credited against a shareholder's U.S. federal income tax
liability.

NON-U.S. SHAREHOLDERS

Shareholders who, as to the United States, are nonresident aliens, foreign
corporations, fiduciaries of foreign trusts or estates, foreign partnerships or
other non-U.S. investors generally will be subject to U.S. withholding tax at
the rate of 30% on distributions treated as ordinary

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<PAGE>

income unless the tax is reduced or eliminated pursuant to a tax treaty or the
dividends are effectively connected with a U.S. trade or business of the
shareholder. In the latter case the dividends will be subject to tax on a net
income basis at the graduated rates applicable to U.S. individuals or domestic
corporations. Distributions of net capital gain, including amounts retained by a
Fund which are designated as undistributed capital gains, to a non-U.S.
shareholder will not be subject to U.S. federal income or withholding tax unless
the distributions are effectively connected with the shareholder's trade or
business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met.

Any gain realized by a non-U.S. shareholder upon a sale or redemption of shares
of a Fund will not be subject to U.S. federal income or withholding tax unless
the gain is effectively connected with the shareholder's trade or business in
the United States, or in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for 183 days or more
during the taxable year and certain other conditions are met. Non-U.S.
investors should consult their tax advisers about the applicability of U.S.
federal income or withholding taxes to certain distributions received by them.

STATE AND LOCAL

The Funds may be subject to state or local taxes in jurisdictions in which the
Funds may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of a Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws, and investment in the Fund may have tax consequences for
shareholders different from those of a direct investment in the Fund's portfolio
securities. Shareholders should consult their own tax advisers concerning these
matters.

GENERAL INFORMATION ABOUT THE TRUST

GENERAL

The Trust is an open-end investment company organized as a Delaware business
trust on September 13, 1993. The Trust commenced operations on January 3, 1994.
The Board of Trustees of the Trust is responsible for the overall management and
supervision of the affairs of the Trust. The Declaration of Trust authorizes
the Board of Trustees to create separate investment series or portfolios of
shares. As of the date hereof, the Trustees have established the thirteen Funds
described in this SAI and nine additional series. The Declaration of Trust
further authorizes the Trust to classify or reclassify any series or portfolio
of shares into one or more classes. As of the date hereof, the Trustees have
established four classes of shares: Premier, Institutional, Investment and L
Class shares. On February 28, 2000, the European Equity Growth Fund changed its
name to the European Equity as indicated on the cover page of this Statement of
Additional Information.

The shares of each class represent an interest in the same portfolio of
investments of a Fund. Each class has equal rights to voting, redemption,
dividends and liquidation, except that only Investment shares bear service fees
and each class may bear other expenses properly attributable

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to the particular class. Also, holders of Investment shares of each Fund have
exclusive voting rights with respect to the service plan adopted by their Fund.

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

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

In the event of a liquidation or dissolution of the Trust or an individual Fund,
shareholders of a particular Fund would be entitled to receive the assets
available for distribution belonging to such Fund. Shareholders of a Fund are
entitled to participate in the net distributable assets of the particular Fund
involved on liquidation, based on the number of shares of the Fund that are held
by each shareholder.

As of _________, the following shareholders owned the following respective
percentages of the outstanding Institutional shares of the indicated Funds:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Percentage of
Fund Shareholder Name and Address Outstanding
Shares of the
Fund
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
European Equity National Investor Services Corp for the Exclusive 59.769%
Benefit of our Customers, 55 Water St, Fl 32, New York,
NY 10041-3288
-------------------------------------------------------------------------------------------------------------------
National Financial Services Corp for the Exclusive 15.520%
Benefits of our Customers, 200 Liberty St, 1 World
Financial Ctr, New York, NY 100261-1003
-------------------------------------------------------------------------------------------------------------------
SEMA & CO, 12 E 48/th/ Street, New York, NY 6.817%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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<PAGE>

As of _________, the following shareholders owned the following respective
percentages of the outstanding Investment shares of the indicated Funds:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Percentage of
Fund Shareholder Name and Address Outstanding
Shares of the
Fund
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Select Equity Fund Public Employees' Retirement Association Attn Daryl 93.188%
Roberts, 1300 Logan Street, Denver, CO 80203-2386
-------------------------------------------------------------------------------------------------------------------
International Equity Fund FTC & Co, ATTN Datalynx - House Account, P.O. Box 93.391%
Investment Shares 173736, Denver, CO 80217
-------------------------------------------------------------------------------------------------------------------
</TABLE>

SHAREHOLDER AND TRUSTEE LIABILITY

The Trust is organized as a Delaware business trust and, under Delaware law, the
shareholders of a business trust are not generally subject to liability for the
debts or obligations of the trust. Similarly, Delaware law provides that none
of the Funds will be liable for the debts or obligations of any other Fund.
However, no similar statutory or other authority limiting business trust
shareholder liability exists in other states. As a result, to the extent that a
Delaware business trust or a shareholder is subject to the jurisdiction of the
courts in such other states, the courts may not apply Delaware law and may
thereby subject the Delaware business trust shareholders to liability. To guard
against this risk, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. Notice of such
disclaimer will normally be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification by the relevant Fund for any loss suffered by a
shareholder as a result of an obligation of the Fund. The Declaration of Trust
also provides that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. The Trustees believe that, in view of the above,
the risk of personal liability of shareholders is remote.

The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee

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<PAGE>

against any liability to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.

ANNUAL AND SEMI-ANNUAL REPORTS

Shareholders of each Fund receive an annual report containing audited financial
statements and semi-annual report. All transactions in institutional shares of
a Fund and dividends and distributions paid by a Fund are reflected in
confirmations issued by the Transfer Agent at the time of the transaction and/or
in monthly statements issued by the Transfer Agent. A year-to-date statement
will be provided by the Transfer Agent.

CONSIDERATION FOR PURCHASES OF SHARES

The Trust generally will not issue shares of the Funds for consideration other
than cash. At the Trust's sole discretion, however, it may issue Fund shares
for consideration other than cash in connection with an acquisition of portfolio
securities (other than municipal debt securities issued by state political
subdivisions or their agencies or instrumentalities) or pursuant to a bona fide
purchase of assets, merger or other reorganization, provided the securities meet
the investment objectives and policies of the Fund and the securities are
acquired by the Fund for investment and not for resale. An exchange of
securities for Fund shares will generally be a taxable transaction to the
shareholder.

ADDITIONAL INFORMATION

INDEPENDENT ACCOUNTANTS

_____________________, 1177 Avenue of the Americas, New York, NY 10036 serves as
the Trust's independent accountants, providing audit services, including review
and consultation in connection with various filings by the Trust with the
Commission and tax authorities.

REGISTRATION STATEMENT

The Trust has filed with the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Funds and certain other series of
the Trust. If further information is desired with respect to the Trust, the
Funds or such other series, reference is made to the Registration Statement and
the exhibits filed as a part thereof.

FINANCIAL STATEMENTS

The Trust's audited financial statements for the period ended October 31, 1999
are included in, and incorporated by reference into, this Statement of
Additional Information in reliance upon the report of
___________________________, the Trust's independent accountants, as experts in
accounting and auditing.

The financial statements of the Trust for the periods ended on and prior to
October 31, 1999 are incorporated by reference into this Statement of Additional
Information from the Trust's 1999

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<PAGE>

Annual Report to Shareholders for the year ended October 31, 1999 (filed
electronically on December 30, 1999); file no. 811-08006 and the Semi-annual
report (filed electronically on June ___, 2000); file no. _________ and will be
attached to each copy of such Statement of Additional Information that is
distributed.

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<PAGE>

APPENDIX A
DESCRIPTION OF RATINGS CATEGORIES OF
MOODY'S INVESTORS SERVICE, INC. AND
STANDARD & POOR'S RATINGS GROUP

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

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

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

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

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

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

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

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

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

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

-66-
<PAGE>

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

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

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

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

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

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

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

-67-
<PAGE>

APPENDIX B
QUALITY DISTRIBUTION FOR EMERGING MARKETS DEBT

As of the six months ended April 30, 2000, the percentages of Emerging Market
Debt's assets invested in unrated debt securities and securities rated in
particular rating categories by Standard & Poor's were, on a weighted average
basis, as follows*:

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

Not Rated................................................ ___%

Rated by Standard & Poor's (Moody's):
BBB-..................................................... ___%
BB+, BB, BB-............................................. ___%
B+....................................................... ___%
CCC ___%
Cash..................................................... ___%

__________

* Based on the average of month-end portfolio holdings during the fiscal year
ended October 31, 1999. Asset composition does not represent actual holdings on
October 31, 1999; nor does it imply that the overall quality of portfolio
holdings is fixed.

As of the fiscal year ended October 31, 1999, the percentages of Emerging Market
Debt's assets invested in unrated debt securities and securities rated in
particular rating categories by Standard & Poor's were, on a weighted average
basis, as follows*:

Percentage of Total
Standard & Poor's (Moody's) Ratings Investments
---------------------------------------------------------- ---------------------
Not Rated................................................. 19.8%

Rated by Standard & Poor's (Moody's):
BBB-...................................................... 0%
BB+, BB, BB-.............................................. 37.2%
B+........................................................ 33.6%
CCC 9.4%
Cash...................................................... 0%

__________

-68-
<PAGE>

PART C. OTHER INFORMATION
Item 23. EXHIBITS
Except as noted, the following exhibits are being filed herewith:
(a). Agreement and Declaration of Trust of Registrant dated September 13,
1993, as amended./1/
(b). Amended By-Laws of Registrant./1/
(c). See Articles III, IV, and V of the Agreement and Declaration of Trust
(exhibit (a)) and Article II of the Amended By-Laws (exhibit (b))./1/
(d)(1). Management Contract dated January 3, 1994, as amended as of April 25,
1994, April 1, 1995 and September 1, 1995, between Deutsche Asset
Management Investment Services Limited (formerly Morgan Grenfell
Investment Services Limited) and Registrant, on behalf of
International Select Equity Fund, Global Equity Fund, European Equity
Fund (formerly European Equity Growth Fund), New Asia Fund,
International Small Cap Equity Fund, Japanese Small Cap Equity Fund,
European Small Cap Equity Fund, Emerging Markets Equity Fund, Global
Fixed Income Fund, International Fixed Income Fund and Emerging
Markets Debt Fund./1/
(d)(1)(i) Amendment dated August 22, 2000, to Management Contract dated January
3,1994, as amended April 25, 1994, April 1, 1995 and September 1, 1995
between Deutsche Asset Management Investment Services Limited and
Registrant, on behalf of International Select Equity, European Equity,
International Small Cap Equity, Emerging Markets Equity Fund, Global
Fixed Income, International Fixed Income and Emerging Markets Debt.
/8/
(d)(2). Management Contract dated as of December 28, 1994 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of Fixed Income Fund and Municipal Bond Fund./1/
(d)(3). Management Contract dated as of December 28, 1994 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of Large Cap Growth Fund, Smaller Companies Fund, Short-Term
Fixed Income Fund and Short-Term Municipal Bond Fund./1/
(d)(4). Management Contract between Deutsche Asset Management, Inc. (formerly
Morgan Grenfell Inc. dated August 23, 1996) and Registrant, on behalf
of Micro Cap Fund./2/
(d)(5). Form of Management Contract between Deutsche Asset Management, Inc.
(formerly Morgan Grenfell Inc.) and Registrant dated August 23, 1996,
on behalf of Total Return Bond Fund and High Yield Bond Fund./3/
(d)(6). Form of Subadvisory Contract between Deutsche Asset Management
Investment Services Limited (formerly Morgan Grenfell Investment
Services Ltd.), Deutsche Asset Management Investment, Inc. (formerly
Morgan Grenfell Inc.) and Registrant, on behalf of Total Return Bond
Fund./4/
(d)(7). Form of Management Contract between Deutsche Asset Management, Inc.
and Registrant, on behalf of European Equity Fund./7/
(e)(1). Form of Distribution Agreement between ICC Distributors, Inc. and
Registrant, on behalf of all of its series/7/
(e)(1)(i) Appendix A, revised as of September 29, 2000, to Distributor's
Agreement between ICC Distributors, Inc. and Registrant, on behalf of
all of its series. /8/
(f). Not Applicable.
(g). Custody Agreement dated as of August 24, 1998 between Brown Brothers
Harriman & Co. and Registrant, on behalf of all of its series./4/
(h)(1). Administration Agreement dated as of August 27, 1998 between Deutsche
Asset Management, Inc. (formerly Morgan Grenfell Inc.) and Registrant,
on behalf of all of its series./4/
(h)(2). Form of Transfer Agency Agreement dated November 22, 1999, between
Investment Company Capital Corp. and Registrant, on behalf of each of
<PAGE>

its series./7/
(h)(2)(i) Appendix A dated September 29, 2000 to Transfer Agency Agreement dated
November 22, 1999, between Investment Company Capital Corp. and
Registrant, on behalf of each of its series. /8/
(h)(3). Accounting Agency Agreement dated September 8, 1998 among Brown
Brothers Harriman & Co., Morgan Grenfell Inc. (formerly Morgan
Grenfell Capital Management, Inc.) and Registrant on behalf of all of
its series./4/
(h)(3)(i) Form of Amendments dated September 1, 2000, September 13, 2000,
September 18, 2000, and September 22, 2000 to Accounting Agency
Agreement dated September 8, 1998 among Brown Brothers Harriman & Co.,
Deutsche Asset Management, Inc.(formerly Morgan Grenfell, Inc.) and
Registrant. /8/
(h)(5). Form of Accounting Services Agreement dated September 1, 2000, among
Investment Company Capital Corp., Deutsche Asset Management, Inc. and
Registrant on behalf of Short-Term Fixed Income, Short-Term Municipal
Bond, Municipal Bond and Fixed Income. /8/
(h)(6). Delegation Agreement dated as of August 24, 1998 between Brown
Brothers Harriman & Co. and Registrant on behalf of International
Select Equity Fund, Global Equity Fund, European Equity Fund, New Asia
Fund, International Small Cap Equity Fund, Japanese Small Cap Equity
Fund, European Small Cap Equity Fund, Morgan Grenfell Emerging Markets
Equity Fund, Core Global Fixed Income Fund, Global Fixed Income Fund,
International Fixed Income Fund, Morgan Grenfell Emerging Markets Debt
and Emerging Local Currency Debt Fund./4/
(h)(8)(i) Expense Limitation Agreement dated September 30, 1999, between
Deutsche Asset Management, Inc. and Registrant, on behalf of each
class of shares of Micro Cap. /8/
(h)(8)(ii)Expense Limitation Agreement dated October 31, 1999, between Deutsche
Asset Management, Inc. and Registrant, on behalf of each class of
shares of Fixed Income, Municipal Bond, Short-Term Fixed Income,
Short-Term Municipal Bond, High Yield Bond and Smaller Companies. /8/
(h)(8)(iii)Expense Limitation Agreement dated October 31, 1999, among Deutsche
Asset Management, Inc., Deutsche Asset Management Investment Services
Limited and Registrant, on behalf of each class of shares of
International Select Equity, European Equity, Emerging Markets Equity,
Global Fixed Income, International Fixed Income, Emerging Markets Debt
and International Small Cap Equity. /8/
(h)(8)(iv)Form of Expense Limitation Agreement dated September 29, 2000, between
Deutsche Asset Management, Inc. and Registrant, on behalf of High
Yield Bond Premier Class. /8/
(i). Not Applicable.
(j). Not Applicable.
(k). Not Applicable.
(l). Share Purchase Agreement dated as of December 29, 1993 between
Registrant and SEI Financial Management Corporation./6/
(m). Form of 12b-1 Plan dated November 30, 2000, on behalf of European
Equity--L Class and International Select Equity--L Class - filed with
amendment.
(n). Amended Rule 18f-3 Plan dated August 17, 2000 /8/.
(o). Not applicable.
(p). Fund and Advisers' Codes of Ethics - /8/;
(q). Powers of Attorney (Jones, Lynch, Searcy, Tokar)/7/
- -------------------
/1/ Filed as an exhibit to Post-Effective Amendment no. 9 to Registrant's
Registration Statement on February 15, 1996 (accession number 0000950146-96-
00221) and incorporated by reference herein.
<PAGE>

/2/ Filed as an exhibit to Post-Effective Amendment no. 12 Registrant's
Registration Statement on November 1, 1996 (accession number 0000950146-96-
001933) and incorporated by reference herein.

/3/ Filed as an exhibit to Post-Effective Amendment no. 18 Registrant's
Registration Statement on December 12, 1997 (accession number0000950146-97-
001909) and incorporated by reference herein.

/4/ Filed as an exhibit to Post-Effective Amendment no. 20 Registrant's
Registration Statement on December 28, 1998 (accession number 0001047469-98-
045270) and incorporated by reference herein.

/5/ Filed as an exhibit to Post-Effective Amendment no. 10 Registrant's
Registration Statement on June 11, 1996 (accession number0000950146-96-000954)
and incorporated by reference herein.

/6/ Filed as an exhibit to Post-Effective Amendment no. 16 Registrant's
Registration Statement on February 11, 1997 (accession number 0000950146-97-
000164) and incorporated by reference herein.

/7/ Filed as an exhibit to Post-Effective Amendment no. 22 Registrant's
Registration Statement on December 23, 1999 (accession number 0000928385-99-
003687) and incorporated by reference herein.

/8/ Filed as an exhibit to Post-Effective Amendment No. 26 Registrant's
Registration Statement on September 29, 2000 (accession number _________) and
incorporated by reference herein.

Item 24. Persons Controlled By or Under Common Control With Registrant
The Registrant does not directly or indirectly control any person.

Item 25. INDEMNIFICATION
Article III, Section 7 and Article VII, Section 2 of the Registrant's Agreement
and Declaration of Trust and Article VI of the Registrant's By-Laws provide for
indemnification of the Registrant's trustees and officers under certain
circumstances.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
All of the information required by this item is set forth in the Form ADV, as
amended, of Deutsche Asset Management Investment Services Limited (formerly
Morgan Grenfell Investment Services Limited) (File No. 801-12880) and in the
Form ADV, as amended, of Deutsche Asset Management, Inc. (formerly Morgan
Grenfell Inc.) (File No. 801-27291). The following sections of each such Form
ADV are incorporated herein by reference:

(a) Items 1 and 2 of Part II

(b) Section 6, Business Background, of each Schedule D.

Item 27. PRINCIPAL UNDERWRITER
(a) ICC Distributors, Inc., the Distributor for shares of the Registrant, also
acts as principal underwriter for the following open-end investment companies:
BT Advisor Funds, BT Institutional Funds, BT Pyramid Mutual Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity 500
Index Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio, BT
<PAGE>

Investment Portfolios, Deutsche Banc Alex. Brown Cash Reserve Fund, Inc., Flag
Investors Communications Fund, Inc., Flag Investors Emerging Growth Fund, Inc.,
the Flag Investors Total Return U.S. Treasury Fund Shares of Total Return U.S.
Treasury Fund, Inc., the Flag Investors Managed Municipal Fund Shares of Managed
Municipal Fund, Inc., Flag Investors Short-Intermediate Income Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors Real Estate Securities Fund,
Inc., Flag Investors Equity Partners Fund, Inc., Flag Investors Funds, Inc.
(formerly known as Deutsche Funds, Inc.), Flag Investors Portfolios Trust
(formerly known as Deutsche Portfolios), The Glenmede Funds, Inc. and The
Glenmede Portfolios.

(b) Unless otherwise stated, the principal business address for the following
persons is Two Portland Square, Portland, Maine 04101.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name and Principal Business Position and Offices with Positions and Offices
Address Underwriter with Registrant
--------------------------------------------------------------------------------------------------------
John Y. Keffer President None
--------------------------------------------------------------------------------------------------------
Ronald H. Hirsch Treasurer None
--------------------------------------------------------------------------------------------------------
Nanette K. Chern Chief Compliance Officer None
--------------------------------------------------------------------------------------------------------
David I. Goldstein Secretary None
--------------------------------------------------------------------------------------------------------
Benjamin L. Niles Vice President None
--------------------------------------------------------------------------------------------------------
Frederick Skillin Assistant Treasurer None
--------------------------------------------------------------------------------------------------------
Marc D. Keffer Assistant Secretary None
--------------------------------------------------------------------------------------------------------
</TABLE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS

The Agreement and Declaration of Trust, By-Laws and minute books of the
Registrant are in the physical possession of Deutsche Asset Management, One
South Street, Baltimore, Maryland 21202. All other books, records, accounts
and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder will be in
the physical possession of the Registrant's custodian: Brown Brothers Harriman
& Co., 40 Water Street, Boston, Massachusetts 02109, except for certain
transfer agency and records which are in the physical possession of Investment
Company Capital Corp., One South Street, Baltimore, Maryland 21202, the
Registrant's transfer agent, and Deutsche Asset Management, Inc., the Trust's
administrator.

Item 29. MANAGEMENT SERVICES

Not Applicable.

Item 30. UNDERTAKING

Not Applicable.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Baltimore and State of Maryland, on
September 29, 2000.

MORGAN GRENFELL INVESTMENT TRUST

By: /s/ Richard T. Hale
-----------------------------------
Richard T. Hale
President

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed by the following persons in the capacities and on the dates indicated:

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

/s/ Richard T. Hale President and Chief September 29, 2000
--------------------------------- Executive Officer
Richard T. Hale

/s/ Amy M. Olmert Chief Financial Officer September 29, 2000
---------------------------------
Amy M. Olmert

Trustee September 29, 2000
---------------------------------
Paul K. Freeman

/s/ Graham E. Jones* Trustee September 29, 2000
---------------------------------
Graham E. Jones

/s/ Hugh G. Lynch* Trustee September 29, 2000
---------------------------------
Hugh G. Lynch

/s/ William N. Searcy* Trustee September 29, 2000
---------------------------------
William N. Searcy

/s/ Edward T. Tokar* Trustee September 29, 2000
---------------------------------
Edward T. Tokar

*By: /s/ Daniel O. Hirsch Dated: September 29, 2000
-----------------------
Daniel O. Hirsch
Power-of-Attorney
<PAGE>

RESOLVED, That the officers of the Trust are hereby authorized and directed to
prepare and file with the appropriate regulatory bodies the
appropriate amendments to the registration statement of the Morgan
Grenfell Investment Trust, with respect to European Equity and
International Select Equity and its Classes, on Form N-1A.