<PAGE>
Deutsche Asset Management
Mutual Fund
Annual Report
October 31, 2000
European Equity
International Select Equity
International Small Cap Equity
Emerging Markets Equity
Each formerly a Morgan Grenfell Fund
A Member of the
Deutsche Bank Group [LOGO]
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Table of Contents
<TABLE>
<S> <C>
Letter to Shareholders.......................................................... 3
International Equity Funds
Schedule of Investments...................................................... 19
Statements of Assets and Liabilities......................................... 29
Statements of Operations..................................................... 30
Statements of Changes in Net Assets.......................................... 32
Financial Highlights......................................................... 34
Notes to Financial Statements................................................ 41
Report of Independent Accountants............................................ 46
Tax Information.............................................................. 46
</TABLE>
--------------------------------
The Fund is not insured by the FDIC and is not a deposit, obligation of
or guaranteed by Deutsche Bank. The Fund is subject to investment
risks, including possible loss of principal amount invested.
--------------------------------
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2
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
. European Equity
We are pleased to present you with this annual report for European Equity fund.
It provides a review of the markets, the portfolio and our outlook as well as a
complete financial summary of the Fund's operations and a listing of the
portfolio's holdings for the twelve month period ended October 31, 2000.
We are also pleased to announce that Morningstar continues to recognize the Fund
for its strong investment performance.1 In fact, the fund maintained the highest
Overall Morningstar Rating(TM) (five stars) based on its risk-adjusted
performance. As of October 31, 2000, European Equity Institutional Class was
rated 5 stars out of 1,208 international equity funds.
MARKET ACTIVITY
Most world equity markets achieved new highs during the closing two months of
1999 and first weeks of the new year, as Y2K fears abated. Within a broader
market rally, the telecommunications, media and technology sectors outperformed,
as the market focused on growth opportunities offered by the Internet, mobile
communications and content ownership.
Concerns that stock valuations had become stretched while economic fundamentals
were weakening led to a market correction in early spring. A series of interest
rate increases in the US and Europe and persistent strength in oil prices
further clouded the outlook for equities. A lack of coordinated European Central
Bank policy and the relative strength of the US economy contributed to the
ongoing weakness of the euro. The euro's 19.3% decline over the fiscal year, in
turn, severely dampened European equity market returns in US dollar terms.
European equities achieved a 1.2% annual return in US dollar terms, with
continental Europe up 3.8% and the UK down 5.9%. The UK equity market was held
back by the dual headwinds of increasing interest rates and the persistence of a
strong sterling against the euro.
For the region as a whole, the fall from grace experienced by bellwether
European Technology, Media, and Telecommunications service and Equipment stocks
weighed heavily on the markets. Downward revisions regarding the pace of
European economic growth further dampened investor sentiment. Although currency
weakness may contribute to the illusion that confidence was lacking in the
region, European markets continued to demonstrate the benefits of Economic and
Monetary Union, corporate restructuring, tax reform efforts and the development
of an equity culture. In fact, for the European investor, this was a banner year
for domestic equity market performance. Local investors enjoyed a 27.8% annual
return on the continent and a 6.4% annual return in the UK. In local currency
terms, Italy was up 38.4% for the fiscal period, France rose 33.1%, Germany was
up 25.8% and the Netherlands rose 24.7%. Nordic markets, lifted mostly by
telecommunications equipment and higher energy prices, experienced new highs.
These equity markets included Finland (+55.7%), Denmark (+43.1%), Sweden
(+35.6%) and Norway (+32.8%). Still, currency weakness severely eroded gains in
these markets for US dollar investors.
INVESTMENT REVIEW
European Equity Institutional Class produced a return of 149.63% for the twelve
months ended October 31, 2000, dramatically outperforming the 1.21% return of
the MSCI Europe Index. This strong outperformance is particularly notable given
the volatility of the European markets during the annual period./2/
The Fund's strong outperformance was primarily due to effective country and
sector allocation and strong individual stock selection. The Fund maintained its
overweight exposure to the continent, its underweight exposure to the UK, and
its modest position in select emerging European markets.
The Fund began the new year with a significant exposure to the
Telecommunications, Media and Technology (TMT)
--------------------------------------------------------------------------------
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Morningstar proprietary ratings on U.S. domiciled funds reflect historical
risk-adjusted performance as of October 31, 2000. The ratings are subject to
change every month. Morningstar ratings are calculated from the Fund's
three-, five-, and ten-year (if applicable) average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments,
and a risk factor that reflects fund performance below 90-day T-bill
returns. The Overall Morningstar Rating(TM) is a weighted average of the
Fund's three-, five- and ten-year (if applicable) risk adjusted performance.
European Equity was rated 5 stars among 1,208 International Equity funds for
the 3-year period. The top 10% of the funds in a broad asset class receive 5
stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the
next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Fund was
rated exclusively against U.S. domiciled funds. Ratings are for the
Institutional Class only. Other classes may vary.
/2/ The Fund's performance in 2000 was significantly impacted by gains from
initial public offerings (IPOs) during a period when the Fund's assets were
relatively small and the market for IPOs was strong. There is no assurance
that any future investments in IPOs by the Fund will have a similar effect
on its future performance. The Fund's performance also benefitted from a
one-time gain from accounting for the cancellation of certain shareholder
trades in February 2000.
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3
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
sectors. Higher growth markets, including the Neuer Markt in Germany and the
Nouvelle Marche in France, gave rise to significant new investment opportunities
in these sectors. The Fund was also able to take advantage of a buoyant initial
public offering (IPO) market. In the early spring, we took profits in some of
those technology investments that had outperformed to that point but whose
momentum, in our view, had carried them ahead of their fundamentals. We also
reduced the portfolio's exposure to the volatile Telecommunications sector, as
bidding for certain licenses and slowing equipment demand signaled weakness
ahead. These concerns about TMT sectors' valuations led us to reposition the
Fund more heavily in defensive sectors, including Financials, Energy, Health
Care and Consumer Goods.
We believe that as the peak of the current interest rate cycle nears, banks will
be key beneficiaries of widening interest rate spreads and moderate economic
growth. The rise of an equity culture, especially in continental Europe, should
also benefit asset-gathering financial institutions with savings products to
offer, including mutual funds and life insurance. We added ING, Royal Bank of
Scotland, Unicredito and Banco Santander Central Hispano to the Fund's holdings.
We also established or added to positions within the Energy and Oil Services
sector to capture improving industry fundamentals. A restraint in OPEC
production amidst higher global demand has led to a tripling of oil prices.
Early in the period, we added to the Fund's positions in several integrated
companies, including Total Fina and Shell T&T. We also added several smaller oil
service names, including Coflexip and Saipem.
MANAGER OUTLOOK
The equity markets seem to have entered a period of adjustment where valuations
are beginning to reflect the
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
Past Past Since Past Past Since
Periods ended October 31, 2000 1-year 3-years inception 1-year 3-years inception
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
European Equity Institutional Class/1/
(inception 9/3/96) 149.63% 248.96% 353.04% 149.63% 51.68% 43.80%
------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital International
(MSCI) Europe Index/2/ 1.21% 40.97% 86.28%/4/ 1.21% 12.13% 16.10%/4/
------------------------------------------------------------------------------------------------------------------------------
Lipper European Regions
Funds Average/3/ 12.53% 42.35% 76.54%/4/ 12.53% 12.00% 14.33%/4/
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Cumulative Total Returns
Since
Periods ended October 31, 2000 inception
-------------------------------------------------------------------
European Equity Investment Class/1/
(inception 12/23/99) 85.30%
-------------------------------------------------------------------
Morgan Stanley Capital International
(MSCI) Europe Index/2/ -10.65%/4/
-------------------------------------------------------------------
Lipper European Regions
Funds Average/3/ -7.41%/4/
-------------------------------------------------------------------
______________
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
These figures assume the reinvestment of dividend and capital gain
distributions. Performance figures for the classes differ because each class
maintains a distinct expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund. The Fund's performance in 2000 was significantly
impacted by gains from initial public offerings (IPOs) during a period when
the Fund's assets were relatively small and the market for IPOs was strong.
There is no assurance that any future investments in IPOs by the Fund will
have a similar effect on its future performance. The Fund's performance also
benefitted from a one-time gain from accounting for the cancellation of
certain shareholder trades in February 2000.
/2/ The MSCI Europe Index is an unmanaged index representative of major markets
in Europe. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the periods beginning August 31, 1996 and December
31, 1999 for the Institutional and Investment classes, respectively.
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4
<PAGE>
International Equity Funds
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Letter to Shareholders
notion that global growth has peaked and that going forward one should expect an
economic environment characterized by slower growth and moderating demand.
Despite the recent volatility, we continue to believe that the most likely
outcome is that of a 'soft landing.' Regionally, we anticipate a firmer euro and
greater investor confidence in equities in the months ahead.
Recent market weakness can be attributed largely to short-term factors, such as
interest rate hikes, higher oil prices and a moderation of global growth from
very high levels. It is important to put this most recent period of market
consolidation into context and to view it as a pause in, rather than a change
in, the longer-term trend of the market. In our view, economic fundamentals
remain sound.
As we pass through the peak of the current interest rate cycle, we believe there
is considerable room for rates to head lower in both the US and Europe next
year. We would expect this to add further support to equity markets. Longer
term, the story for Europe remains compelling. We expect European equities to
benefit from a broadening regionalization, as Economic and Monetary Union
convergence takes further hold in both Eastern Europe and the Mediterranean.
Continued privatization, consolidation and a deepening of the capital markets
are also helping to foster an equity culture in Europe. In our view, further
steps being taken in both pension fund and tax reform across the continent will
only help to promote the equity story for Europe.
We will, of course, continue to monitor economic conditions and political
initiatives and their effect on financial markets as we seek long-term capital
appreciation.
We sincerely value your ongoing support of European Equity and look forward to
continuing to serve your investment needs in the years ahead.
/s/ Michael Levy
/s/ Caroline Altmann
/s/ Clare Brody
/s/ Matthias Knerr
/s/ Oliver Kratz
Michael Levy, Caroline Altmann, Clare Brody,
Matthias Knerr and Oliver Kratz
Portfolio Managers of European Equity Portfolio
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5
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
International Equity Funds
. International Select Equity
. International Small Cap Equity
. Emerging Markets Equity
We are pleased to present you with this annual report for International Select
Equity, International Small Cap Equity and Emerging Markets Equity funds.
We are also pleased to announce that Morningstar continues to recognize several
of the Funds for their strong investment performance./1/ Most notably,
International Select Equity maintained the highest Overall Morningstar
Rating(TM) (five stars) based on its risk-adjusted performance. As of October
31, 2000, International Select Equity Institutional Class was rated 5 stars out
of 1,208 international equity funds.
In the pages that follow, you will find a discussion of the Funds' investment
performance by the portfolio management teams. The analyses highlight key
factors influencing recent performance of the Funds and are followed by detailed
financial statements for the 12-month period ended October 31, 2000.
Our continuing goal is to provide you with high-quality investment management
services across a broad range of specialized mutual funds. We thank you for
investing in our family of mutual funds and we appreciate your continued support
and confidence.
Sincerely,
/s/ Alex J.H. Tedder
Alex J.H. Tedder, Portfolio Manager of
International Select Equity
/s/ Matthew Linsey
Matthew Linsey, Portfolio Manager of
Emerging Markets Equity
/s/ Richard Curling
Richard Curling, Portfolio Manager of
International Small Cap Equity
--------------------------------------------------------------------------------
MARKET REVIEW
International equity markets saw a dramatic change in investor sentiment as the
fiscal year progressed, characterized by high volatility, aggressive sector
rotation and unprecedented share price gyrations.
While forecasters had expected growth within the global economy to accelerate
towards the end of 1999 and into 2000, the acceleration was beyond expectations.
Equity markets, which had been largely flat until September 1999, began to rally
sharply. This was partly in response to the excess liquidity pumped into the
markets during the fourth calendar quarter by the central banks as Y2K
approached. However, the rally was largely concentrated in the 'New Economy'
growth stocks benefiting from the new technological age and the more buoyant
world economy.
Then, as stock valuations were stretched to unprecedented levels, some of these
'New Economy' growth stocks began to falter. International markets, taking their
lead from the technology-dominated NASDAQ in the US, suffered losses in March
and April. The sell-off was further exacerbated by the negative judgment against
Microsoft, which became public at the end of March. Valuations, which seemed to
matter little to investors during the first half of the period, suddenly became
important.
It became apparent that interest rates were likely to continue to rise to calm
excessive growth and indeed they did in all of the G7 economies. As the impact
of interest rate hikes began to take hold, oil prices rose, hitting decade highs
toward the end of the fiscal year. Concerns that inflation would be fueled both
by stronger than expected economic growth and
--------------------------------------------------------------------------------
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Morningstar proprietary ratings on U.S. domiciled funds reflect historical
risk-adjusted performance as of October 31, 2000. The ratings are subject to
change every month. Morningstar ratings are calculated from the Fund's
three-, five-, and ten-year (if applicable) average annual returns in excess
of 90-day Treasury bill returns with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. The
Overall Morningstar Rating(TM) is a weighted average of the Fund's three-,
five- and ten-year (if applicable) risk adjusted performance. European
Equity was rated 5 stars among 1,208 International Equity funds for the 3-
year period. The top 10% of the funds in a broad asset class receive 5
stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the
next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Fund was
rated exclusively against U.S. domiciled funds. Ratings are for the
Institutional Class only. Other classes may vary.
--------------------------------------------------------------------------------
6
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
by the substantial gain in oil prices led central banks to maintain their
hawkish stance. Inflation was of particular concern in Europe, where the
continued devaluation of the euro has increased inflationary pressures.
Emerging markets fell 8.8% in US dollar terms for the fiscal year,
underperforming most developed markets during the period. The emerging markets
were strong through the end of March 2000, driven by Technology, Media and
Telecommunications (TMT) stocks. However, the subsequent faltering of these
sectors since March, combined with the negative impact of higher oil prices,
eroded all positive returns. While the TMT sectors performed poorly, the
resources sector performed well.
Positive country performance came from Russia, Turkey, Mexico and Brazil.
Negative country performance came from Asia, in particular Korea, Thailand,
Malaysia and the Philippines. Declining interest rates in Mexico, Turkey and
Brazil supported those equity markets' positive performance. The economic impact
of rising oil prices was the primary factor undermining investor confidence in
the Asian equity markets.
--------------------------------------------------------------------------------
. International Select Equity
International Select Equity Institutional Class produced a return of 20.68% for
the 12-months ended October 31, 2000, as compared to -2.90% for the MSCI EAFE
Index in US dollar terms. This strong outperformance is particularly notable
given the challenging environment international equity markets faced during the
fiscal year.
The Fund is a focused portfolio of what we believe to be the best ideas from
international markets represented in the MSCI EAFE Index. As always, the
management team continued to carefully monitor the intrinsic value of the stocks
already held in the portfolio relative to those available for purchase. In other
words, we remained true to our valuation approach, focusing on growth companies
with a high and sustainable return on capital. There was a consistent emphasis
on the long term. There was no active allocation between countries and regions.
In fact, the Fund's outperformance was primarily due to individual stock
selection across all regions.
During the first fiscal quarter, a number of Technology, Media and
Telecommunications (TMT) stocks in the portfolio attained or were very close to
the price targets we had set for them. We were concerned that TMT valuations
were largely unsustainable. Thus, we sold a number of holdings in these sectors
at this time. Throughout the fiscal year, we took the opportunity to further
reduce the Fund's exposure to TMT sectors during volatile periods, finding value
elsewhere. We maintained several positions in the TMT sectors, however, where we
believed there to be a solid valuation case.
The Fund remained balanced throughout the year. Strong performers for the Fund
included several German stocks. Specifically, MLP, the financial services
company, Consors, the on-line trading company and SCM Microsystems, a company
employed in the production of smart-card technology, boosted Fund returns. The
Fund also benefited from positions in two of the spin-off companies from
Siemens, known as Infineon and Epcos. Infineon is Siemen's semiconductor
business. Epcos offered one of the few pure electrical component plays available
in Europe.
There were also several winners among the Fund's UK holdings. Early in the
period, the Fund benefited from its positions in Colt Telecom, a competitive
local exchange carrier, Baltimore Technologies, Europe's largest developer of
security software for computer systems, and Geo Interactive Media Group, which
has a pre-eminent position in video compression. Marconi was one of the core
technology names that remained in the Portfolio throughout the period. This
stock rose dramatically after the announcement that it was selected by British
Telecom as a key strategic partner in building its advanced optical network.
Allied Domecq, an international food, drink and hospitality group, and Billiton,
a mining company, also performed exceptionally well.
Elsewhere in Europe, Switzerland's Compagnie Financiere Richemont, the luxury
goods company, benefited from its acquisition of Jaeger-LeCoutre. This made it
one of the most prominent owners of luxury brands globally. Several
pharmaceutical companies also were strong performers in the face of global
equity market volatility.
We sold the Fund's position in Japanese Internet company Softbank, as its level
of valuation became unsustainable. However, the Fund continued to benefit from
other select investment opportunities in the Japanese market. For example, Nihon
Denpa Kogyo, a quartz crystal maker, did well due to the rally in small and
mid-sized telecommunications parts makers. Daikin Industries, an aggressively
restructuring manufacturer of air conditioning equipment,
--------------------------------------------------------------------------------
7
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
and Sanyo Electric, a battery maker for mobile phones and manufacturer of
digital cameras, also performed well. Fujisawa Pharmaceutical was a strong
performer, in keeping with defensive growth stocks worldwide.
In the last weeks of the period, we shifted the Fund's emphasis somewhat toward
stable growth stocks. We believe defensive stocks, such as Pharmaceuticals,
Utilities and Food Producers, no longer offer significant upside following
strong performance in the second and third calendar quarters. Still, the Fund's
positioning remains entirely determined by our views on specific companies. We
either established or added to positions in Reckitt Benckiser, the UK household
products company; SmithKline Beecham, the UK healthcare group; Dexia, the
Belgian mortgage finance bank; Lonmin, the UK mining and minerals group; and
Mitusi OSK Lines, the Japanese shipping company. We expect these companies to
perform well regardless of market conditions. Finally, we believe there is again
value in the Telecommunications sector, but only on a selective stock-by-stock
basis. We recently added positions in the portfolio in Vodafone Airtouch, the UK
telecommunications company, and KPN, the Dutch telephone company.
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
Past Past Past Since Past Past Past Since
Periods ended October 31, 2000 1-year 3-years 5-years inception 1-year 3-years 5-years inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Select Equity Institutional
Class/1/ (inception 5/15/95) 20.68% 109.85% 145.44% 168.76% 20.68% 28.03% 19.67% 19.83%
------------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index/2/ -2.90% 30.99% 51.41% 50.79%/4/ -2.90% 9.42% 8.65% 7.88%/4/
------------------------------------------------------------------------------------------------------------------------------------
Lipper International Equity
Funds Average/3/ 2.70% 34.13% 62.88% 67.37%/4/ 2.70% 9.96% 9.93% 9.62%/4/
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
Past Since Past Since
Periods ended October 31, 2000 1-year inception 1-year inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Select Equity Investment
Class/1/ (inception 10/29/99) 19.41% 19.41% 19.41% 19.25%
------------------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index/2/ -2.90% -2.90%/4/ -2.90% -2.90%/4/
------------------------------------------------------------------------------------------------------------------------------------
Lipper International Equity
Funds Average/3/ 2.70% 2.70%/4/ 2.70% 2.70%/4/
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Cumulative Total Returns
Since
Periods ended October 31, 2000 inception
--------------------------------------------------------------------------------
International Select Equity Premier
Class/1/ (inception 2/29/00) -22.37%
--------------------------------------------------------------------------------
MSCI EAFE Index/2/ -10.45%/4/
--------------------------------------------------------------------------------
Lipper International Equity
Funds Average/3/ -14.84%/4/
--------------------------------------------------------------------------------
________________
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
These figures assume the reinvestment of dividend and capital gain
distributions. Performance figures for the classes differ because each class
maintains a distinct expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund.
/2/ The MSCI EAFE Index is an unmanaged index of international stock performance
in Europe, Australasia and the Far East. Index returns do not reflect
expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the periods beginning May 31, 1995, October 31,
1999 and February 29, 2000 for the Institutional, Investment and Premier
classes, respectively.
--------------------------------------------------------------------------------
8
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
. International Small Cap Equity
International Small Cap Equity Institutional Class outperformed its benchmark
for the 12-months ended October 31, 2000 with a return of 7.52% as compared to
-2.15% for the SSB World Equity Extended Market Index Euro Pacific. We continued
to focus our investment strategy on high quality, high growth companies with
visible earnings streams and above average return on capital. Through a
disciplined investment process with a clear control of risk, we believe we have
constructed a portfolio of the best small businesses outside the US, as we seek
to deliver excellent performance over the long term.
The primary drivers of the Fund's outperformance were strong stock selection in
Europe, especially in France, Germany and Italy during the first half of the
fiscal year. For example, Tiscali, an Italian Internet stock, performed well, as
did many Italian Internet stocks. In France, Altran Technologie, growing in
profits 40% per year and trading at a low price/earnings multiple, was another
top performer. Versatel Telecom, an alternative telecommunications provider in
Holland, benefited from strong demand. Other winners for the Fund included
Switzerland's Kudelski, the Netherlands' Fugro and Germany's Medion. We
purchased GFI Informatique, an information technology consulting company, as the
firm is currently growing at a rate of 50% in profits per year. We sold
Intershop, a communications firm in Germany, at a profit, when it reached the
price target we had set for that stock. We also sold Montupet of France, as its
margins failed to increase as forecast.
Stock selection was also a strong positive factor in the Fund's UK investments.
Canary Wharf Group, a property investment and development company, has seen
increased demand for space at its properties, and it still has further capacity.
Schroders sold its merchant banking business and transformed itself into a fund
management business in the UK and continental Europe. We sold Bowthorpe Group, a
telecommunications equipment testing business, at a profit after it reached its
price target.
Fund holdings in Hong Kong and Singapore contributed positively to performance.
Japanese positions detracted from performance, as the environment for smaller
companies remained uncertain in Japan, in spite of signs of economic recovery.
We purchased Fujitsu Support, a company providing information services and
support for computer network systems. We also added Yokowo, manufacturer of
wireless communications and information transmission systems.
Sector allocation boosted Fund performance during the first half of the year,
but detracted during the second half. Through March of 2000, European
Technology, Media and Telecommunications (TMT) stocks, where the Fund was
overweighted, performed strongly. There was accelerating Internet penetration in
Europe as well as a string of successful new offerings on the market. There was
also an ongoing shift on the part of European retail investors from fixed income
and government retirement packages to equity products and private pensions.
These factors fueled liquidity to the small cap equity markets. The second part
of the year, however, saw a sharp correction in TMT sectors. Still, we
maintained the Fund's overweighting in TMT and business services sectors,
because these are the areas where we are finding companies that we believe are
able to produce superior growth in earnings and an ability to sustain positive
ongoing cash flows over the medium term.
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
Past Past Past Since Past Past Past Since
Periods ended October 31, 2000 1-year 3-years 5-years inception 1-year 3-years 5-years inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International SmallCap Equity Institutional
Class/1/ (inception 1/3/94) 7.52% 51.60% 44.57% 39.66% 7.52% 14.88% 7.65% 5.02%
------------------------------------------------------------------------------------------------------------------------------------
SSB World Equity EMIEPAC Index/2/ -2.15% 16.81% 24.87% 36.15%/4/ -2.15% 5.31% 4.54% 4.62%/4/
Lipper International Small Cap
------------------------------------------------------------------------------------------------------------------------------------
Funds Average/3/ 17.20% 76.22% 139.14% 109.34%/4/ 17.20% 19.60% 17.01% 10.38%/4/
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
______________
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
These figures assume the reinvestment of dividend and capital gain
distributions. Performance figures for the classes differ because each class
maintains a distinct expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund.
/2/ The SSB World Equity Extended MarketIndex Euro Pacific comprises the small
capitalization equities of each country in the Salomon Broad Market Index.
The unmanaged index contains approximately 3,000 issues in more than 20
countries. Index returns do not reflect expenses, which have been deducted
from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the periods beginning December 31, 1993.
--------------------------------------------------------------------------------
9
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
. Emerging Markets Equity
Emerging markets as a whole underperformed most developed markets during the
period. Over the first half, the emerging markets performed well, primarily
driven by the Telecommunications, Media and Technology (TMT) sectors. The
subsequent fall of these sectors, combined with the negative impact of higher
oil prices, eroded all positive returns and pulled the emerging markets into
negative territory for the second half of the period. Emerging Markets Equity
Institutional Class slightly outperformed its benchmark for the 12-months ended
October 31, 2000, with a return of -8.45% as compared to -8.81% for the MSCI
Emerging Markets Free Index.
For most of the fiscal period, we were overweight in Brazil, India and Mexico,
and underweight in Greece and Argentina. There was a re-balancing of the
Portfolio in May, in anticipation of the benchmark's re-weighting. Malaysia
re-entered the benchmark, and the weighting of Taiwan and China increased
significantly. Late in the period, we moved to a more neutral position in Latin
America. Our Brazilian position became undermined by ongoing sovereign credit
concerns in Argentina. We also eliminated the Fund's position in Greece on the
basis of unattractive valuations. We moved to a neutral weighting in Asia by
adding to Korea and Taiwan.
Strong performers for the Fund included:
. Telmex, the dominant Mexican telecommunications company. Buoyant cellular
growth and an accelerated fixed line CAPEX program continued to drive revenues
and profitability. Telmex is one of the Fund's largest holdings.
. Taiwan Semiconductor, the largest semiconductor foundry in the world. It
benefited from strong global demand, especially from the telecommunications
industry. Net income and sales both grew in excess of 100%.
. China Mobile, the largest mobile telephone operator in China. It has a
dominant market position and is aggressively growing its subscriber base through
organic means and acquisition of new franchises. China Mobile is one of the
Fund's top ten holdings.
. LUKOil, Russia's leading oil company. LUKOil has
benefited from a highly competitive cost base after 1998's currency devaluation
and from rising world oil prices. The company is beginning to exploit large new
oil reserves in the Timan-Pechora and Caspian regions. It trades at a
significant discount to international oil majors.
<TABLE>
<CAPTION>
Cumulative Total Returns Average Annual Total Returns
Past Past Past Since Past Past Past Since
Periods ended October 31, 2000 1-year 3-years 5-years inception 1-year 3-years 5-years inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets Equity Institutional
Class/1/ (inception 2/1/94) -8.45% -14.29% -15.42% -26.50% -8.45% -5.01% -3.29% -4.46%
------------------------------------------------------------------------------------------------------------------------------------
MSCIEmerging Markets Free Index/2/ -8.81% -8.98% -11.30% -25.38%/4/ -8.81% -3.09% -2.37% -4.25%/4/
------------------------------------------------------------------------------------------------------------------------------------
Lipper Emerging Markets
Funds Average/3/ -2.78% -11.94% -2.88% -29.92%/4/ -2.78% -4.46% -0.88% -5.24%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________
/1/ Past performance is not indicative of future results. Market volatility can
significantly impact short term performance. Results of an investment made
today may differ substantially from the Fund's historical performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
These figures assume the reinvestment of dividend and capital gain
distributions. Performance figures for the classes differ because each class
maintains a distinct expense structure. Performance would have been lower
during the specified periods if certain fees and expenses had not been
waived by the Fund.
/2/ The MSCIEmerging Markets Free Index is an unmanaged market capitalization
index of over 850 stocks traded in 22 world markets. Index returns do not
reflect expenses, which have been deducted from the Fund's returns.
/3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
/4/ Benchmark returns are for the periods beginning January 31, 1994.
--------------------------------------------------------------------------------
10
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Letter to Shareholders
MARKET OUTLOOK
As we near the peak of the current interest rate cycle, we believe there is
considerable room for rate reductions in the coming year to spur economic
growth. We believe that, in the near term, earnings expansion may slow to
reflect moderate global demand. Our most likely scenario is for a `soft
landing.'
In Europe, we anticipate a firmer euro and greater investor confidence in
equities in the months ahead. We expect European equities to benefit from a
broadening regionalization, as Economic and Monetary Union convergence takes
further hold in both Eastern Europe and the Mediterranean. Continued
privatization, consolidation and a deepening of the capital markets are also
helping to foster an equity culture in Europe. In our view, further steps being
taken in both pension fund and tax reform across the continent will only help to
promote the equity story for Europe.
We believe that the much-trumpeted Japanese recovery offers little of substance
for many deep-rooted and fundamental reasons. A lack of political resolve has
led to a `lost decade' for economic growth, which is clearly being felt by
consumers refusing to spend. The pace of fiscal and financial sector reform has
stalled and announcements of corporate restructuring efforts have all but ended.
A rollback of many of the `big bang' efforts to stimulate the troubled financial
sector bodes ill for financial transparence and equity demand. Foreigners are
not likely to be strong net buyers of the Japanese equity market in the near
future, given the miserable turnabout they have experienced recently. Thus,
investors will need to be selective and willing to trade out of positions
quickly in order to preserve gains in this contradictory market.
The sharp correction in Asia ex-Japan stocks has left equity valuations more
attractive. However, in the short term, Asia lacks an obvious catalyst to ignite
a sustained rally. Concerns about technology and the direction of the US economy
are likely to continue to weigh on markets in the near term. The likely catalyst
for Asian markets next year should be the widening of the relative GDP and
earnings growth rates between Asia and the rest of the world. The most
unpredictable long-term factor remains corporate Asia's genuine willingness to
restructure. While the prognosis overall is not encouraging, there are many
Asian companies that have managed to increase their cash flow return on
investment recently.
Within Latin America, we remain cautious on Mexico due to above-trend economic
growth and a tight labor market. We remain positive on Brazil, as lower interest
rates there are spurring growth, while inflation targeting is keeping a lid on
overheating, despite the oil price shock. Fiscal and monetary stability in
Brazil should be positive for earnings growth and equity valuations.
The concerted action among European, US and Japanese central banks to support
the euro above 0.85 against the US dollar could be positive for emerging
European markets. In our view, euro strength would also improve the inflation
outlook in central Europe and take some pressure off the Polish zloty in
particular. We believe it would help Turkish exporters and reduce the likelihood
of cash flow out of Greece. Low valuations and belief that the returning
parliament will restart the reform process also make us increasingly positive on
Turkey. We believe the Israeli market is likely to see some profit taking,
following its strong year-to-date performance. The recent escalation in tensions
raises the country's political risk. But, in the medium term, we believe the
resumption of the peace process will allow investors to focus on the
strengthening economy and the positive interest rate cycle.
Inflationary pressures persist in South Africa, due to the recent buoyancy in
oil prices. This is preventing an interest rate cut, which is required to
stimulate domestic demand. Other macroeconomic data continues to be positive,
and the equity market still looks cheap based on historical valuations.
The outlook for small and medium cap international stocks remains overall
positive. Smaller companies are still undervalued relative to larger companies
when taking into account their growth prospects. However, in the short term,
high levels of volatility will likely continue.
Given the difficult market conditions this past fiscal year, it is important to
put corrective periods into a long-term context and to treat them as pauses
rather than emerging trends provided the fundamental economic, demographic and
political environment remains sound. We believe recent market weakness can be
primarily attributed to short-term influences--higher interest rates, restrained
economic growth, rising oil prices. Although the bursting of the Internet bubble
has had a significant impact on investor confidence, developed market
demographics, public policy and many positive variables are favorable for
continued and expanding equity ownership by investors the world over.
--------------------------------------------------------------------------------
11
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
EUROPEAN EQUITY INSTITUTIONAL CLASS/1/,
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX
AND LIPPER EUROPEAN REGIONS FUNDS AVERAGE
GROWTH OF A $250,000 INVESTMENT (SINCE SEPTEMBER 3, 1996)/2/
9/3/96 257,500 255,350 254,021
10/31/96 265,000 261,351 258,011
10/31/97 324,550 330,343 316,055
10/31/98 374,425 407,683 368,784
10/31/99 453,725 460,036 416,095
10/31/00 1,132,600 465,605 441,355
=== European Equity Institutional Class $1,132,600
___ Morgan Stanley Capital International (MSCI) Europe Index $465,605
--- Lipper European Regions Funds Average $441,355
Average Annual Total Return for the Periods Ended October 31, 2000
One-year 149.63% Three-year 51.68% Since 9/3/962 43.80%
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. The Fund's recent
performance was achieved during favorable market conditions that may not be
sustained. The Fund's performance in 2000 was significantly impacted by gains
from initial public offerings (IPOs) during a period when the Fund's assets were
relatively small and the market for IPOs was strong. There is no assurance that
any future investments in IPOs by the Fund will have a similar effect on its
future performance. The Fund's performance also benefited from a one-time gain
from accounting for the cancellation of certain shareholder trades in February
2000. Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. These
figures assume the reinvestment of dividend and capital gain distributions.
Performance would have been lower during the specified periods if certain fees
and expenses had not been waived by the Fund.
The MSCI Europe Index is an unmanaged index representative of major markets in
Europe. Lipper figures represent the average of the total returns reported by
all the mutual funds designated by Lipper Inc. as falling into the category
indicated.
Benchmark returns are for the period beginning August 31, 1996.
--------------------------------------------------------------------------------
12
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
EUROPEAN EQUITY INVESTMENT CLASS/1/,
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX
AND LIPPER EUROPEAN REGIONS FUNDS AVERAGE
GROWTH OF A $10,000 INVESTMENT (SINCE DECEMBER 23, 1999)/2/
12/31/99 10,000 10,000 10,000
1/31/00 10,171 9,290 9,611
4/30/00 18,681 9,576 10,088
7/31/00 19,843 9,552 10,048
10/31/00 18,530 8,935 9,259
=== European Equity Investment Class $18,530
___ Morgan Stanley Capital International (MSCI) Europe Index $8,935
--- Lipper European Regions Funds Average $9,259
Average Annual Total Return for the Period Ended October 31, 2000
Since 12/23/99/2/ 85.30%
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Service Shares were renamed the Investment Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. The Fund's recent
performance was achieved during favorable market conditions that may not be
sustained. The Fund's performance in 2000 was significantly impacted by gains
from initial public offerings (IPOs) during a period when the Fund's assets were
relatively small and the market for IPOs was strong. There is no assurance that
any future investments in IPOs by the Fund will have a similar effect on its
future performance. The Fund's performance also benefited from a one-time gain
from accounting for the cancellation of certain shareholder trades in February
2000. Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. These
figures assume the reinvestment of dividend and capital gain distributions.
Performance would have been lower during the specified period if certain fees
and expenses had not been waived by the Fund.
The MSCI Europe Index is an unmanaged index representative of major markets in
Europe. Lipper figures represent the average of the total returns reported by
all the mutual funds designated by Lipper Inc. as falling into the category
indicated.
Benchmark returns are for the period beginning December 31, 1999.
--------------------------------------------------------------------------------
13
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
INTERNATIONAL SELECT EQUITY INSTITUTIONAL CLASS/1/,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
AND LIPPER INTERNATIONAL EQUITY FUNDS AVERAGE
GROWTH OF A $250,000 INVESTMENT (SINCE MAY 15, 1995)/2/
5/15/95 252,000 250,000 250,000
10/31/95 273,750 248,997 257,073
10/31/96 308,525 275,089 286,368
10/31/97 320,175 287,800 315,228
10/31/98 349,875 315,502 328,841
10/31/99 556,750 388,158 412,088
10/31/00 671,900 376,980 418,420
=== International Select Equity Institutional Class $671,900
___ Morgan Stanley Capital International (MSCI) EAFE Index $376,980
--- Lipper International Equity Funds Average $418,420
Average Annual Total Return for the Periods Ended October 31, 2000
One-year 20.68% Three-year 28.03% Five-Year 19.67% Since 5/15/95/2/ 19.83%
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. The Fund's recent
performance was achieved during favorable market conditions that may not be
sustained. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. These figures assume the reinvestment of dividend and capital gain
distributions. Performance would have been lower during the specified periods if
certain fees and expenses had not been waived by the Fund.
The MSCI EAFE Index is an unmanaged index of international stock performance in
Europe, Australasia and the Far East. Lipper figures represent the average of
the total returns reported by all the mutual funds designated by Lipper Inc. as
falling into the category indicated.
Benchmark returns are for the period beginning May 31, 1995.
--------------------------------------------------------------------------------
14
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
INTERNATIONAL SELECT EQUITY INVESTMENT CLASS/1/,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
AND LIPPER INTERNATIONAL EQUITY FUNDS AVERAGE
GROWTH OF A $10,000 INVESTMENT (SINCE OCTOBER 29, 1999)/2/
10/31/99 10,000 10,000 10,000
1/31/00 13,331 10,560 11,416
4/30/00 13,947 10,672 11,451
7/31/00 13,538 10,366 11,160
10/31/00 11,941 9,710 10,270
=== International Select Equity Investment Class $11,941
___ Morgan Stanley Capital International (MSCI) EAFE Index $9,710
--- Lipper International Equity Funds Average $10,270
Average Annual Total Return for the Periods Ended October 31, 2000
One-Year 19.41% Since 10/29/992 19.25%
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Service Shares were renamed the Investment Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. The Fund's recent
performance was achieved during favorable market conditions that may not be
sustained. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. These figures assume the reinvestment of dividend and capital gain
distributions. Performance would have been lower during the specified periods if
certain fees and expenses had not been waived by the Fund. The MSCI EAFE Index
is an unmanaged index of international stock performance in Europe, Australasia
and the Far East. Lipper figures represent the average of the total returns
reported by all the mutual funds designated by Lipper Inc. as falling into the
category indicated.
Benchmark returns are for the period beginning October 31, 1999.
--------------------------------------------------------------------------------
15
<PAGE>
International Equity Funds
-------------------------------------------------------------------------------
Performance Comparison
INTERNATIONAL SELECT EQUITY PREMIER CLASS,
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
AND LIPPER INTERNATIONAL EQUITY FUNDS AVERAGE
GROWTH OF A $5,000,000 INVESTMENT (SINCE FEBRUARY 29, 2000)/1/
2/29/00 5,000,000 5,000,000 5,000,000
4/30/00 4,523,000 4,920,796 4,712,139
7/31/00 4,394,500 4,779,421 4,592,348
10/31/00 3,881,500 4,477,500 4,258,000
=== International Select Equity Premier Class $3,881,500
___ Morgan Stanley Capital International (MSCI) EAFE Index $4,477,500
--- Lipper International Equity Funds Average $4,258,000
Average Annual Total Return for the Period Ended October 31, 2000
Since 2/29/00/1/ (22.37)%
--------------------------------------------------------------------------------
/1/ The Fund's inception date.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions. Performance would have
been lower during the specified period if certain fees and expenses had not been
waived by the Fund.
The MSCI EAFE Index is an unmanaged index of international stock performance in
Europe, Australasia and the Far East. Lipper figures represent the average of
the total returns reported by all the mutual funds designated by Lipper Inc. as
falling into the category indicated.
Benchmark returns are for the period beginning February 29, 2000.
--------------------------------------------------------------------------------
16
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
INTERNATIONAL SMALL CAP EQUITY INSTITUTIONAL CLASS/1/, SSB WORLD EQUITY EXTENDED
MARKET INDEX EURO PACIFIC, SSB GLOBAL EQUITY MARKET INDEX, DB EURO PACIFIC SMALL
CAP INDEX AND LIPPER INTERNATIONAL SMALL CAP FUNDS AVERAGE GROWTH OF A $250,000
INVESTMENT (SINCE JANUARY 3, 1994)/2/
International Small Cap Equity Institutional Class $349,150
SSB World Equity Extended Market Index Euro Pacific $340,384
SSB Global Equity Market Index $475,954
DB Euro Pacific Small Cap Index $318,222
Lipper International Small Cap Funds Average $523,345
1/31/94 250,000 250,000 250,000 250,000 250,000
10/31/94 258,750 286,676 264,240 268,096 301,560
10/31/95 241,500 272,601 258,042 286,559 276,751
10/31/96 257,025 305,405 293,760 329,210 306,812
10/31/97 230,300 291,406 315,082 373,166 273,795
10/31/98 234,475 294,725 316,456 356,395 269,878
10/31/99 324,725 347,879 445,528 418,650 320,453
10/31/00 349,150 340,384 523,345 475,954 318,222
Average Annual Total Return for the Periods Ended October 31, 2000
One-year 7.52% Three-year 14.88% Five-year 7.65% Since 1/3/94/2/ 5.02%
________________________________________________________________________________
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. The Fund's recent
performance was achieved during favorable market conditions that may not be
sustained. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. These figures assume the reinvestment of dividend and capital gain
distributions. Performance would have been lower during the specified period if
certain fees and expenses had not been waived by the Fund. The Salomon Smith
Barney (SSB) World Equity Extended MarketIndex Euro Pacific comprises the small
capitalization equities of each country in the Salomon Broad Market Index. The
unmanaged index contains approximately 3,000 issues in more than 20 countries.
Lipper figures represent the average of the total returns reported by all of the
mutual funds designated by Lipper Inc. as falling into the category indicated.
The Fund has changed its benchmark from the Salomon Smith Barney (SSB) Global
Equity Extended Market Index and the DBEuro Pacific Small Cap Index to the
Salomon Smith Barney (SSB) World Equity Extended Market Index Euro Pacific. This
index more closely reflects the market sectors in which the Fund invests.
Benchmark returns are for the period beginning December 31, 1993.
17
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Performance Comparison
EMERGING MARKETS EQUITY INSTITUTIONAL CLASS/1/, MORGANSTANLEY CAPITAL
INTERNATIONAL EMERGING MARKETS FREE INDEX AND LIPPER EMERGING MARKETS EQUITY
FUNDS AVERAGEGROWTH OF A $250,000 INVESTMENT (SINCE FEBRUARY 1, 1994)/2/
Emerging Markets Equity Institutional Class $183,750
Morgan Stanley Capital International Emerging Markets Free Index $186,612
Lipper Emerging Markets Equity Funds Average $175,202
2/1/94 250,000 250,000 250,000
10/31/94 275,000 261,014 246,808
10/31/95 217,275 210,307 197,941
10/31/96 239,050 223,968 216,200
10/31/97 214,400 204,961 211,334
10/31/98 144,375 141,464 139,982
10/31/99 200,700 204,605 187,638
10/31/00 183,750 186,612 175,202
Average Annual Total Return for the Periods Ended October 31, 2000
One-year (8.45)% Three-Year (5.01)% Five-Year (3.29)% Since 2/1/94/2/ (4.46)%
________________________________________________________________________________
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
/2/ The Fund's inception date.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions. Performance would have
been lower during the specified periods if certain fees and expenses had not
been waived by the Fund.
MSCI Emerging Markets Free Index is an unmanaged market capitalization index of
over 850 stocks traded in 22 world markets. Lipper figures represent the average
of the total returns reported by all the mutual funds designated by Lipper Inc.
as falling into the category indicated.
Benchmark returns are for the period beginning January 31, 1994.
18
<PAGE>
European Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
FOREIGN COMMON STOCKS - 88.50%
CROATIA - 0.91%
15,000 Pliva d.d. GDR 144A.......... $ 158,250
36,095 Zagrebacka Banka GDR
144A*....................... 568,496
----------
726,746
----------
DENMARK - 3.21%
34,915 GN Store Nord................ 676,690
18,000 NEG Micon.................... 933,711
17,900 Vestas Wind Systems.......... 969,338
----------
2,579,739
----------
FINLAND - 1.35%
88,000 Metsa Soy B.................. 552,673
12,867 Nokia Oyj.................... 529,522
----------
1,082,195
----------
FRANCE - 16.70%
10,190 Alcatel...................... 621,809
10,102 Alcatel Optronics*........... 601,007
23,930 Aventis SA................... 1,726,298
8,120 Axa.......................... 1,075,065
14,084 BNP Paribas SA............... 1,214,434
8,698 BusinessObjects SA ADR*...... 685,375
9,650 Coflexip SA.................. 1,117,929
3,700 France Telecom SA............ 386,871
5,593 Galeries Lafayette........... 902,363
15,590 InfoVista SA ADR*............ 572,933
14,790 Societe Generale, Cl A....... 839,747
8,960 STMicroelectronics NV........ 465,360
2,530 Suez Lyonnaise des
Eaux SA..................... 386,069
11,555 Total Fina SA................ 1,653,415
16,460 Vivendi...................... 1,183,225
----------
13,431,900
----------
GERMANY - 5.84%
19,680 Dresdner..................... 817,583
22,430 E.On AG...................... 1,140,277
7,120 Epcos AG*.................... 540,826
9,090 Intershop Communications
AG*......................... 393,449
50,157 Kamps AG..................... 793,898
1,346 Muenchener
Rueckversicherungs.......... 424,954
3,820 Thiel Logistik AG*........... 590,050
----------
4,701,037
----------
IRELAND - 3.72%
142,541 Bank of Ireland.............. 1,098,449
36,500 Elan Corp Plc ADR*........... 1,895,719
----------
2,994,168
----------
ISRAEL - 0.50%
3,625 Comverse Technology, Inc.*... $ 405,094
----------
ITALY - 12.57%
24,110 Assicurazioni Generali SPA... 792,909
60,000 Banca Intesta SPA............ 249,009
325,730 Banca Nazionale del Lavoro*.. 1,056,028
34,500 Banca Popolare di Verona..... 380,935
237,650 ENI SPA...................... 1,286,805
129,096 RAS SPA...................... 1,694,952
22,700 SAI SPA...................... 376,640
221,640 Saipem SPA................... 1,154,970
48,770 San Paolo - IMI SPA.......... 790,570
49,030 Telecom Italia SPA........... 568,000
268,310 UniCredito Italiano SPA...... 1,366,288
133,600 Unipol SPA................... 388,688
----------
10,105,794
----------
NETHERLANDS - 11.86%
52,564 ABN AMRO Holding NV.......... 1,217,882
40,535 Buhrmann NV.................. 1,107,746
35,840 Fortis NV.................... 1,095,027
32,320 Hagemeyer NV................. 763,925
27,217 ING Groep NV................. 1,869,177
46,910 Koninklijke Ahold NV......... 1,362,783
17,570 Koninklijke Numico NV........ 821,632
33,117 Philips Electronics NV....... 1,301,607
----------
9,539,779
----------
POLANd - 0.52%
84,437 Telekomunikacja Polska
SA 144A GDR................. 416,156
----------
PORTUGAL - 0.97%
70,800 Telecel-Comunicacoes
Pessoais SA................. 776,336
----------
RUSSIA - 0.52%
32,700 Surgutneftegaz ADR........... 421,012
----------
SPAIN - 5.64%
55,130 Altadis SA................... 825,823
58,298 Banco Bilbao Vizcaya
Argentaria SA............... 776,797
27,600 Banco Popular Espanol........ 825,700
26,150 Gamesa*...................... 482,265
88,925 NH Hoteles, SA............... 1,003,760
32,642 Telefonica SA................ 622,492
----------
4,536,837
----------
SWEDEN - 1.83%
54,787 PyroSequencing AB*........... 679,814
102,400 Tele1 Europe Holding AB*..... 789,009
----------
1,468,823
----------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
19
<PAGE>
European Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
SWITZERLAND - 4.27%
2,490 Leica Geosystems AG*......... $ 706,520
568 Nestle SA.................... 1,177,145
83 Roche Holding AG............. 758,240
415 Serono SA.................... 373,348
871 Zurich Financial Services
AG......................... 421,592
-----------
3,436,845
-----------
TURKEY - 1.19%
46,437,200 Global Menkul Degerler
AG........................... 488,948
53,976,384 Yapi ve Kredi Bank........... 466,620
-----------
955,568
-----------
UNITED KINGDOM - 16.90%
177,756 BAE Systems Plc.............. 1,009,703
42,164 Barclays Bank................ 1,206,386
34,460 British Telecom Plc.......... 403,984
41,740 Celltech Group Plc*.......... 829,680
35,270 Energis Plc*................. 301,665
38,820 Glaxo Wellcome Plc........... 1,117,467
78,022 HSBC Holdings Plc............ 1,111,645
26,170 Logica Plc................... 774,209
94,948 Reckitt Benckiser Plc........ 1,248,106
50,530 Royal Bank of Scotland
Group Plc*................... 59,751
76,200 Royal Bank of Scotland
Group Plc.................... 1,710,341
109,343 Shell Transport & Trading
Co........................... 879,691
705,895 Vodafone Airtouch Plc........ 2,936,845
-----------
13,589,473
-----------
Total Foreign Common Stocks
(Cost $71,386,024).................... $71,167,502
-----------
Shares Security..................... Value
FOREIGN PREFERRED
STOCKS - 1.42%
Germany - 1.42%
340 Porsche AG................... $ 1,139,804
-----------
Total Foreign Preferred Stock
(Cost $1,144,803)....................... 1,139,804
-----------
OPTIONS - 0.89%
3,400,000 Euro Fx Nov .8600
(Exchange with Strike
Price of .86 and
Expiration 11/18/00)..... 102,241
38,187 Euro Tech Eqy Bsk
(Exchange with Strike
Price of 100 and
Expiration 4/21/01)...... 619,069
-----------
Total Options
(Cost $575,930)......................... 721,310
-----------
Total Investments
(Cost $73,106,757)............ 90.81% $73,028,616
Cash........................... 14.74 11,853,948
Liabilities in Excess
of Other Assets.............. (5.55) (4,466,011)
------ -----------
Total Net Assets............... 100.00% $80,416,553
====== ===========
______________________________________________________
*Non-income producing security
ADR American Depository Receipt
GDR Global Depository Receipt
144A Security exempt from registration under 144A of the Security Act of 1933.
These securities may be resold in transactions exempt from registrations,
normally to qualified institutional buyers.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20
<PAGE>
International Select Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
FOREIGN COMMON STOCKS - 91.76%
BELGIUM - 2.71%
50,200 Dexia.......................................... $ 7,545,300
-------------
FINLAND - 2.03%
256,000 Sonera......................................... 5,640,257
-------------
FRANCE - 1.78%
195,432 GFI Informatique............................... 4,962,625
-------------
HONG KONG - 2.27%
3,400,000 Li & Fung Ltd.................................. 6,321,323
-------------
ITALY - 5.43%
1,669,200 ENI............................................ 9,038,227
413,100 Mediolanum..................................... 6,054,827
-------------
15,093,054
-------------
JAPAN - 17.13%
660,000 Asahi Breweries, Ltd........................... 6,519,265
140,000 Canon, Inc..................................... 5,554,588
400,000 Daito Trust Construction
Co., Ltd...................................... 6,743,941
500,000 Hitachi, Ltd................................... 5,360,333
220,000 Kao Corp....................................... 6,591,836
155,000 Nihon Dempa Kogyo
Co., Ltd...................................... 5,524,809
2,700,000 Mitsui O.S.K. Lines, Ltd....................... 5,937,600
220 NTT DoCoMo*.................................... 5,422,642
-------------
47,655,014
-------------
NETHERLANDS - 14.90%
206,107 ASM Lithography Holding*....................... 5,634,270
82,000 Gucci Group.................................... 8,003,241
132,500 IHC Caland..................................... 5,847,543
378,000 Koninklijke KPN................................ 7,657,701
166,548 Philips Electronics............................ 6,545,886
366,870 TNT Post Group................................. 7,771,610
-------------
41,460,251
-------------
SPAIN - 9.42%
673,871 Amadeus Global Travel
Distribution*................................. 5,507,535
604,930 NH Hoteles..................................... 6,828,275
294,400 Grupo Prisa*................................... 5,671,760
429,858 Telefonica..................................... 8,197,516
-------------
26,205,086
-------------
SWEDEN - 5.33%
393,000 Assa Abloy AB B................................ $ 7,236,048
570,068 Ericsson LM B.................................. 7,586,988
-------------
14,823,036
-------------
SWITZERLAND - 5.87%
3,939 Nestle SA...................................... 8,163,333
58,856 UBS AG......................................... 8,153,524
-------------
16,316,857
-------------
UNITED KINGDOM - 24.89%
629,500 BATM Advanced
Communications Ltd............................ 4,658,042
734,000 Carlton Communications
Plc........................................... 5,910,531
476,700 Lonmin Plc..................................... 5,878,974
451,984 Marconi Plc.................................... 5,705,317
778,000 The Peninsular and Oriental
Steam Navigation Co........................... 3,205,793
778,000 P & O Princess Cruises Plc..................... 3,056,227
285,000 Pearson Plc.................................... 7,645,735
552,000 Reckitt Benckiser Plc.......................... 7,256,125
360,000 SEMA Group Plc................................. 4,544,219
623,000 SmithKline Beecham Plc......................... 8,044,805
3,201,756 Vodafone Airtouch Plc.......................... 13,320,764
-------------
69,226,532
-------------
Total Investments
(Cost $280,686,346).............................. 91.76% $ 255,249,335
Cash............................................... 6.78 18,854,418
Other Assets in Excess of
Liabilities..................................... 1.46 4,056,958
------ -------------
Total Net Assets................................... 100.00% $ 278,160,711
====== =============
_________________________________________________________________________
*Non-income producing security
See Notes to Financial Statements.
___________________________________________________________________________
21
<PAGE>
International Small Cap Equity
------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
FOREIGN COMMON STOCKS - 92.55%
AUSTRIA - 0.26%
5,420 Cybertron Telekom AG ......... $ 56,119
-----------
BELGIUM - 0.46%
3,270 Icos Vision System NV ........ 97,896
-----------
CHINA - 0.66%
864,000 Denway Motors Ltd. ........... 139,587
-----------
DENMARK - 0.71%
3,150 William Demant ............... 150,830
-----------
FINLAND - 0.78%
7,500 Amer Group 'A' ............... 166,770
-----------
FRANCE - 8.74%
500 A Novo ....................... 73,455
1,440 Altran Technologies SA* ...... 294,411
225,950 Eurotunnel SA ................ 205,187
6,090 Fimatex ...................... 65,641
6,000 GFI Informatique ............. 152,359
8,640 Infogrames Entertainment* .... 180,753
15,000 Infosources .................. 120,940
15,000 Infosources Exchange
Certificate ................ --
5,040 Ingenico ..................... 187,566
7,040 Lectra Systemes* ............. 80,302
2,350 Natexis Banques
Populaires ................. 180,497
4,250 Oberthur Card Systems ........ 86,207
3,700 Pinguely Haulotte SA ......... 80,075
1,900 UBI Soft Entertainment SA .... 81,917
5,400 Valtech ...................... 69,203
-----------
1,858,513
-----------
GERMANY - 7.25%
360 Aixtron AG ................... 48,274
5,000 BKN International AG* ........ 154,888
950 Comroad AG ................... 45,917
2,170 Direkt Anlage Bank AG* ....... 97,241
1,540 GFT Ges Fuer
Technologies* .............. 72,538
1,640 Grenke Leasing AG ............ 41,895
18,150 Kamps AG ..................... 287,283
2,450 LPKF Laser & Electronics ..... 88,995
3,100 Medion AG .................... 315,716
3,060 SCM Microsystems Inc.* ....... 115,827
1,440 SGL Carbon ................... 87,871
1,752 Tecis Holdings AG ............ 126,834
1,400 Zapf Creaton AG* ............. 59,350
-----------
1,542,629
-----------
GREECE - 0.04%
660 Intrasoft SA ................. $ 9,302
-----------
HONG KONG - 1.13%
60,000 Li & Fung Ltd. ............... 111,553
125,000 South China Morning Post
Holdings Ltd. .............. 85,748
8,000 Television Broadcasting Ltd. . 43,800
-----------
241,101
-----------
ITALY - 5.34%
10,500 Autogrill Spa ................ 115,937
4,510 Banca Popolare Commercio
e Industria ................ 88,610
11,900 Bipop Carire Spa ............. 94,128
129,390 Cementir SPA ................. 166,916
28,310 Cir-Compagnie Industriali
SPA ........................ 83,132
6,190 Class Editori ................ 87,207
3,950 IFI Spa Ord .................. 124,876
24,700 Interpump Group SA ........... 103,137
7,000 Permasteelisa Spa ............ 82,638
4,900 Saes Getters Spa ............. 111,035
2,500 Tiscali SPA* ................. 78,929
-----------
1,136,545
-----------
JAPAN - 24.27%
2,530 Ariake Japan Co. ............. 161,117
4,000 Arrk Corp. ................... 182,893
1,700 C Two-Network Co., Ltd. ...... 105,145
850 C Two-Network Co., Ltd.
New Shares ................. 52,572
2,000 Cimeo Precision Co., Ltd. .... 124,616
1,800 Disco Corp. .................. 169,716
4,000 Doutor Coffee Co., Ltd. ...... 276,355
5,100 Enplas Corp. ................. 215,430
3,000 Fujitsu Support and
Service Inc. ............... 364,503
3,900 H.I.S. Co., Ltd. ............. 55,390
7,000 Hosidan Corp. ................ 223,210
17,500 Idec Izumi Corp. ............. 169,171
1,000 Jafco Co Ltd. ................ 106,290
3,000 Milbon Co. ................... 196,546
2,600 Misumi Corp. ................. 220,846
12 Net One Systems Co., Ltd. .... 356,256
6,000 Origin Toshu Co., Ltd. ....... 197,920
1,300 Park 24 Co., Ltd. ............ 109,708
3,100 People Co., Ltd. ............. 188,610
5,400 Plenus Co., Ltd. ............. 212,764
2 Shoeisha Co., Ltd. ........... 24,557
4,000 Sumida Electric Co., Ltd. .... 183,626
See Notes to Financial Statements.
------------------------------------------------------------------------------
22
<PAGE>
International Small Cap Equity
-------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
Japan - Continued
6,600 Sunkus & Associates Inc ...... $ 196,545
3,000 Suruga Seiki Co., Ltd ........ 129,198
4,000 Taiyo Ink Mfg Co., Ltd ....... 185,825
40,000 Toshiba Tungaloy ............. 197,553
1,000 Trend Micro Inc.* ............ 94,378
6,000 Tsuraha Co., Ltd ............. 89,064
2 Yahoo Japan Corp ............. 172,264
11,000 Yokowo Co., Ltd .............. 201,585
------------
5,163,653
------------
Netherlands - 4.69%
4,110 Fugro NV ..................... 242,252
5,850 IHC Caland ................... 258,174
8,240 Libertel NV* ................. 107,347
4,383 Nutreco Holding NV ........... 188,968
4,640 Unique International NV ...... 94,511
5,390 Versatel Telecom Intl NV* .... 106,357
------------
997,609
------------
Norway - 1.52%
6,730 TGS Nopec Geophysical Co* .... 85,455
5,930 Tomra Systems ................ 238,014
------------
323,469
------------
Singapore - 1.36%
75,000 Delgro Corp., Ltd.* .......... 207,539
15,000 Sembcorp Logistics Ltd ....... 81,136
------------
288,675
------------
Spain - 2.95%
9,450 Aldeasa SA* .................. 178,851
11,410 Amadeus Global Travel
Distribution SA* ........... 93,254
8,430 NH Hoteles SA ................ 95,155
29,400 Red Electrica De Espana ...... 260,996
------------
628,256
------------
Sweden - 2.66%
22,500 Adcore AB .................... 92,537
5,615 Assa Abloy, Series B ......... 103,385
18,750 Enea Data AB ................. 90,998
10,000 Europolitan Holdings ......... 90,060
7,770 Metro International SA ....... 94,080
2,670 OM Gruppen AB ................ 95,383
------------
566,443
------------
Switzerland - 5.26%
250 Also Holding ................. $ 107,655
51 Bachem AG Registered ......... 87,677
33 Bank Sarasin & Cie ........... 106,487
270 Forbo Holding AG ............. 105,002
360 Geberit International AG ..... 86,124
205 Gretag Macbeth Holding AG .... 93,866
90 Kaba Holding AG .............. 121,425
135 Kudelski* .................... 181,763
225 Kuoni Reisen AG .............. 96,389
94 Mikron Holdings .............. 52,821
135 Publigroupe SA ............... 79,239
------------
1,118,448
------------
United Kingdom - 24.47%
50,453 Aegis Group Plc .............. 114,929
8,847 ARM Holdings Plc* ............ 87,287
8,610 Autonomy Corp Plc ............ 301,351
43,554 Barratt Developments ......... 180,731
20,273 BATM Advanced Comm.
Ltd. ....................... 150,013
9,236 Britannic Plc ................ 127,775
64,818 Bunzl ........................ 371,475
45,098 Burford Holdings Plc ......... 65,106
8,136 Caledonia Investments Plc .... 95,026
19,430 Canary Wharf Finance Plc* .... 151,667
33,692 Cattles Plc .................. 120,498
2,754 CMG Plc ...................... 45,472
108,159 Corus Group Plc .............. 97,295
94,807 Countrywide Assured GRP ...... 152,687
7,303 EMAP Publishing Plc .......... 85,827
22,206 Forth Ports .................. 214,254
12,493 Galen Holdings Plc ........... 162,682
3,877 GWR Group Plc ................ 45,564
8,028 Hanson Plc ................... 42,340
5,031 Imperial Chemical
Industries ................. 30,804
10,612 Imperial Tobacco Group Plc ... 104,083
2,362 London Bridge Software ....... 21,248
8,481 London Clubs International ... 15,012
11,406 Lonmin Plc ................... 140,666
26,978 Man (ED&F) Group Plc ......... 193,363
44,399 Morrison Supermarkets ........ 115,309
15,976 Next ......................... 158,896
3,445 NXT Plc ...................... 45,735
4,492 Northern Rock Plc ............ 28,025
7,432 PIC Int'l Group Plc* ......... 3,289
34,305 Pillar Property Plc .......... 167,238
13,430 PowderJect Pharmaceuticals
Plc* ....................... 124,708
See Notes to Financial Statements
-------------------------------------------------------------------------------
23
<PAGE>
International SmallCap Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
UNITED KINGDOM - Continued
16,444 Premier Farnell Plc..................................... $ 100,206
6,268 Reckitt Benckiser Plc................................... 82,394
5,005 Schroders Plc, New Shares............................... 90,554
1,562 Schroders Plc, Non votin
shares................................................ 24,249
6,253 Severn Trent Plc........................................ 66,683
25,323 SIG Plc................................................. 81,382
10,800 Smiths Industries Plc................................... 115,642
12,161 Telewest Communications
Plc*.................................................. 20,115
6,515 Thistle Hotels Plc...................................... 10,681
5,764 Trafficmaster Plc*...................................... 48,505
21,111 United News & Media..................................... 264,183
15,997 Vitec Group Plc......................................... 116,630
35,090 Wolseley Plc............................................ 193,975
17,187 WPP Group Plc........................................... 230,664
-----------
5,206,218
-----------
Total Foreign Common Stocks
(Cost $22,372,634)................................................ 19,692,063
-----------
FOREIGN PREFERRED STOCKS - 1.24%
GERMANY - 1.24%
1,950 Marschollek Lauten...................................... $ 263,139
Total Foreign Preferred Stocks
(Cost $148,069)................................................... 263,139
Total Investments
(Cost $22,520,703)...................................... 93.79% $19,955,202
Other Assets in Excess of Liabilities..................... 6.21 1,320,634
------- -----------
Total Net Assets.......................................... 100.00% $21,275,836
======= ===========
--------------------------------------------------------------------------------
*Non-income producing security
ADR American Depository Receipt
(1) In local currency unless otherwise indicated.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
24
<PAGE>
Emerging Markets Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
COMMON STOCKS - 88.11%
ARGENTINA - 0.36%
334,318 Perez Companc, Class B........ $ 481,519
-----------
BRAZIL - 6.15%
22,496 Brasil Telecom Participacoes
ADR*......................... 1,219,002
48,213 CVRD ADR...................... 1,126,979
37,891 Embratel Participacoes
ADR*......................... 613,361
13,627,700 Siderurgica Nacional*......... 378,278
118,818 Tele Norte Leste
Participacoes ADR............ 2,628,848
19,700 Telesp Celular Participacoes
ADR.......................... 623,012
63,915 Unibanco GDR.................. 1,613,854
-----------
8,203,334
-----------
CHILE - 2.89%
6,000 Banco Santander Chile
ADR.......................... 80,625
91,794 Compania de Telecomunications
de Chile SA ADR.............. 1,399,858
36,800 DyS ADR*...................... 657,800
20,900 Embotelladora Andina SA
ADR - Cl A................... 250,800
35,600 Empresa Nacional de
Electricidad SA ADR*......... 373,800
61,385 Enersis ADR................... 1,089,584
-----------
3,852,467
-----------
CHINA - 5.73%
668,000 China Mobile Ltd.*............ 4,282,600
1,968,000 China Petroleum and
Chemical Corp.*.............. 386,080
177,000 Citic Pacific Ltd............. 710,360
1,936,000 Denway Motors Ltd.*........... 312,779
179 First Pacific Co., Ltd........ 40
1,300 Huaneng Power International,
Inc. ADR*.................... 19,825
804,000 Legend Holdings Ltd........... 680,395
5,950,000 PetroChina Co., Ltd........... 1,251,186
-----------
7,643,265
-----------
CZECH REPUBLIC - 0.68%
134,800 Ceske Energeticke
Zavody*...................... 327,868
31,980 Cesky Telecom AS*............. 420,685
9,830 IF Zivnobanka................. 158,436
-----------
906,989
-----------
GREECE - 0.33%
16,875 STET Hellas Telecom
ADR*......................... $ 244,687
5,430 Titan Cement.................. 195,402
-----------
440,089
-----------
HUNGARY - 2.40%
21,780 Richter Gedeon................ 1,058,896
204,390 Matav......................... 908,751
1,076 Matav ADR..................... 25,286
19,923 OTP BANK...................... 923,681
35,560 Raba.......................... 280,695
-----------
3,197,309
-----------
INDIA - 7.98%
24,800 Cipla Ltd. ................... 468,153
1 EIH Ltd. ..................... 4
53,100 Grasim Industries Ltd. ....... 230,446
6,000 Gujarat Ambuja Cements
Ltd. GDR..................... 16,650
10,700 HCL Technologies Ltd.*........ 271,709
16,700 Himachal Futuristic
Communications, Ltd.*........ 439,950
244,400 Hindustan Lever Ltd. ......... 927,358
10,034 Infosys Technologies Ltd. .... 1,535,655
61,581 ITC Ltd. ..................... 1,001,373
2,000 ITC Ltd. GDR.................. 36,100
73,900 Larsen & Toubro Ltd.*......... 233,713
1,000 Larsen & Toubro Ltd
GDR.......................... 6,263
191,361 Mahanagar Telephone
Nigam Ltd. .................. 575,983
3,110 Mahanagar Telephone
Nigam Ltd. GDR............... 18,349
30,320 NIIT Ltd. .................... 1,020,569
64,595 Ranbaxy Laboratories*......... 961,651
158,171 Reliance Industries Ltd. ..... 1,023,579
98,350 Satyam Computer Services
Ltd.*........................ 645,064
139,800 State Bank of India........... 489,427
8,000 Wipro Ltd. ................... 406,754
6,340 Wipro Ltd. ADR*............... 333,643
-----------
10,642,393
-----------
INDONESIA - 0.89%
360,000 PT Gudang Garam Tbk........... 386,538
2,270,000 PT Indofood Sukes
Makmur Tbk*.................. 187,954
348,500 PT Indosat (Persero) Tbk...... 249,460
1,398,000 PT Telekomunukasi
Indonesia.................... 358,462
-----------
1,182,414
-----------
See Notes to Financial Statements.
------------------------------------------------------------------------------
25
<PAGE>
Emerging Markets Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
ISRAEL - 6.00%
23,600 Baran Group*....................................... $ 652,863
300,160 Bank Hapoalim Ltd.................................. 759,284
719,010 Bank Leumi Le-Israel*.............................. 1,412,310
270,330 Bezeq*............................................. 1,352,630
87,840 Blue Square Chain Stores*.......................... 1,043,936
17,460 Discount Investment Corp........................... 739,487
21,725 Elite Industries................................... 965,789
41,240 Elron*............................................. 1,080,071
-----------
8,006,370
-----------
KOREA - 9.90%
2,850 H&CB 144A GDR*..................................... 69,112
47,680 Hyundai Motor Co., Ltd............................. 544,914
50,021 Kookmin Bank....................................... 571,669
92,080 Korea Electric Power
4,000 Korea Electric Power............................... 2,056,116
Corp. ADR......................................... 48,750
32,775 Korea Telecom Corp. ADR*........................... 1,208,578
36,576 LG Chemical Ltd.................................... 360,133
8,666 Pohang Iron & Steel................................ 503,580
2,525 Pohang Iron & Steel ADR............................ 39,927
28,642 Samsung Electronics................................ 3,588,119
1,374 Samsung Electronics
144A GDR*......................................... 101,332
27,000 Samsung Securities Co., Ltd........................ 488,967
85,310 Shinhan Bank....................................... 854,975
1,300 Shinhan Bank GDR................................... 26,455
6,200 Shinsegae Department Store Co...................... 285,609
4,470 SK Telecom......................................... 952,945
59,659 SK Telecom ADR*.................................... 1,495,204
-----------
13,196,385
-----------
MALAYSIA - 4.17%
384,000 Berjaya Sports Toto................................ 505,270
51,000 British American Tobacco Berhad.................... 466,388
333,000 Malayan Banking.................................... 1,332,018
225,000 MNI Holdings Berhad................................ 432,243
287,000 New Straits Times Press............................ 430,506
254,000 Resorts World Berhad............................... 444,506
240,000 Sime Darby Berhad.................................. 300,635
570,000 Technology Resources
Industries Berhad................................. $ 462,006
133,000 Telekom Malaysia................................... 409,505
169,000 Unisem Berhad...................................... 595,955
130,000 United Engineers (Malaysia) Berhad................. 184,739
-----------
5,563,771
-----------
MEXICO - 10.10%
5,700 Alfa SA de CV*..................................... 11,422
650,520 Banacci*........................................... 1,010,953
362,000 Carso Global Telecom............................... 808,272
177,005 Cemex SA CPO*...................................... 744,154
632,800 Corporacion GEO SA de CV*.......................... 718,700
339,110 Femsa*............................................. 1,290,902
123,101 Grupo Carso........................................ 382,357
105,400 Grupo Industrial Saltillo*......................... 161,153
392,367 Grupo Modelo, Series C*............................ 1,046,367
257,146 Kimberly Clark, Series A........................... 657,521
202,100 Organization Soriana*.............................. 634,072
92,108 Telmex GDR*........................................ 4,968,075
19,041 Televisa GDR*...................................... 1,030,594
-----------
13,464,542
-----------
PERU - 0.09%
16,900 Credicorp Ltd...................................... 123,581
-----------
PHILIPPINES - 0.71%
224,600 ABS CBN Broadcasting
Corp. ADR......................................... 173,445
348,075 Bank of the Philippine Islands*.................... 357,262
16,560 Philippine Long Distance
Telephone Co...................................... 250,909
2,154,700 SM Prime Holdings.................................. 168,500
-----------
950,116
-----------
POLAND - 0.56%
32,120 Budimex*........................................... 158,993
75,230 Weilkopolski Bank Kredytowy........................ 344,862
30,385 Zaklady Metali Lekkich Kety*....................... 238,686
-----------
742,541
-----------
PORTUGAL - 0.00%
40 Jeronimo Martins................................... 386
-----------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
26
<PAGE>
Emerging Markets Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
ROMANIA - 0.09%
109,187 Arlo*............................................ $ 77,332
1,202,500 Dacia*........................................... 30,486
299,212 Terapia.......................................... 18,422
-----------
126,240
-----------
RUSSIA - 3.05%
51,754 Lukoil Holding ADR............................... 2,807,137
127,250 Mosenergo ADR.................................... 404,655
66,100 Surgutneftegaz ADR............................... 854,012
-----------
4,065,804
-----------
SOUTH AFRICA - 9.69%
250,708 ABSA............................................. 852,083
325,300 African Bank Investments
Ltd.*........................................... 257,686
33,600 Anglo American Platinum
Corp............................................ 1,310,816
14,400 AngloGold........................................ 409,432
37,700 Barlow*.......................................... 196,933
66,521 Bidvest Group.................................... 372,997
65,750 De Beers Centenary
Linked Units.................................... 1,808,588
6,177 Dimension Data Holdings.......................... 53,179
65,600 Fedsure Holdings................................. 189,989
1,031,600 FirstRand........................................ 927,686
19,200 Impala Platinum Holdings
Ltd............................................. 822,672
69,800 Naspers Ltd...................................... 518,767
56,500 Nedcor........................................... 1,061,005
490,056 New Clicks Holdings.............................. 641,596
212,110 Sappi............................................ 1,453,020
218,500 Sasol............................................ 1,673,056
62,658 South African Breweries.......................... 375,366
-----------
12,924,871
-----------
TAIWAN - 9.28%
679,736 Advanced Semiconductor
Engineering, Inc.*.............................. 780,749
1,220 ASE Test Ltd.*................................... 18,834
146,905 Asustek Computer Inc.*........................... 732,251
348 Asustek Computer Inc.
144A GDR........................................ 1,905
5,907 Asustek Computer Inc.
GDR............................................. 32,341
1,874,775 Bank Sinopac..................................... 780,673
183,672 Cathay Life Insurance............................ 329,813
796,722 China Steel Corp................................. 461,260
230 China Steel Corp. GDR*........................... 2,645
171,000 Compal Electronics, Inc.......................... 261,000
Shares Security........................................... Value
202,160 Compeq Manufacturing
Co., Ltd........................................ $ 763,577
816,356 Far Eastern Textile Ltd.......................... 672,293
469,517 Formosa Plastics Corp............................ 748,611
116,740 Hon Hai Precision Industry
Co., Ltd........................................ 610,807
251,788 Phoenixtec Power
Co., Ltd.*...................................... 211,252
221,920 President Chain Store
Corp............................................ 632,094
16,500 Procomp Informatics
Co., Ltd.*...................................... 59,257
1,264,968 Taishin International Bank....................... 591,363
178,000 Taiwan Cellular Corp.*........................... 371,981
785,560 Taiwan Semiconductor*............................ 2,383,433
5,935 Taiwan Semiconductor
ADR*............................................ 134,650
853,200 United Microelectronics
Corp., Ltd...................................... 1,505,647
17,500 Via Technologies Inc.*........................... 125,697
164,280 Winbond Electronics
Corp.*.......................................... 159,194
-----------
12,371,327
-----------
THAILAND - 1.02%
82,100 Advanced Info Services*.......................... 675,306
69,000 PTT Exploration.................................. 167,757
22,950 Siam Cement Public
Co., Ltd.*...................................... 215,890
92,000 Siam Commercial Bank
Wt 05/10/02*.................................... 6,689
275,500 TelecomAsia Corp.*............................... 165,888
86,999 Telecom Asia Warrants
12/31/49........................................ 0
248,400 Thai Farmers Bank Public
Co.*............................................ 128,405
-----------
1,359,935
-----------
TURKEY - 5.25%
4,186,204 Akbank........................................... 26,989
6,322,940 Enka Holding Yatirim AS.......................... 1,250,719
290,904,670 Finansbank....................................... 713,957
105,367,753 Hurriyet......................................... 1,265,985
10,055,200 Tansas........................................... 1,583,821
5,503,291 Vestel*.......................................... 1,128,905
119,612,674 Yapi ve Kredi.................................... 1,034,037
-----------
7,004,413
-----------
UNITED KINGDOM - 0.01%
8,200 Old Mutual Plc................................... 17,995
-----------
27
<PAGE>
Emerging Markets Equity
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
Shares Security Value
Venezuela - 0.34%
23,800 CAN-TV*...................$ 452,200
------------
Other - 0.44%
12,500 Framlington Maghreb
Fund*.................... 182,812
49,000 Mauritius Fund Limited* 269,500
14,450 Oryx Fund Limited*........ 140,887
-----------
593,199
-----------
Total Common Stocks
(Cost $132,329,946)..................... 117,513,455
-----------
Preferred Stocks - 6.72%
Brazil - 6.62%
7,387,450 Companhia de Bebidas
das Americas*............ 1,648,574
27,660,150 Electrobras............... 491,189
122,995,500 Gerdau SA................. 1,288,586
20,406,950 Itaubanco................. 1,587,445
100,300 Petrobras*................ 2,914,968
432,469,500 Tele Nordeste Celular
Participacoes SA......... 892,577
-----------
8,823,339
-----------
Thailand - 0.10%
322,000 Siam Commercial Bank
Public Co., Ltd*.........$ 133,526
------------
Total Preferred Stocks
(Cost $8,015,513)........................ 8,956,865
Total Investment
(Cost $140,345,459)............ 94.83% $126,470,320
Cash.................... 5.67 7,560,420
Liabilities in Excess
of Other Assets (0.50) (670,162)
------- ------------
Total Net Assets 100.00% $133,360,578
======= ============
-------------------------------------------------------
*Non-income producing security
ADR American Depository Receipt
GDR Global Depository Receipt
144A Security exempt from registration under 144A of
the Security Act of 1933. These securities may be
resold in transactions exempt from registrations,
normally to qualified institutional buyers.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
28
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 2000
<TABLE>
<CAPTION>
International International Emerging
European Select Small Cap Markets
Equity Equity Equity Equity
<S> <C> <C> <C> <C>
Assets
Investments at value/1/....................................... $73,028,616 $255,249,335 $19,955,202 $126,470,320
Cash.......................................................... 11,853,948 18,854,418 477,866 7,560,420
Foreign currency/2/........................................... 746,770 5,437 46,933 1,385,031
Receivable for securities sold................................ 7,856,128 -- 136,060 1,646,558
Receivable for shares at beneficial interest subscribed....... 3,260,684 3,920,041 925,000 2,121,988
Dividend and interest receivable.............................. 16,277 316,315 36,573 191,168
Receivable for foreign taxes withheld......................... 83,742 160,438 10,849
Unrealized appreciation on forward currency contracts......... 39,803 -- -- --
Due from advisor.............................................. 31,821 -- 10,056 30,840
----------- ------------ ----------- ------------
Total Assets..................................................... 96,917,789 278,505,984 21,598,539 139,406,325
----------- ------------ ----------- ------------
Liabilities
Due to advisor................................................ -- 122,427 -- --
Due to administrator.......................................... 24,515 70,270 9,573 32,636
Due to custodian.............................................. 63,484 53,810 53,087 158,806
Payable for securities purchased.............................. 16,139,480 -- 238,037 5,821,619
Payable for capital shares sold............................... 39,341 39,614 -- 12,496
Dividend payable.............................................. 14,844 -- -- --
Unrealized depreciation on forward currency contracts......... 121,057 -- -- --
Accrued expenses and other.................................... 98,515 59,152 22,006 20,190
----------- ------------ ----------- ------------
Total Liabilities................................................ 16,501,236 345,273 322,703 6,045,747
----------- ------------ ----------- ------------
Net Assets....................................................... $80,416,553 $278,160,711 $21,275,836 $133,360,578
=========== ============ =========== ============
Composition of Net Assets
Paid-in capital............................................... 84,098,964 276,896,418 21,395,538 142,128,259
Undistributed net investment (expenses in excess of) income... 956,444 936,835 325,173 (256,570)
Accumulated net realized gains (losses) on investments and
foreign currency transactions............................... (4,423,790) 25,785,311 2,123,342 5,376,332
Net unrealized depreciation on investments
and foreign currencies...................................... (215,065) (25,457,853) (2,568,217) (13,887,443)
----------- ------------ ----------- ------------
Net Assets....................................................... $80,416,553 $278,160,711 $21,275,836 $133,360,578
=========== ============ =========== ============
Net Asset Value, Offering and Redemption Price Per Share
(Net assets divided by shares outstanding)
Institutional Class/3/........................................ $ 28.44 $ 21.50 $ 11.95 $ 6.24
=========== ============ =========== ============
Investment Class/4/........................................... $ 27.11 $ 21.31 $ -- $ --
=========== ============ =========== ============
Premier Class/5/.............................................. $ -- $ 21.48 $ -- $ --
=========== ============ =========== ============
</TABLE>
--------------------------------------------------------------------------------
/1/ Cost of Investments European Equity $73,106,757, International Select Equity
Fund $280,686,346, International Small Cap Equity $22,520,703, Emerging
Markets Equity $140,345,459.
/2/ Cost of Foreign Currency European Equity $753,276, International Select
Equity $3,641, International Small Cap Equity $46,933, and Emerging Markets
Equity $1,390,676.
/3/ Net asset value, redemption price and offering price per share (based on net
assets of $50,660,515 European Equity, $55,042,879 International Select
Equity, $21,275,836 International Small Cap, and $133,360,578 Emerging
Markets Equity and 1,781,038 European Equity, 2,560,315 International Select
Equity, 1,780,954 International Small Cap, and 21,382,973 Emerging Markets
Equity shares outstanding at October 31, 2000 and $0.001 par value,
unlimited number of shares authorized). On February 28, 2000 the
Institutional Shares were renamed the Institutional Class.
/4/ Net asset value, redemption price and offering price per share (based on net
assets of $29,756,038 European Equity and $9,429,508 International Select
Equity and 1,096,889 European Equity and 442,446 International Select Equity
shares outstanding at October 31, 2000 and $0.001 par value, unlimited
number of shares authorized). On February 28, 2000 the Service Shares were
renamed the Investment Class.
/5/ Net asset value, redemption price and offering price per share (based on net
assets of $213,688,324 International Select Equity and 9,946,734
International Select Equity shares outstanding at October 31, 2000 and
$0.001 par value, unlimited number of shares authorized). The International
Select Equity Premier Class began operations on February 29, 2000.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
29
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Statements of Operations For the year ended October 31, 2000
<TABLE>
<CAPTION>
International International Emerging
European Select Small Cap Markets
Equity Equity Equity Equity
<S> <C> <C> <C> <C>
Investment Income
Interest................................................. $ 335,170 $ 899,224 $ 136,651 $ 76,922
Dividends................................................ 733,010 2,169,164 262,130 2,815,842
Less: Foreign taxes withheld............................. (116,518) (209,575) (51,193) (357,988)
------------- ------------- ------------- ------------
Total Investment Income..................................... 951,662 2,858,813 347,588 2,534,776
Expenses
Investment advisory fee.................................. 315,880 1,629,360 223,256 1,759,276
Administration fees...................................... 135,377 698,297 66,977 527,783
Registration and filing fees............................. 40,341 11,076 28,155 20,227
Custody fee.............................................. 243,599 223,631 208,002 615,457
Professional fees........................................ 81,571 74,963 63,489 110,271
Printing fees............................................ 18,628 24,681 13,842 19,116
Servicing plan fee....................................... 33,527 28,961 -- --
Trustees' fees........................................... 5,877 6,452 5,974 5,902
Transfer tax............................................. -- -- -- 26,134
Interest Expense......................................... 14,410 8,555 118 27,946
Miscellaneous............................................ 2,666 1,427 1,893 --
------------- ------------- ------------- ------------
Total Expenses.............................................. 891,876 2,707,403 611,706 3,112,112
Less: Fee Waivers or Expense Reimbursements................. (280,002) (412,905) (332,640) (859,554)
------------- ------------- ------------- ------------
Net Expenses................................................ 611,874 2,294,498 279,066 2,252,558
------------- ------------- ------------- ------------
Net Investment Income....................................... 339,788 564,315 68,522 282,218
------------- ------------- ------------- ------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain (loss) from:
Investment transactions................................ (4,228,049) 26,128,438 2,599,667 24,638,336*
Foreign currency transactions.......................... 430,934 287,014 (61,250) (416,065)
Net change in unrealized appreciation/depreciation:
Investments............................................ (91,277) (30,989,812) (4,794,838) (28,487,326)
Foreign currencies..................................... (135,601) 17,973 135 39,086
------------- ------------- ------------- ------------
Net Realized and Unrealized Loss on Investments and
Foreign Currencies....................................... (4,023,993) (4,556,387) (2,256,286) (4,225,969)
------------- ------------- ------------- ------------
Net Decrease in Net Assets from Operations.................. $ (3,684,205) $ (3,992,072) $ (2,187,764) $(3,943,751)
============= ============= ============= ============
</TABLE>
________________________________________________________________________________
*Net of $1,866,711 in foreign withholding taxes paid on net realized gains in
certain countries.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
30
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
International Equity Funds
--------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
European Equity
For the For the
year ended year ended
October 31, 2000 October 31, 1999
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income..................................................... $ 339,788 $ 551,068
Net realized gain (loss) on investment and foreign currency transactions.. (3,797,115) 10,338,144
Net change in unrealized appreciation/depreciation on investments
and foreign currencies.................................................. (226,878) (7,021,614)
-------------- --------------
Net Increase (Decrease) in Net Assets from Operations........................ (3,684,205) 3,867,598
-------------- --------------
Distributions to Shareholders
Net investment income
Institutional Class.................................................... (132,743) (1,025,913)
Investment Class....................................................... -- --
Net realized gain from investment transactions............................
Institutional Class.................................................... -- (14,753,865)
Investment Class....................................................... -- --
-------------- --------------
Total Distributions.......................................................... (132,743) (15,779,778)
-------------- --------------
Capital Share Transactions:
Institutional Class:(1)
Proceeds from sales of shares.......................................... 194,147,515 3,624,733
Dividend reinvestments................................................. 117,898 15,779,765
Cost of shares redeemed................................................ (142,972,765) (51,982,255)
-------------- --------------
Increase (decrease) in net assets from institutional class transactions... 51,292,648 (32,577,757)
-------------- --------------
Investment Class:(2)
Proceeds from sales of shares.......................................... 70,287,444 --
Dividend reinvestments................................................. -- --
Cost of shares redeemed................................................ (38,243,526) --
-------------- --------------
Increase in net assets from investment class transactions 32,043,918 --
-------------- --------------
Premier Class:(3)
Proceeds from sales of shares.......................................... -- --
Dividend reinvestments................................................. -- --
Cost of shares redeemed................................................ -- --
-------------- --------------
Increase in net assets from premier class transactions.................... -- --
-------------- --------------
Net Increase (Decrease) in Net Assets from Capital Transactions.............. 83,336,566 (32,577,757)
-------------- --------------
Total Increase (Decrease) in Net Assets...................................... 79,519,618 (44,489,937)
-------------- --------------
Net Assets
Beginning of period....................................................... 896,935 45,386,872
-------------- --------------
End of period............................................................. $ 80,416,553 $ 896,935
============== ==============
</TABLE>
--------------------------------------------------------------------------------
* Net of $1,866,711 in foreign withholding taxes paid on net realized gains in
certain countries.
** Net of $676,141 in foreign withholding taxes paid on net realized gains in
certain countries.
(1) On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
(2) On February 28, 2000 the Service Shares were renamed the Investment Class.
(3) The International Select Equity Premier Class began operations on February
29, 2000.
-------------------------------------------------------------------------------
32
<PAGE>
<TABLE>
<CAPTION>
International Select Equity International Small Cap Equity Emerging Markets Equity
For the For the For the For the For the For the
year ended year ended year ended year ended year ended year ended
October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999
<S> <C> <C> <C> <C> <C>
$ 564,315 $ 102,613 $ 68,522 $ 196,973 $ 282,218 $ 689,853
26,415,452 2,120,538 2,538,417 4,670,963 24,222,271* (1,109,064)**
(30,971,839) 5,235,113 14,794,703) 3,080,617 (28,448,240) 30,283,837
--------------- ------------- ------------- ------------- -------------- --------------
(3,992,072) 7,458,264 (2,187,764) 7,948,553 (3,943,751) 29,864,626
--------------- ------------- ------------- ------------- -------------- --------------
(313,559) (33,758) (258,184) -- (721,835) --
-- -- -- -- -- --
(2,159,370) (300,608) (1,074,834) -- -- --
(242) -- -- -- -- --
--------------- ------------- ------------- ------------- -------------- --------------
(2,473,171) (334,366) (1,333,018) -- (721,835) --
--------------- ------------- ------------- ------------- -------------- --------------
333,177,375 52,180,716 54,937,399 -- 82,381,420 98,148,288
28,468,314 334,363 1,333,010 -- 718,906 --
(388,389,818) (3,480,553) (42,403,412) (21,429,276) (108,960,266) (10,206,765)
--------------- ------------- ------------- ------------- -------------- --------------
(52,744,129) 49,034,526 13,866,997 (21,429,276) (25,859,940) 87,941,523
--------------- ------------- ------------- ------------- -------------- --------------
46,635,620 10,030 -- -- -- --
242 -- -- -- -- --
(32,824,485) -- -- -- -- --
--------------- ------------- ------------- ------------- -------------- --------------
13,811,377 10,030 -- -- -- --
--------------- ------------- ------------- ------------- -------------- --------------
261,971,387 -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
--------------- ------------- ------------- ------------- -------------- --------------
261,971,387 -- -- -- -- --
--------------- ------------- ------------- ------------- -------------- --------------
223,038,635 49,044,556 13,866,997 (21,429,276) (25,859,940) 87,941,523
--------------- ------------- ------------- ------------- -------------- --------------
216,573,392 56,168,454 10,346,215 (13,480,723) (30,525,526) 117,806,149
--------------- ------------- ------------- ------------- -------------- --------------
61,587,319 5,418,865 10,929,621 24,410,344 163,886,104 46,079,955
--------------- ------------- ------------- ------------- -------------- --------------
$ 278,160,711 $ 61,587,319 $ 212275,836 $ 10,929,621 $ 133,360,578 $ 163,886,104
=============== ============= ============= ============= ============== ==============
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statments.
--------------------------------------------------------------------------------
33
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
EUROPEAN EQUITY For the period
INSTITUTIONAL CLASS/1/ Oct. 3, 1996/2/
For the years ended through
2000 1999 1998 1997 Oct. 31, 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period.................... $ 11.43 $13.50 $12.81 $ 10.60 $ 10.00
------- ------ ------ ------- -------
Income from Investment Operations:
Net investment (expenses in excess of) income........ (1.37) 0.29 0.15 0.25 --
Net realized and unrealized gain (loss) on
investments and foreign currencies................. 16.20 2.04 1.68 2.11 0.60
------- ------ ------ ------- -------
Total from Investment Operations........................ 14.83 2.33 1.83 2.36 0.60
------- ------ ------ ------- -------
Distributions to Shareholders:
Net investment income................................ (0.08) (0.29) (0.24) (0.03) --
Realized capital gain from investment
transactions....................................... -- (4.11) (0.90) (0.12) --
------- ------ ------ ------- -------
Total distributions.................................. (0.08) (4.40) (1.14) (0.15) --
------- ------ ------ ------- -------
Other Capital Changes/3/................................ 2.26 -- -- -- --
------- ------ ------ ------- -------
Net Asset Value, End of Period.......................... $ 28.44 $11.43 $13.50 $ 12.81 $ 10.60
======= ====== ====== ======= =======
Total Investment Return................................. 149.63% 21.18% 15.36% 22.48% 6.00%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted)............... $50,677 $ 897 $5,387 $39,330 $17,902
Ratio of Expenses to Average Net Assets
(Including Expense Limitations
and Including Interest Expense)..................... 1.28% --% --% --% --%
Ratio of Expenses to Average Net Assets
(Excluding Expense Limitations
and Including Interest Expense)...................... 1.94% 1.64% 1.13% 1.17% 1.40%
Ratio of Expenses to Average Net Assets
(Including Expense Limitations and Excluding
Interest Expense).................................... 1.25% 0.90% 0.90% 0.90% 0.90%
Ratio of Net Investment (Expenses in Excess of)
Income to Average Net Assets......................... 0.92% 1.23% 1.12% 1.71% (0.41)%
Ratio of Net Investment (Expenses in Excess of)
Income to Average Net Assets
(Excluding Expense Limitations)...................... 0.26% 0.49% 0.89% 1.44% (0.91)%
Portfolio Turnover...................................... 377% 80% 49% 45% 5%
</TABLE>
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
/2/ Commencement of operations.
/3/ Represents one-time gain from accounting for cancellation of certain
shareholder trades.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
34
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
European Equity
INVESTMENT CLASS/1/ For the period
February 29, 2000/1/ through
October 31, 2000
<S> <C>
Per share operating Performance:
Net asset value, beginning of period............................................................... $ 11.43
---------
Income from Investment Operations:
Net investment income........................................................................... 0.04
Net realized and unrealized gain (loss) on investments and foreign currencies................... 14.68
---------
Total from investment operations................................................................... 14.72
---------
Distributions to Shareholders:
Net investment income........................................................................... --
Realized capital gain from investment transactions.............................................. --
Total distributions............................................................................. --
---------
Other Capital Changes/2/........................................................................... 0.96
---------
Net asset value, end of period..................................................................... $ 27.11
=========
total investment return............................................................................ 85.30%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted).......................................................... $ 29,739
Ratio of Expenses to Average Net Assets (Including Expense Limitations
and Including Interest Expense)................................................................. 1.54%
Ratio of Expenses to Average Net Assets (Excluding Expense Limitations
and Including Interest Expense)................................................................. 2.07%
Ratio of Expenses to Average Net Assets (Including Expense Limitations and
Excluding Interest Expense)..................................................................... 1.50%
Ratio of Net Investment Income to Average Net Assets............................................... 0.36%
Ratio of Expenses in Excess of Income to Average Net Assets
(Excluding Expense Limitations)................................................................. (0.17)%
Portfolio Turnover................................................................................. 377%
---------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Commencement of operations.
/2/ Represents one-time gain from accounting for cancellation of certain
shareholder trades.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
35
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
INTERNATIONAL SELECT EQUITY
Institutional CLASS/1/
<TABLE>
<CAPTION>
For the years ended
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period................. $ 18.10 $ 12.02 $ 11.62 $ 11.88 $ 10.95
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment (expenses in excess of) income...... (0.85) (0.09) 0.12 0.16 0.11
Net realized and unrealized gain on
investments and foreign currencies................ 4.57 6.91 0.90 0.28 1.25
--------- --------- --------- --------- ---------
Total from investment operations..................... 3.72 6.82 1.02 0.44 1.36
--------- --------- --------- --------- ---------
Distributions to Shareholders:
Net investment income.............................. (0.04) (0.07) (0.23) (0.15) (0.43)
Realized capital gain from investment
transactions...................................... (0.28) (0.67) (0.39) (0.55) --
--------- --------- --------- --------- ---------
Total distributions................................ (0.32) (0.74) (0.62) (0.70) (0.43)
--------- --------- --------- --------- ---------
Net asset value, end of period....................... $ 21.50 $ 18.10 $ 12.02 $ 11.62 $ 11.88
========= ========= ========= ========= =========
Total Investment Return.............................. 20.68% 59.39% 9.28% 3.78% 12.70%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted)............ $55,043 $61,577 $ 5,419 $ 4,954 $ 3,423
Ratio of Expenses to Average Net Assets
(Including Expense Limitations
and Including Interest Expense).................... 0.96% --% --% --% --%
Ratio of Expenses to Average Net Assets
(Excluding Expense Limitations
and Including Interest Expense).................... 1.05% 2.21% 2.89% 2.79% 3.59%
Ratio of Expenses to Average Net Assets
(Including Expense Limitations and
Excluding Interest Expense)........................ 0.96% 0.90% 0.90% 0.90% 0.90%
Ratio of Net Investment (Expenses in Excess of)
Income to Average Net Assets....................... (0.16)% 0.52% 0.92% 0.97% 0.72%
Ratio of Expenses in Excess of Investment
Income to Average Net Assets
(Excluding Expense Limitations).................... (0.25)% (0.79)% (1.07)% (0.92)% (1.97)%
Portfolio Turnover................................... 233% 239% 127% 55% 39%
</TABLE>
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
36
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
INTERNATIONAL SELECT EQUITY
INVESTMENT CLASS/1/
<TABLE>
<CAPTION>
For the year ended
2000
<S> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period .................................................................. $18.09
---------
Income from Investment Operations:
Net investment income .............................................................................. 0.01
Net realized and unrealized gain (loss) on investments and foreign currencies ...................... 3.49
---------
Total from investment operations ...................................................................... 3.50
---------
Distributions to Shareholders:
Net investment income .............................................................................. --
Realized capital gain from investment transactions ................................................. (0.28)
Total distribution ................................................................................. (0.28)
---------
Net Asset Value, End of Period ........................................................................ $21.31
=========
Total Investment Return ............................................................................... 19.41%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted) ............................................................. $9,430
Ratio of Expenses to Average Net Assets (Including Expense Limitations
and Including Interest Expense) .................................................................... 1.28%
Ratio of Expenses to Average Net Assets (Excluding Expense Limitations
and Including Interest Expense) .................................................................... 1.28%
Ratio of Expenses to Average Net Assets (Including Expense Limitations and
Excluding Interest Expense) ........................................................................ 1.28%
Ratio of Net Investment Income to Average Net Assets .................................................. 0.04%
Ratio of Net Investment Income to Average Net Assets (Excluding Expense Limitations) .................. 0.04%
Portfolio Turnover .................................................................................... 233%
</TABLE>
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Service Shares were renamed the Investment Class
See Notes to Financial Statements.
--------------------------------------------------------------------------------
37
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
INTERNATIONAL SELECT EQUITY
PREMIER CLASS
<TABLE>
<CAPTION>
For the period
March 1, 2000/1/ through
October 31, 2000
<S> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period ........................................................... $ 27.67
--------
Income from Investment Operations:
Net investment income ....................................................................... 0.07
Net realized and unrealized loss on investments and foreign currencies ...................... (6.26)
--------
Total from investment operations ............................................................... (6.19)
--------
Distributions to Shareholders:
Net investment income ....................................................................... --
Realized capital gain from investment transactions .......................................... --
--------
Total distributions ......................................................................... --
--------
Net Asset Value, End of Period ................................................................. $ 21.48
========
Total Investment Return ........................................................................ (22.37)%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted) ...................................................... $213,688
Ratio of Expenses to Average Net Assets (Including Expense Limitations
and Including Interest Expense) ............................................................. 0.60%
Ratio of Expenses to Average Net Assets (Excluding Expense Limitations
and Including Interest Expense) ............................................................. 0.83%
Ratio of Expenses to Average Net Assets (Including Expense Limitations and
Excluding Interest Expense) ................................................................. 0.60%
Ratio of Net Investment Income to Average Net Assets ........................................... 0.51%
Ratio of Net Investment Income to Average Net Assets (Excluding Expense Limitations) ........... 0.28%
Portfolio Turnover ............................................................................. 233%
</TABLE>
________________________________________________________________________________
/1/ The International Select Equity Premier Class began operations on March 1,
2000.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
38
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
INTERNATIONAL SMALL CAP EQUITY
Institutional CLASS/1/
<TABLE>
<CAPTION>
For the years ended
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period................ $ 12.27 $ 8.86 $ 8.81 $ 9.96 $ 9.40
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment income............................. 0.02 0.03 0.08 0.10 0.03
Net realized and unrealized gain (loss) on
investments and foreign currencies............... 1.03 3.38 0.07 (1.12) 0.57
--------- --------- --------- --------- ---------
Total from Investment Operations.................... 1.05 3.41 0.15 (1.02) 0.60
--------- --------- --------- --------- ---------
Distributions to Shareholders:
Net investment income............................. (0.25) -- (0.10) (0.13) (0.04)
Realized capital gain from investment
transactions..................................... (1.12) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions............................... (1.37) -- (0.10) (0.13) (0.04)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period...................... $ 11.95 12.27 $ 8.86 $ 8.81 $ 9.96
========= ========= ========= ========= =========
Total Investment Return............................. 7.52% 38.49% 1.81% (10.40)% 6.43%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted)........... $ 21,276 $ 10,930 $ 24,410 $ 53,395 $ 106,709
Ratio of Expenses to Average Net Assets
(Including Expense Limitations
and Including Interest Expense)................... 1.25% --% --% --% --%
Ratio of Expenses to Average Net Assets
(Excluding Expense Limitations
and Including Interest Expense)................... 2.74% 2.47% 1.49% 1.37% 1.38%
Ratio of Expenses to Average Net Assets
(Including Expense Limitations and
Excluding Interest Expense)....................... 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of Net Investment Income to Average
Net Assets........................................ 0.31% 0.86% 0.43% 0.16% 0.35%
Ratio of Expenses in Excess of Investment
Income to Average Net Assets
(Excluding Expense Limitations)................... (1.18)% (0.36)% 0.19% 0.04% 0.22%
Portfolio Turnover.................................. 129% 86% 106% 59% 47%
</TABLE>
--------------------------------------------------------------------------------
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
39
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Financial Highlights
EMERGING MARKETS EQUITY
INSTITUTIONAL CLASS/1/
<TABLE>
<CAPTION>
For the years ended
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per share operating Performance:
Net asset value, beginning of period................... $ 6.84 $ 4.92 $ 7.69 $ 8.80 $ 8.11
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment (expenses in excess of) income....... 0.01 0.03 0.03 (0.03) 0.06
Net realized and unrealized gain (loss) on
investment and foreign currencies................. (0.58) 1.89 (2.42) (0.85) 0.75
--------- --------- --------- --------- ---------
Total from investment operations....................... (0.57) 1.92 (2.39) (0.88) 0.81
--------- --------- --------- --------- ---------
Distributions to Shareholders:
Net investment income............................... (0.03) -- -- (0.01) (0.03)
Realized capital gain from investment
transactions...................................... -- -- (0.38) (0.22) (0.09)
--------- --------- --------- --------- ---------
Total distributions................................. (0.03) -- (0.38) (0.23) (0.12)
--------- --------- --------- --------- ---------
Net asset value, end of period......................... $ 6.24 $ 6.84 $ 4.92 $ 7.69 $ 8.80
========= ========= ========= ========= =========
Total investment return................................ (8.45)% 39.02% (32.66)% (10.31)% 10.02%
Supplemental Data and Ratios:
Net Assets at End of Period (000 Omitted).............. $133,360 $163,886 46,080 94,101 88,279
Ratio of Expenses to Average Net Assets
(Including Expense Limitations
and Including Interest Expense)..................... 1.27% --% --% --% --%
Ratio of Expenses to Average Net Assets
(Excluding Expense Limitations
and Including Interest Expense)..................... 1.76% 1.90% 1.52% 1.44% 1.52%
Ratio of Expenses to Average Net Assets
(Including Expense Limitations and
Excluding Interest Expense)......................... 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of Net Investment Income to Average
Net Assets.......................................... 0.16% 0.63% 0.90% 0.68% 0.63%
Ratio of Expenses in Excess of Investment
Income to Average Net Assets
(Excluding Expense Limitations)..................... (0.33)% (0.02)% 0.63% 0.49% 0.36%
Portfolio Turnover..................................... 58% 70% 85% 94% 69%
</TABLE>
________________________________________________________________________________
/1/ On February 28, 2000 the Institutional Shares were renamed the Institutional
Class.
See notes to Financial Statements.
--------------------------------------------------------------------------------
40
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Notes to Financial Statements October 31, 2000
Note 1--Organization and Significant Accounting Policies
A. Morgan Grenfell Investment Trust (the "Trust") was organized as a Delaware
business trust on September 13, 1993. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Trust currently consists of fifteen separate investment portfolios
(collectively, the "Funds"). The accompanying financial statements and notes
thereto relate to European Equity fund, International Select Equity fund,
International SmallCap Equity fund and Emerging Markets Equity fund (the
"Funds"), each formerly a Morgan Grenfell Fund. The Funds' prospectuses provide
a description of each Fund's investment objectives, policies and strategies.
B. Valuation of Securities
Investments listed or traded on National Stock Exchanges or other domestic or
foreign exchanges are valued based on the closing price of the security traded
on that exchange prior to the time when a Fund's assets are valued. Short-term
debt securities are valued at market value until such time as they reach a
remaining maturity of 60 days, whereupon they are valued at amortized cost using
their value on the 61st day. All other securities and other assets are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees.
C. Securities Transactions and Interest Income
Securities transactions are accounted for on a trade date basis. Dividend
income, less foreign taxes withheld, if any, is recorded on the ex-dividend date
or upon receipt of ex-dividend notification in the case of certain foreign
securities. Interest income is recorded on the accrual basis and includes
amortization of premium and accretion of discount on investments. Expenses are
recorded as incurred. Realized gains and losses from securities transactions are
recorded on the identified cost basis.
D. Distributions
It is each Fund's policy to declare and distribute dividends annually to
shareholders from net investment income. Dividends and distributions payable to
shareholders are recorded by each Fund on the ex-dividend date. Distributions of
net realized short-term and long-term capital gains, if any, earned by each Fund
are made at least annually to the extent they exceed capital loss carryforwards.
E.Repurchase Agreements
The Funds may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Fund's investment advisor, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Fund's custodian, and pursuant to the terms of the repurchase agreement must
have an aggregate market value greater than or equal to the repurchase price
plus accrued interest at all times. If the value of the underlying securities
falls below the value of the repurchase price plus accrued interest, the Fund
requires the seller to deposit additional collateral by the next business day.
If the request for additional collateral is not met, or the seller defaults on
its repurchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller.
However, in the event of a default or bankruptcy by the seller, realization
and/or retention of the collateral may be subject to legal proceedings.
The Funds may enter into tri-party repurchase agreements with broker-dealers and
domestic banks. The third party, which is the broker's custodial bank, holds the
collateral in a separate account until the repurchase agreement matures. The
agreement ensures that the collateral's market value, including any accrued
interest, is adequate to cover the agreement if the broker defaults.
F. Foreign Currency Transactions
The books and records of the Funds are maintained in US dollars. All assets and
liabilities initially expressed in foreign currencies are converted into U.S.
dollars at prevailing exchange rates. Purchases and sales of investment
securities, dividend and interest income and certain expenses are translated at
the rates of exchange prevailing on the dates of such transactions.
The International Funds do not isolate that portion of gains and losses on
investments in equity securities which is due to changes in the foreign exchange
rates from that which is due to changes in market prices of such securities. The
International Funds do isolate the effect of fluctuations in foreign currency
rates when determining the gain or loss upon sale or maturity of foreign
currency denominated debt obligations pursuant to the Federal income tax
regulations. Such amounts are categorized as foreign currency gain or loss for
both financial reporting and income tax reporting purposes.
The International Funds report gains and losses on foreign currency related
transactions as realized and unrealized gains and losses for financial reporting
purposes, whereas such gains and losses, to the extent realized, are treated as
ordinary income or loss for federal income tax purposes.
G. Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts for the purpose of
settling specific purchases or sales
41
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Notes to Financial Statements
of securities denominated in a foreign currency or with respect to the Fund's
investments. The net US dollar value of foreign currency underlying all
contractual commitments held by the Funds and the resulting unrealized
appreciation or depreciation are determined using prevailing exchange rates.
With respect to forward foreign currency contracts, losses in excess of amounts
recognized in the Statement of Assets and Liabilities may arise due to changes
in the value of the foreign currency or if the counterparty does not perform
under the contract.
H. Option Contracts
Upon the purchase of a put option or a call option by the Funds, the premium
paid is recorded as an investment and marked-to-market daily to reflect the
current market value. When a purchased option expires, each Fund realizes a loss
in the amount of the cost of the option. When the Fund enters into a closing
sale transaction, the Fund realizes a gain or loss depending on whether the sale
proceeds from the closing sale transaction are greater or less than the cost of
the option. When each Fund exercises a put option, it realizes a gain or loss
from the sale of the underlying security and the proceeds from such sale are
decreased by the premium originally paid. When the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise is increased by
the premium originally paid.
I. Futures Contracts
Each Fund may enter into financial futures contracts, which are contracts to buy
a standard quantity of securities at a specified price on a future date. Each
Fund is required to deposit either in cash or securities an amount equal to a
certain percentage of the contract amount. Variation margin payments are made or
received by the Fund each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund.
J. Federal Income Taxes
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required. Each Fund may periodically make reclassifications among
certain of its capital accounts as a result of differences in the
characterization and allocation of certain income and capital gain distributions
determined annually in accordance with federal tax regulations that may differ
from generally accepted accounting principles.
The International Funds may be subject to taxes imposed by countries in which
they invest with respect to their investments in issuers existing or operating
in such countries. Such taxes are generally based on either income earned or
repatriated and/or capital gains realized on sale of such investments. The
International Funds accrue such taxes when the related income is or gains are
earned.
The European Equity fund has a capital loss carryover of $3,397,901 expiring
October 31, 2008.
K. Cash
Deposits held at Brown Brother's Harriman ("BBH"), the Fund's custodian, in a
variable rate account are classified as cash. At October 31, 2000 the interest
rate was 6.03%, which resets on a periodic basis. Amounts on deposit are
generally available on the same business day.
L. Expenses
Expenses that are directly related to a Fund are charged directly to that Fund.
Other operating expenses of the Trust are prorated to the Funds on the basis of
relative net assets. DeAM absorbed all expenses of organizing the Trust.
M. Net Asset Value Per Share
The net asset value per share is calculated on a daily basis by dividing the
assets of each Fund or Class, less its liabilities, by the number of outstanding
shares, of the Fund or Class.
N. Classes
Class-specific expenses, such as service plan fees, are borne by that class.
Income, expenses and realized and unrealized gains/losses are allocated to the
respective classes on the basis of relative daily net assets.
O. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
By an agreement dated August 27, 1998, the Trust entered into an administration
agreement with Deutsche Asset Management Inc. ("DeAM, Inc."), formerly Morgan
Greenfell Inc. (the "Administrator"), an affiliate of Deutsche Bank AG, pursuant
to which the Administrator will receive an annual fee based on the average daily
net assets of each Fund of 0.30%.
The Administrator generally assists in all matters relating to the
administration of the Funds, including the coordination and monitoring of any
third parties furnishing services to the Funds, preparation and maintenance of
financial accounting records, and the provision of necessary office space,
equipment and personnel to perform administrative and clerical functions. The
Administrator
42
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Notes to Financial Statements
is also responsible for engaging an accounting agent, custodian and transfer
agent for the Trust's operations. Fees for services rendered by the accounting
agent and the transfer agent are paid by the Administrator and not the Fund.
Effective November 22, 1999, the Trust has entered into an agreement with
Investment CompanyCapital Corp., an indirect wholly owned subsidiary of Deutsche
Bank AG, to provide transfer agency services to the Trust, replacing DST
Systems, Inc.
Under the advisory agreement with the Trust, Deutsche Asset Management Inc.
("DeAM, Inc.") serves as the Investment Advisor ("Advisor") for the European
Equity fund and Deutsche Asset Management Investment Services Limited ("DeAMIS")
serves as the Advisor for International Select Equity, International SmallCap
and Emerging Markets Equity funds. Under the agreement, DeAM, Inc. receives on a
monthly basis, a fee at an annual rate based on the average daily net assets of
each Fund as follows:
European Equity 0.70%
International Select Equity 0.70%
International Small Cap Equity 1.00%
Emerging Markets Equity 1.00%
The Advisors have contractually agreed to reduce its advisory fees and reimburse
the expenses of each Fund through February 28, 2002 to the extent necessary to
limit each Fund's operating expenses to a specified percentage of its average
daily net assets as follows:
Institutional Investment Premier
Class Class Class
------------ ---------- -------
European Equity 1.25% 1.50% --
International Select Equity 1.25% 1.50% .90%
International Small Cap Equity 1.25% 1.50% --
Emerging Markets Equity 1.25% 1.50% --
Certain officers and/or Trustees of the Trust are affiliated with the
Administrator or the Advisors.
ICCDistributors, Inc. provides distribution services to the Fund.
The Trust, on behalf of each Fund, has adopted a service plan pursuant to which
each Fund that offers an Investment Class pays service fees at an aggregate
annual rate of up to 0.25% of the Investment Class average daily net assets.
Service plan fees are payable to Service Organizations that have agreements with
the Trust, and are intended to compensate Service Organizations for providing
personal services and/or account maintenance services to their customers who
invest in the Investment Class.
At October 31, 2000 the Funds were participants in a revolving credit facility
with Fleet National Bank in the amount of $50,000,000, which expires on February
28, 2001. A commitment fee on the average daily amount of the available
commitment is payable on a quarterly basis and apportioned among all
participants based on net assets. During the year ended October 31, 2000, the
participating Funds incurred commitment fees under the agreement which have been
allocated to the participating funds based on their relative net assets. The
following is a summary of borrowings made during the year ended October 31,
2000:
Weighted Weighted
Maximum Average Average
Amount Balance Interest Interest
Borrowed Outstanding Paid Rate
-------- ----------- ---- ----
European Equity $15,400,000 $6,139,617 $14,410 7.16%
International Select
Equity 6,500,000 3,056,284 8,555 6.77%
International Small
Cap Equity 109,872 97,513 118 8.82%
Emerging Markets
Equity* 11,396,315 2,363,692 27,946 8.16%
Prior to August 2, 2000, Emerging Markets Equity, in the event of an overdraft,
would execute a demand note with Brown Brothers Harriman, the Trust's custodian,
to meet its short-term liquidity requirements.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended October 31, 2000, were as
follows:
Purchases Sales
--------- -----
European Equity $233,809,477 $147,476,575
International Select Equity 699,560,938 497,772,889
International SmallCap Equity 38,052,954 26,221,831
Emerging Markets Equity 98,574,975 131,584,973
For federal income tax purposes, the tax basis of investments held, aggregate
gross unrealized appreciation and aggregate gross unrealized depreciation were
as follows on October 31, 2000:
Tax Unrealized Unrealized
Cost Appreciation Depreciation
---- ------------ ------------
European Equity $ 74,173,153 $3,694,062 $ (4,838,599)
International Select
Equity 280,958,726 5,011,384 (30,720,775)
International SmallCap
Equity 22,723,301 1,388,565 (4,156,664)
Emerging Markets
Equity 141,818,995 9,367,005 (24,715,680)
43
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Notes to Financial Statements
Note 4--Capital Share Transactions
At October 31, 2000, there were an unlimited number of shares authorized.
Transactions in shares during the year were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 2000 Year Ended October 31, 1999
---------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------- --------- --------------
<S> <C> <C> <C> <C>
European Equity - Institutional Class
Shares Sold 6,566,874 $ 194,147,515 280,578 $ 3,624,733
Reinvestment of Distribution 4,273 117,898 1,435,078 15,779,765
Shares Redeemed (4,868,568) (142,972,765) (4,998,828) (51,982,255)
---------- ------------- ---------- --------------
Net Increase (Decrease) 1,702,579 $ 51,292,648 (3,283,172) $ (32,577,757)
========== ============= ========== ==============
European Equity - Investment Class
Shares Sold 2,452,301 $ 70,287,444 -- $ --
Reinvestment of Distribution -- -- -- --
Shares Redeemed (1,355,412) (38,243,526) -- --
---------- ------------- ---------- --------------
Net Increase 1,096,889 $ 32,043,918 -- $ --
========== ============= ========== ==============
International Select Equity -
Institutional Class
Shares Sold 14,288,831 $ 333,177,375 3,146,537 $ 52,180,716
Reinvestment of Distribution 110,157 2,468,314 26,328 334,363
Shares Redeemed (15,241,592) (388,389,818) (220,914) (3,480,553)
---------- ------------- ---------- --------------
Net Increase (842,604) $ (52,744,129) 2,951,951 $ 49,034,526
========== ============= ========== ==============
International Select Equity -
Investment Class
Shares Sold 1,792,947 $ 46,635,620 555 $ 10,030
Reinvestment of Distribution 11 242 -- --
Shares Redeemed (1,351,067) (32,824,485) -- --
---------- ------------- ---------- --------------
Net Increase 441,891 $ 13,811,377 555 $ 10,030
========== ============= ========== ==============
International Select Equity -
Premier Class
Shares Sold 9,946,734 $ 261,971,387 -- $ --
Reinvestment of Distribution -- -- -- --
Shares Redeemed -- -- -- --
---------- ------------- ---------- --------------
Net Increase 9,946,734 $ 261,971,387 -- $ --
========== ============= ========== ==============
International Small Cap Equity
Shares Sold 3,616,277 $ 54,937,399 -- $ --
Reinvestment of Distribution 99,672 1,333,010 -- --
Shares Redeemed (2,825,766) (42,403,412) (1,863,550) (21,429,276)
---------- ------------- ---------- --------------
Net Increase (Decrease) 890,183 $ 13,866,997 (1,863,550) $ (21,429,276)
========== ============= ========== ==============
Emerging Markets Equity
Shares Sold 10,674,820 $ 82,381,420 16,111,925 $ 98,148,288
Reinvestment of Distribution 85,482 718,906 -- --
Shares Redeemed (13,328,270) (108,960,266) (1,536,163) (10,206,765)
----------- ------------- ---------- --------------
Net Increase (Decrease) (2,567,968) $ (25,859,940) 14,575,762 $ 87,941,523
=========== ============= ========== ==============
</TABLE>
44
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Notes to Financial Statements
Note 5-Open Forward Foreign Currency Contracts
On October 31, 2000, the European Equity Portfolio had the following open
forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contract (Depreciation)
Contracts to Deliver In Exchange For Settlement Date Value (U.S.$) (U.S.$)
---------------------------------------------------------------------------------------------------------------------
Sales
---------------------------------------------------------------------------------------------------------------------
None
---------------------------------------------------------------------------------------------------------------------
Purchases
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro 664,800 577,871 9/25/00 580,902 3,031
Euro 1,976,744 1,643,168 11/29/00 1,679,795 36,627
Swiss Franc 2,974,303 1,700,000 11/16/00 1,657,079 (42,921)
Swiss Franc 2,974,703 1,700,000 11/16/00 1,657,302 (42,698)
Swiss Franc 2,987,733 1,700,000 11/16/00 1,664,562 (35,438)
Swiss Franc 3,051,602 1,700,000 11/16/00 1,700,145 145
---------------------------------------------------------------------------------------------------------------------
Total Purchases (81,254)
---------------------------------------------------------------------------------------------------------------------
Net Unrealized Depreciation $(81,254)
---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 6--Concentration of Risks
Each Fund invest in foreign securities. Investing in foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in securities of U.S. companies and the U.S.
government. These risks include devaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies and
the U.S. government. This is particularly true with respect to emerging markets
in developing countries.
Note 7--Change of Investment Advisor
On December 23, 1999, European Equity changed investment advisor from DeAMIS to
DeAM, Inc. Shareholders received notification of the change in an Information
Statement after it was approved by the majority shareholder.
45
<PAGE>
International Equity Funds
--------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Trustees of Morgan Grenfell Investment Trust and Shareholders of
International Select Equity, International Small Cap Equity, European Equity,
and Emerging Markets Equity:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the European Equity, International
Select Equity, International Small Cap Equity, and Emerging Markets Equity (four
of the funds comprising Morgan Grenfell Investment Trust, hereafter referred to
as the "Funds") at October 31, 2000, the results of each of their operations,
the changes in each of their net assets and the financial highlights for each of
the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 20, 2000
--------------------------------------------------------------------------------
Tax Information (Unaudited) For the Tax Year Ended October 31, 2000
Taxpayers filing on a calendar year basis will receive tax information for the
2000 calendar year after year end.
The amount of long-term capital gains distributions paid for the fiscal year
ended October 31, 2000 was as follows:
International Select Equity....................................... $ 462,774
International Small Cap Equity.................................... 1,074,834
Emerging Markets Equity........................................... 6,353
During the year ended October 31, 2000, the following Funds received income from
foreign sources and paid foreign taxes. Such amounts are eligible for the
foreign tax credit. You should consult your tax advisor relating to the
appropriate treatment of foreign taxes paid.
Foreign
Foreign Per Tax Per
Income Share Withheld Share
--------- ------ -------- ------
European Equity Growth.............. $ 767,881 $0.267 $ 116,518 $0.041
International Select Equity......... 2,880,053 0.222 209,575 0.016
International Small Cap Equity...... 330,841 0.186 51,193 0.029
Emerging Markets Equity............. 2,818,693 0.132 2,224,699 0.104
________________________________________________________________________________
46
<PAGE>
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at:
Deutsche Asset Management Service Center
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche Asset
Management Investment Services Limited.
European Equity
Institutional CUSIP #61735K604
Investment 61735K695
International Select Equity
Institutional
Investment 61735K307
Premier 61735K679
International Small Cap Equity
Institutional 61735K406
Emerging Markets Equity
Institutional 61735K109
INTLEQANN (10/00)
Distributed by:
ICC Distributors, Inc.
