<PAGE>
Deutsche Asset Management
Mutual Fund
Semi-Annual Report
April 30, 2000
Emerging Markets Debt
Formerly a Morgan Grenfell Fund
A Member of the
Deutsche Bank Group [LOGO]
<PAGE>
Emerging Markets Debt
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Table of Contents
Letter to Shareholders........................................ 3
Emerging Markets Debt
Schedule of Investments..................................... 6
Statement of Assets and Liabilities......................... 8
Statement of Operations..................................... 9
Statements of Changes in Net Assets......................... 10
Financial Highlights........................................ 11
Notes to Financial Statements............................... 12
_____________________
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>
Emerging Markets Debt
--------------------------------------------------------------------------------
Letter to Shareholders
Dear Fellow Shareholder:
We are pleased to present you with this newly-designed semi-annual report for
Emerging Markets Debt of the Morgan Grenfell Investment Trust. Please note that
with the acquisition of Morgan Grenfell by Deutsche Bank, the Board of Trustees
approved a change in the name of your Fund. The Fund's investment objectives,
policies and strategies remain the same.
In the pages that follow, you will find a discussion of the Fund's investment
performance by the portfolio managers. The analyses highlight key factors
influencing recent performance of the Fund and are followed by detailed
financial statements for the six month period ended April 30, 2000.
Our continuing goal is to provide you with high-quality investment management
services across a broad range of specialized mutual funds. As always, the Board
of Trustees of the Trust and the employees of Deutsche Asset Management, Inc.
thank you for investing in our family of mutual funds. We appreciate your
continued support and confidence.
Sincerely,
/s/ David Dowsett /s/ Brett Diment
David Dowsett and Brett Diment
Portfolio Managers of
Emerging Markets Debt
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International Fixed Income Funds
. Emerging Markets Debt
MARKET REVIEW
The latter part of 1999 was a difficult time for global bond markets, as
interest rate increases in the U.S. and Europe led bond yields to rise across
the yield curve. The first part of 2000 was characterized by a divergence in
performance between shorter-term and longer-term bonds. Two interest rate hikes
by the U.S. Federal Reserve Board and four by the European Central Bank during
the first four months of 2000 kept the short end of the yield curve under
pressure, while reduced government issuance and a resulting perceived scarcity
value lent support to a rally for longer bonds. The result--curve inversion was
seen in all markets but was most pronounced in the U.S. and least so in Japan.
The U.S. bond market was additionally impacted by volatility in its equity
markets and widening credit spreads both in the above and below investment grade
bond markets. On the other hand, despite the continued rise in its deficit and
debt levels in an attempt to generate sustainable economic growth, the Japanese
bond market continued to trade in a tightly defined range.
In the dollar bloc, the Australian market initially benefited from international
cash flows forcing domestic short covering, i.e. the actual purchase of
securities by a seller to replace those securities earlier borrowed. An
improving fundamental background was supportive for the Canadian market.
In Europe, the non-core markets performed better than the Euro market. In Sweden
and the U.K., this was primarily due to speculation over reduced government
supply. The entry of the second round candidates for EMU was a positive dynamic
for markets such as Greece and Poland. Denmark, however, suffered from
nervousness following the announcement of a referendum on EMU entry in the
autumn of 2000.
The South African bond market, having experienced a strong rally through most of
1999, gave back some of its gains during this semi-annual period, as profit
taking and currency weakness impacted negatively.
Emerging market debt was the only part of the global bond market to produce
robust performance over the semi-annual period. Emerging market debt performed
strongly on improving economic growth and deficits combined with improvements in
inflation rates to make credit upgrades possible. For example, Mexico's debt
rating was raised to investment grade, boosting regional performance. The
Russian bond market was the best performing of the emerging markets, as the
replacement of President Yeltsin by Vladimir Putin eliminated some political
uncertainty and commodity price recovery positively affected government
revenues.
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3
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Letter to Shareholders
During most of the semi-annual period, the U.S. dollar appreciated against most
currencies. The continuation of a significant growth and interest rate
differential between the U.S. and Europe meant that the strength of the U.S.
currency was most particularly seen against the euro. Within Europe, the British
pound and the Swedish krona were the strongest currencies, primarily reflecting
the fact that they were the strongest economies in the region. Within the dollar
bloc, the Canadian dollar managed to keep pace with the U.S. dollar. In
contrast, the Australian dollar weakened significantly due to fears of a
widening short-term interest rate differential with the U.S.
. Emerging Markets Debt
We maintained an underweight position in Latin America during the semi-annual
period in favor of an overweight position in Eastern Europe. In our view,
economic growth in Eastern Europe was less vulnerable to monetary policy
tightening by the U.S. Federal Reserve Board.
The largest overweighting in the portfolio over the six months was in Russia,
where we held positions in both non-performing Soviet debt and Eurobonds.
Russian bonds benefited from President Yeltsin's replacement by Vladimir Putin
and concurrent expectations of a renewed drive for economic reform. Soviet debt
was also boosted by faster than expected progress in negotiations to restructure
its bonds into performing assets. We held an overweight position in Bulgaria,
which benefited from lower debt financing needs.
In Latin America, our top picks were Brazil and Mexico, which both benefited
from strong economic growth. Additionally, Mexico's continued integration with
the U.S. economy led to the award of an investment grade credit rating from
Moody's. We were underweight Argentina, where the economic growth recovery was
more uncertain, and Venezuela, where falling oil prices late in the period
complicated President Chavez' re-election bid.
We did not find much value in Asian and African credits during the semi-annual
period. Repayment concerns persisted in Nigeria and the Ivory Coast, and yields
were low in Morocco, Jordan, Korea, and the Philippines.
Such market allocations proved beneficial, as the Fund significantly
outperformed its benchmark, the JP Morgan Emerging Markets Bond Index Plus, for
the six months ended April 30, 2000.
MARKET OUTLOOK
As the global economy, led by the U.S., continues to power ahead, we believe
central banks will continue to tighten monetary policy in an attempt to
pre-emptively stem any inflationary pressures present. Until it is clear at what
point this tightening will peak, bond markets will likely remain
unsettled--especially the U.S. Treasury market. Also, we believe yield curve
inversion will continue. On the other hand, the improving financial positions of
governments around the world, with the exception of Japan, should support fixed
income markets once it does become more evident that such monetary tightening
has worked.
We expect monetary policy in the U.S. to be most aggressive given the advanced
nature of its economic cycle. In our view, this bias will weigh on the bond
market. In the remainder of the dollar bloc, we favor the Canadian market over
the Australian in the months ahead.
We remain optimistic on the European bond markets, as it seems that, despite the
economic upturn, inflation there is on a falling path through the remainder of
the year. The European Central Bank can thus afford to be more gradualistic in
its approach to the tightening of monetary policy. Still, speculation over the
extent of government buybacks and reduced issuance will likely continue. In our
view, the U.K. bond market remains expensive relative to other international
markets, however, Scandinavian bonds appear more attractive as do some of the
other newer European markets such as Poland and Greece.
The Japanese market is likely to continue to trade within its established range,
although speculation over the coming general election and over whether the
economy really is on a self-sustaining recovery path will likely continue as
well.
Emerging market debt should still offer value as should credit spreads at their
present wide levels. In the months ahead, we prefer the former to the latter
given the improving credit environment for sovereign securities and the
worsening one for corporate bonds.
We believe U.S. dollar strength will continue until the growth differential
among the various nations' economies is seen to be narrowing. The euro is
nevertheless a very cheap currency at present levels.
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4
<PAGE>
Emerging Markets Debt
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Performance Comparison
[CHART APPEARS HERE]
DEUTSCHE EMERGING MARKETS DEBT, INSTITUTIONAL SHARES, J.P. MORGAN EMERGING
MARKETS BOND INDEX PLUS AND LIPPER EMERGING MARKETS DEBT FUNDS AVERAGE GROWTH OF
A $250,000 INVESTMENT (SINCE AUGUST 4, 1994)
Aug-94 250,000 250,000 250,000
Apr-95 239,766 239,240 241,644
Apr-96 320,747 339,784 327,210
Apr-97 410,378 447,939 438,592
Apr-98 453,035 514,545 500,697
Apr-99 324,170 469,012 423,689
Apr-00 401,750 554,075 487,425
___ Deutsche Emerging Markets Debt Fund, Institutional Shares - $401,750
___ J.P. Morgan Emerging Markets Bond Index Plus - $554,075
- - Lipper Emerging Markets Debt Average - $487,425
Average Annual Total Return for the Periods Ended April 30, 2000
One Year 24.42% Three Year (0.58)% Five Year 10.86% Since 8/4/941 8.62%
Benchmark returns are for the period beginning 7/31/94.
--------------------------------------------------------------------------------
/1/ The Fund's inception date.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. Performance figures assume the reinvestment of
dividends and capital gain distributions. During the period the Fund waived
certain fees and expenses. The JP Morgan Emerging Markets Bond Plus Index is an
unmanaged foreign securities index representing external currency -- denominated
debt markets of emerging markets and is a widely accepted benchmark of emerging
debt market performance. Lipper figures represent the average of the total
returns reported by all the mutual funds designated by Lipper Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
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5
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Schedule of Investments April 30, 2000 (Unaudited)
Face
Description Amount Value
----------- ------ -----
Foreign Bonds - 79.5%
Argentina - 16.5%
Republic of Argentina
11.250%, 05/24/04.......................... 3,793,750 $ 3,807,028
11.000%, 10/09/06.......................... 3,250,000 3,168,750
11.750%, 04/07/09.......................... 450,000 441,900
11.375%, 01/30/17.......................... 2,950,000 2,808,400
Argentina PAR Series L
6.000%, 03/31/23........................... 26,850,000 18,774,970
6.875%, 03/31/23........................... 22,000,000 18,609,998
------------
47,611,046
------------
Brazil - 22.4%
Brazil FRN Series EI-L (BR)
7.375%, 04/15/06........................... 6,649,500 5,934,679
Brazil FRN Series EI-L
(REGD)
7.375%, 04/15/06........................... 9,532,500 8,507,756
Republic of Brazil
14.500%, 10/15/09.......................... 3,864,000 4,070,724
Brazil DCB FRN - Series L
7.438%, 04/15/12........................... 12,000,000 8,640,000
Brazil C Bond
8.000%, 04/15/14........................... 27,953,007 20,021,341
Brazil FRN Discount ZL
7.375%, 04/15/24........................... 11,000,000 8,346,250
Republic of Brazil
12.250%, 03/06/30.......................... 10,000,000 9,140,000
------------
64,660,750
------------
Bulgaria - 7.7%
Bulgaria FLIRB
2.750%, 07/28/12........................... 6,900,000 4,795,500
Bulgaria Discount
7.063%, 07/28/24........................... 22,950,000 17,556,750
------------
22,352,250
------------
Columbia - 4.4%
Republic of Columbia
9.750%, 04/23/09........................... 8,200,000 6,437,000
11.750%, 02/25/20.......................... 7,300,000 6,186,750
------------
12,623,750
------------
Ecuador - 1.4%
Ecuador PAR
4.000%, 02/28/25........................... 6,200,000 2,154,500
Ecuador Disc FRN
6.000%, 02/28/25........................... 5,000,000 2,000,000
------------
4,154,500
------------
Mexico - 12.8%
United Mexican States
Warrants *
06/30/03................................... 9,938,000 $ --
United Mexican States
9.875%, 01/15/07........................... 1,700,000 1,746,750
9.875%, 02/01/10........................... 9,800,000 10,094,000
11.375%, 09/15/16.......................... 4,500,000 5,090,625
11.500%, 05/15/26.......................... 7,000,000 8,260,000
Petroleos Mexicano
9.250%, 03/30/18........................... 9,150,000 8,646,750
Petroleos Mexicano Ser P
9.500%, 09/15/27........................... 3,000,000 3,030,000
------------
36,868,125
------------
Nigeria - 2.7%
Nigeria Par
6.250%, 11/15/20........................... 15,000,000 7,800,000
Nigeria Warrants *
11/15/20................................... 24,750 --
------------
7,800,000
------------
Panama - 4.1%
Republic of Panama IRB
4.250%, 07/17/14........................... 7,200,000 5,670,000
Republic of Panama
FRN PDI
7.063%, 07/17/16........................... 7,654,150 6,190,294
------------
11,860,294
------------
Russia - 7.5%
Russia Ministry Fin
11.750%, 06/10/03.......................... 2,300,000 2,033,200
8.750%, 07/24/05........................... 4,300,000 3,079,875
10.000%, 06/26/07.......................... 9,650,000 6,899,750
12.750%, 06/24/28.......................... 5,350,000 4,360,250
Russia IAN 144A FRN
6.906%, 12/02/15........................... 449,433 123,594
Vnesh Russia IAN Reg S
FRN
6.906%, 12/15/15........................... 19,100,000 5,300,250
------------
21,796,919
------------
Venezuela - 0.0%
Venezuela Warrants *
04/18/20................................... 42,310 --
------------
Total Foreign Bonds
(Cost $228,592,543).......................... 229,727,634
------------
The accompanying notes are an integral part of the financial statements.
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6
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Schedule of Investments April 30, 2000 (Unaudited)
Face
Description Amount Value
Loan Participations - 15.4%/1/
Morocco - 3.8%
Morocco FRN `A'
(Morgan Guaranty Trust
Company of New York)
6.844%, 01/01/09.......................... 12,341,053 $ 11,014,389
------------
Russia - 11.6%
Russia-Principal loan FRN/2/
(Chase Manhattan, Bank
of America, ING Securities,
JP Morgan, Union Bank of
Switzerland)
6.906%, 12/15/20.......................... 123,450,000 33,640,126
------------
Total Loan Participations
(Cost $37,401,958).......................... 44,654,515
============
Total Investments
(Cost $265,994,501)......................... 94.9% 274,382,149
Other Assets in Excess
of Liabilities.............................. 5.1% 14,612,328
----- ------------
Total Net Assets............................... 100.0% $288,994,477
===== ============
--------------------------------------------------------------------------------
DCB Debt Conversion Bond
FLIRB Front Loaded Interest Reduction Bond
FRN Floating Rate Note. The rate reflected on the Schedule of Investments is
the rate in effect on April 30, 2000.
IAN Interest Arrears Note
IRB Interest Revenue Bond
PDI Past Due Income
/1/ Participations were acquired through financial institutions indicated
parenthetically.
/2/ Portion of income earned is capitalized as Russian Interest in Arrears
Notes.
144 A Security exempt from registration under 144A of the Security Act of 1933.
These Securities may be resold in transactions exempt from registration,
normally to qualified buyers.
Amounts designated as "___" are either $0 or have been rounded to $0.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
--------------------------------------------------------------------------------
7
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
As of
April 30,
2000
----
<S> <C>
Assets
Investment at Value/(1)/........................................................... $274,382,149
Cash............................................................................... 19,775,362
Foreign Currency/(1)/.............................................................. 168,149
Receivable for Capital Shares Sold................................................. 367,840
Dividend and Interest Receivable................................................... 7,028,645
------------
Total Assets......................................................................... 301,722,145
------------
Liabilities
Due to Advisor..................................................................... 171,929
Due to Administrator............................................................... 69,303
Payable for Securities Purchased................................................... 10,841,000
Payable for Capital Shares Redeemed................................................ 1,605,530
Accrued Other Expenses............................................................. 39,906
------------
Total Liabilities.................................................................... 12,727,668
------------
Net Assets........................................................................... $288,994,477
============
Composition of Net Assets
Capital Shares of Institutional Class/(2)/ (unlimited authorization
$0.001 par value). Based on Outstanding Shares of Beneficial Interest............ $295,929,293
Undistributed Net Investment Income................................................ 16,620,189
Accumulated Net Realized Loss from Securities, Forward
Currency Contracts and Foreign Currency Translations............................. (31,912,930)
Net Unrealized Appreciation on Investments......................................... 8,384,841
Net Unrealized Depreciation on Foreign
Currencies and Forward Currency Contracts........................................ (26,916)
------------
Net Assets, April 30, 2000........................................................... $288,994,477
============
Computation of Net Asset Value
Institutional Shares:
Net Assets......................................................................... $288,994,477
Shares Outstanding................................................................. 43,621,866
Net Asset Value Per Share.......................................................... $ 6.62
</TABLE>
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/(1)/ Cost of Investments and Currency Investments Foreign Currency
-------------------------------- ----------- ----------------
Emerging Markets Debt Fund $265,994,501 $182,532
/(2)/ On February 28, 2000 the Institutional Shares were renamed Institutional
Class.
See Notes to Financial Statements.
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8
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
April 30, 2000
--------------
<S> <C>
Investment Income
Interest..................................................... $22,950,628
Less: Foreign Taxes Withheld................................. (486,758)
-----------
Total Investment Income......................................... 22,463,870
-----------
Expenses
Investment Advisory Fee...................................... 1,618,487
Administration and Services Fees............................. 404,622
Custody Fee.................................................. 66,590
Registration & Filing Fees................................... 48,033
Professional Fees............................................ 29,210
Printing Fees................................................ 10,397
Trustees' Fees............................................... 5,875
Transfer Agency Fee.......................................... 428
Miscellaneous................................................ 729
-----------
Total Expenses.................................................. 2,184,371
Less: Fee Waivers or Expense Reimbursements..................... (492,496)
-----------
Net Expenses.................................................... 1,691,875
-----------
Net Investment Income........................................... 20,771,995
===========
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net Realized Gain (Loss) from:
Investment Transactions.................................... 33,588,920
Foreign Currency Transactions.............................. (172,318)
Net Change in Unrealized Appreciation/Depreciation:
Investments................................................ 4,208,835
Foreign Currencies and Forward Currency Contracts.......... (158,286)
-----------
Net Realized Gain on Investments, Foreign Currencies
and Forward Currency Contracts............................... 37,467,160
-----------
Net Increase in Net Assets from Operations...................... $58,239,155
===========
</TABLE>
See Notes to Financial Statements.
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9
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
April 30, 2000 October 31, 1999
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net Investment Income....................................................... $ 20,771,995 $ 30,848,031
Net Realized Gain/Loss on Investments....................................... 33,588,929 (1,983,701)
Net Realized Gain/Loss on Foreign Currencies and Forward
Currency Contracts........................................................ (172,318) 549,743
Net Change in Unrealized Appreciation/Depreciation on Investments........... 4,208,835 6,354,445
Net Change in Unrealized Appreciation/Depreciation
on Foreign Currencies and Forward Currency Contracts...................... (158,286) 401,593
------------- -------------
Net Increase in Net Assets from Operations..................................... 58,239,155 36,170,111
------------- -------------
Distributions to Shareholders
Net Investment Income
Institutional Class/(2)/.................................................. (12,181,314) (34,764,644)
Service Shares/(3)/....................................................... (435) (2,278)
Net Realized Gain from Investment Transactions
Institutional Class....................................................... -- --
Service Shares............................................................ -- --
------------- -------------
Total Distributions............................................................ (12,181,749) (34,766,922)
------------- -------------
Capital Share Transactions:
Institutional Class:
Proceeds from Shares Issued............................................... 73,165,188 486,391,228
Shares Issued in Lieu of Cash Distributions............................... 12,181,227 34,749,464
Cost of Shares Repurchased................................................ (182,609,116) (237,863,685)
------------- -------------
Increase (Decrease) in Net Assets from Institutional
Class Transactions........................................................ (97,262,701) 283,277,007
------------- -------------
Service Shares:
Proceeds from Shares Issued............................................... -- 10,000
Shares Issued in Lieu of Cash Distributions............................... 445 94
Cost of Shares Repurchased................................................ (175,997) (16,860)
------------- -------------
Decrease in Net Assets from Service Share Transactions...................... (175,552) (6,766)
------------- -------------
Net Increase (Decrease) in Net Assets from Capital Transactions................ (97,438,253) 283,270,241
------------- -------------
Total Increase (Decrease) in Net Assets........................................ (51,380,847) 284,673,430
Net Assets
Beginning of Period............................................................ 340,375,324 55,701,894
------------- -------------
End of Period.................................................................. $288,994,477 $340,375,324
============= =============
Capital Share Transactions:
Institutional Class:
Shares Issued............................................................. 3,146,537 86,590,263
Shares Issued in Lieu of Cash Distributions............................... 26,328 7,020,094
Shares Repurchased........................................................ (220,914) (44,476,619)
------------- -------------
Increase in Capital Shares from Institutional Class Transactions............ 2,951,951 49,133,738
============= =============
Shares:
Shares Issued............................................................. 555 1,665
Shares Issued in Lieu of Cash Distributions............................... -- 19
Shares Repurchased........................................................ -- (2,898)
------------- -------------
Increase (Decrease) in Capital Shares from Service
Share Transactions........................................................ 555 (1,214)
============= =============
</TABLE>
--------------------------------------------------------------------------------
/(1)/ Unaudited.
/(2)/ On February 28, 2000 the Institutional Shares were renamed Institutional
Class.
/(3)/ Services Shares closed on January 21, 2000.
See Notes to Financial Statements.
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10
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Financial Highlights
For the six months ended April 30, 2000 and the years ended October 31
(Unaudited)
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Net Ratio of
Net Realized Distributions Distributions Net Assets Expenses
Asset and from from Asset End to
Value Net Unrealized Net Realized Value of Average
Beginning Investment Gains/ Investment Capital End of Total Period Net
of Period Income (Losses) Income Gains Period Return (000) Assets
--------- ------ -------- ------ ----- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets Debt Fund:
Institutional Class/(4)/
2000/(1)/ $ 5.80 $1.66 $(0.60) $(0.24) $ -- $ 6.62 18.63% $288,994 1.00%
1999 5.82 0.19 0.69 (0.90) -- 5.80 17.86 340,365 1.00
1998 11.95 1.81 (4.12) (1.32) (2.50) 5.82 (30.35) 55,684 1.05
1997 13.36 1.05 0.40 (1.32) (1.54) 11.95 12.03 187,455 1.32
1996 10.55 1.21 2.60 (1.00) -- 13.36 38.42 102,431 1.50
1995 10.19 0.65 (0.17) (0.11) (0.01) 10.55 4.85 84,438 1.79
1994/(2)/ 10.00 0.13 0.06 -- -- 10.19 1.90+ 16,248 1.90
Service Shares/(5)/
1999 $ 5.82 $0.19 $ 0.67 $(0.90) $ -- $ 5.78 17.40% $ 10 1.25%
1998 11.95 6.65 (8.96) (1.32) (2.50) 5.82 (30.35) 18 1.30
1997/(3)/ 13.61 0.03 (1.69) -- -- 11.95 (12.20)+ 132 1.50
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses to Income to
Investment Average Average
Income Net Net
to Assets Assets
Average (Excluding (Excluding Portfolio
Net Expense Expense Turnover
Assets Limitations) Limitations) Rate
------ ------------ ------------ ----
<S> <C> <C> <C> <C>
Emerging Markets Debt Fund:
Institutional Class/(4)/
2000/(1)/ 12.80% 1.35% 13.10% 167%
1999 10.90 1.40 10.50 397
1998 9.82 1.31 9.56 638
1997 7.15 1.47 7.00 472
1996 10.15 1.92 9.73 227
1995 10.97 2.05 10.71 266
1994/(2)/ 7.04 2.60 6.34 52
Service Shares/(5)/
1999 10.65% 1.66% 10.24% 397%
1998 10.78 1.76 10.32 638
1997/(3)/ 18.65 1.71 18.44 472
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Returns are for the period indicated and have not been annualized
/(1)/ All ratios except for Portfolio Turnover Rate for the six month period
have been annualized. Total Return has not been annualized.
/(2)/ Emerging Markets Debt Fund Institutional Class commenced operations on
8/4/94. All ratios, except for Portfolio Turnover Rate, for the period
have been annualized.
/(3)/ Emerging markets debt fund service shares commenced operations on
10/22/97. All ratios, except for portfolio turnover rate, for the period
have been annualized.
/(4)/ On February 28, 2000 the Institutional Shares were renamed Institutional
Class.
/(5)/ Services Shares closed on January 21, 2000.
--------------------------------------------------------------------------------
11
<PAGE>
Emerging Markets Debt
--------------------------------------------------------------------------------
Notes to Financial Statements April 30, 2000 (Unaudited)
1. Organization
Morgan Grenfell Investment Trust (the "Trust") was organized as a Delaware
business trust on September 13, 1993. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company consisting of fourteen investment portfolios. The Emerging Markets Debt
Fund (the "Fund") is one of the portfolios. The Funds' prospectuses provide a
description of each Fund's investment objectives, policies and strategies.
2. Significant Accounting Policies
The preparation of financial statements in accordance with generally accepted
accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
Security Valuation--Securities listed on a securities exchange for which market
quotations are readily available are valued at the last quoted sales price on
the principal exchange on which they are traded on the valuation date or, if
there is no such reported sale on the valuation date, at the most recently
quoted bid price. Unlisted securities for which market quotations are readily
available are valued at the most recently quoted bid price. Certain debt and
fixed income investments owned by the Fund are valued at prices supplied by
independent pricing agents selected by Deutsche Asset Management, Inc. ("DeAM",
formerly Morgan Grenfell Inc.) and Deutsche Asset Management Investment Services
Limited ("DAMIS", formerly Morgan Grenfell Investment Services Limited),
(collectively, the "Advisers", each an affiliate of Deutsche Bank AG), which
prices reflect broker-dealer supplied valuations. Short-term investments are
valued at amortized cost which approximates market value. Other securities for
which market quotations are not readily available or securities whose market
quotations do not, in the opinion of the Adviser, reflect market value are
valued at fair value using methods determined in good faith by the valuation
committee of the Board of Trustees.
Income Taxes--It is the intention of the Fund to qualify as a regulated
investment company and to distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is considered necessary.
The Fund may be subject to taxes imposed by countries in which it invests with
respect to its 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 Fund accrues such taxes
when the related income is or gains are earned.
Net Asset Value Per Share--The net asset value per share is calculated on a
daily basis by dividing the assets of the Fund or Class, less its liabilities,
by the number of outstanding shares, of the Fund or Class.
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.
Repurchase Agreements--Securities pledged as collateral for repurchase
agreements are held by the custodian banks until maturity of the repurchase
agreements. Provisions of the repurchase agreements and procedures adopted by
the Trust require that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty.
The Funds may also invest in tri-party repurchase agreements. Securities held as
collateral for tri-party repurchase agreements are maintained in a segregated
account by the broker's custodian bank until maturity of the repurchase
agreement. Provisions of the agreements require that the market value of the
collateral, including accrued interest thereon, is sufficient in the event of
default by the counterparty.
If the counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Funds may be delayed or limited.
Foreign Currency Translation--The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis: (I) market value of investment securities, other assets and
liabilities at the current rate of exchange; and (II) purchases and sales of
investment securities, income and expenses at the relevant rates of exchange
prevailing on the respective dates of such transactions.
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12
<PAGE>
Emerging Markets Debt
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Notes to Financial Statements
The Fund does 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 Fund does
isolate the effect of fluctuations in foreign currency rates when determining
the gain or loss upon sale or maturity of foreign currency denominated debt
obligations pursuant to the Federal income tax regulations. Such amounts are
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
The Fund reports gains and losses on foreign currency related transactions as
realized and unrealized gains and losses for financial reporting purposes,
whereas such gains and losses, to the extent realized, are treated as ordinary
income or loss for federal income tax purposes.
Forward Foreign Currency Contracts--The Fund may enter into forward foreign
currency contracts as hedges against portfolio positions as well as for
non-hedging purposes. The aggregate principal amounts of the contracts are not
recorded. All commitments are "marked-to-market" daily at the applicable foreign
exchange rate and any resulting unrealized gains or losses are recorded
currently. The Fund realizes gains or losses at the time forward contracts are
extinguished, except that gains or losses on certain open contracts are required
to be recognized for U.S. federal income tax purposes at the close of the Fund's
taxable year and are generally treated as ordinary income or loss for such
purposes. Risk may arise upon entering into these contracts from the potential
inability of the counterparties to meet the terms of their contracts and is
generally limited to the amount of unrealized gain on the contracts, if any, at
the date of default. Risk may also arise from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
Foreign Currency Options--The premium paid by the Fund for the purchase of an
option is included in the Fund's Statement of Assets and Liabilities as an
investment and subsequently marked to market to reflect the current market value
of the option. For an option held by the Fund on the stipulated expiration date,
the Fund realizes a loss. If the Fund enters into a closing sale transaction, it
realizes a gain or loss, depending on whether the proceeds from the sale are
greater or less than the cost of the purchased option. If the Fund exercises a
purchased put option, it realizes a gain or loss from the sale of the underlying
investment and proceeds from such sale will be decreased by the premium
originally paid. If the Fund exercises a purchased call option, the cost of the
underlying investment which the Fund purchases upon exercise will be increased
by the premium originally paid. The risk associated with purchasing options is
limited to premiums originally paid. Certain foreign currency options may be
required to be marked-to-market for Federal income tax purposes at the close of
a Fund's taxable year, giving rise to a gain or loss that may, depending upon
whether certain elections are made, be capital or ordinary in character.
Distributions--Distributions from net investment income and net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid in capital in the period that the difference arises.
Accordingly, permanent differences primarily attributable to net operating loss
for the year or realized foreign exchange gains and losses have been
reclassified as follows:
Undistributed Accumulated
Net Investment Net Realized Paid-in
Fund Income (Loss) Gains (Losses) Capital
---- ------------- -------------- -------
Emerging Markets
Debt $549,743 $(549,743) $ --
The above reclassification has no effect on net assets or net asset value per
share of the Fund.
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.
Other--Security transactions are accounted for on the date the security is
purchased or sold (trade date). Costs used in determining net realized capital
gains and losses on the sale of investment securities are those of the specific
securities sold adjusted for the accretion and amortization of original issue
discounts and purchase premiums during the respective holding period. Original
issue discounts and purchase premiums on securities held by the Funds are
accreted and amortized ratably to maturity using the effective interest method.
Dividend income is recognized on the ex-dividend date or, using reasonable
diligence, when known to the Funds. Interest income is recognized using the
accrual method.
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13
<PAGE>
Emerging Markets Debt
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Notes to Financial Statements April 30, 2000
3. Administration, Investment Advisory, Distribution and Service Agreements
By an agreement dated August 27, 1998, the Trust entered into an administration
agreement with DeAM (the "Administrator"), pursuant to which the Administrator
will receive an annual fee of 0.25% of the average daily net assets of the Fund.
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 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. At a meeting held on August 19, 1999 the Board of Trustees of the
Trust adopted a resolution to approve a transfer agent agreement between
Investment Company Capital Corp., an affiliate of Deutsche Bank AG, and the
Trust, replacing DST Systems Inc., effective November 22, 1999.
Prior to October 13, 1998, SEI Financial Management Corporation ("SEI") served
as the Trust's Administrator.
For these services, the Adviser is entitled to a monthly fee at an annual rate
of 1.00% of the Fund's average daily net assets.
The Adviser has voluntarily agreed to reduce its advisory fees and/or reimburse
the Fund to the extent necessary to limit the Fund's operating expenses to a
specified percentage of its average net assets as follows:
Institutional Service
Shares Shares
------------- ------
Emerging Markets Debt 1.00% 1.25%
By an Expense Limitation agreement dated November 1999, between the Trust and
the Adviser, the Adviser has agreed to waive its fees and reimburse expenses to
the Fund in order to limit the total operating expenses of the Fund at the above
levels for a period of 16 months from February 28, 2000.
Certain officers and/or Trustees of the Trust are affiliated with the
Administrator or the Adviser.
ICC Distributors, Inc. (the "Distributor") serves as the distributor of shares
of the Fund pursuant to a distribution agreement with the Fund. The Adviser, and
not the Trust, is responsible for payment of any expenses or fees incurred in
the marketing and distribution of shares of the Fund. Prior to November 1, 1999
SEI Investments Distribution Co. served as the Fund Distributor.
The Trust, on behalf of each Fund, has adopted a service plan pursuant to which
each Fund that offers Investment Shares pays service fees at an aggregate annual
rate of up to 0.25% of the Fund's average daily net assets attributable to
Investment Shares. 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 Service Shares.
4. Investment Transactions
The cost of securities purchased and the proceeds from the sale of securities,
other than short-term investments and U.S. government securities, during the six
months ended April 30, 2000, were as follows:
Purchases Sales
--------- -----
$510,269,233 $592,891,585
For federal income tax purposes, the cost of securities owned, the aggregate
gross unrealized appreciation and depreciation and the net unrealized
appreciation (depreciation) on investments at October 31, 1999 for the Fund are
as follows:
Tax Cost
--------
$265,994,501
Net
Unrealized
Appreciated Depreciated Appreciated/
Securities Securities (Depreciated)
------------ ---------- -------------
$18,834,091 $(10,449,250) $8,384,841
At October 31, 1999 the Fund had available realized capital losses to offset
future net capital gains:
Expiration Date
---------------
$58,247,275 10/31/2006
During the six months ended April 30, 2000, the Fund utilized $10,483, of
available realized capital losses from a prior period.
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14
<PAGE>
Emerging Markets Debt
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Notes to Financial Statements April 30, 2000
5. Loan Participations/Assignments
The Fund invests in U.S. dollar-denominated fixed and floating rate loans
("Loans") arranged through private negotiations between a foreign sovereign
entity and one or more financial institutions ("Lenders"). The Fund invests in
such Loans in the form of participations in Loans ("Participations") or
assignments of all or a portion of loans from third parties ("Assignments").
Participations typically result in the Fund having a contractual relationship
only with the Lender, not with the sovereign borrower. The Fund has the right to
receive payments of principal, interest and any fees to which it is entitled
from the Lender selling the Participation and only upon receipt by the Lender of
the payments from the borrower. In connection with purchasing Participations,
the Fund generally has no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan, nor any rights of set-off
against the borrower, and the Fund will not benefit directly from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund assumes the credit risk of both the borrower and the Lender that is
selling the Participation. The Fund may have difficulty disposing of
Participations and Assignments because the market for such instruments is not
highly liquid.
6. Concentration of Risks
The Fund invests in securities of foreign issuers in various countries. These
investments may involve certain considerations and risks not typically
associated with investments in the United States, as a result of, among other
factors, the possibility of future political and economic developments and the
level of governmental supervision and regulation of securities markets in the
respective countries. The Fund invests in emerging markets securities. Emerging
markets are substantially smaller, less developed, less liquid, and more
volatile than the major securities markets in the United States. The Fund
invests in debt securities, the market value of which may change in response to
interest rate changes. Also, the ability of the issuers of debt securities held
by the Fund to meet their obligations may be affected by economic and political
developments in a specific country, industry, or region.
7. Borrowing Agreements
In the event of an overdraft, the Fund may execute a demand note with Brown
Brothers Harriman & Co. ("BBH"), the Trust's custodian, to meet its short-term
liquidity requirements. Interest payment on borrowings under the demand notes
are payable at the federal funds rate plus 2.00% and the borrowings are secured
by the Funds' assets and securities held in the custody of BBH. At April 30,
2000 there were no borrowings from BBH outstanding.
Following is the summary of borrowings made under the Line of Credit facility
with BBH:
Weighted Weighted
Maximum Average Average
Amount Balance Interest Interest
Borrowed Outstanding Paid Rate
-------- ----------- ---- ----
12,979,636 2,355,110 8,648 11.20%
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15
<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.
Emerging Markets Debt-- CUSIP #61735K869
Institutional Class 356SA (04/00)
Morgan Grenfell Investment Trust
Distributed by:
ICC Distributors, Inc.
16
