<PAGE>
- BT INVESTMENT FUNDS -
-------------------------------
PACIFIC BASIN EQUITY FUND
-------------------------------
ANNUAL REPORT
-------------------------------
SEPTEMBER - 1997
<PAGE>
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PACIFIC BASIN EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PACIFIC BASIN EQUITY FUND
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . . . 5
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . 6
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 7
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . 8
PACIFIC BASIN EQUITY PORTFOLIO
Schedule of Portfolio Investments. . . . . . . . . . . . . . . . . . . . . . 9
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . . .11
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . .12
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .13
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . .15
2
<PAGE>
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PACIFIC BASIN EQUITY FUND
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to present you with this annual report for the fiscal year ended
September 30, 1997, for the Pacific Basin Equity Fund, providing a review of the
market, 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.
The Pacific Basin Equity Fund (the "Fund") had a total return of (9.97)%* for
the twelve months ended September 30, 1997, as compared to (16.68)% for the MSCI
Combined Far East Free ex Japan Index**, (13.96)% for the MSCI Combined Asia ex
Japan Index**, and (6.58)% for the Lipper Pacific Basin ex Japan Average+.
Since its inception on November 1, 1993, the Fund has returned 10.14%
cumulatively, or 2.50% annualized.
MARKET ACTIVITY
Overall, the fiscal year was a difficult one for the region's equity markets,
and the benchmark fell considerably. This was primarily due to the contagious
effect of both anticipation over potential currency devaluation in Thailand
during the first half and then the actual floating of the Thai baht early in
July, after being pegged to the U.S. dollar for many years. A downward spiral
in economic fundamentals and investor sentiment led, in turn, to valuations in
several markets plummeting to new lows.
- --------------------------------------------------------------------------------
OBJECTIVE
Seeks to provide long-term capital appreciation through investment primarily in
the equity securities (or other securities with equity characteristics) of
companies domiciled in, or doing business in, the Pacific Basin region.++
- --------------------------------------------------------------------------------
Thailand accepted a $17.2 billion International Monetary Fund-led bailout
package, but unlike the Mexican peso debacle where the currency damage was
fairly contained, the depreciation of the Thai baht set off a wildfire in
Southeast Asia where the traditional currency linkage to the dollar was broken
throughout the region. The Indonesian, Malaysian, and Philippine currencies and
equity markets experienced declines, there were dramatic increases in their
interest rates, and severe problems in their respective banking systems were
created. These nations, along with Singapore, also suffered from sluggish
export demand and structural problems concerning excess capacity in a number of
key industries, including the electronics sector upon which the region is so
dependent. Policy responses by shell-shocked governments have been mainly
disappointing so far.
- --------------------------------------------------------------------------------
INVESTMENT INSTRUMENTS
Primarily common and preferred stocks, rights, warrants and convertible
securities.
- --------------------------------------------------------------------------------
Still, the Hong Kong and Taiwan equity markets performed strongly over the
twelve months. These two North Asia economies as well as India's were generally
supported by lower inflation, improving trade balances, and moves to easier
monetary policy. As domestic liquidity conditions improved ahead of real
recovery in activity, surplus funds were allocated to financial assets, creating
classic liquidity-driven equity markets.
INVESTMENT REVIEW
While the Fund underperformed its category average, it significantly
outperformed both of its benchmarks. This strong relative performance was
driven primarily by stock selection over the first half of the fiscal year and
by effective asset allocation and currency management in the second half.
- --------------------------------------------------------------------------------
TEN LARGEST STOCK HOLDINGS
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Moulin International Holding Ltd. Founder Hong Kong Ltd.
- --------------------------------------------------------------------------------
Cosco Pacific Ltd. China Everbright International Ltd.
- --------------------------------------------------------------------------------
Top Glory International Holdings Ltd. Overseas-Chinese Banking Corp. Ltd.
- --------------------------------------------------------------------------------
China Foods Holdings Ltd. Parkway Holdings Ltd.
- --------------------------------------------------------------------------------
Zhehuang Expressway Co. Ltd.-H Beijing Yanhua Petrochemical Co. Ltd.-H
- --------------------------------------------------------------------------------
More specifically, the Fund's red chip company and bank holdings in Hong Kong,
Singapore, and Malaysia significantly outperformed the underlying markets in the
first half and more than offset its less than ideal underweighted position in
Taiwan. In the second half, we remained underweighted in Taiwan, as we
continued to believe that the market was vulnerable to a contraction in
liquidity based on a recovering real economy and excessive valuations in its
equity prices. While this position hurt relative performance, the Fund benefited
from its underweighted positions in Malaysia, Thailand, and the Philippines and
from its overweighted positions in Hong Kong and South Korea. The Fund also
managed to limit losses caused by weak currencies in the region by being hedged
out of most of them.
MANAGER OUTLOOK
Looking ahead over the near term, we expect market volatility to continue to be
high and for fundamental valuations to overshoot on the downside. However, our
research suggests that the renewed international competitiveness that these
countries have achieved means that the inevitable economic downturn may be
somewhat muted by a boom in exports. Companies that have low levels of debt and
that are involved in export industries or domestic non-cyclical activities will
likely be well positioned to perform strongly over the next few years.
Given this outlook, we intend to remain underweight in Malaysia, Thailand, and
the Philippines, as we believe these economies will likely lag behind North
Asia. We also intend to remain underweight in Taiwan. We anticipate staying
overweight in South Korea, which should benefit from improving trade numbers and
better corporate earnings, and in Indonesia, which should benefit from reduced
political uncertainty and attractive valuations.
- --------------------
* Performance quoted represents past performance and 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.
** The MSCI Far East Free ex Japan Index includes China Free, Hong Kong,
Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan and
Thailand. The MSCI Combined Asia Free ex Japan Index includes those same
markets as the Far East Free ex Japan Index as well as India, New Zealand,
Pakistan and Sri Lanka. Indexes are unmanaged, and investments cannot be
made in an index.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc., as
falling into the respective categories indicated. These figures do not
reflect sales charges.
++ Foreign investing involves special risks, including currency risk,
increased volatility or foreign securities and differences in auditing and
other financial standards.
3
<PAGE>
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PACIFIC BASIN EQUITY FUND
LETTER TO SHAREHOLDERS (CONTINUED)
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
By Country as of September 30, 1997
(PERCENTAGES ARE BASED ON MARKET VALUE)
[Pie Chart]
Taiwan 3%
Pakistan 3%
India 6%
Indonesia 7%
Malaysia 10%
Singapore 11%
Thailand 3%
Philippines 1%
Hong Kong 44%
South Korea 12%
We also intend to keep the Fund overweighted in Hong Kong, as we believe the
positive reaction to the transition back to China will continue to support the
market, overwhelming the effects of any roller coaster rides, such as that
experienced in mid to late October 1997. We believe Hong Kong will benefit from
its exposure to China's emerging economy, the more so because its own has
achieved a position of maturity. The recently concluded 15th Party Congress
confirms that China is dedicated to the reform path through the privatization of
state-owned enterprises. Large foreign reserves, sound current account
balances, and moderate inflation are also benefiting the Hong Kong market. We
remain positive on India, too, as economic reforms and accommodating monetary
conditions highlight its potential as the next China.
While recent market activity may postpone a significant overall recovery, we
believe the outlook for the region's equity markets will improve over the medium
to longer term. Signs of stronger world growth, but still very low inflation,
are creating a favorable backdrop for the markets. Attractive valuations and
accelerating earnings growth also lead us to believe that Asia offers some of
the best investment opportunities over time, and thus we continue to seek
individual stocks in each of these markets that we believe will outperform.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek to provide long-term capital appreciation.
We value your ongoing support of the Pacific Basin Equity Fund and look forward
to continuing to serve your investment needs in the years ahead.
/s/ Paul Duram
Paul Durham
Portfolio Manager of the
PACIFIC BASIN EQUITY PORTFOLIO
September 30, 1997
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PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PACIFIC BASIN
EQUITY FUND AND THE MSCI COMBINED ASIA FREE EX JAPAN INDEX AS OF NOVEMBER 30,
1993.
- --------------------------------------------------------------------------------
TOTAL RETURN FOR THE PERIOD
ENDED SEPTEMBER 30, 1997
One Year Since 11/1/93*
(9.97)% 2.50%**
* The Fund's inception date.
** Annualized.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- - Pacific Basin - - MSCI Combined Asia
Equity Fund - $11,366 Free ex Japan Index - $9,432
Nov-93 10000 10000
Dec-93 13127 12419
Mar-94 10392 9840
Jun-94 11115 10195
Sep-94 12198 11310
Dec-94 10913 10136
Mar-95 10614 9799
Jun-95 11641 10531
Sep-95 11727 10306
Dec-95 11705 10348
Mar-96 12518 11308
Jun-96 12775 11353
Sep-96 12625 10963
Dec-96 13223 11187
Mar-97 12888 10816
Jun-97 13559 11481
Sep-97 11366 9432
Past performance is not indicative of future performance.
4
<PAGE>
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PACIFIC BASIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in Pacific Basin Equity Portfolio, at Value. . . . . . . . . . . . $ 26,530,155
Prepaid Expenses and Other. . . . . . . . . . . . . . . . . . . . . . . . . . 18,309
------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,548,464
------------------
LIABILITIES
Due to Bankers Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,811
Accrued Expenses and Other. . . . . . . . . . . . . . . . . . . . . . . . . . 18,354
------------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,165
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,501,299
------------------
------------------
COMPOSITION OF NET ASSETS
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,738,288
Undistributed Net Investment Income . . . . . . . . . . . . . . . . . . . . . 367,937
Accumulated Net Realized Gain from Investment and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,194,751
Net Unrealized Depreciation on Investment and Foreign Currency Transactions . (3,799,677)
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,501,299
------------------
------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided
by shares outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.16
------------------
------------------
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) . . . . . . . . . . . . . . . . . . . . . . . . 2,607,284
------------------
------------------
</TABLE>
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STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Income Allocated from Pacific Basin Equity Portfolio, net. . . . . . . . . . . . $ 107,080
------------------
EXPENSES
Administration and Services Fees. . . . . . . . . . . . . . . . . . . . . . . 240,390
Registration Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,758
Printing and Shareholder Reports. . . . . . . . . . . . . . . . . . . . . . . 14,000
Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,495
Trustees Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,066
------------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,459
Less Expenses Absorbed by Bankers Trust . . . . . . . . . . . . . . . . . . . (47,069)
------------------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,390
------------------
NET INVESTMENT LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (133,310)
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain from:
Investment Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 1,690,506
Foreign Currency Transactions. . . . . . . . . . . . . . . . . . . . . . . 501,247
Net Change in Unrealized Depreciation on Investment and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,795,001)
------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,603,248)
------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ (2,736,558)
------------------
------------------
</TABLE>
See Notes to Financial Statements on Page 7
5
<PAGE>
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PACIFIC BASIN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (133,310) $ (68,268)
Net Realized Gain from Investment and Foreign Currency Transactions . . . . . 2,191,753 1,604,612
Net Change in Unrealized Appreciation (Depreciation) on Investment and
Foreign Currency Transactions. . . . . . . . . . . . . . . . . . . . . . . (4,795,001) 590,614
------------------ ------------------
Net Increase (Decrease) in Net Assets from Operations. . . . . . . . . . . . . . (2,736,558) 2,126,958
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions. . . . . . . . . . . . . . . . (1,399,729) --
------------------ ------------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Sales of Shares . . . . . . . . . . . . . . . . . . . . . . . . 57,656,522 37,293,728
Dividend Reinvestments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,917 --
Cost of Shares Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,983,156) (34,535,657)
------------------ ------------------
NET INCREASE FROM CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST. . . . . 1,248,283 2,758,071
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (2,888,004) 4,885,029
NET ASSETS
Beginning of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,389,303 24,504,274
------------------ ------------------
End of Year (including undistributed net investment income of $367,937
and $0, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,501,299 $ 29,389,303
------------------ ------------------
------------------ ------------------
</TABLE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the
periods indicated for the Pacific Basin Equity Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED NOVEMBER 1, 1993
SEPTEMBER 30, (COMMENCEMENT OF
--------------------------------- OPERATIONS) TO
1997 1996 1995 SEPTEMBER 30, 1994
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $ 11.80 $ 10.96 $ 11.82 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss). . . . . . . . . . (0.05) (0.03) 0.01 (0.04)
Net Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency Transactions. (1.07) 0.87 (0.49) 1.86
------- ------- ------- -------
Total Income (Loss) from Investment Operations . . (1.12) 0.84 (0.48) 1.82
------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions. (0.52) -- (0.38) --
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $ 10.16 $ 11.80 $ 10.96 $ 11.82
------- ------- ------- -------
------- ------- ------- -------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . (9.97)% 7.66% (3.87)% 20.11%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . $26,501 $29,389 $24,504 $25,362
Ratios to Average Net Assets:
Net Investment Income (Loss) . . . . . . . . (0.42)% (0.24)% 0.12% (0.59)%*
Expenses, Including Expenses of the
Pacific Basin Equity Portfolio. . . . . . . 1.75% 1.75% 1.75% 1.75%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . 0.29% 0.31% 0.52% 0.60%*
</TABLE>
- --------------------
* Annualized
See Notes to Financial Statements on Page 7
6
<PAGE>
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PACIFIC BASIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The Pacific Basin Equity Fund (the "Fund") is
one of the funds offered to investors by the Trust. The Fund commenced
operations and began offering shares of beneficial interest on November 1, 1993.
The Fund invests substantially all of its assets in the Pacific Basin Equity
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio. The value
of such investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio. At September 30, 1997, the Fund's investment
was approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
B. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
C. ORGANIZATION EXPENSES
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
D. DIVIDENDS
It is the Fund's policy to declare and distribute dividends annually to
shareholders from net investment income, if any. Dividends and distributions
payable to shareholders are recorded by the Fund on the ex-dividend date.
Distributions of net realized short-term and long-term capital gains, if any,
earned by the Fund will also be made annually.
E. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required. The Fund may periodically make
reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles. For the year ended September 30,
1997, $501,247 of accumulated net realized gain was reclassified as
undistributed net investment income.
F. OTHER
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's Funds are allocated among
them.
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
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.75 of 1% of the Fund's average daily net assets.
For the year ended September 30, 1997, this fee aggregated $240,390.
The Trust entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the Act, Edgewood may seek reimbursement, at an annual rate not
exceeding 0.20 of 1% of the Fund's average daily net assets, for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares. For the year ended September 30, 1997, there were no
reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.75 of 1% of the
average daily net assets of the Fund, excluding expenses of the Portfolio and
1.75 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. For the year ended September 30, 1997, expenses of the Fund have
been reduced by $47,069.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Edgewood. None of the trustees so affiliated received compensation
for services as trustee of the Fund. Similarly, none of the Fund's officers
received compensation from the Fund.
NOTE 3--SHARES OF BENEFICIAL INTEREST
At September 30, 1997, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
Sold 4,938,090 $ 57,656,522 3,199,745 $ 37,293,728
Reinvested 50,080 574,917 -- --
Redeemed (4,870,624) (56,983,156) 2,946,088) (34,535,657)
------------- ------------- ------------- -------------
Net Increase 117,546 $ 1,248,283 253,657 $ 2,758,071
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
7
<PAGE>
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PACIFIC BASIN EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of BT Investment Funds:
We have audited the accompanying statement of assets and liabilities of the
Pacific Basin Equity Fund (one of the Funds comprising BT Investment Funds) as
of September 30, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for the years ended September 30,
1997, 1996 and 1995 and the period November 1, 1993 (commencement of operations)
to September 30, 1994. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Pacific Basin Equity Fund of BT Investment Funds as of September 30, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for the periods referred to above, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 26, 1997
8
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC BASIN EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -------------
COMMON STOCK - 83.95%
HONG KONG - 37.58%
1,348,000 Beijing Yanhua Petrochemical Co. Ltd.-Cl. H
(Chemicals) (a). . . . . . . . . . . . . . . . . $ 540,036
32,000 Cheung Kong Holdings Ltd. (Real Estate). . . . . . 359,783
852,000 China Everbright International Ltd. (Steel) (a). . 594,572
1,154,000 China Foods Holdings Ltd. (Food) . . . . . . . . . 790,411
2,206,000 China Star Entertainment Ltd. (Distribution) (a) . 109,758
1,159,000 Companion Marble Holdings Ltd. (Building
& Construction). . . . . . . . . . . . . . . . . 197,710
514,000 Cosco Pacific Ltd. (Commercial Services) . . . . . 913,350
1,729,000 DC Finance Holdings Ltd. (Real Estate
Investment). . . . . . . . . . . . . . . . . . . 373,149
616,280 Founder Hong Kong Ltd. (Computers) . . . . . . . . 601,307
14,000 Genting International Plc. (Commercial
Services). . . . . . . . . . . . . . . . . . . . 34,860
69,000 Hong Kong Land Holdings, Ltd. (Real Estate
Investment). . . . . . . . . . . . . . . . . . . 234,600
16,000 Hutchison Whampoa Ltd. (Diversified) . . . . . . . 157,663
5,256,864 Moulin International Holding Ltd. (Diversified). . 1,161,700
48,000 New World Development Co. Ltd. (Real Estate) . . . 290,308
894,450 Pacific Concord Holdings (Diversified) . . . . . . 511,494
196,000 Semi-Tech (Global) Ltd. (Electric Products). . . . 284,957
613,000 Shenyin Wanguo HK Ltd. (Diversified
Financial Services). . . . . . . . . . . . . . . 235,678
34,000 Sun Hung Kai Properties Ltd. (Real Estate) . . . . 399,845
336,000 Tai Fook Group Ltd. (Diversified Financial
Services). . . . . . . . . . . . . . . . . . . . 230,137
2,480,000 Top Glory International Holdings Ltd. (Real
Estate). . . . . . . . . . . . . . . . . . . . . 857,327
1,618,000 Wing Shan International Ltd. (Electric-
Generation). . . . . . . . . . . . . . . . . . . 418,196
2,448,000 Zhehuang Expressway Co. Ltd.-H (Traffic
Management System) (a) . . . . . . . . . . . . . 672,267
-------------
9,969,108
-------------
INDIA - 5.05%
12,400 BSES Ltd., GDR (Utility) . . . . . . . . . . . . . 255,750
4,400 Industrial Credit & Investment Corporation
of India Ltd., GDR (Financial Services). . . . . 66,770
35,834 Mahindra & Mahindra Ltd., GDR (Automobiles). . . . 418,362
9,990 Reliance Industries (Diversified) (a). . . . . . . 230,020
16,000 State Bank of India GDR (Banks). . . . . . . . . . 368,080
-------------
1,338,982
-------------
INDONESIA - 5.44%
241,000 Bank Internasional Indonesia PT (Banks). . . . . . 70,015
148,000 Daya Guna Samudera PT (Fisheries). . . . . . . . . 246,667
29,500 Gudang Garam PT (Tobacco). . . . . . . . . . . . . 85,703
35,000 Jaya Real Property PT (Real Estate). . . . . . . . 11,774
20,000 Lautan Luas PT (Chemicals) . . . . . . . . . . . . 15,902
114,000 Lippo General Insurance PT (Insurance) (a) . . . . 52,294
279,000 Lippo Securities PT (Finance). . . . . . . . . . . 40,528
4,400,000 Multipolar Corp. PT (Retail) . . . . . . . . . . . 538,225
264,000 Putra Surya Multidana PT (Finance) (a) . . . . . . 121,101
243,000 Tamara Bank PT (Commercial Banks). . . . . . . . . 148,624
101,000 Telekomunikasi Indonesia PT
(Telecommunications) . . . . . . . . . . . . . . 111,965
-------------
1,442,798
-------------
MALAYSIA - 8.31%
17,000 Amway (Malaysia) Holdings BHD (Consumer
Products). . . . . . . . . . . . . . . . . . . . 42,939
191,800 Commerce Asset Holding BHD (Banks) . . . . . . . . 215,048
84,000 Gadek (Malaysia) BHD (Diversified) . . . . . . . . 161,713
21,666 Gadek Capital BHD (Financial Services) . . . . . . 18,686
72,000 Gopeng BHD (Construction). . . . . . . . . . . . . 54,779
22,000 Kedah Cement Holdings BHD (Building
Products). . . . . . . . . . . . . . . . . . . . . 19,991
87,000 Konsortuim Perkapalan BHD
(Transportation) . . . . . . . . . . . . . . . . 171,508
71,000 Malaysia International Shipping BHD
(Transportation) . . . . . . . . . . . . . . . . 135,592
54,000 Metroplex BHD (Real Estate Investment) . . . . . . 35,595
128,000 MNI Holdings BHD (Diversified) . . . . . . . . . . 388,356
299,000 Multi-Purpose Holdings BHD (Diversified) . . . . . 222,880
72,000 PPB Oil Palms BHD (Agricultural Operations) (a). . 72,743
120,000 Rashid Hussain BHD (Financial Services). . . . . . 275,373
122,000 Tanjong Plc. (Gaming). . . . . . . . . . . . . . . 261,174
40,000 United Engineers (Malaysia) BHD
(Engineering & Construction) . . . . . . . . . . 128,138
-------------
2,204,515
-------------
PAKISTAN - 1.90%
55,400 Engro Chemicals Pakistan Ltd. (Chemicals). . . . . 205,289
63,000 Hub Power Company (Utilities) (a). . . . . . . . . 84,276
42,000 Karachi Electric Supply (Utility) (a). . . . . . . 29,415
17,830 Pakistan State Oil Co. Ltd. (Oil -
International) . . . . . . . . . . . . . . . . . 185,878
-------------
504,858
-------------
PHILIPPINES - 1.05%
288,000 Belle Corp. (Real Estate) (a). . . . . . . . . . . 37,565
2,436 Benpres Holdings Corp. GDR (Broadcast
Media) (a) . . . . . . . . . . . . . . . . . . . 11,571
89,675 International Container Terminal Services,
Inc. (Harbor Transportation) (a) . . . . . . . . 8,455
18,300 La Tondena Distillers, Inc. (Beverages). . . . . . 17,504
288,000 Marsman & Company, Inc.-B
(Pharmaceuticals) (a). . . . . . . . . . . . . . 20,870
4,080 Petron Corp. (Oil Refining). . . . . . . . . . . . 520
5,000 Philippine Long Distance Telephone Co.
(Telecommunications) . . . . . . . . . . . . . . 134,783
129 Philippine Savings Bank (Banks) (a). . . . . . . . 63
1,250 Republic Glass Holdings Corp. (Wholesale
Distributor) . . . . . . . . . . . . . . . . . . 58
31,000 San Miguel Corp.-A (Brewery) . . . . . . . . . . . 37,665
13,000 Solid Group Inc. (Diversified) . . . . . . . . . . 980
-------------
280,034
-------------
SINGAPORE - 9.16%
26,000 City Developments Ltd. (Real Estate) . . . . . . . 168,400
34,000 Development Bank of Singapore Ltd. (Banks) . . . . 347,007
47,000 Far East Levingston Shipbuilding Ltd. (Capital
Equipment) . . . . . . . . . . . . . . . . . . . 138,371
48,000 Hwa Hong Corporation Ltd. (Diversified). . . . . . 52,444
22,000 Nasteel Electronics Ltd. (Electronics) . . . . . . 20,582
82,800 Overseas-Chinese Banking Corp. Ltd. (Banks). . . . 574,210
91,800 Overseas Union Bank Ltd. (Banks) . . . . . . . . . 408,400
137,000 Parkway Holdings Ltd. (Diversified). . . . . . . . 555,708
74,000 QAF Ltd. (Food). . . . . . . . . . . . . . . . . . 50,350
26,000 Singapore Land Ltd. (Real Estate). . . . . . . . . 115,669
-------------
2,431,141
-------------
SOUTH KOREA - 9.79%
21,350 Asia Motors Co., Inc. (Auto) (a) . . . . . . . . . 65,800
5,000 Commercial Bank of Korea (Banking) . . . . . . . . 21,585
2,200 Daesang Industrials Ltd. (Food). . . . . . . . . . 188,743
15,250 Daewoo Heavy Industries (Machinery). . . . . . . . 121,333
See Notes to Financial Statements on Pages 13 and 14
9
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC BASIN EQUITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -------------
9,000 Han Kuk Paper Manufacturing Co. (Paper
Products). . . . . . . . . . . . . . . . . . . . $ 253,770
28,800 Hanil Bank (Banks) . . . . . . . . . . . . . . . . 132,511
7,800 Housing & Commercial Bank, Korea, GDR
(Banks) (a). . . . . . . . . . . . . . . . . . . 147,225
6,400 Hyundai Engineering & Construction Co.
(Building & Construction) (a). . . . . . . . . . 125,902
7,860 Hyundai Housing & Industrial Development
(Building) . . . . . . . . . . . . . . . . . . . 127,134
21,000 Hyundai Securities Co. (Finance) (a) . . . . . . . 270,820
7,271 Kookmin Bank (Banks) . . . . . . . . . . . . . . . 89,159
3,009 Kookmin Bank, GDR (Banks) (a). . . . . . . . . . . 39,117
10,360 Korea Electric Power Corp. (Electric). . . . . . . 229,845
8,865 L.G. Chemical Ltd. (Petrochemicals). . . . . . . . 143,390
12,020 L.G. International Corp. (Distribution/
Wholesale) . . . . . . . . . . . . . . . . . . . 82,761
3,350 Pohang Iron & Steel (Iron/Steel) . . . . . . . . . 265,430
2,777 Shinhan Bank (Banking) . . . . . . . . . . . . . . 23,309
103 SK Telecommunications (Telecommunications) . . . . 63,652
9,150 Sunkyong Ltd. (Distribution/Wholesale) . . . . . . 110,000
5,060 Youngone Corp. (Apparel Manufacturers) . . . . . . 96,223
-------------
2,597,709
-------------
TAIWAN - 2.90%
20,000 Asustek Computer, Inc. GDR (Computers) (a) . . . . 350,000
14,900 Siliconware Precision Industries Co. GDR
(Electronic Components) (a). . . . . . . . . . . 265,369
4,600 Synnex Technology International Corp. GDR
(Computers) (a). . . . . . . . . . . . . . . . . 153,870
-------------
769,239
-------------
THAILAND - 2.77%
40,000 BEC World Public Co. Ltd. (Diversified). . . . . . 263,687
69,700 Big C Supercenter Public Co. Ltd. (Textiles) . . . 18,691
21,200 Ch. Karnchang Public Co. Ltd. (Building &
Construction). . . . . . . . . . . . . . . . . . 47,966
33,500 Hana Microelectronics (Electronics). . . . . . . . 116,034
63,000 Phatra Thanakit Public Co. Ltd. (Financial
Services). . . . . . . . . . . . . . . . . . . . 95,028
11,600 Siam Cement Public Co. Ltd. (Building Products). . 193,117
-------------
734,523
-------------
TOTAL COMMON STOCK (Cost $27,369,620). . . . . . . . . . . . . . 22,272,907
-------------
PREFERRED STOCK CONVERTIBLE - 0.37%
SOUTH KOREA - 0.37%
20,850 L.G. Securities PN (Financial Services)
(Cost $134,108). . . . . . . . . . . . . . . . . 98,439
-------------
SOVEREIGN DEBT - 0.50%
PAKISTAN - 0.50%
130,000 Republic of Pakistan, 6.00%, 2/26/02
(Cost $130,000). . . . . . . . . . . . . . . . . 131,950
-------------
WARRANTS AND RIGHTS - 0.83%
HONG KONG - 0.75%
840,000 Cheung Kong Holdings Ltd. Warrants (Real
Estate) (a). . . . . . . . . . . . . . . . . . . 143,293
362,240 Moulin International Holding Ltd. Warrants
(Diversified) (a). . . . . . . . . . . . . . . . 23,407
117,750 Paliburg Holdings Ltd. Warrants (Real
Estate) (a). . . . . . . . . . . . . . . . . . . 12,326
67,200 Tai Fook Group Warrants (Diversified
Financial Services) (a). . . . . . . . . . . . . 19,106
-------------
198,132
-------------
INDONESIA - 0.08%
142,868 Indah Kiat Pulp & Paper Corp. PT Warrants
(Paper) (a). . . . . . . . . . . . . . . . . . . 21,410
-------------
PHILIPPINES - 0.00%
57,600 Belle Corp. Warrants (Real Estate
Development) (a) . . . . . . . . . . . . . . . . 0
-------------
TOTAL WARRANTS AND RIGHTS (Cost $180,154). . . . . . . . . . . . 219,542
-------------
TOTAL INVESTMENTS (Cost $27,813,882). . . . . . . . . . 85.65% 22,722,838
Assets in Excess of Other Liabilities . . . . . . . . . 14.35% 3,807,242
------- -------------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . 100.00% $ 26,530,080
------- -------------
------- -------------
- --------------------
(a) Non-Income Producing Security
Abbreviations:
GDR - Global Depository Receipt
BHD - Berhad
Industry Diversification (as a percentage of Total Investments):
Diversified. . . . . . . . . . . . . . . . . . . . . . . . 16.39%
Real Estate. . . . . . . . . . . . . . . . . . . . . . . . 13.29%
Banks . . . . . . . . . . . . . . . . . . . . . . . . . 11.52%
Financial Services . . . . . . . . . . . . . . . . . . . . 6.35%
Electrical . . . . . . . . . . . . . . . . . . . . . . . . 6.28%
Computers. . . . . . . . . . . . . . . . . . . . . . . . . 4.83%
Food . . . . . . . . . . . . . . . . . . . . . . . . . 4.50%
Other* . . . . . . . . . . . . . . . . . . . . . . . . . 36.84%
-------
100.00%
-------
-------
* No one industry represents more than 4% of Portfolio holdings.
See Notes to Financial Statements on Pages 13 and 14
10
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC BASIN EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at Value (Cost of $27,813,882) . . . . . . . . . . . . . . . . . $ 22,722,838
Cash* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,215,643
Receivable for Securities Sold. . . . . . . . . . . . . . . . . . . . . . . . 63,408
Dividends and Interest Receivable . . . . . . . . . . . . . . . . . . . . . . 47,627
Net Unrealized Appreciation on Forward Foreign Currency Contracts . . . . . . 3,111,583
Prepaid Expenses and Other. . . . . . . . . . . . . . . . . . . . . . . . . . 22,020
------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,183,119
------------------
LIABILITIES
Due to Bankers Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,767
Payable for Securities Purchased. . . . . . . . . . . . . . . . . . . . . . . 283,936
Net Unrealized Depreciation on Forward Foreign Currency Contracts . . . . . . 1,322,020
Accrued Expenses and Other. . . . . . . . . . . . . . . . . . . . . . . . . . 11,316
------------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,653,039
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,530,080
------------------
------------------
COMPOSITION OF NET ASSETS
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,330,339
Net Unrealized Depreciation on Investment and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,800,259)
------------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,530,080
------------------
------------------
</TABLE>
- --------------------
* Includes foreign cash of $192,711 with a cost of $199,858.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $48,652) . . . . . . . . . . . . $ 364,074
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,169
------------------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428,243
------------------
EXPENSES
Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,868
Administration and Services Fees. . . . . . . . . . . . . . . . . . . . . . . 80,289
Transfer Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,221
Professional Fees and Miscellaneous . . . . . . . . . . . . . . . . . . . . . 23,024
Trustees Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100
------------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366,502
Less Expenses Absorbed by Bankers Trust . . . . . . . . . . . . . . . . . . . 45,345)
------------------
Net Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321,157
------------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,086
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain from:
Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 1,690,994
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . 501,435
Net Change in Unrealized Depreciation on Investment and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,789,185)
------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,596,756)
------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ (2,489,670)
------------------
------------------
</TABLE>
See Notes to Financial Statements on Pages 13 and 14
11
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC BASIN EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,086 $ 142,641
Net Realized Gain from Investment and Foreign Currency Transactions . . . . . 2,192,429 1,606,317
Net Change in Unrealized Appreciation (Depreciation) on Investment and
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . (4,789,185) 584,216
------------------ ------------------
Net Increase (Decrease) in Net Assets from Operations. . . . . . . . . . . . . . (2,489,670) 2,333,174
------------------ ------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested. . . . . . . . . . . . . . . . . . . . . . . . 58,200,896 37,502,717
Value of Capital Withdrawn. . . . . . . . . . . . . . . . . . . . . . . . . . (58,790,078) (34,883,257)
------------------ ------------------
Net Increase (Decrease) in Net Assets from Capital Transactions. . . . . . . . . (589,182) 2,619,460
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (3,078,852) 4,952,634
NET ASSETS
Beginning of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,608,932 24,656,298
------------------ ------------------
End of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,530,080 $ 29,608,932
------------------ ------------------
------------------ ------------------
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for the periods indicated for the Pacific Basin Equity Portfolio.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED NOVEMBER 1, 1993
SEPTEMBER 30, (COMMENCEMENT OF
--------------------------------- OPERATIONS) TO
1997 1996 1995 SEPTEMBER 30, 1994
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . $26,530 $29,609 $24,656 $25,366
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . 0.33% 0.51% 0.87% 0.16%*
Expenses. . . . . . . . . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . 0.14% 0.11% 0.20% 0.26%*
Portfolio Turnover Rate . . . . . . . . . . . . 172% 118% 104% 40%
Average Commission Per Share**. . . . . . . . . $0.0017 $0.0049
</TABLE>
- --------------------
* Annualized
** For fiscal years beginning on or after September 1, 1995, the portfolio is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
See Notes to Financial Statements on Pages 13 and 14
12
<PAGE>
- --------------------------------------------------------------------------------
PACIFIC BASIN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Pacific Basin Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on August 6, 1993 as
an unincorporated trust under the laws of New York and commenced operations on
November 1, 1993. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. SECURITY VALUATION
The Portfolio's 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 the Portfolio assets are
valued. Short-term obligations with remaining maturities of 60 days or less are
valued at amortized cost. Other short-term debt securities are valued on a
mark-to-market basis until such time as they reach a remaining maturity of 60
days, whereupon they will be 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. SECURITY TRANSACTIONS AND INTEREST INCOME
Security 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 discount on investments. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security and foreign currency transactions of the Portfolio are
allocated pro rata among the investors in the Portfolio at the time of such
determination.
D. ORGANIZATION EXPENSES
Costs incurred by the Portfolio in connection with its organization and initial
registration are being amortized evenly over a five year period.
E. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisers, 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 Portfolio'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 Portfolio will require 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 Portfolio 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 default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
F. FOREIGN CURRENCY TRANSACTIONS
The books and records of the Portfolio are maintained in U.S. 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 respective dates of such
transactions.
G. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio may enter into forward foreign currency contracts for the purpose
of settling specific purchases or sales of securities denominated in a foreign
currency or with respect to the Portfolio's investments. The net U.S. dollar
value of foreign currency underlying all contractual commitments held by the
Portfolio 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 Portfolio, the premium
paid is recorded as an investment and marked-to-market daily to reflect the
current market value. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize 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 the Portfolio exercises a
put option, it realizes a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Portfolio exercises a call option, the cost of the security which
the Portfolio purchases upon exercise will be increased by the premium
originally paid.
I. FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date.
The Portfolio is required to deposit either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Portfolio each day, dependent 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 Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
J. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
K. OTHER
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
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to
13
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PACIFIC BASIN EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
the Portfolio in return for a fee computed daily and paid monthly at an annual
rate of 0.25 of 1% of the Portfolio's average daily net assets. For the year
ended September 30, 1997, this fee aggregated $80,289.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.75 of 1% of the
Portfolio's average daily net assets. For the year ended September 30, 1997,
this fee aggregated $240,868.
Bankers Trust has entered into a Sub-Advisory Agreement with BT Portfolio
Managers International Limited ("BT Portfolio Managers International"), a wholly
owned subsidiary of Bankers Trust Australia Limited, for Pacific Basin Equity
Portfolio. Under such Agreement, BT Portfolio Managers International receives a
fee from Bankers Trust for providing investment advice and research services,
computed daily and paid monhtly at an annual rate of 0.60 of 1% of the
Portfolio's average daily net assets.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 1.00 of 1% of the
average daily net assets of the Portfolio. For the year ended September 30,
1997, expenses of the Portfolio have been reduced by $45,345.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood Services, Inc. None of the trustees so affiliated
received compensation for services as trustee of the Portfolio. Similarly, none
of the Portfolio's officers received compensation from the Portfolio.
For the year ended September 30, 1997, the Portfolio paid brokerage commissions
of $398,743.
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 September 30, 1997, were
$50,650,466 and $52,959,804, respectively.
For federal income tax purposes, the tax basis of investments held at September
30, 1997 was $28,423,617. The aggregate gross unrealized appreciation for all
investments was $1,176,658 and the aggregate gross unrealized depreciation for
all investments was $6,877,437.
- --------------------------------------------------------------------------------
NOTE 4--OPEN FORWARD FOREIGN CURRENCY CONTRACTS
As of September 30, 1997, the Pacific Basin Equity Portfolio had the following
open forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE VALUE (US$) (DEPRECIATION) (US$)
- -------------------------------------------------------------------------------------------------------------------
SALES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HKD 73,305,215 USD 9,419,237 1/16/98 9,427,112 $ (7,875)
THB 38,354,675 USD 1,450,000 12/11/97 997,806 452,194
MYR 5,274,000 USD 2,000,000 1/22/98 1,609,399 390,601
MYR 6,805,200 USD 2,650,000 4/10/98 2,065,123 584,877
HKD 15,555,400 USD 2,000,000 4/16/98 1,994,001 5,999
IDR 5,779,200,000 USD 2,150,000 4/16/98 1,651,861 498,139
IDR 5,650,200,000 USD 2,150,000 4/16/98 1,614,989 535,011
IDR 1,805,375,000 USD 650,000 4/16/98 516,028 133,972
THB 38,354,675 USD 1,384,645 5/29/98 997,806 386,839
SGD 2,443,920 USD 1,700,000 10/17/97 1,597,960 102,040
SGD 2,728,260 USD 1,800,000 12/08/97 1,786,914 13,086
- -------------------------------------------------------------------------------------------------------------------
Total Sales $ 3,094,883
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
PURCHASES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
USD 3,750,000 HKD 29,228,625 1/16/98 3,758,825 $ 8,825
USD 2,408,500 HKD 18,714,045 1/16/98 2,406,642 (1,858)
USD 1,415,301 THB 38,354,675 12/11/97 997,806 (417,495)
USD 1,300,000 MYR 3,667,690 1/22/98 1,119,222 (180,778)
USD 350,000 MYR 1,039,500 1/22/98 317,211 (32,789)
USD 55,000 MYR 176,495 1/22/98 53,859 (1,141)
USD 500,000 IDR 1,551,000,000 4/16/98 443,320 (56,680)
USD 83,000 IDR 289,338,000 4/16/98 82,701 (299)
USD 2,155,614 IDR 5,779,200,000 4/16/98 1,651,861 (503,753)
USD 245,045 THB 6,800,000 5/29/98 176,904 (68,141)
USD 500,000 THB 17,900,000 5/29/98 465,673 (34,327)
USD 800,000 SGD 1,198,800 10/17/97 783,837 (16,163)
USD 248,000 SGD 378,547 10/17/97 247,514 (486)
USD 5,296 IDR 16,550,000 10/17/97 5,061 (235)
- ------------------------------------------------------------------------------------------------------------------
Total Sales $ (1,305,320)
- ------------------------------------------------------------------------------------------------------------------
Net Unrealized Appreciation $ 1,789,563
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
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PACIFIC BASIN EQUITY PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees and Holders of Beneficial Interest of BT Investment Portfolios:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Pacific Basin Equity Portfolio
(one of the Portfolios comprising BT Investment Portfolios) as of September 30,
1997, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for the years ended September 30, 1997, 1996
and 1995 and the period November 1, 1993 (commencement of operations) to
September 30, 1994. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Pacific Basin Equity Portfolio of BT Investment Portfolios as of September 30,
1997, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for the periods referred to above, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 26, 1997
15
<PAGE>
BT INVESTMENT FUNDS
PACIFIC BASIN EQUITY FUND
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
-------------------
For information on how to invest, shareholder
account information and current price and yield
information, please contact your relationship
manager or the BT Mutual Fund Service Center at
(800) 730-1313.
-------------------
