<PAGE>
- BT INVESTMENT FUNDS -
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD
SECURITIES FUND
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
------------------
MARCH-1997
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS. . . . . . . . . . . . . . . . . . 3
GLOBAL HIGH YIELD SECURITIES FUND
Statement of Assets and Liabilities. . . . . . . . . . 5
Statement of Operations. . . . . . . . . . . . . . . . 5
Statement of Changes in Net Assets . . . . . . . . . . 6
Financial Highlights . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements. . . . . . . . . . . . . 8
GLOBAL HIGH YIELD SECURITIES 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
2
<PAGE>
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GLOBAL HIGH YIELD SECURITIES FUND
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to present you with this semi-annual report for the Global High
Yield Securities 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 Global High Yield Securities Fund (the "Fund") had a total return of 7.76%*
for the six months ended March 31, 1997, as compared to 4.14% for the Fund's
benchmark and just 1.78% for the Lipper Global Income Average**. The benchmark
is now calculated using the performances of three appropriate indices in the
following proportions: J.P. Morgan Emerging Markets Bond Index, 1/3; Merrill
Lynch High Yield Master Index, 1/3; and J.P. Morgan Global Government Bond
Index, 1/3+. Since its inception on December 14, 1993, the Fund has returned
42.58% cumulatively, or 11.37% annualized. The Fund returned 19.26% for the year
ended March 31, 1997.
MARKET ACTIVITY
Overall, spreads in the global high yield market continued to tighten in the
fourth calendar quarter of 1996 as they had for much of the previous period, and
then they widened out considerably at the end of the first quarter of 1997.
Correspondingly, both the emerging markets and U.S. high yield markets posted
strong returns in the first part of the Fund's semi-annual period and then were
negatively impacted in March. The overriding influence was the increasing
expectation that the U.S. Federal Reserve Board would raise interest rates to
quell nascent inflation pressures. The Fed finally took action on March 25,
1997, increasing the Fed Funds rate by 0.25% to 5.50%.
OBJECTIVE
Seeks a high level of current income, with a secondary
objective of capital appreciation, through investments in
the global high yield debt markets.++
U.S. MARKET
In December, U.S. high yield market returns strongly outperformed U.S.
Treasuries, and spreads tightened. By the end of 1996, the spread of the
Merrill Lynch High Yield Master Index, which measures U.S. high yield
securities, was close to all-time low levels. The increase in short-term
interest rates by the Federal Reserve Board and the concern that the Fed will
act again impacted U.S. high yield prices negatively at the end of March, as
investors started discounting the effect of rate rises on cash flow growth and
credit quality.
EMERGING MARKETS
The emerging markets' performance was definitely mixed during the Fund's
semi-annual period. The Latin American markets performed well early in the
period, with Brazil posting the strongest performance. But then, as investors
focused on the rate increase by the U.S. Federal Reserve Board, the markets as a
whole weakened. Local factors impacted as well. For example, Mexico was
weaker, as investors' concerns about the decertification proceedings in the U.S.
Congress dominated. Venezuelan debt was also weaker, primarily due to lower oil
prices and substantial wage increases that dampened investor enthusiasm for the
country. Argentina and Brazil outperformed the other major Latin debt markets
based on anticipation of April 2 credit quality upgrades by Standard & Poor's.
INVESTMENT INSTRUMENTS
Primarily high yield, non-investment grade debt securities
issued in many of the world's securities markets.
Similarly, Eastern European issues performed strongly in 1996 and then weakened.
In Russia, spreads widened as concerns over the timing of their debt
restructuring closing outweighed positive political and economic news. The
positive news included rising international reserves and the economic reform
program taking another step forward when Yeltsin replaced most of his cabinet
with pro-reformers. More potentially good news in the region included the
International Monetary Fund announcement of a loan facility for Bulgaria,
predicated on the establishment of a currency board, additional privatizations,
and other economic reforms.
- --------------------------------------------------------------------------------
DIVERSIFICATION OF PORTFOLIO INVESTMENTS
BY COUNTRY AS OF MARCH 31, 1997
(PERCENTAGES ARE BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
[CHART]
China 4% Bulgaria 4%
South Africa 4% Thailand 4%
Venezuela 5% Indonesia 3%
Hong Kong 7% Morocco 3%
Argentina 8% Other 12%
Brazil 12% United States 21%
Mexico 13%
The South African Financial & Industrial Index+ was down for the first part of
the semi-annual period and up in the second part. The South African All Share
Index+ performed poorly virtually throughout. The rand was up versus the
dollar, gross reserves increased, and inflation remained high.
The Asian markets were generally lackluster. Spreads throughout the region
widened, as the U.S. Treasury market sold off and weak U.S. -based holders of
Asian securities sold their Asian positions.
INVESTMENT REVIEW
As indicated in our last report, the Fund is structured to outperform in down
markets, and so it did. In fact, the Fund significantly outper-
- ------------------------
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Sevices, Inc. as
falling into the respective categories indicated. These figures do not
reflect sales charges.
+ Indexes are unmanaged, and investments cannot be made in an index.
++ Foreign investing involves special risks, including currency risk,
increased volatility of foreign securities and differences in auditing and
other financial standards. Lower rated bonds involve a higher degree of
risk than investment grade bonds in return for higher yield potential.
3
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GLOBAL HIGH YIELD SECURITIES FUND
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
formed both its benchmark and its category average. This was primarily due to
strong corporate credit and individual issue selection as well as above-average
asset allocation.
In the U.S. market, the Fund remained sheltered in higher quality issuers with
limited downside potential. We also were invested in some of the lower rated,
higher yielding zero coupon bonds, as we believe the liquidity-driven rally had
caused some of the middle credit quality issues to become overvalued.
The Fund continued to hold Latin American positions, particularly in Mexico and
Brazil, and to favor sovereign issues over corporates. In Eastern Europe, the
Fund's Russian Vnesheconom loans performed particularly strongly, and we
continued to find value in Bulgarian Brady bonds. The Fund's South African
positions were down slightly in December due to the weaker equity market,
however overall we outperformed the Indices due to strong capital appreciation
from our Trans Zambezi and Sechaba positions. The Fund's Asian holdings were up
slightly, with appreciation in selected positions offsetting the lackluster
markets. In particular, the "Finance One 2% '01" convertible bonds in Thailand
moved up as the company moved closer to completing its merger with Thai Danu
Bank, a conservative local bank. With these bonds yielding substantially more
than Treasuries, we believe that this will be one of our best investments in
Asia.
MANAGER OUTLOOK
Going forward, we believe that the U.S. and emerging market high yield markets
will continue to be highly influenced by the actions of the Federal Reserve
Board. Since it is likely that the Fed will stay in its tightening phase
through the spring and summer, we remain cautious for the near term. We intend
to maintain our barbell approach to the U.S. market, i.e. overweighted in both
the higher quality and lower rated issues, as we feel the middle range remains
vulnerable to further price weakness. We would look to buy issues in this range
only on a highly opportunistic basis.
For a number of reasons, we intend to use this same individual issue selection
strategy for the emerging markets as well. First, any real or anticipated
Federal Reserve Board action has an effect on the international markets.
Second, we see specific opportunities in markets such as Poland, which was
upgraded last year, and Romania, which remains on an investment-grade track.
Third, there remain uncertainties over local elections in many parts of the
world, which could cause near-term volatility.
We will, of course, continue to monitor economic conditions and how they affect
the financial markets, as we seek a high level of current income, with capital
appreciation as a secondary objective.
We value your ongoing support of the Global High Yield Securities Fund and look
forward to continuing to serve your investment needs in the years ahead.
/s/ Stephen C. Friedheim
/s/ David A. Reiss
Stephen C. Friedheim and David A. Reiss
PORTFOLIO MANAGERS OF THE
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
March 31, 1997
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL HIGH YIELD
SECURITIES FUND AND THE BLENDED JP MORGAN EMERGING BOND/MERRILL LYNCH HIGH
YIELD/JP MORGAN GLOBAL GOVERNMENT BOND INDEX SINCE DECEMBER 31, 1993.
-------------------------------------------
Total Return for the Period
Ended March 31, 1997
Six months Since 12/14/93*
7.76% 42.58%
* The Fund's inception date.
Investment return and principal value
may fluctuate so that shares, when
redeemed, may be worth more or less
than their original cost.
-------------------------------------------
[GRAPH]
Global High Yield Securities Fund - $14,216
JPM EMBI/ML High Yield/JPM GGB - $13,183
Dec-93 10000 10000
Mar-94 9870 9298
Jun-94 9711 9224
Sep-94 10259 9597
Dec-94 9694 9381
Mar-95 9128 9617
Jun-95 10207 10577
Sep-95 10699 10857
Dec-95 11496 11436
Mar-96 11920 11552
Jun-96 12346 11964
Sep-96 13192 12642
Dec-96 13953 13231
Mar-97 14216 13183
Past performance is not indicative of future performance.
4
<PAGE>
<TABLE>
<CAPTION>
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GLOBAL HIGH YIELD SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investment in Global High Yield Securities Portfolio, at Value . . . . . . . . . . . . . . . . . . . . . . . . $ 23,486,823
Receivable for Shares of Beneficial Interest Subscribed. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,339
Deferred Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,835
Prepaid Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,671
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,505,668
---------------
LIABILITIES
Due to Bankers Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,814
Accrued Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,318
---------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,132
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,474,536
---------------
---------------
COMPOSITION OF NET ASSETS
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,330,912
Undistributed Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,045
Undistributed Net Realized Gain from Investments and Foreign Currency Transactions . . . . . . . . . . . . . . 631,814
Net Unrealized Appreciation on Investments and Foreign Currency Transactions . . . . . . . . . . . . . . . . . 1,459,765
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,474,536
---------------
---------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided by shares outstanding). . . . . . . $ 11.10
---------------
---------------
SHARES OUTSTANDING ($0.001 par value per share, unlimited number of shares of beneficial interest authorized). . 2,115,036
---------------
---------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income Allocated from Global High Yield Securities Portfolio, net. . . . . . . . . . . . . . . . . . . . . . . $ 835,106
---------------
EXPENSES
Administration and Services Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,655
Printing and Shareholder Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996
Registration Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,568
Professional Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,442
Trustees Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,367
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,755
---------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,783
Less Expenses Absorbed by Bankers Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,161)
---------------
Net Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,622
---------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752,484
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
Net Realized Gain (Loss) from:
Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974,553
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,444)
Net Change in Unrealized Depreciation on Investments and Foreign Currency Transactions . . . . . . . . . . . . (188,803)
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS . . . . . . . . . . . . . . . . 777,306
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,529,790
---------------
---------------
</TABLE>
See Notes to Financial Statements on Page 8
5
<PAGE>
<TABLE>
<CAPTION>
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GLOBAL HIGH YIELD SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1997+ 1996
---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 752,484 $ 1,566,619
Net Realized Gain from Investment and Foreign Currency Transactions. . . . . . . . . . . . . 966,109 855,081
Net Change in Unrealized Appreciation on Investments and Foreign Currency Transactions . . . (188,803) 1,618,682
---------------- ---------------
Net Increase in Net Assets from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 1,529,790 4,040,382
---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,289,655) (1,488,712)
Net Realized Gain from Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . (489,931) --
---------------- ---------------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,779,586) (1,488,712)
---------------- ---------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Sales of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,199,880 10,018,654
Dividend Reinvestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297,948 381,174
Cost of Shares Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,314,115) (16,324,044)
---------------- ---------------
NET INCREASE FROM CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST. . . . . . . . . . . . 4,183,713 (5,924,216)
---------------- ---------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,933,917 (3,372,546)
---------------- ---------------
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,540,619 22,913,165
---------------- ---------------
End of Period (includes undistributed net investment income of $52,045 and $589,216,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,474,536 $ 19,540,619
---------------- ---------------
---------------- ---------------
- --------------
+ Unaudited
</TABLE>
See Notes to Financial Statements on Page 8
6
<PAGE>
<TABLE>
<CAPTION>
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GLOBAL HIGH YIELD SECURITIES FUND
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 Global High Yield Securities Fund.
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 14, 1993
FOR THE SEPTEMBER 30, (COMMENCEMENT OF
PERIOD ENDED -------------------------- OPERATIONS) TO
MARCH 31, 1997+ 1996 1995 SEPTEMBER 30, 1994
----------------- ---------- ---------- --------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . $11.20 $9.78 $10.29 $10.00
---------- --------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . 0.33 0.87 0.77 0.31
Net Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency Transactions. . . . 0.43 1.30 (0.41) (0.02)
---------- --------- ---------- -----------
Total Income from Investment Operations. . . . . . . . 0.76 2.17 0.36 0.29
---------- --------- ---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . (0.61) (0.75) (0.87) --
Net Realized Gain from Investment Transactions . . . (0.25) -- -- --
---------- --------- ---------- -----------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . (0.86) (0.75) (0.87) --
---------- --------- ---------- -----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . $11.10 $11.20 $9.78 $10.29
---------- --------- ---------- -----------
---------- --------- ---------- -----------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . 7.76% 23.31% 4.28% 3.66%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . . $23,475 $19,541 $22,913 $14,738
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . 6.83%* 8.04% 8.68% 5.44%*
Expenses, including Expenses of the
Global High Yield Securities Portfolio . . . . . 1.50%* 1.50% 1.74% 1.75%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . . . . 0.71%* 1.00% 0.87% 1.08%*
- -------------------
+ Unaudited
* Annualized
</TABLE>
See Notes to Financial Statements on Page 8
7
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 Global High Yield Securities 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
December 14, 1993. The Fund invests substantially all of its assets in the
Global High Yield Securities 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 March 31, 1997,
the Fund's investment was 99.99% 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 inital
registration are being amortized evenly over a five year period.
D. DIVIDENDS
It is the Fund's policy to declare and distribute dividends quarterly 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 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 distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
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.
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 0.95 of 1% of the Fund's average daily net assets.
For the six months ended March 31, 1997, this fee aggregated $104,655.
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 1940 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 six months ended March 31, 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
1.50 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. For the six months ended March 31, 1997, expenses of the Fund
have been reduced by $36,161.
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 March 31, 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
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 (UNAUDITED) SEPTEMBER 30, 1996
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------
Sold 992,284 $ 11,199,880 955,647 $ 10,018,654
Reinvested 27,026 297,948 43,268 381,174
Redeemed (649,005) (7,314,115) (1,596,653) (16,324,044)
----------- ------------- ----------- ------------
Net Increase (Decrease) 370,305 $ 4,183,713 (597,738) $ (5,924,216)
----------- ------------- ----------- ------------
----------- ------------- ----------- ------------
8
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------- ----------- -----
CORPORATE DEBENTURES - 47.77%
CANADA - 1.13%
$ 250,000 Stone Consolidated, 10.25%, 12/15/00. . . . . . $ 264,375
-------------
CHINA - 3.58%
500,000 AES China Generating Co., 10.125%, 12/15/06 . . 522,500
50,000 Qingling Motors Ltd., 3.50%, 1/22/02. . . . . . 49,562
250,000 Zhuhai Highway Co. Ltd., 11.50%, 7/01/08 (b). . 269,448
-------------
841,510
-------------
COLOMBIA - 2.66%
500,000 Celcaribe SA, 0.00%, 3/15/04 (b) (c). . . . . . 625,000
-------------
HONG KONG - 4.19%
500,000 Lai Fung Overseas Finance Ltd., 5.75%, 1/05/98. 455,000
150,000 New World Infrastructure, 5.00%, 7/15/01. . . . 173,905
250,000 Universal Robina, 8.375%, 12/19/06. . . . . . . 247,970
100,000 Zhenhai Refining & Chemical Corp., 3.00%,
12/19/03 . . . . . . . . . . . . . . . . . . . 106,000
-------------
982,875
-------------
INDONESIA - 3.23%
500,000 Rapp International Finance, 13.25%, 12/15/05. . 505,000
250,000 Tri Polyta Finance BV, 11.375%, 12/01/03. . . . 252,500
-------------
757,500
-------------
MALAYSIA - 0.86%
250,000 Aokam Perdana Berhad, 3.50%, 6/13/04. . . . . . 201,250
-------------
MEXICO - 0.69%
150,000 Grupo Industrial Durango, 12.625%, 8/01/03. . . 162,750
-------------
PHILIPPINES - 2.32%
500,000 Buang Private Power Corp., 10.17%, 3/15/08. . . 543,750
-------------
SOUTH AFRICA - 3.46%
250,000 Liberty Life International, 6.50%, 9/30/04. . . 308,125
520,000 Samancor Overseas Financing, 7.00%, 6/30/04 . . 505,700
-------------
813,825
-------------
TAIWAN - 1.08%
250,000 Macronix International Co., 1.00%, 2/04/07. . . 254,063
-------------
THAILAND - 3.40%
840,000 Finance One Plc., 2.00%, 8/31/01. . . . . . . . 672,000
150,000 Tanayong Public Co., Ltd., 3.50%, 3/01/04 . . . 127,313
-------------
799,313
-------------
UNITED KINGDOM - 1.18%
500,000 Diamond Cable Co., 2/15/07 (c). . . . . . . . . 277,500
-------------
UNITED STATES - 19.99%
500,000 Allied Waste North America, 10.25%, 12/01/06 (b) 520,800
500,000 Cinemark USA, Inc., 9.625%, 8/01/08 . . . . . . 505,000
500,000 Empress River Casino Finance, 10.75%, 4/01/02 . 528,750
250,000 Forcenergy, Inc., 8.50%, 2/15/07 (b). . . . . . 232,500
500,000 Grand Union Co., 12.00%, 9/01/04. . . . . . . . $ 498,750
400,000 Majestic Star Casino, 12.75%, 5/15/03 . . . . . 434,000
255,000 Paging Network, 11.75%, 5/15/02 . . . . . . . . 270,937
500,000 PriCellular Corp., Cl. A, 10/01/03 (c). . . . . 450,000
250,000 Schuller International Group, 10.875%, 12/15/04 272,188
500,000 Twin Laboratories Inc., 10.25%, 5/15/06 . . . . 510,000
250,000 United Meridian Corp., 10.375%, 10/15/05. . . . 267,500
200,000 U.S. Can Corp., 10.125%, 10/15/06 (b) . . . . . 205,000
-------------
4,695,425
-------------
TOTAL CORPORATE DEBENTURES (Cost $10,995,760). . . . . . . . . $ 11,219,136
-------------
GOVERNMENT BONDS - 46.02%
ARGENTINA - 7.68%
800,000 Argentina Discount, 6.375%, 3/31/23 . . . . . . $ 647,000
242,500 Argentina FRB, Series L, 6.75%, 3/31/05 (a) . . 217,492
1,500,000 Argentina Par, Series L-GP, 5.50%, 3/31/23. . . 939,375
-------------
1,803,867
-------------
BRAZIL - 11.94%
715,891 Brazil C, 8.00%, 4/15/14 (f). . . . . . . . . . 528,864
1,321,644 Brazil C, Series L, 8.00%, 4/15/14 (f). . . . . 976,365
900,000 Brazil DCB, Series L, 6.563%, 4/15/12 (a) . . . 707,625
700,000 Brazil New Money Bond, 6.563%, 4/15/09. . . . . 591,500
-------------
2,804,354
-------------
BULGARIA - 3.55%
1,400,000 Bulgaria Discount, Series A, 6.563%, 7/28/24 (a) 833,000
-------------
MEXICO - 12.25%
1,000,000 Mexico Discount, Series B, 6.375%, 12/31/19 . . 880,000
750,000 Mexico Discount, Series D, 6.352%, 12/31/19 . . 653,437
1,900,000 Mexico Par, Series B, 6.25%, 12/31/19 . . . . . 1,344,250
-------------
2,877,687
-------------
MOROCCO - 2.95%
800,000 Morocco Reconstruction & Consolidation
Agreement, Series A, 6.375%, 1/01/09 (a). . . 692,000
-------------
PANAMA - 1.72%
505,000 Panama PDI, 6.563%, 7/17/16 . . . . . . . . . . 404,000
-------------
RUSSIA - 1.33%
400,000 Vnesheconombank Loan, 11/29/26 (e). . . . . . . 312,500
-------------
VENEZUELA - 4.60%
1,250,000 Venezuela DCB Trust, 6.50%, 12/18/07. . . . . . 1,081,250
-------------
TOTAL GOVERNMENT BONDS (Cost $9,603,517) . . . . . . . . . . . $ 10,808,658
-------------
Shares
- ------
OTHER - 3.14%
HONG KONG - 2.19%
20,000 Swire Pacific Offshore, 9.33% . . . . . . . . . $ 515,000
-------------
See Notes to Financial Statements on Pages 13 and 14
9
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
- --------- ----------- -----
MEXICO - 0.00%
1,538,000 Mexican Value Recovery Rights (d) . . . . . . . $ 0
500,000 Mexico-Ser. B Warrants (d). . . . . . . . . . . 0
------------
0
------------
SOUTH AFRICA - 0.90%
24,185 Bidvest Group Ltd. (d). . . . . . . . . . . . . 147,736
1,160 Bidvest Group Ltd. Rights . . . . . . . . . . . 74
7,435 Fedsure Holdings Ltd. . . . . . . . . . . . . . 62,239
------------
210,049
------------
UNITED STATES - 0.05%
500 IHF Holdings-Ser. I Warrants (b). . . . . . . . 12,500
------------
TOTAL OTHER SECURITIES (Cost $702,343) . . . . . . . . . . . . $ 737,549
------------
TOTAL INVESTMENTS (Cost $21,301,620) . . . . . . 96.93% $ 22,765,343
Other Assets Less Liabilities. . . . . . . . . . 3.07% 721,493
----------- ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . 100.00% $ 23,486,836
----------- ------------
----------- ------------
- ----------------------
(a) Floating rate security.
(b) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(c) Debt obligations initially issued in zero coupon form which converts to
coupon form at specified rate and date.
(d) Non-income producing security.
(e) Zero coupon.
(f) Payment-in-kind security.
See Notes to Financial Statements on Pages 13 and 14
10
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at Value (Cost of $21,301,620). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,765,343
Receivable for Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,388
Dividends, Interest Receivable and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,398
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,573,129
----------------
LIABILITIES
Due to Bankers Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,243
Due to Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,859
Accrued Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,191
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,293
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,486,836
----------------
----------------
COMPOSITION OF NET ASSETS
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,023,107
Net Unrealized Appreciation on Investment and Foreign Currency Transactions. . . . . . . . . . . . . . . . . . 1,463,729
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,486,836
----------------
----------------
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,268
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896,335
Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,597
----------------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920,200
----------------
EXPENSES
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,516
Administration and Services Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,129
Professional Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,022
Trustees Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,023
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,690
Less Expenses Absorbed by Bankers Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,707)
----------------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,983
----------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837,217
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
Net Realized Gain (Loss) from:
Investment Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 977,027
Foreign Currency Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,465)
Net Change in Unrealized Depreciation on Investments and Foreign Currency Transactions . . . . . . . . . . . . (188,017)
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS . . . . . . . . . . . . . . . . 780,545
----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,617,762
----------------
----------------
</TABLE>
See Notes to Financial Statements on Pages 13 and 14
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997+ SEPTEMBER 30, 1996
------------------ -------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 837,217 $ 1,718,740
Net Realized Gain from Investment and Foreign Currency Transactions. . . . . . . . . 968,562 859,124
Net Change in Unrealized Appreciation on Investments, Foreign Currencies and
Forward Foreign Currency Contracts . . . . . . . . . . . . . . . . . . . . . . . . (188,017) 1,621,753
----------------- -------------------
Net Increase in Net Assets from Operations . . . . . . . . . . . . . . . . . . . . . . 1,617,762 4,199,617
----------------- -------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,545,921 10,592,611
Value of Capital Withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,420,002) (18,052,538)
----------------- -------------------
Net Increase (Decrease) in Net Assets from Capital Transactions. . . . . . . . . . . . 2,125,919 (7,459,927)
----------------- -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 3,743,681 (3,260,310)
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,743,155 23,003,465
----------------- -------------------
End of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,486,836 $ 19,743,155
----------------- -------------------
----------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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 Global High Yield Securities Portfolio.
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 14, 1993
FOR THE SEPTEMBER 30, (COMMENCEMENT OF
SIX MONTHS ENDED ---------------------- OPERATIONS) TO
MARCH 31, 1997+ 1996 1995 SEPTEMBER 30, 1994
---------------- ------- ------- ------------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . $23,487 $19,743 $23,003 $14,729
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . 7.57%* 8.78% 9.63% 6.44%*
Expenses . . . . . . . . . . . . . . . . . . 0.75%* 0.75% 0.75% 0.75%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . 0.38%* 0.44% 0.45% 0.59%*
Portfolio Turnover Rate. . . . . . . . . . . . 85% 207% 169% 347%
- ------------------
+ Unaudited
* Annualized
</TABLE>
See Notes to Financial Statements on Pages 13 and 14
12
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Global High Yield Securities Portfolio (the "Portfolio") is registered under
the Investment Company Act of 1940 (the "Act"), as amended, as 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
December 14, 1992. 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 are carried at fair market value as determined by
independent pricing services at the end of each business day. 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 by 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. 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.
E. 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.
F. 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.
G. OPTION CONTRACTS
Upon the purchase of a put option or a call option by a Portfolio, the premium
paid is recorded as an investment and valued at mark-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.
H. 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.
I. 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.
J. 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.
13
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL HIGH YIELD SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.10 of 1% of the Portfolio's average daily
net assets. For the six months ended March 31, 1997, this fee aggregated
$22,129.
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 0.80 of 1% of the
Portfolio's average daily net assets. For the six months ended March 31, 1997,
this fee aggregated $88,516.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 0.75 of 1% of the
average daily net assets of the Portfolio. For the six months ended March 31,
1997, expenses of the Portfolio have been reduced $41,707.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood. 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.
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 six months ended March 31, 1997, were
$21,056,807 and $18,142,531, respectively.
For federal income tax purposes, the tax basis of investments held at March 31,
1997 was $21,364,690. The aggregate gross unrealized appreciation for all
investments was $1,630,990 and the aggregate gross unrealized depreciation for
all investments was $230,337.
NOTE 4--CREDIT RISKS
Although the Portfolio's investments are diversified, the Portfolio invests in
primarily high yield, non-investment grade debt securities issued in many of the
world's securities markets. Investments in higher yielding securities are
accompanied by a greater degree of credit risk and the risk tends to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.
14
<PAGE>
This page intentionally left blank.
15
<PAGE>
BT INVESTMENT FUNDS
GLOBAL HIGH YIELD SECURITIES 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.
----------------------------
