o BT INVESTMENT FUNDS o
LATIN AMERICAN EQUITY FUND
SEMI-ANNUAL REPORT
------------------
MARCH o 1998
<PAGE>
Latin American Equity Fund
Table of Contents
Letter to Shareholders 3
Latin American Equity Fund
Statement of Assets and Liabilities 6
Statement of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9
Latin American Equity Portfolio
Statement of Net Assets 10
Statement of Operations 11
Statements of Changes in Net Assets 12
Financial Highlights 12
Notes to Financial Statements 13
---------------------
The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed byBankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
---------------------
2
<PAGE>
Latin American Equity Fund
Letter to Shareholders
The Latin American Equity Fund (the "Fund") returned (3.28)%* for the six months
ended March 31, 1998, as compared to (12.55)% for the IFCI Latin American
Index** and (11.32)% for the Lipper Latin American Average***. Since its
inception on October 25, 1993, the Fund has delivered a total return of 54.84%
cumulatively, or 10.37% annualized, as of March 31, 1998. The Fund returned
23.88% for the year ended March 31, 1998.
MARKET ACTIVITY
In general, the Latin American markets turned in a disappointing performance
over the six months ended March 31, 1998, with each of the region's markets
declining over this period. The worst performing markets were Chile, Colombia,
Peru, and Venezuela, while Argentina and Brazil suffered smaller declines.
However, it is worth noting that most of the disappointing performance occurred
in the fourth calendar quarter and that a number of markets recovered strongly
in the first quarter of 1998. The two primary factors impacting the markets were
the Asian currency and economic crises, which increased risk premiums on Latin
American investments, and falling commodity prices, which impacted the region's
exports. The positive news is that domestic growth has resumed in a number of
Latin American countries, inflation continues to decline throughout, and
governmental policy action overall was very good following the Asian crisis.
- --------------------------------------------
Objective
Seeks 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, Latin America.
- --------------------------------------------
More specifically, Brazil was most impacted by the Asian crisis initially, as
its currency came under immense pressure following the Asian devaluations.
However, strong policy action by the Brazilian government in raising interest
rates from 20% to 40%, reducing the fiscal deficit by 2% of GDP, and enacting
administrative reforms, restored confidence in the currency rather quickly. As a
result, interest rates fell from a high of 40% in October to around 25% at the
end of quarter, and following a substantial decline in October, Brazilian
equities rallied for the next five months. Investors perceived that stocks had
become very attractively valued. Government owned utilities, such as Telebras,
recovered particularly strongly, as investors realized that these businesses
were not affected by the economic slowdown following the Asian crisis and that
strong foreign interest remained in these utilities' upcoming privatizations in
1998 and 1999.
The Mexican market turned in mixed performance over the semi-annual period. It
was strong in the fourth calendar quarter, as investors saw it as a safe haven,
protected from the Asian crisis. But then it sold off in the first quarter of
1998, as concerns evolved about its trade and fiscal accounts. The fall in oil
prices also had a significant impact on Mexico, as oil represents around 12% of
its exports and around 38% of its government's fiscal revenue. Overall, though,
the Mexican economy continued to perform strongly, supported by real wage and
employment growth. Consumer- oriented stocks outperformed the market, while
cyclical stocks were impacted by a fall in commodity prices and by a perception
that international competition would increase following the Asian currency
devaluations.
- ----------------------------------------------
Investment Instruments
Primarily common and preferred stocks,
rights, warrants, American Depository
Receipts ("ADRs") and convertible securities.
- ----------------------------------------------
The Venezuelan market was the worst performing market of the period, as it
suffered from weak oil prices. Oil is the main source of export and fiscal
revenue in Venezuela. Uncertainty about Presidential elections there further
impacted the market. The markets of Chile, Colombia, and Peru were also poor
performers. A deteriorating current account deficit resulting from a weak copper
price as well as rising interest rates negatively impacted the Chilean market.
Colombia's market was also impacted by rising interest rates, uncertainty ahead
of May's presidential election, and a fall in the price of some of its main
exports, namely coffee and oil. The Peruvian market was impacted by falling
commodity prices and the negative effects of El Nino on its economy.
INVESTMENT REVIEW
The Fund outperformed its benchmark and its category average for the period, as
it primarily benefited from both asset allocation and stock selection. For
example, the Fund benefited from an underweight position in Brazil at the start
of period and then moving to an overweight position there following the market's
large decline in October. Early in the period, we believed the market was not
discounting the potential risks related to the current account and fiscal
deficits. Once the government acted strongly following the Asian crisis, and
stocks were trading at 50-60% of pre-crisis levels, we became more comfortable
with the economic outlook and felt that a number of companies were attractively
valued. The Fund increased its exposure to both public sector utilities and
private sector companies in Brazil.
The Fund also benefited from being underweight in Chile and Colombia and from
having moved to a neutral position in Venezuela early in the fourth calendar
quarter. Towards the end of the first quarter of 1998, the Fund sold a
significant portion of its Argentine exposure, moving to an underweight
position. We feel the current level of GDP growth is unsustainable, as the trade
deficit is growing rapidly. Additionally, a couple of Argentine stocks had
appreciated significantly and were sold as they hit our price targets.
As for stock selection, the Fund is positioned in a combination of utilities and
private sector stocks in Brazil. The utilities should benefit from privatization
and a lowering of the Brazilian risk premium, while the private sector stocks
should benefit from a resumption of growth in the second half of 1998. Large
positions in utilities include such stocks as CEMIG, Petrobras, and Telebras. We
also added to the portfolio White Martins, the largest industrial gases company
in South America, and Banco Itau, a major domestic bank with a very strong
retail franchise. The Fund switched into a number of Brazilian small
capitalization stocks towards the end of the period, as they
- ----------
* Performance quoted represents past performance and is not a guarantee
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.
** 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.
3
<PAGE>
Latin American Equity Fund
Letter to Shareholders
- ---------------------------------------------
Ten Largest Stock Holdings
- ---------------------------------------------
Telefonos de Mexico SA ADR - L
- ---------------------------------------------
Grupo Industrial Bimbo SA
- ---------------------------------------------
Companhia Vale de Rio Doce ADR
- ---------------------------------------------
Banco Itau SA PN
- ---------------------------------------------
Telebras ON
- ---------------------------------------------
Companhia Energetica de Minas Gerais ADR
- ---------------------------------------------
Grupo Televisa SA ADR
- ---------------------------------------------
CRT Corp PN
- ---------------------------------------------
Quilmes Industrial SA ADR
- ---------------------------------------------
Petroleo Brasileiro SA PN
- ---------------------------------------------
have not appreciated in line with the large capitalization stocks and are
currently selling at very low valuations.
The Fund's Mexican holdings are concentrated in stocks that should benefit from
the strong domestic consumption currently taking place there. These include
Grupo Bimbo, a major Mexican food company, Grupo Televisa, the largest producer
of Spanish language programming in the world, Femsa, Mexico's second largest
brewer, and Kimberly Clark de Mexico, a major consumer products company. The
Fund also added to its portfolio Corporacion Geo, the largest low income home
builder in Mexico, as we believe it will benefit from the large pent up demand
for housing in that nation.
In Peru, the Fund holds two attractively valued mining stocks, Buenaventura and
Minsur. Buenaventura's Yanacocha mine has one of the lowest production costs for
gold in the world.
Diversification of Portfolio Investments
By Country as of March 31, 1998
(percentages are based on market value)
[PIE CHART APPEARS HERE]
Mexico 32%
Brazil 46%
U.S.A. 1%
Argentina 6%
Chile 7%
Venezuela 3%
Colombia 1%
Peru 4%
MANAGER OUTLOOK
Our outlook for the Latin American equity markets remains generally positive. In
our opinion, these markets are cheap relative to other international markets;
growth is resuming in a number of countries; and governments have responded
swiftly and strongly with policy action to deal with problems the countries have
encountered. In a number of Latin American countries, for instance, the
governments have reduced fiscal expenditures to compensate for the loss of
revenue from lower commodity prices. Our concerns going forward are a potential
rise in global interest rates, current account deficits in Argentina and Chile,
and fiscal deficits in Brazil. However, as concerns about emerging markets
dissipate, Latin American equity markets should start to post positive
performance.
Given this, we intend to keep the Fund overweight in Brazil, neutral in Mexico,
Peru, and Venezuela, and underweight in Argentina, Chile, and Colombia for the
near term. We also will maintain our focus on individual stock selection,
looking for attractively valued securities in markets where we are comfortable
with the economic outlook and investing on an opportunistic basis.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek long-term capital appreciation.
/s/ Michael Levy
________________
Michael Levy
Portfolio Manager of the
Latin American Equity Portfolio
March 31, 1998
4
<PAGE>
Latin American Equity Fund
Performance Comparison
Comparison of Change in
Value of a $10,000 Investment
in the Latin American Equity
Fund and the IFCI Latin
American Index since October 31, 1993.
- -------------------------------------
Total Return for the Period
Ended March 31, 1998
Six Months Since 10/25/93*
-3.28% 10.37%**
* 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.
- -------------------------------------
[GRAPH APPEARS HERE - SEE PLOT POINTS BELOW]
Latin American IFCI Latin
Equity Fund American Index
Oct-93 10,000 10,000
Dec-93 12,433 12,111
Mar-94 12,822 12,275
Jun-94 10,917 11,051
Sep-94 14,526 14,736
Dec-94 11,071 11,018
Mar-95 7,350 7,686
Jun-95 8,476 9,100
Sep-95 8,618 9,602
Dec-95 8,384 9,161
Mar-96 9,408 9,652
Jun-96 10,706 10,584
Sep-96 10,838 10,763
Dec-96 11,134 10,869
Mar-97 12,463 12,536
Jun-97 14,633 15,248
Sep-97 15,961 15,933
Dec-97 14,608 14,077
Mar-98 15,484 13,922
Past performance is not indicative of future performance.
5
<PAGE>
Latin American Equity Fund
Statement of Assets and Liabilities March 31, 1998 (unaudited)
<TABLE>
<S><C>
Assets
Investment in Latin American Equity Portfolio, at Value $ 30,551,853
Receivable for Shares of Beneficial Interest Subscribed 21,684
Prepaid Expenses and Other 16,609
---------------
Total Assets 30,590,146
---------------
Liabilities
Due to Bankers Trust 21,928
Payable for Shares of Beneficial Interest Redeemed 40,186
Accrued Expense and Other 14,813
---------------
Total Liabilities 76,927
---------------
Net Assets $ 30,513,219
===============
Composition of Net Assets
Paid-in Capital $ 28,758,136
Undistributed Net Investment Income 40,649
Accumulated Net Realized (Loss) from Investment and Foreign Currency Transactions (777,573)
Net Unrealized Appreciation on Investment and Foreign Currency Transactions 2,492,007
---------------
Net Assets $ 30,513,219
===============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares
outstanding) $ 15.19
===============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of beneficial
interest authorized) 2,008,867
===============
</TABLE>
- -------------------------------------------------------------------------------
Statement of Operations For the six-month period ended March 31, 1998
(unaudited)
<TABLE>
<S><C>
Investment Income
Income Allocated from Latin American Equity Portfolio, net $ 261,143
---------------
Expenses
Administration and Services Fees 143,923
Printing and Shareholder Reports 6,962
Registration Fees 3,108
Professional Fees 5,094
Trustees Fees 1,367
Miscellaneous 2,737
---------------
Total Expenses 163,191
Less Expenses Absorbed by Bankers Trust (11,693)
---------------
Net Expenses 151,498
---------------
Net Investment Income 109,645
---------------
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions
Net Realized Gain (Loss) from:
Investment Transactions 801,992
Foreign Currency Transactions (24,339)
Net Change in Unrealized Appreciation Depreciation on Investment and Foreign Currency
Transactions (3,049,095)
---------------
Net Realized and Unrealized Loss on Investment and Foreign Currency Transactions (2,271,442)
---------------
Net Decrease in Net Assets from Operations $ (2,161,797)
===============
</TABLE>
See Notes to Financial Statements on Page 9
6
<PAGE>
Latin American Equity Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
six month period year ended
ended March 31, 1998+ September 30, 1997
--------------------- ------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 109,645 $ 43,318
Net Realized Gain from Investment and Foreign Currency Transactions 777,653 6,748,749
Net Change in Unrealized Appreciation/Depreciation on Investment and
Foreign Currency Transactions (3,049,095) 3,980,334
--------------- ---------------
Net Increase (Decrease) in Net Assets from Operations (2,161,797) 10,772,401
--------------- ---------------
Distributions to Shareholders
Net Investment Income (68,996) (4,313)
--------------- ---------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 29,095,467 59,057,526
Dividend Reinvestments 41,256 2,063
Cost of Shares Redeemed (33,805,882) (49,411,389)
--------------- ---------------
Net Increase (Decrease) from Capital Transactions in Shares of Beneficial
Interest (4,669,159) 9,648,200
--------------- ---------------
Total Increase in Net Assets (6,899,952) 20,416,288
Net Assets
Beginning of Period 37,413,171 16,996,883
--------------- ---------------
End of Period $ 30,513,219 $ 37,413,171
=============== ===============
</TABLE>
- ----------
+ Unaudited
See Notes to Financial Statements on Page 9
7
<PAGE>
Latin American Equity 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 Latin American Equity Fund.
<TABLE>
<CAPTION>
For the period
For the years ended October 25, 1993
For the September 30, (Commencement of
six months ended ----------------------------- Operations) to
March 31, 1998+ 1997 1996 1995 September 30, 1994
---------------- ------ ------ ------ ------------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $15.74 $10.71 $8.50 $14.59 $10.00
Income fromInvestment Operations
Net Investment Income 0.04 0.00** 0.02 0.03 --
Net Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency Transactions (0.59) 5.03 2.19 (5.92) 4.59
Total Income (Loss) from Investment Operations (0.55) 5.03 2.21 (5.89) 4.59
Distributions to Shareholders
Net Investment Income -- 0.00** -- -- --
Net Realized Gain from Investment Transactions -- -- -- (0.20) --
Net Asset Value, End of Period $15.19 $15.74 $10.71 $8.50 $14.59
Total Investment Return 3.28% 47.00% 26.00% (40.68)% 50.01%*
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $30,513 $37,413 $16,997 $13,624 $27,489
Ratios to Average Net Assets:
Net Investment Income 0.72%* 0.16% 0.16% 0.29% 0.03%*
Expenses, Including Expenses of the
Latin American Equity Portfolio 2.00%* 2.00% 2.00% 2.00% 2.00%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.57%* 0.44% 0.66% 1.17% 1.27%*
</TABLE>
- ----------
* Annualized
** Less than $0.01
+ Unaudited
See Notes to Financial Statements on Page 9
8
<PAGE>
Latin American Equity 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 Latin American 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 October 25, 1993.
The Fund invests substantially all of its assets in the Latin American 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 March 31, 1998, the Fund's investment was
approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Statement of Net
Assets, are contained elsewhere in this report.
B. Investment Income
The Fund earns income, net of expenses, daily on its investment in the Portfolio
and is recorded on the accrual basis. 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.
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 .95% of the Fund's average daily net assets.
Amounts owed under the Administration and Services Agreement amounted to
$21,928, net of waived expenses of $2,130 at March 31, 1998.
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 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, 1998, there were no
reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to 1.00% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and 2.00% of the average daily net assets of the Fund, including expenses of the
Portfolio. For the six months ended March 31, 1998, expenses of the Fund have
been reduced by $11,693.
Certain officers of the Fund are also directors, officers and/or employees of
Edgewood. None of the officers so affiliated received compensation for services
as officers of the Fund.
The Fund is a participant with other affiliated entities in a revolving credit
facility ("the revolver") and a discretionary demand line of credit collectively
"the credit facilities" in the amounts of $50,000,000 and $100,000,000
respectively. A commitment fee of .07% per annum on the average daily amount of
the available commitment is payable on a calendar quarter basis and apportioned
equally amongst all the participants. Amounts borrowed under the credit
facilities will bear interest at a rate per annum equal to the Federal Funds
Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the period ended March 31, 1998.
Note 3--Shares of Beneficial Interest
At March 31, 1998, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
For the For the
six months ended year ended
March 31, 1998 (unaudited) September 30, 1997
-------------------------- ------------------------
Shares Amount Shares Amount
------- --------- -------- ---------
<S><C>
Sold 2,095,707 $ 29,095,467 4,496,165 $ 59,057,526
Reinvested 3,104 41,256 190 2,063
Redeemed (2,466,505) (33,805,882) (3,707,034) (49,411,389)
---------- ------------ ---------- ------------
Net Increase (Decrease) (367,694) $ (4,669,159) 789,321 $ 9,648,200
========== ============ ========== ============
</TABLE>
9
<PAGE>
Latin American Equity Portfolio
Statement of Net Assets March 31, 1998 (unaudited)
Shares Security Value
------ -------- -----
COMMON STOCKS - 68.72%
Argentina - 5.97%
25,834 Nortel Inversora SA, ADR (Telecom Services) $ 745,957
75,754 Quilmes Industrial SA, ADR (Brewery) 866,436
5,900 Telecom Argentina SA, ADR (Telephone) 211,294
-----------
1,823,687
-----------
Brazil - 17.10%
3,132 Banco Bradesco SA (Banks) 32,370
1,004 Companhia de Saneamento Basico de
Estado de Sao Paulo (Water) 229,518
13,600 Companhia Energetica de Minas Gerais,
ADR (Electric) 661,432
56,450 Companhia Paranaense de Energia, ADR
(Electric) 822,053
1,131 Companhia Paulista de Forca e Luz (Electric) 154,182
70,500 Companhia Vale de Rio Doce, ADR (Steel) 1,556,332
8,831 Telecommunicacoes Brasileiras SA Telebras,
ADR (Telecommunications) 1,146,374
397,000 White Martins SA (Chemicals) 621,513
-----------
5,223,774
-----------
Chile - 6.36%
19,860 Chilgener SA, ADR (Utility) 477,881
34,600 Embotelladora Andina, ADR (Beverages) 692,000
54,000 Quinenco SA, ADR (Diversified) (a) 664,875
5,982 Santa Isabel, ADR (Retail) 108,798
-----------
1,943,554
-----------
Colombia - 1.28%
20,000 Banco de Bogota (Commercial Banks) 129,257
109,375 Banco Industrial Colombiano (Commercial
Banks) 261,946
-----------
391,203
-----------
Mexico - 31.30%
24 Controladora de Farmacia (Retail) 13
81,200 Corporacion GEO SA de CV-Ser. B
(Real Estate Development) (a) 528,726
95,600 Corporacion Industrial San Luis, SA de CV
(Auto Parts) 483,412
97,400 Fomento Economico Mexicano, SA de CV
(Brewery) 707,346
326,000 Grupo Financiero Banorte-Ser. B (Banks) 527,811
614,800 Grupo Industrial Bimbo SA de CV-Ser. A (Food) 1,630,138
102,000 Grupo Mexico SA-Ser. L (Other) 311,140
13,800 Grupo Radio Centro SA de CV, ADR (Radio) 195,788
26,800 Grupo Televisa SA Spons, GDR (Television) 981,550
19,450 Industrias Bachoco SA, ADR (Food) (a) 325,788
51,000 Industrias Penoles SA (Other-Non-Ferrous) 212,413
163,000 Kimberly Clark De Mexico-A (Paper) 841,438
49,960 Telefonos de Mexico SA, ADR-L
(Utilities-Telecom) 2,816,495
-----------
9,562,058
-----------
Peru - 4.21%
10,560 Compania de Minas Buenaventura SA-A
(Metals and Mining) 62,610
31,016 Compania de Minas Buenaventura SA, ADR
(Metals and Mining) 509,817
3,015 Compania de Minas Buenaventura-B
(Metals and Mining) 24,968
176,415 Minsur SA (Other) 350,752
10,000 YPF, SA ADR (Oil) 340,000
-----------
1,288,147
-----------
Venezuela - 2.50%
8,400 Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecom Services) 351,225
433,516 Electricidad de Caracas (Utilities) 408,860
137 Siderurgica Venezolana Sivensa, Saica
SACA (Building and Construction) 2,356
-----------
762,441
-----------
Total Common Stocks (Cost $18,543,171) 20,994,864
-----------
Shares Security Value
------ -------- -----
PREFERRED STOCK CONVERTIBLE - 28.55%
Brazil - 28.55%
1,912 Banco Itau SA PN (Banks) $ 1,227,581
22,404 Companhia Energetica de Minas Gerais
PN (Electric) 1,087,702
37,200 Companhia Energetica do Ceara-Coelce-A
PN (Electric) (a) 143,958
6,600 Companhia Vale de Rio Doce PN (Steel) 158,470
17,900 Companhia Vale de Rio Doce-B PN (Steel) (a) --
7,352 CRT Corp., PN (Telecommunications) 924,600
262,000 Dixie Toga SA PN (Containers) 119,824
21,200 Globex Utilidades SA PN (Retail) 186,456
280,000 IKPC-Industrias Klabin de Papel e Celulose
SA PN (Paper) 201,935
64,781 Lojas Americanas SA PN (Retail) 398,828
610,800 Mesbla PN (Retail) (a) (b) --
86,255 Odebrecht SA PN (Building-Heavy Construction) 379,310
94,500 Perdigao SA PN (Food) 153,760
3,567 Petroleo Brasileiro SA Petrobras PN
(Oil-International) 850,087
4,051 Telecomunicacoes de Minas Gerais-Telemig-B
PN (Telephone) 666,259
874 Telecomunicacoes do Parana SA PN (Telephone) 484,179
4,309 Telecomunicacoes do Rio de Janeiro SA PN
(Telephone) 607,126
101,726 Usiminas PN (Steel) 823,113
14,700 Votorantim Celulose e Papel SA PN (Paper) 310,290
-----------
Total Preferred Stock Convertible (Cost $8,681,391) 8,723,478
-----------
SHORT TERM INSTRUMENTS - 1.31%
United States - 1.31%
400,665 BT Institutional Cash Management Fund,
(Cost $400,665) 400,665
-----------
Total Investments (Cost $27,625,227) 98.58% 30,119,007
Assets in Excess of Other Liabilities 1.42% 432,857
------- -----------
Net Assets 100.00% $30,551,864
======= ===========
- ----------
(a) Non-Income Producing Security
(b) Issuer in bankruptcy
The following abbreviations are used in portfolio descriptions:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
Industry Diversification (as a percentage of Total Investments):
Telecommunications 16.88%
Utilities 12.92%
Electrical 9.43%
Beverages 7.45%
Diversified 7.30%
Banks 7.16%
Food 6.93%
Paper 4.45%
Oil 3.91%
Television 3.87%
Steel 3.23%
Mining 3.12%
Building/Construction 2.99%
Auto Related 2.61%
Retail 2.28%
Other 2.11%
Chemicals and Toxic Waste 2.04%
Short Term Investment 1.32%
-------
100.00%
=======
See Notes to Financial Statements on Pages 13 and 14
10
<PAGE>
Latin American Equity Portfolio
Statement of Operations For the six months ended March 31, 1998 (unaudited)
<TABLE>
<S><C>
Investment Income
Dividends (net of foreign withholding tax of $24,022) $ 368,599
Interest 41,169
---------------
Total Investment Income 409,768
---------------
Expenses
Advisory Fees 151,716
Administration and Services Fees 30,343
Custody Transaction Fees 30,829
Professional Fees 11,586
Trustees Fees 1,045
Miscellaneous 267
---------------
Total Expenses 225,786
Less Expenses Absorbed by Bankers Trust (74,071)
---------------
Net Expenses 151,715
---------------
Net Investment Income 258,053
---------------
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions
Net Realized Gain (Loss) from:
Investment Transactions 803,120
Foreign Currency Transactions (6,820)
Net Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency
Transactions (3,010,735)
---------------
Net Realized and Unrealized (Loss) on Investments and Foreign Currency Transactions (2,214,435)
---------------
Net Decrease in Net Assets from Operations $ (1,956,382)
===============
</TABLE>
See Notes to Financial Statements on Pages 13 and 14
11
<PAGE>
Latin American Equity Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
six months year ended
ended March 31, 1998+ September 30, 1997
--------------------- ------------------
<S><C>
Increase in Net Assets from:
Operations
Net Investment Income $ 258,053 $ 318,479
Net Realized Gain from Investment and Foreign Currency Transactions 796,300 6,749,012
Net Change in Unrealized Appreciation/Depreciation on Investment and
Foreign Currency Transactions (3,010,735) 3,979,986
--------------- ---------------
Net Increase (Decrease) in Net Assets from Operations (1,956,382) 11,047,477
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested 29,136,723 59,002,666
Value of Capital Withdrawn (34,032,940) (49,696,877)
--------------- ---------------
Net Increase (Decrease) in Net Assets from Capital Transactions (4,896,217) 9,305,789
--------------- ---------------
Total Increase (Decrease) in Net Assets (6,852,599) 20,353,266
Net Assets
Beginning of Period 37,404,463 17,051,197
--------------- ---------------
End of Period $ 30,551,864 $ 37,404,463
=============== ===============
</TABLE>
- -------------------------------------------------------------------------------
Financial Highlights
Contained below are selected, ratios to average net assets and other
supplemental data for the periods indicated for the Latin American Equity
Portfolio.
<TABLE>
<CAPTION>
For the period
For the years ended October 25, 1993
For the September 30, (Commencement of
six months ended ------------------------------ Operations) to
March 31, 1998+ 1997 1996 1995 September 30, 1994
---------------- ------ ------ ------ ------------------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $30,552 $37,404 $17,051 $13,658 $27,366
Ratios to Average Net Assets:
Net Investment Income 1.70%* 1.16% 1.21% 1.27% 1.03%*
Expenses 1.00%* 1.00% 1.00% 1.00% 1.00%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.49%* 0.32% 0.31% 0.80% 0.79%*
Portfolio Turnover Rate 45% 122% 171% 161% 124%
</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.
+ Unaudited
See Notes to Financial Statements on Pages 13 and 14
12
<PAGE>
Latin American Equity Portfolio
Notes to Financial Statements (unaudited)
Note 1--Organization and Significant Accounting Policies
A. Organization
The Latin American 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
October 25, 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. Expenses are recorded as incurred. 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. 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
Net Assets 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 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. Actual results could
differ from those estimates.
13
<PAGE>
Latin American Equity 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 .20% of the Portfolio's average daily net
assets. Amounts owed under the Administration and Services Agreement amounted to
$5,071 at March 31, 1998.
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 1.00% of the Portfolio's
average daily net assets. Accrued advisory fee amounted to $14,428, net of
reimbursable expenses of $10,925 at March 31, 1998.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
1.00% of the average daily net assets of the Portfolio. For the six months ended
March 31, 1998, expenses of the Portfolio have been reduced by $74,041.
Certain trustees of the Portfolio are also directors, officers and/or employees
of Edgewood Services, Inc. None of the officers so affiliated received
compensation for services as officers of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund ("the
Fund"), an open-end management investment company managed by Bankers Trust
Company ("the Company"). The fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the fund
to the Portfolio as of March 31, 1998 amounted to $39,302 and are included in
interest income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility ("the revolver") and a discretionary demand line of credit
facility collectively ("the credit facilities") in the amounts of $50,000,000
and $100,000,000 respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a calendar quarter basis
and apportioned equally amongst all participants. Amounts borrowed under the
credit facilities will bear interest at a rate per annum equal to the Federal
Funds Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the period ended March 31, 1998.
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, 1998, were
$28,641,842 and $27,467,159, respectively.
For federal income tax purposes, the tax basis of investments held at March 31,
1998 was $27,625,227. The aggregate gross unrealized appreciation for all
investments was $4,134,250 and the aggregate gross unrealized depreciation for
all investments was $1,640,470.
Note 4--Net Assets
At March 31, 1998 net assets consisted of:
Paid-in Capital $28,060,335
Net Unrealized Appreciation on Investments,
Futures, Foreign Currencies and Forward
Foreign Currency Contracts $ 2,491,529
-----------
$30,551,864
===========
14
<PAGE>
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15
<PAGE>
BT INVESTMENT FUNDS
LATIN AMERICAN EQUITY FUND
Investment Advisor and Administrator of the Portfolio
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. This must be preceded or
accompanied by a current prospectus for the Fund.
----------------------
STA497100 (5/98)
