o BT INVESTMENT FUNDS o
-----------------------------------------------------------
GLOBAL EMERGING MARKETS
EQUITY FUND
-----------------------------------------------------------
A N N U A L R E P O R T
-----------------------------
S E P T E M B E R o 1 9 9 8
<PAGE>
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Global Emerging Markets Equity Fund
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareholders 3
Global Emerging Markets Equity 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
Report of Independent Accountants 9
Global Emerging Markets Equity Portfolio
Schedule of Portfolio Investments 10
Statement of Assets and Liabilities 11
Statement of Operations 11
Statement of Changes in Net Assets 12
Financial Highlights 12
Notes to Financial Statements 13
Report of Independent Accountants 15
-------------------
The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
-------------------
2
<PAGE>
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Global Emerging Markets Equity Fund
Letter to Shareholders
- --------------------------------------------------------------------------------
We are pleased to present you with this first annual report for the Global
Emerging Markets Equity Fund (the "Fund"), providing a review of the markets,
the Portfolio, and our outlook. Included are a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings. The Fund has not
been in operation for a full twelve months, thus, while this is an annual
report, performance is being reported for the life of the Fund as of September
30, 1998.
MARKET ACTIVITY
Equity markets in the emerging regions of Asia, Latin America, and Eastern
Europe experienced extreme weakness in recent months. This primarily reflected a
sharp reduction in investors' tolerance for risk in the uncertain global
financial environment.
The current bout of emerging market weakness began in late 1997 with the crisis
in Asia. The Asian markets fell sharply and have continued to do so in response
to weak currencies, high interest rates, financial system instability, and
slowing growth. Investors were concerned most recently that the weak Japanese
yen would force a competitive devaluation in the Chinese currency, in turn,
negatively impacting other currencies in the Asian region.
In August 1998, the risks spread to all emerging markets due to developments in
Russia. The Russian government had had severe budget funding problems based on
the short-term nature of its outstanding debt. Then, in the third calendar
quarter, the government devalued the ruble and announced a plan to restructure
its debt by exchanging short-dated Russian government securities for
longer-dated U.S. securities. This disappointed investors, who would experience
losses of around 70%. Acute political uncertainty in Russia also impacted
investor sentiment.
The worst affected emerging equity markets were generally those with current
account and budget deficits reliant on foreign capital. Countries with fixed
currency systems in Latin America, such as Argentina and Brazil, particularly
came under pressure, as speculators positioned themselves for the possibility
that these currency systems will break down.
In Europe, the Middle East, and Africa, equity markets also experienced
volatility. Investors in these markets predominantly focused on macroeconomic
developments and ignored stock specific issues. Scared by the Russian
double-tiered debacle of devaluation plus default, an emphasis was especially
being put on large debt refinancing needs, current account deficits, and
currency vulnerability.
Still, sentiment towards emerging markets improved near the end of the period,
particularly for Asia. The main catalysts for this shift were several government
actions, including:
o official intervention in the Hong Kong equity market;
o implementation of capital controls in Malaysia, which stabilized the nation's
currency and enabled some recovery in stock prices; local investors were
attracted by falling domestic interest rates and decreasing chances of foreign
selling; and
o the Federal Reserve Board's decision to officially reduce the fed funds rate
by 0.25% on September 29, 1998, reflecting its concern over developments in
global financial system instability and a possible slowdown in U.S. economic
growth.
Diversification of Portfolio Investments
By Asset Type as of September 30, 1998
(percentages are based on market value)
[PIE CHART APPEARS HERE -- SEE PERCENTAGES BELOW]
Poland 2% Turkey 2%
Hungary 3%
Philippines 4% Mexico 19%
Thailand 4%
Malaysia 5%
Hong Kong 5% Brazil 10%
Greece 6%
Taiwan 7% South Korea 9%
South Africa 7% India 9%
Argentina 8%
- --------------------------------------------------------------------------
Ten Largest Stock Holdings
- --------------------------------------------------------------------------
Telefonos de Mexico SA, ADR Pohang Iron & Steel Co., Ltd., ADR
- --------------------------------------------------------------------------
Taiwan Semiconductor Mfg. New World Infrastructure
Co. Ltd., ADR Limited
- --------------------------------------------------------------------------
Alpha Credit Bank I.T.C. Limited, GDR
- --------------------------------------------------------------------------
Companhia Energetica de Mahanagar Telephone
Minas Gerais-CEMIG, ADR. Nigam Ltd., GDR
- --------------------------------------------------------------------------
Fomento Economico Berjaya Sports Toto Bhd
Mexicano SA, ADR
- --------------------------------------------------------------------------
3
<PAGE>
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Global Emerging Markets Equity Fund
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
The Fund outperformed its benchmark and its category average, primarily due to
strong stock selection in Asia. The Fund also benefited from its underweight
positions in the EMEA (Europe, Middle East, Africa) markets, particularly South
Africa and Greece.
- ---------------------------------------------------------------------------
Period ended September 30, 1998 Cumulative Total Returns
- ---------------------------------------------------------------------------
Past 3 months and Since inception
- ---------------------------------------------------------------------------
BT Investment Global Emerging
Markets Equity Fund* -19.60%
(inception 6/30/98)
- ---------------------------------------------------------------------------
MSCI International Emerging
Market Free Index** -22.01%
- ---------------------------------------------------------------------------
Lipper Emerging Markets Average*** -23.57%
- ---------------------------------------------------------------------------
In Latin America, some early portfolio exposure to Brazil was
switched to Mexico. The uncertainty surrounding Brazil and the possibility of a
currency devaluation there has substantially increased its risk. We are more
optimistic about Mexico for several reasons:
o the free float of the currency should allow interest rates to trend down
faster
o the government has demonstrated its commitment to fiscal reform
o economic growth should still be a respectable 4% this year and 2%-3% next
year.
Portfolio positioning in Asia remains defensive. We are managing with biases
towards:
o utilities, such as telecommunication and infrastructure companies, which tend
to have more stable cash flows
o electronics companies in Taiwan, that have low cost bases and that, in our
opinion, are well positioned to benefit from U.S. outsourcing
o consumer domestic franchises with a domestic brand name, established
distribution networks, and fairly defensive natures.
The Fund currently has under 4% invested in Malaysia. We do not intend to commit
any additional allocation to this market while its capital controls remain in
place. We view the recent strength of its equity market as artificial, since it
would not have occurred without government intervention. It may not be
sustainable. While we maintain our holdings in the Malaysian market, the Fund
also has the option of selling its equity exposure and investing in Malaysian
cash, if the outlook for this equity market deteriorates.
The Fund's exposure to Russia was sold during the period, as we believe the
situation is likely to get worse before it gets better. The nation's politics
remain very uncertain, with President Yeltsin having lost a lot of credibility
over the August crisis and with its parliament having rejected the reappointment
of the former Prime Minister, Victor Chernomyrdin. The issue of the presidency,
in particular, needs to be resolved before further policy progress can be made.
New positions were established toward the end of the period in Greece, South
Africa, and Turkey. Still, the Fund remains underweighted in these markets.
The Fund is also holding a relatively high cash level due to the current
uncertain global environment overall.
MANAGER OUTLOOK
Although recent U.S. interest rate reductions have provided some support to
emerging equity markets, we believe the major near-term risks to performance in
these markets are further weaknesses in the Japanese economy and the currency
pressures in Brazil. A devaluation in Brazil could lead to another round of
destabilizing currency falls throughout the emerging regions. So, too, could
fears of a significant slowdown in the U.S. economy.
In Asia, sentiment has improved markedly due to government intervention and the
recent strength of the yen. The latter has even taken pressure off other
currencies in the region and improved the relative competitiveness of countries
like Taiwan and Korea that compete directly with Japan. However, Asian economies
are likely to remain weak in the coming year, which, in turn, will constrain
earnings growth.
Given these global factors, we believe that emerging equity markets overall will
continue to be volatile and constrained by weak growth, currency pressures,
political instability, and a lack of support from international investors.
However, sentiment could improve sharply if further policy responses are
announced by the major developed economies.
We will continue to monitor economic conditions and their effect on financial
markets as we seek long-term capital growth.
We value your support of the Global Emerging Markets Equity Fund and look
forward to serving your investment needs in the years ahead.
/s/ Paul Durham
_______________
Paul Durham
Portfolio Manager of the
Global Emerging Markets Equity Portfolio
September 30, 1998
- ---------------
* 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.
** Indices 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.
4
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Fund
Statement of Assets and Liabilities September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Assets
Investment in Global Emerging Markets Equity Portfolio, at Value $ 1,939,763
Prepaid Expenses 13,722
Receivable from Bankers Trust 397
------------
Total Assets 1,953,882
------------
Liabilities
Accrued Expenses and Other 16,624
------------
Total Liabilities 16,624
------------
Net Assets $ 1,937,258
============
Composition of Net Assets
Paid-in Capital $ 2,331,479
Undistributed Net Investment Income 7,000
Accumulated Net Realized Loss from Investment, Foreign Currency and
Forward Foreign Currency Transactions (45,776)
Net Unrealized Depreciation on Investment, Foreign Currency and
Forward Foreign Currency Contracts (355,445)
------------
Net Assets $ 1,937,258
============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares outstanding) $ 8.04
============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) 240,916
============
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations For the period June 30, 1998* through September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Investment Income
Income Allocated from Global Emerging Markets Equity Portfolio, net $ 9,478
---------------
Expenses
Administration and Services Fees 3,459
Printing and Shareholder Reports 8,550
Registration Fees 2,677
Professional Fees 5,650
Trustee Fees 846
Miscellaneous 861
---------------
Total Expenses 22,043
Less Expenses Absorbed by Bankers Trust (18,969)
---------------
Net Expenses 3,074
---------------
Net Investment Income 6,404
---------------
Realized and Unrealized Gain (Loss) on Investment, Foreign Currency
and Forward Foreign Currency Contracts
Net Realized Gain (Loss) from:
Investment Transactions (144,545)
Foreign Currency Transactions 4,719
Forward Foreign Currency Transactions (4,123)
Net Change in Unrealized Appreciation/Depreciation on Investment, Foreign Currency and
Forward Foreign Currency Contracts (355,445)
---------------
Net Realized and Unrealized Loss on Investment, Foreign Currency and
Forward Foreign Currency Contracts (499,394)
---------------
Net Decrease in Net Assets from Operations $ (492,990)
===============
</TABLE>
- ----------
* Commencement of operations
See Notes to Financial Statements on Page 8
5
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
June 30, 1998*
through
September 30, 1998
------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 6,404
Net Realized Loss from Investment, Foreign Currency and
Forward Foreign Currency Transactions (143,949)
Net Change in Unrealized Appreciation/Depreciation on Investment, Foreign Currency
and Forward Foreign Currency Contracts (355,445)
----------------
Net Decrease in Net Assets from Operations (492,990)
----------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 2,586,798
Cost of Shares Redeemed (156,550)
----------------
Total Increase from Capital Transactions in Shares of Beneficial Interest 2,430,248
----------------
Total Increase in Net Assets 1,937,258
Net Assets
Beginning of Period --
----------------
End of Period (including undistributed net investment income of $7,000) $ 1,937,258
================
</TABLE>
- ----------
* Commencement of operations
See Notes to Financial Statements on Page 8
6
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets 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 period
indicated for the Global Emerging Markets Equity Fund.
<TABLE>
<CAPTION>
For the period
June 30, 1998**
through
September 30,
1998
---------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 10.00
-------
Income from Investment Operations
Net Investment Income 0.03
Net Realized and Unrealized Loss on Investment, Foreign Currency, and
Forward Foreign Currency Contracts (1.99)
-------
Total Loss from Investment Operations (1.96)
-------
Net Asset Value, End of Period $ 8.04
=======
Total Investment Return (19.60)%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $1,937
Ratios to Average Net Assets:
Net Investment Income* 1.67%
Expenses, Including Expenses of the
Global Emerging Markets Portfolio* 1.90%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust* 10.64%
</TABLE>
- ---------
* Annualized
** Commencement of operations
See Notes to Financial Statements on Page 8
7
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a Massachusetts business trust
under the laws of the Commonwealth of Massachusetts. Global Emerging Markets
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 June 30, 1998. The Fund invests substantially all of its assets in the Global
Emerging Markets Equity Portfolio (the "Portfolio"). The Portfolio is an
open-end management investment company registered under the Act. The Fund seeks
to achieve its investment objective by investing all of its investable assets in
the Portfolio. The value of such investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. At September 30,
1998, the Fund's investment was approximately 99% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
B. Investment Valuation
Valuation of securities by the Portfolio is discussed in Note 1A of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. 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.
D. Distributions
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
differences in the characterization and allocations of certain income and
capital gains determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. For the period
ended September 30, 1998, the Global Emerging Markets Equity Fund reclassified
$596 from paid-in capital to undistributed net investment income and $98,173
from paid-in capital to accumulated net realized loss. The Fund had a capital
loss carry forward in the amount of $45,776 expiring in 2006.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of
each 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 the Funds. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
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 .90% of the Fund's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to 0.80% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and 1.90% of the average daily net assets of the Fund, including expenses of the
Portfolio.
The Trust has entered into a distribution agreement with ICCDistributors, Inc.
("ICC") under which ICCwill serve as distributor for shares sold on behalf 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 among 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 year ended September 30, 1998.
Note 3--Shares of Beneficial Interest
At September 30, 1998, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
For period June 30, 1998
(Commencement of Operations)
to September 30, 1998
----------------------------
Shares Amount
-------------- -------------
Sold 261,126 $2,586,798
Reinvested -- --
Redeemed (20,210) (156,550)
------- ----------
Net Increase 240,916 $2,430,248
======= ==========
Note 4--Risks of Investing in Emerging Markets
The risks involved when investing in emerging markets are of a nature generally
not encountered when investing in securities traded on major international
markets.
Investment in securities of issuers based in underdeveloped emerging markets
involves special risks and considerations not typically associated with
investing in U.S. companies. These risks include: (i) greater risks of
expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (ii) the smaller size of the market for such
securities and a low or nonexistent volume of trading, resulting in lack of
liquidity and in price volatility. Additionally, developments affecting emerging
market investments cannot always be foreseen.
8
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of BT Investment Funds and Shareholders of
Global Emerging Markets Equity Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Global Emerging Markets Equity Fund (one of the funds comprising of BTInvestment
Funds hereafter referred to as the "Fund") at September 30, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for the period June 30, 1998 (commencement of operations) through
September 30, 1998, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at
September 30, 1998 by correspondence with the transfer agent, provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 6, 1998
9
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Portfolio
Schedule of Portfolio Investments September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S><C>
COMMON STOCKS - 77.59%
Argentina - 5.93%
6,950 Quilmes Industrial Quins, ADR $ 56,903
2,300 Y.P.F. Sociedad Anonima, ADR 59,800
----------
116,703
----------
Brazil - 7.61%
4,142 Companhia Energetica de Minas
Gerais-CEMIG, ADR. 91,594
4,050 Companhia Vale do Rio Doce, ADR 58,089
----------
149,683
----------
Greece - 4.74%
1,255 Alpha Credit Bank 93,324
----------
Hong Kong - 4.09%
78,000 New World Infastructure Limited (a) 80,533
----------
Hungary - 2.25%
2,300 Mol Magyar Olaj-es, GDR 144A (b) 44,275
----------
India - 7.03%
3,500 I.T.C. Limited, GDR 70,000
5,760 Mahanagar Telephone Nigam Ltd.,
GDR 68,400
----------
138,400
----------
Malayasia - 3.47%
125,000 Berjaya Sports Toto Bhd(+) (c) 68,181
----------
Mexico - 15.06%
4,420 Fomento Economico Mexicano SA, ADR 86,742
2,900 Grupo Televisa SA, GDR (a) 56,006
3,470 Telefonos de Mexico SA, ADR 153,547
----------
296,295
----------
Philippines - 3.01%
2,800 Philippine Long Distance Telephone 59,218
----------
Poland - 1.79%
3,440 Bank Handlowy W. Warszawie 35,260
----------
South Africa - 5.55%
13,801 ABSA Group Limited 50,266
3,908 South African Breweries Limited 58,930
----------
109,196
----------
South Korea - 7.12%
5,900 Pohang Iron & Steel Co., Ltd.,
ADR 81,493
8,300 SK Telecom Co. Ltd., ADR 58,618
----------
140,111
----------
Taiwan - 5.03%
8,070 Taiwan Semiconductor Mfg. Co.
Ltd., ADR (c) $ 98,857
----------
Thailand - 3.30%
21,000 Shinawatra Computer Public Co.,
Ltd. 64,942
----------
Turkey - 1.61%
2,190,000 Hurriyet Gazetecilik ve
Matbaacilik AS 31,596
----------
Total Common Stocks (Cost $1,879,466) 1,526,574
----------
Total Investments (Cost $1,879,466) 77.59% $1,526,574
Other Assets in Excess of Liabilities 22.41% 440,969
------ ----------
Net Assets 100.00% $1,967,543
====== ==========
</TABLE>
- -----------
(a) Non-Income Producing Security
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. This Security may be resold in transactions exempt from registrations,
normally to qualified institutional buyers.
(c) Illiquid security
(+) Security has been fair valued as of September 1, 1998, the repatriation of
proceeds received from the sale of these securities has been blocked until at
least 9/1/99. These securities are considered illiquid and are being fair valued
using methods determined in good faith by the valuation committee of the Board
of Trustees. See footnote 1.
The following abbreviations are used in portfolio descriptions:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
Industry Diversification (as a percentage of Total Investments):
(Unaudited)
% of
Industry Market Value
- -------- ------------
Banks 6.11%
Beverages 9.54%
Brewery 3.73%
Bridge & Tunnel 5.28%
Broadcasting 3.67%
Computer Services 4.25%
Consumer Services 3.29%
Diversified 4.47%
Electronics 6.48%
Holding Company 4.59%
Metals & Mining 3.81%
Miscellaneous 8.31%
Oil - International 6.82%
Printing & Publishing 2.07%
Steel 5.34%
Telecommunications 22.24%
------
100.00%
======
See Notes to Financial Statements on Pages 13 and 14
10
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Portfolio
Statement of Assets and Liabilities September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Assets
Investments, at value (cost of $1,879,466) $ 1,526,574
Cash* 576,238
Dividends Receivable 4,387
Net Unrealized Appreciation on Forward Currency Contracts 4,833
Receivable for Securities Sold 135,750
Receivable from Bankers Trust 50,336
---------------
Total Assets 2,298,118
---------------
Liabilities
Payable for Securities Purchased 301,916
Net Unrealized Depreciation on Forward Currency Contracts 5,602
Accrued Expenses and Other 23,057
---------------
Total Liabilities 330,575
---------------
Net Assets $ 1,967,543
===============
Composition of Net Assets
Paid-in Capital $ 2,323,806
Net Unrealized Depreciation on Investments, Foreign Currencies and
Forward Foreign Currency Contracts (356,263)
---------------
Net Assets $ 1,967,543
===============
</TABLE>
- ------------
* Includes Foreign Cash of $117,072 with a cost of $119,003.
- --------------------------------------------------------------------------------
Statement of Operations For the period June 30, 1998* through September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Investment Income
Dividends (net of foreign withholding tax of $23) $ 7,408
Interest 6,648
---------------
Total Investment Income 14,056
---------------
Expenses
Advisory Fees 4,542
Administration and Services Fees 619
Professional Fees 22,200
Trustees Fees 706
Miscellaneous 36
---------------
Total Expenses 28,103
Less Expenses Absorbed by Bankers Trust (23,561)
---------------
Net Expenses 4,542
---------------
Net Investment Income 9,514
---------------
Realized and Unrealized Gain (Loss) on Investments, Foreign Currencies,
and Forward Foreign Currency Contracts
Net Realized Gain (Loss) from:
Investment Transactions (146,204)
Foreign Currency Transactions 4,771
Forward Foreign Currency Transactions (4,127)
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign Currencies and
Forward Foreign Currency Contracts (356,263)
---------------
Net Realized and Unrealized Loss on Investments, Foreign Currencies and
Forward Foreign Currency Contracts (501,823)
---------------
Net Decrease in Net Assets from Operations $ (492,309)
===============
</TABLE>
- --------------
* Commencement of operations
See Notes to Financial Statements on Pages 13 and 14
11
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
June 30, 1998*
through
September 30, 1998
------------------
<S><C>
Increase in Net Assets from:
Operations
Net Investment Income $ 9,514
Net Realized Loss from Investment, Foreign Currency, and
Forward Foreign Currency Transactions (145,560)
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign Currencies,
and Forward Foreign Currency Contracts (356,263)
----------------
Net Decrease in Net Assets from Operations (492,309)
----------------
Capital Transactions
Proceeds from Capital Invested 2,616,975
Value of Capital Withdrawn (157,122)
----------------
Net Increase in Net Assets from Capital Transactions 2,459,853
----------------
Total Increase in Net Assets 1,967,543
Net Assets
Beginning of Period --
----------------
End of Period $ 1,967,543
================
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for the period indicated for the Global Emerging Markets Equity Portfolio.
<TABLE>
<CAPTION>
For the period
June 30, 1998**
through
September 30,
1998
---------------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $1,968
Ratios to Average Net Assets:
Net Investment Income* 2.30%
Expenses* 1.10%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust* 5.71%
Portfolio Turnover Rate 38%
</TABLE>
- -----------
* Annualized
** Commencement of operations
See Notes to Financial Statements on Pages 13 and 14
12
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Global Emerging Markets 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 is a subtrust or "series" of BT
Investment Portfolios. The BT Investment Portfolios were organized on October 8,
1997 as a master trust under the laws of The State of New York and commenced
operations on June 30, 1998. 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 debt securities are valued at market value until such time as
they reach a remaining maturity of 60 days, whereupon they are valued at
amortized cost using their value on the 61st day. All other securities and other
assets are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees. At
September 30, 1998 the total value of fair valued securities was $68,181.
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 Adviser, 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 marked-to-market daily to reflect the
current market value. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain or
loss depending on whether the sale proceeds from the closing sale transaction
are greater or less than the cost of the option. When the Portfolio exercises a
put option, it realizes a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Portfolio exercises a call option, the cost of the security which
the Portfolio purchases upon exercise will be increased by the premium
originally paid.
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 make initial margin deposits either in cash or
securities in an amount equal to a certain percentage of the contract amount.
Variation margin 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
The Portfolio is considered a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
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.
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 .15% of the Portfolio's average daily net
assets.
13
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity Portfolio
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 1.10% of the Portfolio's
average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
1.10% of the average daily net assets 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.
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 among 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 year ended September 30, 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 year ended September 30, 1998, were
$2,660,857 and $635,186, respectively.
For federal income tax purposes, the tax basis of investments held at September
30, 1998 was $1,980,333. The aggregate gross unrealized appreciation for all
investments was $21,693 and the aggregate gross unrealized depreciation for all
investments was $475,452.
Note 4--Open Forward Foreign Currency Contracts
As of September 30, 1998, the Global Emerging Markets Portfolio had the
following open forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation) (US$)
- -------------------------------------------------------------------------------------------------------------------
<S><C>
Sales
- -------------------------------------------------------------------------------------------------------------------
BRL 301,735 USD 233,000 12/09/98 235,118 (2,118)
HKD 70,000 USD 8,980 10/27/98 9,021 (41)
HKD 252,025 USD 32,529 10/27/98 32,477 52
HKD 720,845 USD 91,200 12/22/98 92,473 (1,273)
KRW 392,000,000 USD 280,000 02/10/99 279,103 897
PHP 2,840,000 USD 63,592 09/28/98 65,287 (1,695)
PHP 1,212,300 USD 27,000 11/16/98 27,350 (350)
THB 1,694,950 USD 42,228 01/29/99 42,353 (125)
- -------------------------------------------------------------------------------------------------------------------
Total Sales (4,653)
- -------------------------------------------------------------------------------------------------------------------
Purchases
- -------------------------------------------------------------------------------------------------------------------
HKD 275,275 USD 35,000 10/27/98 35,474 474
HKD 7,775 USD 1,000 10/27/98 1,002 2
HKD 38,975 USD 5,014 10/27/98 5,023 9
HKD 720,845 USD 92,455 12/22/98 92,473 18
KRW 185,115,000 USD 129,000 02/10/99 131,801 2,801
KRW 70,500,000 USD 50,000 02/10/99 50,196 196
PHP 2,220,000 USD 50,650 10/01/98 51,034 384
- -------------------------------------------------------------------------------------------------------------------
Total Purchases 3,884
- -------------------------------------------------------------------------------------------------------------------
Net Depreciation (769)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
BRL -- Brazilian Real
HKD -- Hong Kong Dollar
PHP -- Philippines Peso
KRW -- South Korean Won
THB -- Thai Baht
USD -- U.S. Dollar
Note 5--Risks of Investing in Emerging Markets
The risks involved when investing in emerging markets are of a nature generally
not encountered when investing in securities traded on major international
markets.
Investment in securities of issuers based in underdeveloped emerging markets
involves special risks and considerations not typically associated with
investing in U.S. companies. These risks include: (i) greater risks of
expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (ii) the smaller size of the market for such
securities and a low or nonexistent volume of trading, resulting in lack of
liquidity and in price volatility. Additionally, developments affecting emerging
market investments cannot always be foreseen.
14
<PAGE>
- --------------------------------------------------------------------------------
Global Emerging Markets Equity
Portfolio Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of BT Investment Portfolios and Holders of
Beneficial Interest of the Global Emerging Markets Equity Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Global Emerging Markets Equity
Portfolio (one of the portfolios comprising BT Investment Portfolios, hereafter
referred to as the "Portfolio") at September 30, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
period June 30, 1998 (commencement of operations) through September 30, 1998, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at
September 30, 1998 by correspondence with the custodian and brokers, provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 6, 1998
15
<PAGE>
BT INVESTMENT FUNDS
GLOBAL EMERGING MARKETS EQUITY FUND
Investment Advisor and Administrator of the Portfolio
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
P.O. Box 7558
Portland, ME 04112-9892
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
-------------------
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.
-------------------
STA809200 (9/98)
Global Emerging Markets Equity CUSIP #055922678
