O BT INVESTMENT FUNDS O
LATIN AMERICAN EQUITY FUND
ANNUAL REPORT
----------------
SEPTEMBER 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
Report of Independent Accountants 11
Tax Information 11
Latin American Equity Portfolio
Schedule of Portfolio of Investments 12
Statement of Assets and Liabilities 13
Statement of Operations 13
Statements of Changes in Net Assets 14
Financial Highlights 14
Notes to Financial Statements 15
Report of Independent Accountants 17
---------------
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
We are pleased to present you with this annual report for the Latin American
Equity Fund (the "Fund"), providing a review of the markets, the Portfolio, and
our outlook as well as a complete financial summary of the Fund's operations and
a listing of the Portfolio's holdings.
MARKET ACTIVITY
In general, the Latin American equity markets had a difficult year, as events in
other parts of the globe impacted investor sentiment toward these nations'
currencies and economies.
Early in the fiscal year, Latin American equity markets weakened sharply, as
currency devaluations throughout Asia caused investors to question the stability
of Latin American currencies in general and the Brazilian real in particular.
However, prompt policy action by the Brazilian government helped to stabilize
the markets, and investor confidence throughout most of the region was rather
quickly restored. In contrast to Asia, investors were convinced that the Latin
American nations had lower current account deficits, stronger banking systems,
and governments that were willing to take appropriate action.
Equity market weakness resumed in the second half of the fiscal year in response
to several global, regional, and domestic developments. These included:
o the contagious effect and increased emerging market risk following monetary
events in Asia--especially the weakening of the Japanese yen and the possible
devaluation in China and Hong Kong
o devaluation of the ruble and default on debt in Russia, which, in turn, led to
a sharp sell-off in emerging market debt and increased the perceived risk
associated with all emerging market investments
o further deterioration in trade balances throughout the Latin American region
caused by both stronger imports and weaker commodity prices; the former was in
response to domestic consumption growth, the latter to falling oil prices
o tighter economic policy in acknowledgement of these trade problems, which
resulted in a downgrade of economic growth expectations across the region
o increased political risk, particularly in Brazil, where polls showed a decline
in the popularity of the sitting president, Mr. Cardoso, who was standing for
re-election in October.
The worst affected markets were those with current account and budget deficits
reliant on foreign capital. Countries with fixed currency systems, like Brazil
and Argentina, particularly came under pressure, as speculators positioned
themselves for the possibility that these currency systems would break down.
INVESTMENT REVIEW
While the Fund's performance was disappointing due to the developments just
described, the Fund did outperform both its benchmark and its category average
for the annual period. It is also well worth noting that the Fund's performance
is well ahead of its benchmark and its category average for the three years and
life of the Fund as of September 30, 1998.
During the annual period, the Fund primarily benefited from a combination of
strong stock selection and country allocation. For example, significantly adding
to the Fund's relative performance was our move from an overweight to an
underweight position in Brazil during the third calendar quarter.
We moved the Fund to a defensive underweight position in Brazil, because we
believe Brazilian interest rates are likely to remain high in the foreseeable
future and because economic recession is expected next year. We also remain
skeptical of the Brazilian government's ability to deliver sufficient policy
change, although we do believe that money will be made available by the
international community. Valuations in this market remain attractive and have
discounted most of this negative news, but the equity market is likely to remain
depressed until some of the current risks abate.
We recently increased the Fund's exposure to Mexico to an overweight position.
Key equity holdings include Telefonos de Mexico, a telecommunications company,
Grupo Industrial Bimbo, a packaged food company, Corporacion Geo, a construction
company, and Gruma, a consumer-based company.
The Fund is underweight in Argentina's equity market. However, we did recently
purchase YPF Sociedad Anonima, an oil and gas company. YPF is a very low cost,
efficient producer with well-respected management. Given its low valuation, we
believe it is well positioned to benefit from consolidation in the industry.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Periods ended September 30, 1998 Cumulative Total Returns Average Annual Total Returns
- ------------------------------------------------------------------------------------------------
Past 1 Past 3 Since Past 1 Past 3 Since
year years inception year years inception
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BT Investment Latin American
Equity Fund(1) (inception 10/25/93) -44.28% 3.20% -10.80% -44.28% 1.05% -2.29%
- ------------------------------------------------------------------------------------------------
IFCI Latin American Index(2) -47.32% -13.87% -16.14% -47.32% -4.85% -3.51%
- ------------------------------------------------------------------------------------------------
Lipper Latin American Average(3) -50.19% -13.52% -26.23% -50.19% -5.03% -6.24%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) This index represents the IFCILatin American Investable Regional total
return Series and represents the amount that the foreign institutional
investors might buy by the virtue of the foreign institutional restrictions
plus factor's in minimum market capitalization and liquidity screens.
Indices are unmanaged, and investments cannot be made in an index.
(3) 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 ADR Grupo Televisa SA GDR
Class L
- -------------------------------------------------------------------------
Grupo Industrial Bimbo Aracruz Cel SA Sponsored
SA Ser. A ADR
- -------------------------------------------------------------------------
Cemig SA Sponsored Corporacion Geo SA de CV
ADR Ser. B
- -------------------------------------------------------------------------
Telesp Participacoes Pfd ADR Electrobras Ord.
- -------------------------------------------------------------------------
Fomento Economico Kimberly Clark de Mexico -- A
Mexico ADR
- -------------------------------------------------------------------------
The Fund holds underweight positions in the peripheral markets of Chile,
Colombia, and Venezuela. The earnings outlook in these economies is poor due to
high interest rates, raised to support weak currencies and external deficits,
and due to their reliance on commodity exports. In Venezuela, we are also
concerned about the risks associated with the upcoming presidential election in
December. A win by Hugo Chavez would likely be interpreted very poorly by the
equity market, as he is advocating a moratorium on Venezuela's foreign debt.
MANAGER OUTLOOK
For the near term, we believe Latin American equity market performance will
continue to be volatile. Thus, the Fund is holding a reasonable cash level and
maintaining a defensive portfolio positioning. More specifically, we intend to
remain underweight in Brazil, as we feel the risks there are very high. The key
issues in Brazil going forward are two. First, whether the re-elected president,
Mr. Cardoso, can satisfy the market with a credible fiscal package needed to
stop capital outflows and prevent a devaluation in its currency, the real.
Second, the size and conditions surrounding any G7/International Monetary Fund
support program for the region. The outlook also remains cautious for Argentina
and the peripheral markets.
We are more optimistic on Mexico for several reasons. We believe the free float
of the currency will allow interest rates to trend down faster there; the
government has demonstrated its commitment to fiscal reform; and economic growth
should still be a respectable 4% this year and 2%-3% next year.
Diversification of Portfolio Investments
----------------------------------------
By Country as of September 30, 1998
(percentages are based on market value)
[Pie Chart Appears Here - See Plot Points Below]
Mexico 47%
Brazil 33%
Argentina 4%
Chile 8%
Peru 8%
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
September 30, 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 Year Ended
September 30, 1998
One Year Since 10/25/93*
-44.28% -2.29%**
* 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 - $8,920 American Index - $8,386
-------------------- ------------------------
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
JUN-98 12,661 12,177
SEP-98 8,920 8,386
.
Past performance is not indicative of future performance.
5
<PAGE>
LATIN AMERICAN EQUITY FUND
Statement of Assets and Liabilities September 30, 1998
<TABLE>
<S> <C>
Assets
Investment in Latin American Equity Portfolio, at Value $ 6,454,114
Receivable for Shares of Beneficial Interest Subscribed 33,000
Receivable from Bankers Trust 145,194
Prepaid Expenses and Other 9,822
-----------
Total Assets 6,642,130
-----------
Liabilities
Payable for Shares of Beneficial Interest Redeemed 369,883
Accrued Expense and Other 15,909
-----------
Total Liabilities 385,792
-----------
Net Assets $6,256,338
===========
Composition of Net Assets
Paid-in Capital $15,161,075
Undistributed Net Investment Income 236,669
Accumulated Net Realized Loss from Investment, Foreign Currency and
Forward Foreign Currency Transactions (7,043,870)
Net Unrealized Depreciation on Investment and Foreign Currency (2,097,536)
-----------
Net Assets $ 6,256,338
===========
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares outstanding) $ 8.75
===========
Shares Outstanding ($0.001 par value per share, unlimited number of shares of beneficial interest authorized) 715,404
===========
</TABLE>
Statement of Operations For the year ended September 30, 1998
<TABLE>
<S> <C>
Investment Income
Income Allocated from Latin American Equity Portfolio, net $ 616,975
------------
Expenses
Administration and Services Fees 243,579
Printing and Shareholder Reports 10,880
Registration Fees 8,102
Professional Fees 14,165
Trustees Fees 3,153
Organization Expenses 1,540
Miscellaneous 6,382
------------
Total Expenses 287,801
Less Expenses Absorbed by Bankers Trust (33,064)
------------
Net Expenses 254,737
------------
Net Investment Income 362,238
------------
Realized and Unrealized Gain (Loss) on Investment, Foreign Currency
and Forward Foreign Currency Contracts
Net Realized Gain (Loss) from:
Investment Transactions (5,539,202)
Foreign Currency Transactions (57,468)
Forward Foreign Currency Transactions 895
Net Change in Unrealized Appreciation/Depreciation on Investment and Foreign Currency (7,638,638)
------------
Net Realized and Unrealized Loss on Investment, Foreign Currency and Forward
Foreign Currency Contracts (13,234,413)
------------
Net Decrease in Net Assets from Operations $(12,872,175)
============
</TABLE>
See Notes to Financial Statements on Pages 9 and 10
6
<PAGE>
LATIN AMERICAN EQUITY FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 362,238 $ 43,318
Net Realized Gain (Loss) from Investment, Foreign Currency and
Forward Foreign Currency Transactions (5,595,775) 6,748,749
Net Change in Unrealized Appreciation/Depreciation on Investment
and Foreign Currency (7,638,638) 3,980,334
------------ ------------
Net Increase (Decrease) in Net Assets from Operations (12,872,175) 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 45,435,848 59,057,526
Dividend Reinvestments 41,257 2,063
Cost of Shares Redeemed (63,692,767) (49,411,389)
------------ ------------
Net Increase (Decrease) from Capital Transactions in Shares of Beneficial Interest (18,215,662) 9,648,200
------------ ------------
Total Increase (Decrease) in Net Assets (31,156,833) 20,416,288
Net Assets
Beginning of Year 37,413,171 16,996,883
------------ ------------
End of Year (Including undistributed net investment income of $236,669 and
$0, respectively) $ 6,256,338 $ 37,413,171
============ ============
</TABLE>
See Notes to Financial Statements on Pages 9 and 10
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
September 30, (Commencement of
------------------------------------ Operations) to
1998 1997 1996 1995 September 30, 1994
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 15.74 $10.71 $ 8.50 $ 14.59 $10.00
------- ------ ------ ------- ------
Income from Investment Operations
Net Investment Income 0.44 0.00** 0.02 0.03 --
Net Realized and Unrealized Gain (Loss) on
Investment, Foreign Currency and Forward
Foreign Currency Contracts (7.40) 5.03 2.19 (5.92) 4.59
------- ------ ------ ------- ------
Total Income (Loss) from Investment Operations (6.96) 5.03 2.21 (5.89) 4.59
------- ------ ------ ------- ------
Distributions to Shareholders
Net Investment Income (0.03) 0.00** -- -- --
Net Realized Gains -- -- -- (0.20) --
------- ------ ------ ------- ------
Net Asset Value, End of Period $ 8.75 $15.74 $10.71 $ 8.50 $14.59
======= ====== ====== ======= ======
Total Investment Return (44.28)% 47.00% 26.00% (40.68)% 50.01%*
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $ 6,256 $37,413 $16,997 $ 13,624 $27,489
Ratios to Average Net Assets:
Net Investment Income 1.42% 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 0.66% 0.44% 0.66% 1.17% 1.27%*
</TABLE>
- ----------
* Annualized
** Less than $0.01
See Notes to Financial Statements on Pages 9 and 10
8
<PAGE>
LATIN AMERICAN EQUITY FUND
Notes to Financial Statements Note 1--Organization and Significant Accounting
Policies
A. Organization
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The 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 September 30, 1998, the Fund's investment
was approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report 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 1B 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. Organization Expenses
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
E. 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.
F. 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 allocation of certain income and capital
gains determined annually in accordance with federal tax regulations which may
differ from generally accepted accounting principles. The Fund has a capital
loss carryforward in the amount of $749,851 expiring in 2004. In addition the
Fund has deferred post October currency losses of $46,858 and post October
capital losses of $5,564,099 to next year.
G. 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 .95% 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 0.90% 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. Prior to August 5, 1998, Bankers Trust voluntarily waived and
reimbursed 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.
The Trust has entered into a distribution agreement with ICC Distributors, 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.
9
<PAGE>
LATIN AMERICAN EQUITY FUND
Notes to Financial Statements
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:
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1998 September 30, 1997
-------------------------- ---------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 3,404,954 $ 45,435,848 4,496,165 $ 59,057,526
Reinvested 3,104 41,257 190 2,063
Redeemed (5,069,215) (63,692,767) (3,707,034) (49,411,389)
---------- ------------ ---------- ------------
Net Increase (Decrease) (1,661,157) $(18,215,662) 789,321 $ 9,648,200
========== ============ ========== ============
</TABLE>
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 effecting emerging
market investments can not always be foreseen.
10
<PAGE>
LATIN AMERICAN EQUITY FUND
Report of Independent Accountants
To the Trustees of the BT Investment Funds and Shareholders of Latin
American 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
the Latin American Equity Fund (one of the Funds comprising BT Investment 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
each of the fiscal periods presented, 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 audits. We conducted our audits 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 audits, which included
confirmation of securities at September 30, 1998 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 6, 1998
Tax Information (Unaudited) For the year ended September 30, 1998
During the year ended September 30, 1998, the Fund received income from foreign
sources in the amount of $861,816. The Fund has paid foreign taxes in the amount
of $45,111, or $0.06 per share. Such amounts are eligible for the foreign tax
credit. You should consult your tax advisor relating to the appropriate
treatment of foreign taxes paid.
11
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Schedule of Portfolio Investments September 30, 1998
Shares Security Value
------ -------- -----
COMMON STOCKS - 73.21%
Argentina - 3.97%
6,055 Nortel Inversora ADR $ 130,939
15,254 Quilmes Industrial Quins ADR 124,892
----------
255,831
----------
Brazil - 12.61%
37,997 Aracruz Cel SA - Sponsored ADR 258,854
22,004 Centrias Geradoras Do Sul B (a) 23,017
10,000 Companhia Vale de Rio Doce 107,137
11,004 Electrobras Ord 228,360
2,848 Telebras (ADR) 196,512
----------
813,880
----------
Chile - 7.26%
15,700 Banco de A. Edwards, ADR 131,487
12,600 Embotelladora Andina SP "B" (ADR) 139,388
28,500 Quinenco SA ADR 197,719
----------
468,594
----------
Colombia - 0.16%
3,387 Banco de Bogota 10,368
----------
Mexico - 42.26%
24 Controladora de Farmacia 12
131,325 Corporacion Geo SA de CV-Ser. B (a) 257,753
20,115 Fomento Economico Mexico ADR 394,757
262,730 Grupo Industrial Bimbo SA Ser. A 510,506
72,000 Grupo Mexico SA de CV-Ser. B 183,709
16,400 Grupo Televisa SA GDR (a) 316,725
69,667 Gruma SA de CV-Ser. B (a) 143,573
85,000 Kimberly Clark de Mexico-A 210,623
12,560 Telefonos de Mexico SA, ADR-Class L 555,780
23,500 TV Azteca SA de CV Spons ADR 154,219
----------
2,727,657
----------
Peru - 6.92%
27,560 Compania de Minas Buenaventura SA-A 159,716
12,215 Compania de Minas Buenaventura SA, ADR 141,999
3,015 Compania de Minas Buenaventura-B 17,769
104,985 Minsur SA "T" Ord 127,182
----------
446,666
----------
Venezuela - 0.03%
136 Siderurgica Venezolana Sivensa, Saica
SACA 2,149
----------
Total Common Stocks (Cost $6,415,473) 4,725,145
----------
Shares Security Value
------ -------- -----
PREFERRED STOCK CONVERTIBLE - 17.43%
BRAZIL - 17.43%
2,017 Petroleo Brasileiro SA Petrobras PN $ 207,588
17,900 Companhia Vale de Rio Doce-B PN (a) --
22,000 Cemig SA Sponsored ADR 486,499
17,920 Telesp Participaceos PFD ADR 430,842
----------
1,124,929
----------
Total Preferred Stock Convertible (Cost $1,587,461) 1,124,929
----------
Short Term Instruments
United States - 0.01%
532 BT Institutional Cash Management Fund,
5.39% (Cost $532) 532
----------
Total Investments (Cost $8,003,466) 90.65% $5,850,606
Other Assets in Excess of Liabilites 9.35% 603,514
------- ----------
Net Assets 100.00% $6,454,120
======= ==========
- ----------
(a) Non-Income Producing Security
The following abbreviations are used in portfolio descriptions:
ADR - American Depository Receipt
GDR- Global Despository Receipt
Industry Diversification (as percentage of Total Investments):
(Unaudited)
Telecommunications 22.46%
Metals and Mining 19.09%
Foods 11.18%
Beverages 9.13%
Television 8.05%
Paper 8.02%
Building and Construction 4.44%
Utilities 4.30%
Oil - International 3.55%
Diversified 3.38%
Financial Services 2.25%
Brewery 2.13%
Steel 1.83%
Banks 0.18%
Short Term 0.01%
-------
100.00%
=======
See Notes to Financial Statements on Pages 15 and 16
12
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Statement of Assets and Liabilities September 30, 1998
<TABLE>
<S> <C>
Assets
Investments at Value (Cost $8,003,466) $ 5,850,606
Cash* 284,216
Receivable for Securities Sold 739,355
Dividends and Interest Receivable 46,359
Due from Bankers Trust, net 1,030
-----------
Total Assets 6,921,566
-----------
Liabilities
Payable for Securities Purchased 442,889
Accrued Expense and Other 24,557
-----------
Total Liabilities 467,446
-----------
Net Assets $ 6,454,120
===========
Composition of Net Assets
Paid-in Capital $ 8,607,912
Net Unrealized Depreciation on Investments and Foreign Currencies (2,153,792)
-----------
Net Assets $ 6,454,120
===========
</TABLE>
- ----------
* Includes foreign currency of $16,957 with a cost of $17,022.
Statement of Operations For the year ended September 30, 1998
<TABLE>
<S> <C>
Investment Income
Dividends (net of foreign withholding tax of $45,111) $ 869,236
Interest 4,463
------------
Total Investment Income 873,699
------------
Expenses
Advisory Fees 256,724
Administration and Services Fees 51,345
Transaction Fees 48,781
Professional Fees 32,672
Trustees Fees 2,663
Miscellaneous 178
------------
Total Expenses 392,363
Less Expenses Absorbed by Bankers Trust (135,639)
------------
Net Expenses 256,724
------------
Net Investment Income 616,975
------------
Realized and Unrealized Gain (Loss) on Investments, Foreign Currencies and
Forward Foreign Currency Contracts
Net Realized Gain (Loss) from:
Investment Transactions (5,538,078)
Foreign Currency Transactions (58,596)
Forward Foreign Currency Transactions 895
Net Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currencies (7,638,639)
------------
Net Realized and Unrealized Loss on Investments, Foreign Currencies and
Forward Foreign Currency Contracts (13,234,418)
------------
Net Decrease in Net Assets from Operations $(12,617,443)
============
</TABLE>
See Notes to Financial Statements on Pages 15 and 16
13
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Increase in Net Assets from:
Operations
Net Investment Income $ 616,975 $ 318,479
Net Realized Gain (Loss) from Investment, Foreign Currency and
Forward Foreign Currency Transactions (5,595,779) 6,749,012
Net Change in Unrealized Appreciation/Depreciation on Investments
and Foreign Currencies (7,638,639) 3,979,986
------------ ------------
Net Increase (Decrease) in Net Assets from Operations (12,617,443) 11,047,477
------------ ------------
Capital Transactions
Proceeds from Capital Invested 45,172,546 59,002,666
Value of Capital Withdrawn (63,505,446) (49,696,877)
------------ ------------
Net Increase (Decrease) in Net Assets from Capital Transactions (18,332,900) 9,305,789
------------ ------------
Total Increase (Decrease) in Net Assets (30,950,343) 20,353,266
Net Assets
Beginning of Year 37,404,463 17,051,197
------------ ------------
End of Year $ 6,454,120 $ 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
September 30, (Commencement of
------------------------------------ Operations) to
1998 1997 1996 1995 September 30, 1994
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $6,454 $37,404 $17,051 $13,658 $27,366
Ratios to Average Net Assets:
Net Investment Income 2.41% 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 0.53% 0.32% 0.31% 0.80% 0.79%*
Portfolio Turnover Rate 92% 122% 171% 161% 124%
</TABLE>
- ----------
* Annualized
See Notes to Financial Statements on Pages 15 and 16
14
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Notes to Financial Statements
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 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.
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
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 deposit 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 .20% of the Portfolio's average daily net
assets.
15
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Notes to Financial Statements
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.
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.
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 September 30, 1998 amounted to $52,531 and are included
in dividend 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 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
$22,182,287 and $37,404,323, respectively.
For federal income tax purposes, the tax basis of investments held at September
30, 1998 was $8,733,386. The aggregate gross unrealized appreciation for all
investments was $42,436 and the aggregate gross unrealized depreciation for all
investments was $2,925,216.
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 effecting emerging
market investments can not always be foreseen.
16
<PAGE>
LATIN AMERICAN EQUITY PORTFOLIO
Report of Independent Accountants
To the Trustees and Holders of Beneficial Interest of the Latin
American 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 Latin American Equity Portfolio
(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 each of the fiscal periods presented, 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 audits. We conducted our
audits 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
audits, which included confirmation of securities at September 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 6, 1998
17
<PAGE>
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<PAGE>
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<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
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 report must be preceded or
accompanied by a current prospectus for the Fund.
---------------
BT Investment Latin American Equity CUSIP#055922785
STA497200 (9/98)
