March 31, 1999
BT Mutual Funds
[GRAPHIC]
International
Equity Fund
Semi-Annual Report
TRUST: BT INVESTMENT FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
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International Equity Fund
Table of Contents
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Letter to Shareholders...................................... 3
International Equity Fund
Statement of Assets and Liabilities...................... 7
Statement of Operations.................................. 7
Statements of Changes in Net Assets...................... 8
Financial Highlights..................................... 9
Notes to Financial Statements............................ 10
International Equity Portfolio
Schedule of Portfolio Investments......................... 12
Statement of Assets and Liabilities....................... 14
Statement of Operations................................... 15
Statements of Changes in Net Assets....................... 16
Financial Highlights...................................... 16
Notes to Financial Statements............................. 17
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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.
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2
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International Equity Fund
Letter to Shareholders
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We are pleased to present you with this semi-annual report for the Investment
International 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
World markets in general rebounded sharply from last summer's painful sell-off.
o Unexpected interest rate reductions by the U.S. Federal Reserve Board
relieved emerging market tensions.
o Congressional approval of International Monetary Fund (IMF) rescue funds for
Brazil was seen as helpful in restoring confidence.
o Initial pessimism that Japan would endure a deep and prolonged recession
took the Nikkei index to 13 year lows. But even there, the subsequent flow
of restructuring announcements by Japanese corporations combined with bank
capital injections led foreign investors to return to Japan despite anemic
economic conditions.
o Emerging markets as a whole reversed their sharp losses of the previous
half-year, staging a broad recovery as a result of a more favorable
interest rate environment and evidence that economic conditions have
bottomed, particularly in Asia.
Europe
European markets shook off their poor performance for the prior six month period
by rising 16.4% during the half year ended March 31, 1999.
o Interest rate cuts led to a rebound in continental markets as the launch of
the new European currency gained support from investors.
o Euromarkets responded with trepidation when then German Finance Minister
Oskar Lafontaine feuded publicly with the newly-established European Central
Bank (ECB), suggesting that politics would interfere with the bank's
independence. His subsequent resignation allowed the ECB to move toward a
more accommodating stance.
o France led core equity markets with a 19.8% gain in U.S. dollar terms,
followed by the United Kingdom with 19.3% as Germany lagged with 2.1%.
o The continent's periphery delivered strong performance with the Nordic
leaders Finland and Sweden up 67.5% and 21.2%, respectively. Other market
leaders included Italy with 23.5%, Ireland 22.8% and Spain 19.4%.
Asia
Despite renewed and unprecedented foreign buying, the Nikkei index ended the
Japanese fiscal year on March 31, 1999 at the worst close seen in 13 years and
its fourth consecutive closing low.
o Still, Japanese stocks rose 42.4% during the semi-annual period with the
sharp appreciation of the yen accounting for nearly half of the gains.
o Indeed, the yen appreciated a staggering 16% over just one 36-hour period as
hedge fund managers covered short positions and domestic investors
repatriated foreign funds.
o Investors responded to a Tankan survey indicating improved business sentiment
while choosing to ignore the bleak prospects implied by the underlying
numbers.
-------------------------------------------------------
Ten Largest Stock Holdings % of Net Assets
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Telecom Italia SPA (Telecommunications) 2.19%
Unicredito Italiano SPA (Finance) 1.93%
Canal Plus (Television) 1.85%
Societe Generale d'Entreprises SA
(Engineering and Construction) 1.79%
Suez-Lyonnaise Des Eaux (Utility) 1.73%
Vivendi (Utility) 1.65%
Fomento de Construccione y Contratas, SA
(Building and Construction) 1.63%
Banca Commerciale Italia (Banks) 1.56%
Vodafone Group PLC
(Telecommunications) 1.54%
Koninklijke Ahold NV (Retail-Food) 1.49%
------------------------------------------------------
Asia ex-Japan markets experienced a stunning recovery after the massive declines
seen previously. The initial surge was based on:
o lower interest rates globally and particularly in Asia where rates dropped to
pre-crisis levels
o sustained strengthening of the yen
o signs that some economies like Thailand and South Korea are bottoming, and
o short-covering by hedge funds as those funds experienced their own credit
crunch.
After initial nervousness during the corporate results season and short-term
resumption of yen weakness, the rally continued into the first quarter of 1999.
Fears of an imploding yen subsided as the equity market focused on positives,
including:
o Japan's reflation efforts and restructuring initiatives
o interest rates that continued to fall in Asia, despite the backup in U.S.
bond yields
o more signs of regional recovery, such as positive growth in industrial
output, bottoming retail sales, and resumption of import growth for the
crisis countries.
Other Markets
After an extended period of underperformance, emerging markets as a whole
surprised investors by delivering unusually strong performance during the six
months ended March 31, up 32.7% in U.S. dollar terms, outpacing even the S&P 500
Index's return of 27.3%.
Reflecting recognition that the emerging market crises over the past two years
are nearing an end, Latin American markets returned 24.1%. This strong
performance was powered primarily by Mexico's 44.0% gain. Even Brazil's equity
market index delivered a 6.1% return, despite initiating the most recent
emerging market crisis with its January 1999 currency devaluation. Confidence in
the Latin American region was buoyed by:
o lower than expected inflation in Brazil and Mexico
3
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International Equity Fund
Letter to Shareholders
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o the appointment of an ex-Wall Street fund manager as Brazil's Central Bank
governor
o declining interest rates in the region
o firming oil and commodity prices, and
o surprisingly strong growth in the U.S. economy.
Emerging Europe was even more impressive, up 43.6% for the semi-annual period.
Interestingly, the worst hit markets from the previous year experienced the
largest rebounds, with Russia and Turkey up 174.7% and 58.4%, respectively.
Greece, still on track to join European economic and monetary union (EMU) in
2001, returned 40.0%. Hungary and Poland during these six months gave back part
of their early gains due to currency pressures and concerns over deteriorating
current account deficits.
INVESTMENT REVIEW
During the Fund's semi-annual period, we maintained our preference toward
continental European equities, favoring smaller equity markets over most of the
region's larger markets. While remaining underweight in the United Kingdom as
compared with the MSCI EAFE benchmark, we increased the Fund's exposure to about
15.5%, equal to its overweight position in France. Similarly, although we
increased investment in Japan to 8.25% of the portfolio, the Fund remains
significantly underweight relative to the nearly 23% benchmark weighting.
Excellent opportunities in emerging markets prompted us to take the Fund's
emerging market position to 4.5%.
Europe continues to offer the most attractive valuations and performance
potential in the Fund's equity universe. Many of the Fund's holdings are
beneficiaries of the restructuring and consolidation underway in specific
industries as well as of the economic growth we will likely witness as part of
European economic and monetary union.
In the U.K., we added several stocks to the Fund's portfolio. These included the
world's most efficient steel producer, British Steel, and automation engineering
leader BTR-Siebe. We purchased shares in retailer Marks & Spencer and media
bellwether Pearson to capture strong consumer demand. We purchased ferry and
cruise line operator P&O and Sema Group, one of the world's leading information
technology companies, and we sold oil & gas exploration firm Soco International.
Exciting opportunities in telecommunications stocks led to additional purchases
of Vodafone Group, which recently bid for U.S. cellular giant AirTouch
Communications, and cable television/telephony firm Telewest.
The consumer-led recovery in France highlighted several stocks to which we
increased the Fund's exposure or added outright. For example, we added to the
portfolio's holdings in media company Canal Plus and bought food retailing giant
Carrefour. We increased the Fund's weighting in data networker Equant, took
profits in CAD/CAM software developer Dassault Systemes, and trimmed
construction company Eiffage. We sold positions in automaker Renault on concerns
over the impact of their investment in Nissan Motors, and in
pharmaceutical/chemical company Rhone-Poulenc, preferring to retain Hoechst,
Rhone-Poulenc's merger partner in Aventis. We made significant additions to the
Fund's positions in the integrated oil firm Total and urban service and
communications company Vivendi.
Elsewhere among core European markets, we were also actively buying and selling.
o Germany -- We bought Deutsche Telecom, one of the world's largest
telecommunications companies and domestic retailer Metro. Weak demand in
international markets led to the sale of athletic shoemaker Adidas-Salomon.
We added to positions in insurer Allianz and regional bank Bayerische
Hypo-und Vereinsbank on weakness as well as to recently merged global car
manufacturer DaimlerChrysler. Volkswagen was sold on revenue concerns and
management's intention to raise capital, and air carrier Lufthansa was sold
on light demand. We purchased restructuring chemical/life sciences company
Hoechst and industrial handling firm Linde, while trading out of utility
conglomerate Viag.
<TABLE>
<CAPTION>
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Periods ended March 31, 1999 Cumulative Total Returns Average Annual Total Returns
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Past 6 Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
months year years years inception year years years inception
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BT Investment International
Equity Fund(1)
(inception 8/4/92) 11.92% (3.40)% 55.39% 91.02% 165.95% (3.40)% 15.83% 13.82% 15.84%
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Morgan Stanley Capital
International ("MSCI")
EAFE Index(2) 22.34% 6.06% 27.63% 52.08% 108.96% 6.06% 8.47% 8.75% 11.70%
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Lipper International Equity
Funds Average(3) 18.22% 0.02% 30.10% 47.80% 100.04% 0.02% 8.94% 7.94% 10.82%
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</TABLE>
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(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) Indexes are unmanaged, and investments cannot be made in an index. During
the period the Fund waived certain fees and expenses. Had these fees and
expenses not been waived, the Fund's return would have been lower.
(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.
4
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International Equity Fund
Letter to Shareholders
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Diversification of Portfolio Investments
By Country as of March 31, 1999
(percentages are based on net assets)
The printed document contains a
pie chart depicting the following percentages:
Sweden 4%
Other(1) 13%
Australia 3%
United Kingdom 16%
Ireland 3%
France 16%
Germany 7%
Switzerland 5%
Spain 7%
Portugal 2%
Netherlands 6%
Japan 8%
Italy 10%
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(1) Includes countries with weightings of less than 2%.
o The Netherlands -- We increased existing positions in food retailer Ahold,
took profits in telecom company KPN, and added new positions in consumer
electronics leader Philips and temporary employment firm Vedior.
o Switzerland -- With signs of recovery evident, we returned Credit Suisse to
the portfolio, trimmed telephone company Swisscom after sizable gains, and
added to an existing position in financial company UBS.
Although slightly lighter than in the past, we continue to maintain an emphasis
on Europe's smaller markets.
o Italy -- We increased the Fund's exposure to Italy's quickly consolidating
banking sector through Banca Popolare di Bergamo, Banca Popolare di Milano
and Banca Commerciale Italiana, while taking profits in privatizing Banca
Nazionale del Lavoro.
o Spain -- We sold the Fund's position in Banco Popular, added Banco Central
Hispanoamericano, whose excellent management will operate the new BSCH formed
by a merger with Banco Santander, and enlarged our positions in Argentaria
and Telefonica.
o Portugal -- We reduced the portfolio's exposure to this market through the
sale of Cimentos de Portugal and Electridade de Portugal and a trim of
Telecel, the cellular operator.
o Sweden -- We increased exposure to strong cyclical companies with machinery
maker Atlas Copco as well as to two firms with excellent exposure to the
U.S., namely appliance manufacturer Electrolux and paper and packaging
company SCA. We also purchased leading telecom equipment maker Ericsson and
money center bank Skandinaviska Enskilda Banken. Sweden is on a probable EMU
convergence path.
o Finland -- We sold crane maker KCI, cellular handset manufacturer Nokia, food
company Raisio and telecom provider Sonera, while adding pulp & paper company
UPM-Kymmene.
o Ireland -- We added to the portfolio's holdings in Bank of Ireland and ESAT
Telecom, while building materials company CRH was trimmed.
We added several new names in Japan in key sectors we believe to be insulated
from a weak domestic economy. These included Subaru car maker Fuji Heavy,
computer giant Fujitsu, household products manufacturer Kao, and electronic
components leader Murata. We sold Nintendo and began selling Fuji Photo Film on
weaker earnings prospects. With signs evident that recovery and restructuring is
underway, we re-entered Asia ex-Japan, focusing on South Korea, Singapore, Hong
Kong, and to a minor extent, Thailand. Financial and property companies such as
Overseas Chinese Bank, Shinhan Bank, Samsung Securities, Thai Farmers Bank,
Bangkok Bank, and Sun Hung Kai Properties should benefit from the sharp
contraction in local interest rates and the peaking of bad debts. Preferred
holdings in the technology sector include Samsung Electronics, South Korea's
DRAM producer, and Natsteel Electronics, Singapore's contract manufacturer.
China Telecom, the dominant cellular service provider in southern China,
prospers from sharply growing demand. Other purchases include conglomerate
Hutchison Whampoa, Korea Electric Power, and Pohang Iron & Steel. In Australia,
we added to the Fund's holding in diversified industrial company Brambles and
switched out of insurer AMP in favor of Westpac Bank.
Favorable domestic developments in Latin America highlighted attractive
valuations in the region even amidst the Brazilian crisis. In Mexico, we
purchased media company Grupo Televisa and telecom leader Telmex, which, in our
opinion, offer ample cost efficiency and growth opportunities. We also added
Brazilian telecom holding company Telebras for its resilient position in the
post-devaluation environment.
In emerging Europe, we trimmed portfolio exposure to Greece and Poland on
valuation grounds. Still, we find these markets attractive long term for future
European economic and monetary union convergence.
MANAGER OUTLOOK
We continue to believe that economic and monetary union (EMU) provides an
unprecedented catalyst for European earnings and for industrial consolidation.
Recent interest rate cuts offer a benign environment for consumers and an
attractive source of capital for the corporate sector. Heightened merger and
acquisition activity, both domestically and cross border, further underscores
attractive valuations and the need to meet competitive pressures with innovative
strategies. However, optimism near term must be tempered by the crisis in
Kosovo. A prolonged military engagement, beyond the human hardship, could
undermine consumer confidence and be detrimental to stability and growth in the
region.
We remain highly doubtful that Japan's economy has bottomed and that
restructuring of a significant nature is underway. Recent announcements that the
corporate sector
5
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International Equity Fund
Letter to Shareholders
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has embraced the need to cut costs, particularly through headcount reductions,
appear spurious at best. Indeed, the majority of restructuring plans have been
of a vague nature spanning several years to implement fully and involving
attrition rather than more pro-active measures. We believe that government
spending to bolster ailing banks is not only wasteful, it preserves and rewards
poorly managed institutions at the expense of those which have operated
responsibly. It is difficult to find conviction in an environment where consumer
confidence is falling from already low levels, unemployment is rising from
post-war highs, and thinly-focused stimulus measures are intended to serve
political rather than economic needs.
Confidence has returned to Asia ex-Japan markets as these economies begin to
bottom and attract capital. European and North American investors have quickly
supplanted Japanese investment into the region, indirectly through security
purchases and directly through acquisition of real assets. We remain optimistic
for the region despite ongoing concerns over the Japanese economy and currency.
We believe Asian reflation will continue due to strong liquidity resulting from
expansionary monetary policy, large current account surpluses, and increasing
capital inflows. Restructuring at the macro and micro levels will likely provide
profitability improvements even if overall global growth is weak.
In short, worldwide financial markets have become more risk tolerant with
cyclicals and emerging markets performing again. While the global economic
environment is not ideal, what is important is that global liquidity is strong,
OECD GDP upgrades have begun to come through, and commodity prices have
bottomed.
We will, of course, continue to monitor economic conditions and political
initiatives and their effect on financial markets as we seek long-term capital
appreciation.
We sincerely value your ongoing support of the International Equity Fund and
look forward to continuing to serve your investment needs in the years ahead.
/s/ Michael Levy
----------------------------
/s/ Robert Reiner
-----------------------------
/s/ Julie Wang
------------------------------
Michael Levy, Robert Reiner and Julie Wang
Portfolio Managers of the
International Equity Portfolio
March 31, 1999
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Performance Comparison
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Comparison of Change in Value of a $10,000 Investment in the BT Investment
International Equity Fund and the Morgan Stanley Capital International EAFE
Index since August 31, 1992.
Total Return for the Periods
Ended March 31, 1999(3)
One Year Five Year Since 8/4/92(1)
(3.40)% 13.82%(2) 15.84%(2)
(1) The Fund's inception date.
(2) Annualized.
(3) Unaudited.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
The printed document contains a line graph depicting the following plot points:
BT Investment
International Equity MSCI EAFE
Fund - $26,595 Index - $20,896
Aug-92 10000 10000
Sep-92 9665 9803
Mar-93 10424 10554
Sep-93 11944 12386
Mar-94 13717 12930
Sep-94 13977 13603
Mar-95 14046 13715
Sep-95 15911 14391
Mar-96 16862 15406
Sep-96 18057 15630
Mar-97 20108 15630
Sep-97 24318 18634
Mar-98 27532 19701
Sep-98 23763 17081
Mar-99 26595 20896
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
6
<PAGE>
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International Equity Fund
Statement of Assets and Liabilities March 31, 1999 (unaudited)
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<TABLE>
<S> <C>
Assets
Investment in International Equity Portfolio, at Value $ 1,796,156,227
Receivable for Shares of Beneficial Interest Subscribed 9,451,293
Prepaid Expenses and Other 70,159
---------------
Total Assets 1,805,677,679
---------------
Liabilities
Payable for Shares of Beneficial Interest Redeemed 10,730,755
Due to Bankers Trust 1,211,431
Accrued Expenses and Other 223,308
---------------
Total Liabilities 12,165,494
---------------
Net Assets $ 1,793,512,185
===============
Composition of Net Assets
Paid-in Capital $ 1,653,054,738
Undistributed Net Investment Income 276,033
Accumulated Net Realized Loss from Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Transactions (71,351,002)
Net Unrealized Appreciation on Investment, Option, Foreign Currency
and Forward Foreign Currency Contracts 211,532,416
---------------
Net Assets $ 1,793,512,185
===============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by
shares outstanding) $ 23.09
===============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) 77,661,479
===============
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Statement of Operations For the six months ended March 31, 1999 (unaudited)
- -------------------------------------------------------------------------------------------------
Investment Income
Income allocated from International Equity Portfolio, net $ 2,604,853
---------------
Expenses
Administration and Services Fees 6,782,824
Registration Fees 74,861
Professional Fees 7,902
Printing and Shareholder Reports 2,992
Trustees Fees 2,139
Miscellaneous 14,082
---------------
Total Expenses 6,884,800
Less Expenses absorbed by Bankers Trust (500,965)
---------------
Net Expenses 6,383,835
---------------
Expenses in Excess of Investment Income (3,778,982
---------------)
Realized and Unrealized Gain (Loss) on Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Contracts
Net Realized Loss from:
Investment Transactions (5,963,177)
Options Transactions (3,408,614)
Foreign Currency Transactions (440,702)
Forward Foreign Currency Transactions (11,586,794)
Foreign Futures Transactions (20,876,017)
Net Change in Unrealized Appreciation/Depreciation on Investment, Option,
Foreign Currency and Forward Foreign Currency Contracts 190,433,932
---------------
Net Realized and Unrealized Gain on Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Contracts 148,158,628
---------------
Net Increase in Net Assets from Operations $ 144,379,646
===============
</TABLE>
See Notes to Financial Statements.
7
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International Equity Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
March 31, 1999(1) September 30, 1998
---------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income (Expenses in Excess of Investment Income) $ (3,778,982) $ 5,740,259
Net Realized Loss from Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Transactions (42,275,304) (40,667,938)
Net Change in Unrealized Appreciation/Depreciation on Investment,
Option, Foreign Currency and Forward Foreign Currency Contracts 190,433,932 (82,397,152)
--------------- ---------------
Net Increase (Decrease) in Net Assets from Operations 144,379,646 (117,324,831)
--------------- ---------------
Distributions to Shareholders
Net Investment Income (3,594,378) (402,898)
Net Realized Gains -- (15,924,100)
--------------- ---------------
Total Distributions (3,594,378) (16,326,998)
--------------- ---------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 1,127,364,361 1,500,555,521
Dividend Reinvestments 3,024,024 12,079,856
Cost of Shares Redeemed (729,241,066) (652,924,155)
--------------- ---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest 401,147,319 859,711,222
--------------- ---------------
Total Increase in Net Assets 541,932,587 726,059,393
Net Assets
Beginning of Period 1,251,579,598 525,520,205
--------------- ---------------
End of Period (including undistributed net investment income of $276,033 and
$7,649,393, respectively) $ 1,793,512,185 $ 1,251,579,598
=============== ===============
</TABLE>
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(1) Unaudited
See Notes to Financial Statements.
8
<PAGE>
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International Equity Fund
Financial Highlights
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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 International Equity Fund.
<TABLE>
<CAPTION>
For the Years Ended
For the Six September 30, For the period For the
Months Ended ------------------------- January 1, 1995 to Year Ended
March 31, 1999(3) 1998 1997 1996 Sept. 30, 1995(1) Dec. 31, 1994
---------------- ------ ------ ----- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $20.68 $22.13 $16.77 $15.47 $13.37 $13.18
------ ----- ------ ------ ------ ------
Income from Investment Operations
Net Investment Income (Expenses in
Excess of Investment Income) (0.07) 0.02 0.09 0.18 0.14 0.10
Net Realized and Unrealized Gain (Loss) on
Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign
Futures Contracts 2.54 (0.87) 5.63 1.80 1.97 0.44
------ ----- ------ ------ ------ ------
Total from Investment Operations 2.47 (0.85) 5.72 1.98 2.11 0.54
------ ----- ------ ------ ------ ------
Distributions to Shareholders
Net Investment Income (0.06) (0.01) (0.16) (0.31) -- (0.09)
Net Realized Gains -- (0.59) (0.20) (0.37) (0.01) (0.26)
------ ----- ------ ------ ------ ------
Total Distributions (0.06) (0.60) (0.36) (0.68) (0.01) (0.35)
------ ----- ------ ------ ------ ------
Net Asset Value, End of Period $23.09 $20.68 $22.13 $16.77 $15.47 $13.37
====== ====== ====== ====== ====== ======
Total Investment Return 11.92% (3.73)% 34.76% 13.42% 15.82% 4.12%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $1,793,512 $1,251,580 $525,520 $161,692 $82,807 $56,020
Ratios to Average Net Assets:
Net Investment Income (0.47)%(2) 0.61% 0.53% 0.91% 1.55%(2) 0.84%
Expenses, Including Expenses of the
International Equity Portfolio 1.50%(2) 1.50% 1.50% 1.50% 1.50%(2) 1.50%
Increase Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.17%(2) 0.20% 0.18% 0.26% 0.33%(2) 0.37%
</TABLE>
- ------------
(1) On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
(2) Annualized
(3) Unaudited
See Notes to Financial Statements.
9
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International Equity Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The International 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 August 4, 1992.
The Fund invests substantially all of its assets in the International Equity
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio. The value
of such investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio. At March 31, 1999, the Fund's investment was
approximately 68% of the Portfolio.
The financial statements of the Portfolio, including a list of assets held 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's income, net of expenses, is earned daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from 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. 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 to the extent they are not offset by any capital loss
carryforwards.
E. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required. 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
distributions determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of
each Fund. Expenses directly attributable to the Fund are charged to the Fund,
while expenses which are attributable to all of the Trust's Funds are allocated
among them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of .85% 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 .80% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and 1.50% of the average daily net assets of the Fund, including expenses of the
Portfolio. Prior to August 13, 1998, Bankers Trust voluntarily waived and
reimbursed expenses of the Fund, to the extent necessary, to limit all expenses
to 0.85% of the average daily net assets of the Fund, excluding expenses of the
Portfolio, and 1.50% of the average daily net assets of the Fund, including the
Portfolio.
ICC Distributors, Inc., a member of the Forum Group of Companies, provides
distribution services to the Fund.
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would
merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with Bankers Trust thereafter is subject to the approval of Fund
shareholders. If the transaction is approved and completed, Deutsche Bank AG, as
Bankers Trust's new parent company, will control its operations as investment
adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
10
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 3--Shares of Beneficial Interest
At March 31, 1999, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
For the Six Months Ended For the Year Ended
March 31, 1999(1) September 30, 1998
----------------------------- ------------------------------
Shares Amount Shares Amount
---------- -------------- ----------- --------------
Sold 48,716,463 $1,127,364,361 64,961,016 $1,500,555,521
Reinvested 129,786 3,024,024 608,250 12,079,856
Redeemed (31,714,158) (729,241,066) (28,791,427) (652,924,155)
----------- -------------- ----------- --------------
Net Increase 17,132,091 $ 401,147,319 36,777,839 $ 859,711,222
=========== ============== =========== ==============
- ----------------
(1) Unaudited
Note 4--Risks of Investing in Foreign Securities
The Portfolio invests in foreign securities. Investing in foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in U.S. companies and the U.S. government. These risks
include devaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
This is particularly true with respect to emerging markets in developing
countries.
11
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
COMMON STOCKS - 99.1%
Australia - 2.9%
1,030,200 Brambles Industries(2) (Transportation) $26,078,151
2,862,234 Cable Wireless Optus Ltd.(1)
(Telecommunications) 6,633,528
2,087,600 TABCORP Holdings Ltd. (Leisure Related) 15,819,833
1,567,600 Telstra Corp. Ltd. (Telecommunications) 8,171,950
2,910,000 Westpac Banking Corp. Ltd.(2) (Banks) 21,133,147
-----------
77,836,609
-----------
Austria - 0.7%
388,787 Erste Bank Common (Banks) 19,727,519
-----------
Botswana - 0.2%
5,817,600 Sechaba Breweries Ltd. (Brewery) 6,295,894
-----------
Brazil - 0.4%
132,500 Telebras (Telecommunications) 10,682,812
-----------
Canada - 1.8%
448,500 Northern Telecom Ltd.(1)
(Telecommunications) 27,868,191
1,070,000 Rogers Communication B(1)
(Telecommunications) 19,379,958
-----------
47,248,149
-----------
Finland - 1.2%
433,800 Helsinki Telecom (Telecommunications) 21,215,371
149,250 KCI Konecranes Intl. PLC(2) (Manufacturing) 5,156,170
245,160 UPM-Kymmene Corp. (Paper) 6,775,673
-----------
33,147,214
-----------
France - 16.3%
709,100 Alstom(1) (Machinery) 21,052,470
245,700 AXA-UAP (Insurance) 32,573,648
229,400 Banque Nationale de Paris (Banks) 19,961,415
167,500 Canal Plus(2) (Television) 49,096,159
27,400 Carrefour Supermarche SA (Retail-Food) 21,120,863
76,194 Eiffage (Building and Construction) 5,042,479
408,000 Equant N.V.(1) (Computer Services) 31,009,567
612,021 Neopost SA(1) (Machinery) 9,844,994
403,055 SEITA (Tobacco) 27,391,948
1,006,520 Societe General d'Entreprises SA
(Engineering and Construction) 47,377,460
106,776 Societe Generale Paris (Banks) 20,519,016
247,600 Suez Lyonnaise Des Eaux (Utility) 45,816,756
321,100 Total SAB (Oil-International) 39,553,856
144,630 Unibail (Real Estate) 18,112,536
178,200 Vivendi (Utility) 43,844,478
-----------
432,317,645
-----------
Germany - 7.3%
86,500 Allianz AG (Insurance) 26,334,683
544,050 Bayerische Hypo-Und Vereinsbank AG(2)
(Banks) 32,539,543
315,919 Daimler-Chrysler AG (Autos and Trucks) 27,489,932
748,200 Hoechst AG(2) (Chemical-Specialty) 32,431,432
24,400 Linde AG(2) (Engineering) 13,935,045
278,400 Mannesmann AG (Machinery) 35,556,324
388,629 Metro AG (Retail) 24,322,117
-----------
192,609,076
-----------
Shares Description Value
Greece - 1.0%
202,000 Alpha Credit Bank (Banks) $13,403,002
298,121 Hellenic Telecommunication Organization
SA (Telecommunications) 7,229,296
192,640 Panafon SA(1) (Telecommunications) 4,999,418
-----------
25,631,716
-----------
Hong Kong - 1.2%
7,658,000 China Telecommunications(1,2)
(Telecommunications) 12,747,522
663,000 Hutchison Whampoa Ltd. (Diversified) 5,218,721
1,757,400 Sun Hung Kai Properties Ltd. (Real Estate) 13,152,834
-----------
31,119,077
-----------
Hungary - 0.4%
252,829 Otp Bank Rt. (Banks) 9,792,012
-----------
India - 0.0%
975 Niit Ltd. (Computer Software) 43,086
-----------
Ireland - 3.2%
1,816,300 Bank of Ireland (Finance) 38,041,023
1,902,870 CRH PLC (Materials-Frgn.) 32,848,872
315,600 Esat Telecom Group PLC ADR
(Telecommunications) 13,215,750
-----------
84,105,645
Italy - 10.1%
805,925 Assicurazioni Generali (Insurance) 32,279,843
5,060,800 Banca Commerciale Italiana(2) (Banks) 41,523,662
793,500 Banca Popolare di Bergamo(2) (Banks) 20,131,571
2,188,400 Banca Popolare di Milano (Banks) 20,389,209
168,950 Ducati Motor Holding Spa(1) (Manufacturing) 494,300
4,237,300 ENI SPA (Oil-International) 26,990,076
37,600 ENI SPA ADR (Oil-International) 2,373,500
10,488,800 Parmalat Finanziaria SPA(2)
(Food/Dairy Products) 14,947,295
5,467,500 Telecom Italia SPA(2) (Telecommunications) 58,082,696
9,505,900 Unicredito Italiano SPA (Finance) 51,312,848
-----------
268,525,000
-----------
Japan - 8.3%
1,927,000 Fujitsu Ltd.(2) (Electronics) 30,947,851
4,111,000 Fuji Heavy Industry(2) (Autos and Trucks) 25,444,254
1,454,600 Kao Corp.(2) (Cosmetics and Toiletries) 32,118,374
494,000 Murata Manufacturing Co. Ltd.
(Electrical Equipment) 26,278,814
32,500 Nippon Telegraph & Telephone Corp.
(Telecommunications) 31,833,150
5,270 Ntt Docomo (Telecommunications) 26,031,833
696,900 Takeda Chemical Industries
(Pharmaceuticals) 27,009,803
630,000 Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceutical) 19,948,493
--------------
219,612,572
--------------
Mexico - 0.6%
334,200 Grupo Televisa SA GDR(1) (Broadcasting) 10,485,525
68,100 Telefonos de Mexico SA ADR
(Telecommunications) 4,460,550
--------------
14,946,075
--------------
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
Netherlands - 5.9%
387,661 Benckiser NV B Shares(2)
(Soaps and Toiletries) $ 21,742,052
636,584 ING Groep NV (Finance) 35,084,423
1,035,000 Koninklijke Ahold NV (Retail-Food) 39,667,203
652,248 Nutreco Holding NV (Foods) 26,863,969
246,500 Philips Electronics NV
(Consumer Goods) 20,078,860
615,600 Vedior NV CVA (Miscellaneous) 14,255,708
--------------
157,692,215
--------------
Poland - 0.3%
1,357,193 Telekom Polska Gdr(1) (Telecommunications) 7,369,558
--------------
Portugal - 2.3%
670,400 Banco Comercial Portugues, SA (Banks) 20,265,388
496,600 BPI - SGPS, SA (Banks) 15,092,041
160,100 Telecel - Comunicacados Pessoasis SA
(Telecommunications) 25,494,484
--------------
60,851,913
--------------
Singapore - 0.9%
2,608,200 Natsteel Electronics Ltd.
(Electrical Equipment) 7,122,189
2,400,800 Overseas-Chinese Banking Corp. Ltd.
(Banks) 16,250,714
--------------
23,372,903
--------------
South Korea - 1.4%
706,200 Kepco ADR 8,959,913
186,643 Samsung Electronics (Electronics) 14,450,762
404,069 Samsung Securities Co. (Securities Brokerage) 10,735,656
504,600 Shinhan Bank (Banks) 4,091,907
--------------
38,238,238
--------------
Spain - 6.9%
1,355,560 Argentaria SA (Banks) 32,576,677
1,588,500 Banco Central Hispanoamericano(2) (Banks) 19,910,507
1,274,832 Endesa SA (Utility) 32,178,096
704,891 Fomento de Construccione y Contratas, SA
(Building and Construction) 43,377,018
1,216,673 Tabacalera SA A Shares (Tobacco) 24,654,774
699,822 Telefonica Compania d' Espana
(Telecommunications) 29,684,688
--------------
182,381,760
--------------
Sweden - 4.6%
831,550 Atlas Copco AB A Shares(2) (Machinery) 22,550,851
1,851,810 Castellum AB(2) (Real Estate) 17,227,711
1,816,920 Electrolux AB Series B(2)
(Household Furnishings) 36,015,804
558,900 Ericsson Lm B Shares (Telecommunications) 13,593,579
2,218,900 Skandinaviska Enskilda Banken A Shares(2)
(Banks) 27,118,989
330,200 Svenska Cellulosa AB B Shares
(Forest Products and Paper) 7,167,785
--------------
123,674.719
--------------
Switzerland - 5.0%
16,300 Compagnie Financiere Richemont
(Tobacco) 27,091,413
67,400 Credit Suisse Group (Banks) 12,568,340
85,250 Swisscom AG - Registered
(Telecommunications) 33,291,332
Shares/
Par Value Description Value
104,000 UBS AG - Registered (Banks) $ 32,673,468
41,500 Zurich Allied Ltd. (Insurance) 26,552,598
--------------
132,177,151
--------------
Thailand - 0.1%
1,907,200 Thai Farmers Bank(2) (Banks) 3,858,570
--------------
United Kingdom - 16.1%
1,084,200 Barclays PLC (Banks) 31,521,535
3,409,300 British Land Co. PLC (Real Estate) 29,361,882
6,383,550 British Steel PLC (Iron and Steel) 12,932,731
2,052,100 Colt Telecom Group PLC(1)
(Telecommunications) 36,174,739
3,126,800 Compass Group PLC (Catering) 36,468,861
849,500 Glaxo Wellcome PLC (Pharmaceuticals) 28,428,041
285,800 Global Crossing Ltd.(1) (Telecommunications) 13,218,250
232,600 Global Telesystems Group, Inc.(2)
(Telecommunications) 13,011,063
2,963,540 Marks & Spencer PLC (Retail) 19,351,452
1,374,200 Orange PLC(1) (Telecommunications) 19,322,012
969,300 Pearson PLC (Communication) 22,234,969
1,680,300 Peninsular & Orient Steam Navigation
Co. (Transportation) 24,548,200
1,560,100 Railtrack Group PLC (Railroads) 35,711,897
1,918,272 Sema Group PLC(1) (Computer Services) 21,661,182
5,843,350 Siebe PLC (Diversified) 26,011,277
3,896,200 Telewest Communications PLC(1)
(Communication) 16,982,016
2,189,826 Vodafone Group PLC (Telecommunications) 40,900,368
--------------
427,840,475
--------------
Total Common Stock
(Cost $2,352,129,888) 2,631,097,603
--------------
SHORT TERM INSTRUMENT
MUTUAL FUND - 0.0%
68,000 BT Institutional Cash Management Fund
Mutual Fund
(Cost $68,001) 68,001
--------------
Total Investments (Cost $2,352,197,889) 99.1% $2,631,165,604
Other Assets in Excess of Liabilities 0.9% 22,876,960
----- --------------
Net Assets 100.0% $2,654,042,564
===== ==============
- ------------------
(1) Non-Income Producing Security
(2) Securities on Loan
Industry Diversification (as a percentage of Net Assets): (unaudited)
Telecommunications 18.26%
Banks 16.39%
Finance 4.69%
Utility 4.59%
Insurance 4.44%
Machinery 3.35%
Tobacco 2.98%
Real Estate 2.93%
Pharmaceuticals 2.84%
Oil - International 2.60%
Engineering & Construction 2.31%
Retail - Food 2.29%
Autos & Trucks 1.99%
Computer Services 1.98%
Transportation 1.91%
Television 1.85%
Building & Construction 1.82%
Electronics 1.71%
Retail 1.65%
Electrical Equipment 1.60%
Foods 1.58%
Communication 1.48%
Catering 1.37%
Household Furnishings 1.36%
Railroads 1.35%
Materials - Foreign 1.24%
Chemical - Specialty 1.22%
Cosmetics & Toiletries 1.21%
Diversified 1.18%
Other Industries(3) 4.97%
------
99.14%
Cash & Cash Equivalents 0.86%
------
100.00%
======
(3) No one industry represents more than 1.00% of the Portfolio.
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statement of Assets and Liabilities March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at Value:
Common Stock (Cost $2,352,129,888) $ 2,631,097,603
Short Term Instruments (Cost $68,001) 68,001
---------------
Total Investments, at Value 2,631,165,604
Cash(1) 45,226,803
Receivable for Securities Sold 108,940,549
Collateral for Securities Loaned 266,796,888
Unrealized Appreciation on Forward Foreign Currency Contracts 3,931,397
Dividends and Interest Receivable 4,239,486
Receivable for Foreign Taxes Withheld 2,780,953
Securities Lending Income Receivable 125,246
---------------
Total Assets 3,063,206,926
---------------
Liabilities
Payable for Securities Purchased 137,548,350
Payable Under Security Loan Agreements 266,796,888
Unrealized Appreciation on Forward Foreign Currency Contracts 3,237,287
Due to Bankers Trust 1,559,075
Accrued Expenses and Other 22,762
Total Liabilities 409,164,362
---------------
Net Assets $ 2,654,042,564
===============
Composition of Net Assets
Paid-in Capital $ 2,432,093,150
Net Unrealized Appreciation on Investments, Foreign Currencies and
Forward Foreign Currency Contracts 221,949,414
---------------
Net Assets $ 2,654,042,564
===============
</TABLE>
- --------------
(1) Includes foreign cash of $51,513,093 with a cost of $51,447,860.
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statement of Operations For the six months ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Dividends (net for foreign withholding tax of $20,651) $ 11,096,165
Interest 562,349
Securities Lending Income 345,358
-----------
Total Investment Income 12,003,872
-----------
Expenses
Advisory Fees 7,595,478
Administration and Service Fees 1,752,803
Professional Fees 17,252
Trustees Fees 1,622
Miscellaneous 15,096
-----------
Total Expenses 9,382,251
Less Expenses absorbed by Bankers Trust (1,202,506)
-----------
Net Expenses 8,179,745
-----------
Net Investment Income 3,824,127
-----------
Realized and Unrealized Gain (Loss) on Investments, Options, Foreign Currencies,
Forward Foreign Currency and Foreign Futures Contracts
Net Realized Loss from:
Investment Transactions (8,498,977)
Options Transactions (5,019,494)
Foreign Currency Transactions (656,436)
Forward Foreign Currency Transactions (16,787,197)
Foreign Futures Transactions (30,617,052)
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign
Currencies and Forward Foreign Currency Contracts 281,434,284
-----------
Net Realized and Unrealized Gain on Investments, Options, Foreign Currencies,
Forward Foreign Currency and Foreign Futures Contracts 219,855,128
-----------
Net Increase in Net Assets from Operations $223,679,255
============
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
March 31, 1999(1) September 30, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 3,824,127 $ 19,824,918
Net Realized Loss from Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Transactions (61,579,156) (57,508,505)
Net Change in Unrealized Appreciation/Depreciation on Investments,
Foreign Currencies and Forward Foreign Currency Contracts 281,434,284 (106,649,538)
-------------- --------------
Net Increase (Decrease) in Net Assets from Operations 223,679,255 (144,333,125)
-------------- --------------
Capital Transactions
Proceeds from Capital Invested 1,637,752,297 2,330,783,580
Value of Capital Withdrawn (1,039,640,815) (926,603,490)
--------------- --------------
Net Increase in Net Assets from Capital Transactions 598,111,482 1,404,180,090
--------------- --------------
Total Increase in Net Assets 821,790,737 1,259,846,965
Net Assets
Beginning of Period 1,832,251,827 572,404,862
--------------- ---------------
End of Period $ 2,654,042,564 $ 1,832,251,827
=============== ===============
</TABLE>
- ----------------
(1) Unaudited
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for periods indicated for the International Equity Portfolio.
<TABLE>
<CAPTION>
For the Years Ended
For the Six September 30, For the period For the
Months Ended -------------------------------- January 1, 1995 Year Ended
March 31, 1999(3) 1998 1997 1996 to Sept. 30, 1995(2) Dec. 31, 1994
---------------- ---------- --------- -------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $2,654,043 $1,832,252 $572,405 $164,813 $83,313 $56,042
Ratios to Average Net Assets:
Net Investment Income 0.33%(1) 1.52% 1.35% 1.76% 2.39%(1) 1.69%
Expenses 0.70%(1) 0.66% 0.65% 0.65% 0.65%(1) 0.65%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust 0.10%(1) 0.15% 0.17% 0.20% 0.22%(1) 0.24%
Portfolio Turnover Rate 44% 65% 63% 68% 21% 15%
</TABLE>
- -----------
(1) Annualized
(2) On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
(3) Unaudited
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1 -- Organization and Significant Accounting Policies
A. Organization
The International 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 December 11, 1991
as an unincorporated trust under the laws of New York and commenced operations
on August 4, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments 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 Advisor, 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 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 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.
17
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
J. Security Loans
The Portfolio receives compensation in the form of fees or it retains a portion
of interest on the investment of any cash received as collateral. The Portfolio
also continues to receive interest or dividends on the securities loaned. The
loans are secured by collateral at least equal, at all times, to the fair value
of the securities loaned plus accrued interest. Gain or loss in the fair value
of the securities loaned that may occur during the term of the loan will be for
the account of the Portfolio.
K. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2 -- Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.15% of the Portfolio's average daily net
assets.
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 .65% 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
0.70% of the average daily net assets of the Portfolio. Prior to August 13,
1998, Bankers Trust voluntarily waived and reimbursed expenses of the Portfolio,
to the extent necessary, to limit all expenses to 0.65% 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 for the six months ended March 31, 1999 amounted to $2,847,623.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility 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 quarterly commitment fee of .07% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and is
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 six months ended March 31, 1999.
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would
merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with Bankers Trust thereafter is subject to the approval of Fund
shareholders. If the transaction is approved and completed, Deutsche Bank AG, as
Bankers Trust's new parent company, will control its operations as investment
adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
Note 3 -- Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended March 31, 1999, were
$1,644,260,755 and $971,404,243, respectively.
The tax basis of investments held at March 31, 1999 amounted to $2,351,950,807.
The aggregate gross unrealized appreciation for all investments was $315,763,360
and the aggregate gross depreciation for all investments was $36,548,563.
18
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 4--Open Forward Foreign Currency Contracts
At March 31, 1999, the International Equity Portfolio had the following open
forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation)(US$)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Sales
- -------------------------------------------------------------------------------------------------------------------
Canadian Dollar 33,971,820 US Dollar 22,300,000 5/18/99 22,508,328 (208,328)
Swiss Franc 33,948,000 US Dollar 23,000,000 5/18/99 22,995,326 4,674
Euro Dollar 5,000,000 US Dollar 5,401,500 4/1/99 5,398,000 3,500
Euro Dollar 73,800,000 US Dollar 80,070,048 4/8/99 79,394,040 676,008
Euro Dollar 73,800,000 US Dollar 80,332,038 4/8/99 79,394,040 937,998
Euro Dollar 74,000,000 US Dollar 80,925,660 4/8/99 79,609,200 1,316,460
Japanese Yen 3,760,950,000 US Dollar 30,000,000 4/8/99 30,889,852 (889,852)
Japanese Yen 5,177,480,000 US Dollar 44,000,000 4/19/99 43,625,548 374,452
Swedish Krona 119,760,900 US Dollar 14,700,000 5/18/99 14,527,038 172,962
Singapore Dollar 29,690,679 US Dollar 17,255,000 5/10/99 17,240,973 14,027
South African Rand 285 US Dollar 46 4/1/99 46 --
- -------------------------------------------------------------------------------------------------------------------
Total Sales 2,401,901
- -------------------------------------------------------------------------------------------------------------------
Purchases
- -------------------------------------------------------------------------------------------------------------------
Canadian Dollar 33,971,820 US Dollar 22,576,238 5/18/99 22,508,328 (67,910)
Euro Dollar 73,800,000 US Dollar 81,465,237 4/8/99 79,394,040 (2,071,197)
Euro Dollar 74,000,000 US Dollar 79,568,500 4/8/99 79,609,200 40,700
Japanese Yen 3,670,950,00 US Dollar 30,584,878 4/8/99 30,889,852 304,974
Norwegian Krone 114,874,620 US Dollar 14,700,000 5/18/99 14,766,894 66,894
Swedish Krona 16,000,000 US Dollar 1,927,014 4/1/99 1,945,762 18,748
- -------------------------------------------------------------------------------------------------------------------
Total Purchases (1,707,791)
- -------------------------------------------------------------------------------------------------------------------
Net Appreciation 694,110
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 5 -- Lending of Portfolio Securities
The International Equity Portfolio has the ability to lend its securities to
brokers, dealers and other financial organizations. Loans of portfolio
securities by the Portfolio are collateralized by cash and/or government
securities that are maintained at all times in an amount equal to 102% and 105%
to the current market value of the loaned securities for both domestic and
international, respectively.
Market Value Market Value % of Portfolio
of Loaned Securities of Collateral on Loan
-------------------- ------------- ---------------
$253,690,016 $266,796,888 1.05
Note 6 -- Foreign Securities
The Portfolio invests in foreign securities. Investing in foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in U.S. companies and the U.S. government. These risks
include devaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
This is particularly true with respect to emerging markets in developing
countries.
Note 7 -- Subsequent Event
Subsequent to period end, the portfolio has entered into a $100,000,000 364-day
senior unsecured committed revolving credit facility ("the facility") with two
lenders. The borrowings shall bear interest at a rate based on the Federal Funds
rate. A commitment fee is charged on the unused portion of the facility. The
facility replaces the revolving credit facility described in footnote 2.
19
<PAGE>
Investment Advisor and Administrator of the Portfolio
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, ME 04101
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
[LOGO]
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-368-4031
This report must be preceded or accompanied by a current prospectus for the
Fund.
International Equity Fund CUSIP #055922868
BT Investment Funds 463 SA (3/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
