MARCH 31, 1999
[LOGO]
BT Mutual Funds
Intermediate
Tax Free Fund
Semi-Annual Report
TRUST: BT INVESTMENT FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
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Intermediate Tax Free Fund
Table of Contents
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Letter to Shareholders 3
Intermediate Tax Free Fund
Statement of Assets and Liabilities 5
Statement of Operations 5
Statements of Changes in Net Assets 6
Financial Highlights 6
Notes to Financial Statements 7
Intermediate Tax Free Portfolio
Statement of Net Assets 9
Statement of Operations 11
Statements of Changes in Net Assets 12
Financial Highlights 12
Notes to Financial Statements 13
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The Fund is not insured by the FDICand is not a deposit obligation of or
guaranteed by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
------------------------------
2
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Intermediate Tax Free Fund
Letter to Shareholders
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We are pleased to present you with this semi-annual report for the Intermediate
Tax Free Fund (the "Fund"), providing a review of the market, the Portfolio, and
our outlook as well as a complete financial summary of the Fund's operations and
a listing of the Portfolio's holdings.
MARKET ACTIVITY
With the U.S. economy strong, interest rates rose over the Fund's semi-annual
period, even as the Federal Reserve Board eased monetary policy.
o After the Federal Reserve Board lowered the fed funds rate by 25 basis points
on September 29th, it did so twice again--on October 15 and November 17.
These moves improved investor confidence after a third calendar quarter
turbulent with crises in world economies, a Fed-orchestrated bailout of a
major leveraged hedge fund, and volatility in the equity markets.
o The pace of U.S. economic growth was greater than expected, with fourth
calendar quarter GDP growth logging in at 6.0% and estimates for first quarter
1999 only moderately lower.
o Although the strong economy raised concerns of re-emerging inflation, it has
in fact, remained quite subdued, with the increase in the Consumer Price
Index at only 1.6% on an annual basis through the end of March 1999.
Municipal bonds were less volatile than other fixed income sectors primarily
because they are less impacted by overseas turmoil.
o Yields on intermediate Treasuries rose by approximately 1.20% over the six
months ended March 31, 1999. In contrast, intermediate tax free bond yields
moved within a narrower band, increasing by about 0.33% over the semi-annual
period.
o With limited overseas exposure, credit quality spreads of municipal bonds did
not widen as they did within the corporate and mortgage-backed fixed income
sectors.
Rising interest rates meant lower municipal security supply, but a healthy
economy led to improved credit quality picture.
o During the semi-annual period, overall supply of municipal bonds was down
approximately 10% over the same six month period one year ago. Refinancing of
outstanding loans was actually down about 25%, as higher interest rates
slowed the rush to lower payments seen through most of the previous period.
New issuance was up only modestly. Municipal securities' demand remained
relatively flat.
o Full tax revenue coffers and strong fiscal positions led to more credit
quality upgrades than downgrades in the municipal sector during these six
months.
INVESTMENT REVIEW
The Fund nearly tracked its category average over the six months, and for the
one year ended March 31, 1999, the Fund outperformed its category average. This
was primarily because we moved from a somewhat longer duration position in the
second half of the last fiscal year to a shorter duration in this semi-annual
period, given our cautious strategy in a rising interest rate environment. On
March 31, the Fund's duration stood at 5.4 years and its average maturity at 8.0
years.
The underperformance to the Fund's benchmark can be attributed to our more
conservative credit posture. Such a posture means the Fund does not benefit from
narrow credit spreads, as seen in the municipal bond market during this period.
Still, it is important to reiterate that the Fund's prospectus mandates higher
credit quality standards than held by the benchmark, and we continue to believe
that this is the more prudent strategy over the long term. The Fund's average
credit quality, as of March 31, remained AA2 as rated by Moody's.
The Fund was able to find opportunities in both sector and specific issue
selection to take advantage of market aberrations. For example:
o While already overweighted in the high tax state of California, we added to
our holdings in this state as a sector and to our ongoing focus on
non-callable bonds within the state. The Fund benefited from this positioning
as yield spreads vacillated during this semi-annual period.
o The Fund benefited from its overweighting of issues exempt from taxes in
New York, as yield spreads on New York paper narrowed relative to the market
as a whole at the end of 1998.
o We sold some Connecticut and Massachusetts portfolio holdings, as a lack of
supply there narrowed credit spreads, making them comparatively less
attractive.
<TABLE>
<CAPTION>
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Periods ended March 31, 1999 Cumulative Total Returns Average Annual Total Returns
- ----------------------------------------------------------------------------------------------------------------------
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>
Intermediate Tax Free Fund(1)
(inception 7/20/92) 0.69% 5.26% 18.87% 33.90% 43.77% 5.26% 5.93% 6.01% 5.57%
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Lehman 7 Year Government
Obligations Index(2) 1.42% 5.99% 20.97% 39.87% 50.24% 5.99% 6.55% 6.94% 6.30%
- ----------------------------------------------------------------------------------------------------------------------
Lipper Intermediate
Municipal Debt Average(3) 0.97% 4.97% 18.70% 34.74% 44.94% 4.97% 5.88% 6.14% 5.72%
- ----------------------------------------------------------------------------------------------------------------------
</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) Indices are unmanaged, and investments cannot be made in an index. The index
represents government obligation securities with maturities of 7 to 8 years.
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.
3
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Intermediate Tax Free Fund
Letter to Shareholders
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Diversification of Portfolio Investments
By Sector as of March 31, 1999
(percentages are based on market value)
Pollution Control 1%
Prison 5%
Environmental Control 3%
Miscellaneous 4%
Sewer 6%
General
Obligations 19%
Dorm Authority 2%
Power Revenue 2%
Turnpike/Highway Revenue 4%
Refunding Bonds 9%
Building Revenue 4%
Hospital Revenue 2%
Property &
Development 10%
Water 11%
University
Revenue 7%
Transportation 10%
Electric 1%
Again reflecting our cautious posture, the Fund ended the semi-annual period
with 15% of its assets in cash, as compared to approximately 9% at the end of
September 1998.
MANAGER OUTLOOK
We anticipate that despite softness in some key employment statistics toward the
end of the Fund's semi-annual period, the U.S. labor market and the U.S. economy
remain strong. Consumer fundamentals remain favorable, consumer spending shows
no signs of slowing, and housing activity is still high. Indeed, even the
industrial sector, which has been the weak link in the U.S. economic juggernaut,
has begun to show signs of life. Further, recent data suggest that underlying
inflation pressures remain tame, despite some uptick in energy prices. Given
this scenario, we believe the Federal Reserve Board is likely to stay on hold at
least into the summer.
For the near term then, we will likely maintain the Fund's slightly short to
neutral Index duration. Should inflation in fact remain tame, we will likely
look to extend the Fund's duration in the months ahead. However, if signs of
inflation do become evident, we intend to shorten the Fund's duration even more.
It is worth noting that even with interest rates having risen, they are still at
historically attractive levels. This, along with yields on intermediate tax free
bonds actually somewhat higher than those of same-duration U.S. Treasuries on a
taxable equivalent basis, continues to make a positive backdrop for municipal
bond market investment.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek to produce a yield greater than a tax free
money market fund with lower risk to principal than a longer term or lower
credit quality tax free bond fund.
/s/ Gary Pollack
---------------------------------
Gary Pollack
Portfolio Manager of the
Intermediate Tax Free 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 Tax Free Fund and
the Lehman 7-Year G.O. Bond Index since July 31, 1992.
Total Return for the Periods
Ended March 31, 1999(3)
One Year Five Year Since 7/20/921
5.26% 5.93%(2) 5.57%(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.
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
Intermediate Tax Lehman 7-Year G.O.
Free Fund - $14,377 Bond Index - $15,024
Jul-92 10000 10000
Sep-92 9937 9972
Mar-93 10377 10463
Sep-93 10960 11076
Mar-94 10667 10741
Sep-94 10787 10973
Mar-95 11255 11452
Sep-95 11779 12147
Mar-96 12018 12419
Sep-96 12261 12691
Mar-97 12499 12997
Sep-97 13172 13715
Mar-98 13658 14176
Sep-98 14278 14816
Mar-99 14403 15024
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
4
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Intermediate Tax Free Fund
Statement of Assets and Liabilities March 31, 1999 (unaudited)
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<TABLE>
<S> <C>
Assets
Investment in Intermediate Tax Free Portfolio, at Value $21,192,713
Receivable for Shares of Beneficial Interest Sold 81,838
Prepaid Expenses and Other 10,148
Due from Bankers Trust 9,353
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Total Assets 21,294,052
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Liabilities
Dividends Payable 68,314
Accrued Expenses and Other 21,915
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Total Liabilities 90,229
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Net Assets $21,203,823
===========
Composition of Net Assets
Paid-in Capital $20,267,744
Undistributed Net Realized Gain from Investment Transactions 127,916
Net Unrealized Appreciation on Investments 808,163
-----------
Net Assets $21,203,823
===========
Net Asset Value, Offering and Redemption Price Per Share (net assets
divided by shares outstanding) $10.81
===========
Shares Outstanding ($0.001 par value per share, unlimited number of
shares of beneficial interest authorized) 1,960,906
===========
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Statement of Operations For the six months ended March 31, 1999 (unaudited)
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Investment Income
Income Allocated from Intermediate Tax Free Portfolio, net $ 460,826
-----------
Expenses
Administration and Services Fees 44,180
Professional Fees 14,477
Printing and Shareholder Reports 9,221
Registration Fees 5,323
Trustees Fees 3,384
Miscellaneous 5,566
-----------
Total Expenses 82,151
Less Expenses absorbed by Bankers Trust (37,972)
-----------
Net Expenses 44,180
-----------
Net Investment Income 416,646
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Realized and Unrealized Gain (Loss) on Investment
Net Realized Gain from Investment Transactions 137,403
Net Change in Unrealized Appreciation/Depreciation on Investment (440,446)
-----------
Net Realized and Unrealized Loss on Investment (303,043)
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Net Increase in Net Assets from Operations $ 113,603
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Intermediate Tax Free Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the six For the
months ended year ended
March 31, 1999 September 30, 1998
------------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 416,646 $ 851,783
Net Realized Gain from Investment Transactions 137,403 144,761
Net Change in Unrealized Appreciation/Depreciation on Investment (440,446) 630,290
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Net Increase in Net Assets from Operations 113,603 1,626,834
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Distributions to Shareholders
Net Investment Income (416,646) (851,783)
Net Realized Gain from Investment Transactions (153,783) (25,237)
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Total Distributions to Shareholders (570,429) (877,020)
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Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 4,407,306 10,929,947
Dividend Reinvestments 252,161 452,871
Cost of Shares Redeemed (7,070,804) (6,793,047)
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Net Increase (Decrease) from Capital Transactions in
Shares of Beneficial Interest (2,411,339) 4,589,771
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Total Increase (Decrease) in Net Assets (2,868,163) 5,339,585
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Net Assets
Beginning of period 24,071,986 18,732,401
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End of period $ 21,203,823 $ 24,071,986
============= ============
</TABLE>
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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 Intermediate Tax Free Fund.
<TABLE>
<CAPTION>
For the years ended
For the six September 30, For the period For the
months ended --------------- January 1, 1996 to year ended
March 31, 1999(3) 1998 1997 September 30, 1996(2) December 31, 1995
----------------- ----- ----- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $11.02 $10.65 $10.34 $10.56 $ 9.72
------ ------ ------- ------- -------
Income fromInvestment Operations
Net Investment Income 0.21 0.42 0.44 0.33 0.47
Net Realized and Unrealized Gain (Loss)
on Investments (0.13) 0.38 0.31 (0.22) 0.84
------ ------ ------ ------- -------
Total from Investment Operations 0.08 0.80 0.75 0.11 1.31
------ ------ ------ ------- -------
Distributions to Shareholders
Net Investment Income (0.21) (0.42) (0.44) (0.33) (0.47)
Net Realized Gains (0.08) (0.01) -- -- --
------ ------ ------ ------- -------
Total Distributions (0.29) (0.43) (0.44) (0.33) (0.47)
------ ------ ------ ------- -------
Net Asset Value, End of Period $10.81 $11.02 $10.65 $10.34 $10.56
====== ====== ====== ====== =======
Total Investment Return 0.69% 7.71% 7.43% 4.09% 13.71%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $21,204 $24,072 $18,732 $22,008 $22,213
Ratios to Average Net Assets:
Net Investment Income 3.75%(1) 3.91% 4.23% 4.25%(1) 4.58%
Expenses, Including Expenses of the
Intermediate Tax Free Portfolio 0.85%(1) 0.85% 0.85% 0.85%(1) 0.85%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.50%(1) 0.37% 0.30% 0.38%(1) 0.28%
</TABLE>
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(1) Annualized
(2) The Board of Trustees approved the change of the fiscal year end from
December to September 30.
(3) Unaudited
See Notes to Financial Statements.
6
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Intermediate Tax Free Fund
Notes to Financial Statements (unaudited)
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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 Intermediate Tax Free 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 July 20, 1992.
The Fund invests substantially all of its assets in the Intermediate Tax Free
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 100% 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 earns income, net of expenses, on its investment in the Portfolio. All
of the net investment income and realized and unrealized gains and losses from
the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Distributions
It is the Fund's policy to declare dividends daily and distribute them monthly
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 be made annually to the extent they exceed capital loss carryforwards.
E. Federal Income Taxes
It is the Fund's policy to continue 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.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's funds are allocated among
them. 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 .40% 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 .40% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and .85% of the average daily net assets of the Fund, including expenses of the
Portfolio.
ICC Distributors, Inc., a member of the Forum Group of Companies, provides
distribution services to the Fund.
The Trust 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 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 month period ended March 31, 1999.
7
<PAGE>
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Intermediate Tax Free Fund
Notes to Financial Statements (unaudited)
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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--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 For the
six months ended year ended
March 31, 1999 (unaudited) September 30, 1998
----------------------- -------------------------
Shares Amount Shares Amount
------- ----------- --------- -----------
Sold 403,048 $ 4,407,306 1,014,118 $10,929,947
Reinvested 23,108 252,161 41,978 452,871
Redeemed (649,585) (7,070,804) (630,927) (6,793,047)
-------- ----------- --------- -----------
Net Increase
(Decrease) (223,429) $(2,842,542) 425,169 $ 4,589,771
======== =========== ========= ===========
8
<PAGE>
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Intermediate Tax Free Portfolio
Statement of Net Assets March 31, 1999 (unaudited)
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Principal
Amount Description Value
Long-Term Municipal Bonds - 83.6%
Arizona - 2.2%
$ 440,000 Arizona State Transportation Board
Excise Tax, 5.60%, 7/1/03 $ 471,051
-----------
California - 7.2%
500,000 California State, 5.75%, 11/1/11 560,295
920,000 California State Department of
Public Works, 5.00%, 9/1/09 979,552
-----------
1,539,847
-----------
Connecticut - 5.3%
500,000 Connecticut State, Series A,
6.25%, 5/15/06 566,615
500,000 Connecticut State Special
Tax Obligations, 5.90%, 9/1/05 553,010
-----------
1,119,625
-----------
Delaware - 2.6%
520,000 Delaware Transportation Authority,
6.10%, 7/1/02 556,072
-----------
Florida - 0.3%
50,000 Dade County, Florida Aviation Authority,
5.40%, 10/1/07 54,160
-----------
Illinois - 7.1%
440,000 Chicago, Illinois, G.O. (FGIC Insured),
5.00%, 1/1/07 460,236
1,000,000 Chicago, Illinois, G.O. (FGIC Insured),
5.00%, 1/1/09 1,041,050
-----------
1,501,286
-----------
Indiana - 4.1%
300,000 Indiana University Revenue, 6.60%,
8/1/01 319,209
500,000 Purdue University of Indiana University
Revenue, Series N, 5.50%, 7/1/12 541,910
-----------
861,119
-----------
Maine - 4.8%
445,000 Maine Municipal Bond, Series A,
5.50%, 11/1/10 485,023
500,000 Maine Municipal Bond, Series B (MBIA
Insured), 5.37%, 11/1/05 538,980
-----------
1,024,003
-----------
Michigan - 3.5%
500,000 Michigan State Building Authority,
(AMBAC Insured), 6.00%, 10/1/02 537,345
200,000 Michigan State Housing Development
Authority, 6.30%, 12/1/03 211,198
-----------
748,543
-----------
Nebraska - 1.5%
300,000 Nebraska Public Power District Revenue,
5.70%, 1/1/05 325,323
-----------
Nevada - 2.5%
500,000 Clark County, Nevada Highway Improvement
Revenue, (AMBAC Insured),
5.70%, 7/1/03 537,230
-----------
Principal
Amount Description Value
-------- ----------- ------
New York - 24.7%
$ 700,000 New York City, New York, GO, Series E,
6.00%, 8/1/07 $ 782,978
500,000 New York City Transitional Finance
Authority, 4.75%, 11/15/15 492,350
500,000 New York State Dormitory Authority
Revenue Consolidated City University
System (FGIC Insured),
5.75%, 7/1/13 555,420
500,000 New York State Dormitory Authority
Revenue New York University,
(MBIA Insured), 6.00%, 7/1/06 558,195
400,000 New York State Dormitory Authority
Revenue State University
Educational Facility, 5.25%, 5/15/10 426,908
300,000 New York State Dormitory Authority
Revenue State University Educational
Facility, (AMBAC Insured),
5.00%, 5/15/10 308,751
500,000 New York State Environment Facilities
Corp., 5.75%, 6/15/10 554,265
500,000 New York State Environment Facilities
Corp., Pollution Control Revenue
State Water Revolving Fund,
Series C, 5.05%, 12/15/10 522,900
500,000 New York State Local Government
Assistance Corp, Series E,
5.25%, 4/1/16 520,325
500,000 Oyster Bay, New York, 5.00%, 2/1/09 527,590
-----------
5,249,682
-----------
North Carolina - 3.2%
650,000 North Carolina State, 5.10%, 6/1/07 690,534
-----------
Tennessee - 2.1%
10,000 Shelby County, Tennesse Public
Improvement, Series B,
5.25%, 11/1/06 10,726
405,000 Shelby County, Tennesse Public
Improvement, Series B,
5.50%, 8/1/07 440,932
-----------
451,658
-----------
Texas - 6.4%
500,000 Texas State, Series A, 6.00%, 10/1/06 558,925
260,000 Texas Water Resources Finance
Authority Revenue, 7.30%, 8/15/04 262,896
500,000 University of Texas, Series A,
6.50%, 8/15/01 533,070
-----------
1,354,891
-----------
Vermont - 3.0%
615,000 Vermont State, Series B,
5.00%, 1/15/10 642,349
-----------
Virginia - 2.1%
400,000 Arlington County, Virginia,
5.50%, 8/1/05 437,140
-----------
Wisconsin - 1.0%
200,000 Wisconsin State Transportation,
6.00%, 7/1/00 205,258
-----------
Total Long-Term Municipal Bonds
(Cost $16,961,190) 17,769,771
-----------
See Notes to Financial Statements.
9
<PAGE>
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Intermediate Tax Free Portfolio
Statement of Net Assets March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Description Value
-------- ----------- -----
FLOATING RATE DEMAND NOTES - 14.6%
Florida - 1.9%
$ 400,000 Pinellas County, Florida, Health Facility
Authority Revenue, 5.40%, 12/1/15 $ 400,000
-----------
Mississippi - 0.9%
200,000 Perry County, Mississippi, Leaf River State
Project, 1.60%, 3/1/02 200,000
-----------
New York - 11.8%
800,000 New York City, New York, Municipal
Water Finance Authority, Water and
Sewer System Revenue, Series A,
(FGIC Insured), 3.65%, 6/15/25 800,000
1,000,000 New York City, New York, Municipal
Water Finance Authority, Water and
Sewer System Revenue, Series G,
(FGIC Insured), 3.90%, 6/15/24 1,000,000
Principal
Amount Description Value
--------- ----------- -----
$ 400,000 New York State, Energy Research and
Development Authority, P.C.R.,
5.55%, 7/1/15 $ 400,000
300,000 New York, New York, Sub Series B-4,
5.00%, 8/15/21 300,000
-----------
2,500,000
-----------
Total Floating Rate Demand Notes
(Cost $3,100,000) 3,100,000
-----------
Total Investments (Cost $20,061,190)* 98.2% $20,869,771
Other Assets Less Liabilites 1.8% 378,100
----- -----------
Net Assets 100.0% $21,247,871
===== ===========
The following abbreviations are used in portfolio descriptions:
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Corporation
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
*Tax basis of investments
See Notes to Financial Statements.
10
<PAGE>
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Intermediate Tax Free Portfolio
Statement of Operations For the six months ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Interest Income $ 510,601
---------
Expenses
Advisory Fees 44,241
Professional Fees 13,563
Administration and Services Fees 5,530
Trustees Fees 2,622
Miscellaneous 819
---------
Total Expenses 66,775
Less Expenses absorbed by Bankers Trust (17,003)
---------
Net Expenses 49,772
---------
Net Investment Income 460,829
---------
Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain from Investment Transactions 137,404
Net Change in Unrealized Appreciation/Depreciation on Investments (440,449)
---------
Net Realized and Unrealized Loss on Investments (303,045)
---------
Net Increase in Net Assets from Operations $ 157,784
=========
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free 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 $ 460,829 $ 938,751
Net Realized Gain from Investment Transactions 137,404 144,762
Net Change in Unrealized Appreciation/Depreciation on Investments (440,449) 630,294
------------- -------------
Net Increase in Net Assets from Operations 157,784 1,713,807
------------- -------------
Capital Transactions
Proceeds from Capital Invested 4,460,468 11,556,348
Value of Capital Withdrawn (7,282,089) (7,741,467)
------------- -------------
Net Increase (Decrease) in Net Assets from Capital Transactions (2,821,621) 3,814,881
------------- -------------
Total Increase (Decrease) in Net Assets (2,663,837) 5,528,688
Net Assets
Beginning of period 23,911,708 18,383,020
------------- -------------
End of period $ 21,247,871 $ 23,911,708
============= =============
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for the periods indicated for the Intermediate Tax Free Portfolio.
<TABLE>
<CAPTION>
For the years ended
For the September 30, For the period For the
six months ended ------------------- January 1, 1996 to year ended
March 31, 1999 1998 1997 September 30, 1996(2) December 31, 1995
----------------- -------- ------ --------------------- -----------------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $21,248 $23,912 $18,383 $22,019 $22,253
Ratios to Average Net Assets:
Net Investment Income 4.15%(1) 4.30% 4.62% 4.64%(1) 4.97%
Expenses 0.45%(1) 0.45% 0.45% 0.45%(1) 0.45%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.15%(1) 0.16% 0.11% 0.14%(1) 0.08%
Portfolio Turnover Rate 56%(1) 64% 171% 130% 95%
</TABLE>
- --------------------
(1) Annualized
(2) The Board of Trustees approved the change of the fiscal year end from
December 31 to September 30.
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Intermediate Tax Free 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 July 20, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments are carried at fair market value as determined by an
independent pricing service at the end of each business day. 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. Securities for which quotations are not available are
stated 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 Investment Income
Security transactions are accounted for on a trade date basis. 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 securities transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio at the time of such determination.
D. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Adviser, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. Federal Income Taxes
The portfolio is considered to be a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
F. 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 .05% of the Portfolio's average daily net
assets. At March 31 1999, amount owed under the administration and service
agreement amounted to $914.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, Bankers Trust manages the Portfolio in accordance with
the Portfolio's investment objective and stated investment policies in return
for a fee computed daily and paid monthly at an annual rate of .40% of the
Portfolio's average daily net assets. At March 31, 1999 amount owed under the
advisory agreement amounted to $3,585.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio to the extent necessary, to limit all expenses to .45%
of the average daily net assets of the Portfolio.
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, which expires April 30, 1999. A 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 month period 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
13
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 March 31, 1999 were $5,481,553
and $8,993,988, respectively.
The aggregate gross unrealized appreciation for all investments was $808,581,
and the aggregate gross unrealized depreciation for all investments was $0.
Note 4--Net Assets
At March 31, 1999, net assets consisted of:
Paid in Capital $20,439,290
Net Unrealized Appreciation
on Investments 808,581
-----------
$21,247,871
===========
Note 5--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.
<PAGE>
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<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: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Intermediate Tax Free Fund CUSIP #055922801
BT Investment Funds 467 SA (3/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
