DEUTSCHE ASSET MANAGEMENT
[LOGO OMITTED]
[GRAPHIC OMITTED]
Mutual Fund
Annual Report
October 31, 2000
International Equity
Formerly BT Investment International Equity Fund
A Member of the
DEUTSCHE BANK GROUP [LOGO OMITTED]
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International Equity
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ...................................... 3
INTERNATIONAL EQUITY
Statement of Assets and Liabilities ......................10
Statement of Operations ..................................11
Statements of Changes in Net Assets ......................12
Financial Highlights .....................................13
Notes to Financial Statements ............................14
Report of Independent Accountants ........................16
Tax Information ..........................................16
INTERNATIONAL EQUITY PORTFOLIO
Schedule of Portfolio Investments ........................17
Statement of Assets and Liabilities ......................21
Statement of Operations ..................................22
Statements of Changes in Net Assets ......................23
Financial Highlights .....................................24
Notes to Financial Statements ............................25
Report of Independent Accountants ........................29
-------------------
The Fund is not insured by the FDIC and is not a
deposit, obligation of or guaranteed by Deutsche
Bank. 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
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LETTER TO SHAREHOLDERS
We are pleased to present you with this annual report for the period ended
October 31, 2000 for International Equity (the "Fund"). It provides 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
MOST WORLD EQUITY MARKETS ACHIEVED NEW HIGHS DURING THE CLOSING WEEKS OF 1999,
AS Y2K FEARS ABATED. HOWEVER, LINGERING CONCERNS THAT STOCK VALUATIONS HAD
BECOME STRETCHED WHILE ECONOMIC FUNDAMENTALS WERE WEAKENING LED INVESTORS TO
FLEE EQUITIES DURING MUCH OF 2000.
o A series of interest rate increases in the US and Europe, as well as Japan's
first rate hike in a decade, further clouded the outlook for equities.
o A dramatic rise in the tech-laden NASDAQ Composite Index in the early months
of the fiscal year and a relatively tight correlation with foreign stocks
offering similar attributes was followed by a sharp downturn in global equity
indices beginning in mid-March. The dot.com bubble burst, and sectors rotated
abruptly. Valuations, which seemed to matter little to investors during the
first half of the period, suddenly became important.
o Europe was particularly impacted by the failure of central bank coordination
and intervention to stop the euro currency from touching new lows against the
US dollar and Japanese yen.
o The abrupt departure of foreign investors from the Japanese market, due to
concerns regarding the pace of both economic recovery and restructuring
efforts, unwound 20 months of strong Nikkei performance.
o After being adversely impacted by higher interest rates and decreased
liquidity, emerging markets were further hurt by fears that impending slower
world economic growth would cut short domestic economic recovery and export
demand.
EUROPE
EUROPE OVERALL POSTED A BARELY POSITIVE 1.2% RISE IN US DOLLAR TERMS FOR THE
FISCAL YEAR, GIVING BACK DURING THE SECOND HALF MUCH OF THE GAINS EARNED DURING
THE FIRST HALF. THE CONTINENT (EXCLUDES THE UK) OUTPERFORMED, WITH RETURNS IN US
DOLLAR TERMS OF 3.8% VERSUS -5.9% FOR THE UK.
o The euro's 19.3% decline over the twelve months due to strong demand for
assets outside of the region, and particularly in the US, severely dampened
returns.
TEN LARGEST STOCK HOLDINGS
(percentages are based on net assets of total investments in the Portfolio)
--------------------------------------------------------------------------------
Vodafone Group PLC ............................. 3.63%
ING Groep NV ................................... 2.59
Takeda Chemical Industries Ltd. ................ 2.19
Total Fina ELF ................................. 2.18
Shell Transport & Trading Co. PLC .............. 2.17
Royal Bank of Scotland Group PLC ............... 2.14
Aventis SA ..................................... 2.10
Elan Corp. PLC ADR ............................. 1.94
Reckitt Benckiser PLC .......................... 1.89
Koninklijke Ahold NV ........................... 1.87
o Despite several attempts by the European Central Bank to prop up the sagging
euro with interest rate increases and foreign exchange market intervention,
the currency continued to set new lows.
o The fall from grace experienced by bellwether European technology, media and
telecommunications service and equipment stocks lowered domestic indices.
o Downward revisions in the pace of European economic growth weighed on investor
sentiment.
o Although currency weakness may contribute to the illusion that confidence is
lacking in the region, European markets continued to demonstrate the benefits
of the Economic and Monetary Union, corporate restructuring and tax reform
efforts. In fact, for the European investor, this was a banner year for
domestic equity market performance. Local investors enjoyed a 27.8% annual
return on the continent and a 6.4% annual return in the UK.
FOR THE SECOND HALF OF THE FISCAL YEAR, EUROPE RETURNED -6.7% IN US DOLLAR
TERMS. AFTER POSTING A STRONG FIRST HALF AND A FLAT SECOND HALF IN LOCAL
CURRENCY, THE WEAK EURO AND CORRELATED CURRENCIES LED TO NEARLY ACROSS THE BOARD
LOSSES. THE IMPACT WAS FELT BOTH IN CORE LARGE MARKETS AND TECHNOLOGY-SENSITIVE
NORDIC MARKETS.
o Germany led the way down on weaker economic news falling 12.2%, while neighbor
France dropped 6.4% in US dollar terms.
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3
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International Equity
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LETTER TO SHAREHOLDERS
o Finland and Sweden lost 30.8% and 27.2%, respec tively, weighed down by
bellwethers Nokia and Ericsson.
o Italy was able to buck the trend by rising 1.9% on strong financial sector
performance.
o Although not part of the Eurozone, the United Kingdom also saw currency
weakness drag down a respectable local currency gain to register a 2.8%
decline in dollars.
ASIA
AFTER LEADING MAJOR EQUITY INDICES IN CALENDAR 1999, THE JAPANESE EQUITY MARKET
GAVE BACK ALL OF ITS GAINS AND MORE, FALLING 14.4% OVER THE LAST SIX MONTHS AND
11.6% FOR THE FISCAL YEAR IN US DOLLAR TERMS.
o Foreign investors were punished for believing that a sustainable economic
recovery, which could buoy company profits, was in place.
o The anemic pace of corporate restructuring announcements, the rollback of
financial reform efforts and the increasing number of small and large company
bankruptcies further undermined investor sentiment. For example, the collapse
of retailer Sogo and insurers Kyoei Life and Chiyoda Life, after desperate
attempts to prop up sagging balance sheets, severely diminished investor
confidence.
o The beleaguered bank sector had been declared saved after massive government
capital injections. However, it lost nearly one-third of its value during the
fiscal period, experiencing its 33rd consecutive month of lending declines.
o Hope that with the maturity of postal savings accounts domestic investors
would flood into equities was dashed as the market tumbled just after the end
of the March 31 fiscal year.
o The first hike in Japanese interest rates in a decade was seen as a threat to
the fragile recovery, much as a previous consumption tax increase had done so.
ASIA EX-JAPAN CONTRACTED 25.5% IN US DOLLAR TERMS DURING THE SIX-MONTH PERIOD
ENDING OCTOBER 31 AND 5.3% OVER THE 12 MONTH PERIOD.
o The region suffered from domestic challenges as well as negative international
factors. These included slowing global growth, higher oil prices, a downturn
in the semiconductor cycle, a de-rating of global telecom companies and
increased global risk aversion.
o Hong Kong and Singapore were least exposed to these factors and benefited from
their traditional 'safe haven' status in times of market volatility.
o On the other hand, higher oil prices had a detrimental effect on Korea, India,
the Philippines and Thailand.
o Taiwan and South Korea were hurt by domestic concerns, dropping 36.6% and
35.1% over the last six months and 30.0% and 33.8% for the fiscal year,
respectively. These declines were despite high earnings growth and inexpensive
valuations. Exposure to the global technology cycle and political uncertainty
were felt in both markets.
o South Korea's credit crunch and dissatisfaction with its reform progress
hampered equity purchases despite the pledge of 40-50 trillion won for
financial restructuring. Ford Motor's pullout in September of its Daewoo Motor
purchase damaged sentiment.
OTHER MARKETS
Emerging markets fell 19.9% in US dollar terms for the latter half of the period
and 8.8% for the full fiscal year.
LATIN AMERICAN MARKETS OVERALL PERFORMED STRONGLY, WITH BOTH MEXICO AND
VENEZUELA BENEFITING FROM HIGHER OIL PRICES.
o Argentina, however, shook regional confidence with its fiscal problems,
political scandal and debt load concerns.
o Brazil was hurt by weakness in telecom stocks, concerns over the inflationary
impact of higher oil prices and Argentina contagion fears. Investor sentiment
improved following Moody's upgrade of Brazil's debt rating to B1.
EMERGING EUROPE, OFF 24.2% IN US DOLLAR TERMS FOR THE SECOND HALF OF THE YEAR
AND 5.6% OVER TWELVE MONTHS, PROVED TO BE LESS RESILIENT.
o Turkey led the region down on concerns that it would be unable to adhere to
International Monetary Fund proposals.
o Poland and Hungary were lackluster, given deterioration in continental
Europe's leading indicators.
o Although Russia was a beneficiary of high oil prices, its market declined
following lapses in corporate governance.
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International Equity
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LETTER TO SHAREHOLDERS
INVESTMENT REVIEW
THE FUND OUTPERFORMED ITS BENCHMARK INDEX, THE MSCIEAFEINDEX,2 FOR THE FISCAL
YEAR ENDED OCTOBER 31, 2000. STILL, MANY OF THE STOCKS IN THE PORTFOLIO WERE
BUFFETED BY HEIGHTENED VOLATILITY IN WORLD MARKETS BASED ON QUESTIONABLE GROWTH
EXPECTATIONS. SHORT-TERM SECTOR ROTATIONS ALSO LED TO THE KIND OF ABRUPT SWINGS
IN PERFORMANCE NOT SEEN SINCE THE EMERGING MARKET CRISES OF 1997 AND 1998.
o We maintained a neutral weighting in the European region, with a continued
preference for the continent. We believe the profound changes taking place in
the Eurozone will have a deep and long-lasting impact on trade, economic
growth and domestic prosperity both within the region and throughout the
world. As part of the ongoing restructuring of European businesses, spin-offs
of non-core assets and strategic alliances also provided rare opportunities.
o We continued to be underweight in the United Kingdom and Japan, EAFE's 2
largest markets, because better stock specific investment opportunities lay
elsewhere.
o We significantly reduced the Portfolio's exposure to Asia ex-Japan and
emerging markets based on sensitivities to a slowing in global economic growth
rates.
o We remained buyers of Canada, the best performing market of the past year,
because of exciting technology, capital equipment and financial sector
opportunities there.
WE SIGNIFICANTLY REDUCED THE PORTFOLIO'S EXPOSURE TO THE VOLATILE
TELECOMMUNICATIONS AND TECHNOLOGY SECTORS, BASED ON WHAT WE BELIEVED TO BE RICH
VALUATIONS, PEAKING FUNDAMENTALS AND HIGHER CAPITAL EXPENDITURE REQUIREMENTS. WE
REMAINED OVERWEIGHT IN ATTRACTIVELY PRICED TECHNOLOGY STOCKS AND UNDERWEIGHT IN
TELECOMMUNICATIONS.
o We expect that next year will represent the near-term peak in semiconductor
profits, but unlike previous cycles, supply restraint will prevent earnings
from collapsing. We sold or trimmed several semiconductor-related companies
such as Europe's ASM Lithography and STMicroelectronics, Japan's PC giant
Fujitsu, and emerging Asia's Samsung Electronics, Hyundai Electronics, United
Microelectronics and Malaysian Pacific Industries.
o Evidence of slowing handset sales and lower capital spending by telecom
operators led us to take profits in communications equipment manufacturers
Nokia, Alcatel and Nortel and to sell Ericsson. Software names were also
reduced, including Sema Group, Intershop Communications and Satyam Computer.
<TABLE>
<CAPTION>
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS
Periods ended Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
October 31, 2000 year years years inception year years years inception
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity 1
(inception 8/4/92) 0.83% 28.59% 87.98% 194.17% 0.83% 8.74% 13.45% 13.99%
------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital
International ("MSCI")
EAFE Index 2 (2.90)% 30.99% 51.41% 125.34%4 (2.90)% 9.42% 8.65% 10.35%4
------------------------------------------------------------------------------------------------------------------
Lipper International
Equity Funds Average 3 2.70% 34.13% 62.88% 129.27%4 2.70% 9.96% 9.93% 10.39%4
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<FN>
-----------
1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MARKET VOLATILITY CAN
SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN INVESTMENT MADE
TODAY MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL 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.
These figures assume reinvestment of dividend and capital gain distributions.
Performance would have been lower during the specified periods if certain fees
and expenses had not been waived by the Fund.
2 The MSCI EAFE Index is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in Europe,
Australasia and the Far East. Index returns do not reflect expenses, which
have been deducted from the Fund's returns.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper, Inc. as falling into the category
indicated. These figures do not reflect sales charges.
4 Benchmark returns are for the period beginning July 31, 1992.
</FN>
</TABLE>
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International Equity
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LETTER TO SHAREHOLDERS
o European governments' overly successful auctions for third generation mobile
licenses highlighted the high cost of participation in this competitive arena.
Margin pressures, compounded by capacity buildups, are also emerging for
telecom providers globally. Thus, we lowered our overall exposure through the
reduction or sale of KPN, KPNQwest, Sonera, Telefonica, Cable & Wireless,
Colt, NTT, NTT Docomo, Optus, Telstra, SK Telecom, Embratel and Telmex.
THE COMBINATION OF A WEAKENING GLOBAL ECONOMY AND EXPECTATIONS OF A SHARP
FALL-OFF IN INTERNET ADVERTISING LED US TO UNDERWEIGHT THE PORTFOLIO'S MEDIA
POSITION DURING THE SECOND HALF OF THE PERIOD.
o We believe the Internet will expand as a powerful force in communications,
commerce and productivity. However, valuations remain a persistent issue.
o We sold cable and broadcast players Canal Plus, NTL, PT Multimedia and Ucoma
as well as other media concerns including Seat Pagine, TF1, News Corp,
Singapore Press Holdings and Televisa.
WE SIGNIFICANTLY RE-ORIENTED THE PORTFOLIO TOWARDS FINANCIAL STOCKS, PRIMARILY
AS A RESULT OF ATTRACTIVE CONTINENTAL EUROPEAN AND CANADIAN GROWTH PROSPECTS AND
VALUATIONS.
o As we near what we feel to be the peak of the current interest rate cycle and
an economy undergoing a soft landing, we believe banks will be key
beneficiaries of widening interest rate spreads and moderate economic growth.
We feel comfortable with the European and Canadian banks' asset quality given
the less extended credit cycle there. We particularly favor asset-gathering
banks and insurance companies that are well positioned to capture the rising
equity culture, especially in continental Europe.
o We were overweight in the insurance group with several additions to the
Portfolio. These include Canada's Sun Life Financial Services and Manulife
Financial, Italy's Riunione Adriaticadi Sicurta and Generali, and
Switzerland's Zurich Financial.
o Other financials that were added include Germany's Dresdner Bank, Netherlands'
ABN Amro Holdings and Fortis, Spain's Banco Popular Espanol, UK's Royal Bank
of Scotland and Hungary's OTP Bank.
o In Spain, we sold Banco Santander Central Hispano given its similar profile to
and our preference for Banco Bilbao Vizcaya Argenta. We sold Japanese consumer
finance companies Nichiei and Shohkoh Fund due to deteriorating industry
fundamentals.
WE INCREASED HOLDINGS IN THE ENERGY AND OIL SERVICES SECTOR TO CAPTURE IMPROVING
INDUSTRY FUNDAMENTALS AND THE RECOVERY IN DRILLING ACTIVITY.
o OPEC production restraint amidst higher global demand led to a tripling of oil
prices, benefiting many key industry participants.
o During the early months of the period we purchased integrated oil leader BP
Amoco, which has bid for ARCO, and Shell T&T, an undervalued oil major with
significant restructuring potential. We also added to the Portfolio's position
in Total Fina Elf, which is benefiting from merger synergies.
o We purchased emerging market oil companies Petrobras of Brazil and PetroChina,
oil services firms Petroleum Geo Services and Saipem.
OTHER SIGNIFICANT ACTIVITY IN THE PORTFOLIO WAS FOCUSED ON DEFENSIVE GROWTH
AREAS.
o Within the consumer staples sector, we either purchased or added to positions
in food retailer Ahold, food producers Nestle and Numico, household products
manufacturer Reckitt Benckiser and tobacco firm Altadis.
o We moved to an overweighting in pharmaceutical and biotechnology through
investments in Aventis, Elan, Glaxo Wellcome, Serono and Celltech.
o We added select consumer discretionary firms viewed as more resilient to any
consumption slowdown. These included Japan's audio and video equipment leader
Pioneer and France's luxury goods manufacturer Christian Dior.
MANAGER OUTLOOK
As we near what we feel to be the peak of the current interest rate cycle, we
believe there is considerable room for rate reductions in the coming year to
spur economic growth. We believe that in the near term earnings expansion may
slow to reflect moderate global demand. Our most likely scenario is for a
'soft-landing.'
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International Equity
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LETTER TO SHAREHOLDERS
PORTFOLIO DIVERSIFICATION
By Country as of October 31, 2000
(percentages are based on market value of total investments in the Portfolio)
United Kingdom ............................... 17.53%
France ....................................... 13.36
Netherlands .................................. 11.20
Japan ........................................ 9.30
Italy ........................................ 8.48
Canada ....................................... 5.67
Germany ...................................... 5.47
Ireland ...................................... 4.56
Spain ........................................ 4.25
Switzerland .................................. 3.40
Hong Kong .................................... 2.81
Australia .................................... 1.97
Other 1 ...................................... 12.00
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Total ........................................ 100.00%
=======
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1 Includes countries with weightings of less than 2%.
IN EUROPE, WE ANTICIPATE A FIRMER EURO AND GREATER INVESTOR CONFIDENCE IN
EQUITIES IN THE MONTHS AHEAD.
o The 11 member countries of the Eurozone saw unemployment fall to 9.0% in
September, down from over 10.0% a year ago.
o With currency risk mitigated by the introduction of the euro, Eurozone
investors continue to shift from money market and bond investments to
equities. However, they are still significantly underexposed to longer-term
savings products versus Anglo-Saxon investors.
o Though reduced, the outlook for earnings growth is still positive. With
short-term interest rates believed to be at or near peak levels and scope for
bond yields expected to decline, equity valuations should be well supported.
From a valuation perspective, the UK is looking the most attractive of the
major European markets for the first time in two years, and we are
intensifying our bottom-up research efforts there.
o Tax reform, both corporate and household, is proceeding more rapidly than we
initially anticipated. Marginal rates throughout the region are expected to be
at or below US levels in several years.
o Restructuring and consolidation, heightened sensitivity to minority
shareholders and shareholder value, and improving labor force flexibility are
resulting in pressure to allocate capital more rationally.
o These trends support the rapid rise of an equity culture. They are also
expected to lead to positive fund flows into the region from both portfolio
and corporate investors.
WE BELIEVE THAT THE MUCH-TRUMPETED JAPANESE RECOVERY OFFERS LITTLE SUBSTANCE FOR
MANY DEEP-ROOTED AND FUNDAMENTAL REASONS.
o A lack of political resolve has led to a 'lost decade' for economic growth,
which is clearly being felt by consumers refusing to spend.
o The pace of fiscal and financial sector reform has stalled and announcements
of corporate restructuring efforts have all but ended.
o A rollback of many of the `big bang' efforts to stimulate the troubled
financial sector bodes ill for financial transparence and equity demand.
o Foreigners are not likely to be strong net buyers of the Japanese equity
market in the near future, given the miserable turnabout they have experienced
recently.
o Thus, investors will need to be selective and willing to trade out of
positions quickly in order to preserve gains in this contradictory market.
IN ASIA EX-JAPAN AND THE EMERGING MARKETS OVERALL, CONCERNS ABOUT SLOWING GLOBAL
GROWTH, THE GLOBAL TECHNOLOGY CYCLE, RESTRUCTURING, COMMODITY PRICES AND THE
DIRECTION OF THE US ECONOMY ARE LIKELY TO CONTINUE TO WEIGH ON EQUITIES FOR THE
NEAR TERM. HOWEVER, PROFITABILITY, DOMESTIC GROWTH AND ATTRACTIVE VALUATIONS ARE
ALL SUPPORTIVE GOING FORWARD. WE ARE CONTENT TO HAVE EXPOSURE TO THESE MARKETS
BUT AT LEVELS THAT BALANCE RISK WITH POTENTIAL RETURNS.
o The sharp correction in Asian stocks has left valuations more attractive.
However, in the short term, Asia lacks an obvious catalyst to ignite a
sustained rally. If high energy price levels are sustained in 2001, Asia is
expected to suffer from a combination of decelerating growth, higher inflation
and deteriorating trade balances.
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LETTER TO SHAREHOLDERS
o We remain cautious in Mexico due to above-trend economic growth and a tight
labor market. Lower rates in Brazil are spurring growth, while inflation
targeting is keeping a lid on overheating.
o Emerging Europe is less vulnerable to global volatility, given its lower
exposure to the telecommunications and technology sectors. The concerted
action among European, US and Japanese central banks to support the euro above
0.85 against the US dollar could be positive for emerging European markets.
o In our view, euro strength would also improve the inflation outlook in central
Europe and take some pressure off the Polish zloty in particular. We believe
it would help Turkish exporters and reduce the likelihood of cash flow out of
Greece.
THE DIFFICULT MARKET CONDITIONS THIS PAST FISCAL YEAR CERTAINLY TEST THE RESOLVE
OF INVESTORS AFTER SEVERAL YEARS OF STRONG EQUITY RETURNS. THAT IS WHY IT IS
IMPORTANT TO PUT CORRECTIVE PERIODS INTO A LONG-TERM CONTEXT AND TO TREAT THEM
AS PAUSES RATHER THAN EMERGING TRENDS PROVIDED THAT THE FUNDAMENTAL ECONOMIC,
DEMOGRAPHIC AND POLITICAL ENVIRONMENT REMAINS SOUND.
o We believe recent market weakness can be primarily attributed to short-term
influences -- higher interest rates, restrained economic growth, rising oil
prices -- rather than fundamental economic or political crises like those seen
in previous years.
o Although the bursting of the Internet bubble has had a significant impact on
investor confidence, developed market demographics and public policy are
favorable for continued and expanding equity ownership by investors the world
over.
o Many positive variables that can benefit international equities lie ahead. We
believe these include an interest rate cycle that has likely peaked, expanding
tax reduction and pension reform measures and commodity prices that are
expected to soften.
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 International Equity and look forward
to continuing to serve your investment needs in the years ahead.
\S\ SIGNATURES MICHAEL LEVY, ROBERT REINER AND JULIE WANG
Michael Levy, Robert Reiner and Julie Wang
Portfolio Managers of the
INTERNATIONAL EQUITY PORTFOLIO
October 31, 2000
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8
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International Equity
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PERFORMANCE COMPARISON
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
INTERNATIONAL EQUITY, MSCI EAFE INDEX AND
LIPPER INTERNATIONAL EQUITY FUNDS AVERAGE
GROWTH OF A $10,000 INEVESTMENT (SINCE AUGUST 4,1992)1
Lipper International Equity
International Equity MSCI EAFE Index Funds Average
8/4/92 10,150 10,000 10,000
10/31/92 9,390 9,871 9,551
4/30/93 10,900 12,281 11,147
10/31/93 12,564 13,569 12,672
4/30/94 14,227 14,322 13,581
10/31/94 14,583 14,937 14,103
4/30/95 14,841 15,123 13,595
10/31/95 15,649 14,883 14,136
4/30/96 17,757 16,849 15,864
10/31/96 18,207 16,442 15,829
4/30/97 20,722 16,700 16,870
10/31/97 22,877 17,202 17,597
4/30/98 28,302 19,857 20,539
10/31/98 25,280 18,858 18,529
4/30/99 27,528 21,736 21,054
10/31/99 29,175 23,200 22,774
4/30/00 33,770 24,760 25,545
10/31/00 29,417 22,532 22,927
Average Annual Total Return for the Periods Ended October 31, 2000
One-Year 0.83% Three-Year 8.74% Five-Year 13.45% Since 8/4/92 1 13.99%
--------------------------------------------------------------------------------
1 The Fund's inception date.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. These figures assume the
reinvestment of dividend and capital gain distributions. Performance would have
been lower during the specified periods if certain fees and expenses had not
been waived by theFund.
The MSCI EAFE Index is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located in Europe,
Australasia and the Far East. Lipper figures represent the average of the total
returns reported by all of the mutual funds designated by Lipper Inc. as falling
into the category indicated.
Benchmark returns are for the period beginning July 31, 1992.
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9
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International Equity
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
--------------------------------------------------------------------------------
ASSETS
Investment in International Equity Portfolio, at value ..... $2,101,093,734
Receivable for shares of beneficial interest subscribed .... 29,671,394
Prepaid expenses and other ................................. 34,663
--------------
Total assets .................................................. 2,130,799,791
--------------
LIABILITIES
Payable for shares of beneficial interest redeemed ......... 1,513,369
Due to Bankers Trust ....................................... 1,264,139
Accrued expenses and other ................................. 106,492
--------------
Total liabilities ............................................. 2,884,000
--------------
NET ASSETS .................................................... $2,127,915,791
==============
COMPOSITION OF NET ASSETS
Paid-in capital ............................................ $2,003,583,597
Undistributed net investment income ........................ 14,694,277
Net unrealized appreciation on investments and
foreign currencies ....................................... 109,637,917
--------------
NET ASSETS .................................................... $2,127,915,791
==============
SHARES OUTSTANDING ($0.001 par value per share,
unlimited number of shares
of beneficial interest authorized) ......................... 83,289,855
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) $ 25.55
==============
See Notes to Financial Statements.
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International Equity
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
OCTOBER 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income allocated from International Equity Portfolio, net ... $ 17,141,626
-------------
EXPENSES
Administration and services fees ............................ 19,983,674
Printing and shareholder reports ............................ 232,082
Registration fees ........................................... 87,985
Professional fees ........................................... 45,814
Trustees fees ............................................... 4,294
Miscellaneous ............................................... 1,069
-------------
Total expenses ................................................. 20,354,918
Less: fee waivers or expense reimbursements .................... (1,551,972)
-------------
Net expenses ................................................... 18,802,946
-------------
EXPENSES IN EXCESS OF INCOME ................................... (1,661,320)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investment transactions ................................... 273,594,050
Option transactions ....................................... (9,181,624)
Futures transactions ...................................... (17,671,152)
Foreign currency transactions ............................. (3,110,388)
Forward foreign currency transactions ..................... 17,223,301
Net change in unrealized appreciation/depreciation
on investments and foreign currencies ..................... (237,607,479)
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES ...................................... 23,246,708
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..................... $ 21,585,388
=============
See Notes to Financial Statements.
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11
<PAGE>
International Equity
--------------------------------------------------------------------------------
STATEMENTS OFCHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD FOR THE
YEAR ENDED OCTOBER 1, 1999 YEAR ENDED
OCTOBER 31, TO OCTOBER 31, SEPTEMBER 30,
2000 1999 1 1999
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment (expenses in excess of
investment) income ................... $ (1,661,320) $ (1,479,472) $ 3,254,083
Net realized gain (loss) from investment
and foreign currency transactions .... 260,854,187 (6,378,904) 1,150,801
Net change in unrealized appreciation/
depreciation on investments and
foreign currencies ................... (237,607,479) 93,522,062 232,624,850
--------------- --------------- ---------------
Net increase in net assets resulting
from operations ........................ 21,585,388 85,663,686 237,029,734
--------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................. -- -- (3,594,378)
--------------- --------------- ---------------
CAPITAL TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from sales of shares .......... 4,341,550,311 242,653,438 2,139,841,944
Dividend reinvestments ................. -- -- 3,024,024
Cost of shares sold .................... (4,148,886,702) (265,880,726) (1,776,650,526)
--------------- --------------- ---------------
Net increase (decrease) from capital
transactions in shares of
beneficial interest .................... 192,663,609 (23,227,288) 366,215,442
--------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS .............. 214,248,997 62,436,398 599,650,798
NET ASSETS
Beginning of period .................... 1,913,666,794 1,851,230,396 1,251,579,598
--------------- --------------- ---------------
End of period (including undistributed
(distributions in excess of) net
investment income of $14,694,277,
$(973,857) and $3,610,542,
respectively) ........................ $ 2,127,915,791 $ 1,913,666,794 $ 1,851,230,396
=============== =============== ===============
<FN>
--------------------------------------------------------------------------------
1 On September 8, 1999, the Board of Trustees approved the change of the fiscal
year end from September 30 to October 31.
</FN>
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12
<PAGE>
International Equity
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR PERIOD
ENDED OCT. 1, 1999 FOR THE YEARS ENDED SEPTEMBER 30,
OCT. 31, TO OCT. 31, ---------------------------------------------
2000 1999 1 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD ................. $25.33 $24.22 $20.68 $22.13 $16.77 $15.47
INCOME FROMINVESTMENT OPERATIONS
Net investment (expenses in
excess of) income ................. (0.02) (0.02) 0.04 0.02 0.09 0.18
Net realized and unrealized
gain (loss) on investments
and foreign currencies ............ 0.24 1.13 3.56 (0.87) 5.63 1.80
------ ------ ------ ------ ------ ------
Total from investment
operations .......................... 0.22 1.11 3.60 (0.85) 5.72 1.98
------ ------ ------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............... -- -- (0.06) (0.01) (0.16) (0.31)
Net realized gains .................. -- -- -- (0.59) (0.20) (0.37)
------ ------ ------ ------ ------ ------
Total distributions .................... -- -- (0.06) (0.60) (0.36) (0.68)
------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD ....................... $25.55 $25.33 $24.22 $20.68 $22.13 $16.77
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN ................ 0.83% 4.63% 17.35% (3.73)% 34.76% 13.42%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(000s omitted) .................... $2,127,916 $1,913,667 $1,851,230 $1,251,580 $525,520 $161,692
Ratios to average net assets:
Net investment (expenses
in excess of) income ........... (0.07)% (0.93)%2 0.19% 0.61% 0.53% 0.91%
Expenses after waivers,
including expenses of the
International Equity
Portfolio ...................... 1.50% 1.50%2 1.50% 1.50% 1.50% 1.50%
Expenses before waivers,
including expenses of the
International Equity
Portfolio ...................... 1.67% 1.70%2 1.66% 1.70% 1.68% 1.76%
<FN>
--------------------------------------------------------------------------------
1 On September 8, 1999, the Board of Trustees approved the change of the fiscal
year end from September 30 to October 31.
2 Annualized.
</FN>
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
13
<PAGE>
International Equity
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. International Equity (the "Fund") is one of
the funds offered to investors by the Trust. The Fund began operations and
offering shares of beneficial interest on August 4, 1992.
The Fund seeks to achieve its investment objective by investing 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 value of the investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio. At October 31, 2000, the Fund's
investment was approximately 71% 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. VALUATION OF SECURITIES
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements, which are included elsewhere in this
report.
C. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the securities 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
are made at least annually to the extent they exceed 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 accounting principles
generally accepted in the United States.
These book/tax differences are either temporary or permanent in nature.To the
extent these differences are permanent, they are charged or credited to
paid-in-capital or accumulated net realized gain, as appropriate, in the period
that the differences arise. Accordingly, permanent differences as of October 31,
2000 have been primarily attributable to partnership tax allocations, foreign
currency transactions, and the utilization of earnings and profits distributed
to shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes, and have been reclassified to the following
accounts:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
FUND INCOME (LOSS) GAINS (LOSSES) CAPITAL
---- -------------- -------------- ------------
International Equity $17,329,454 $(245,198,292) $227,868,838
F. OTHER
The Trust accounts separately for the assets, liabilities, and operations of
each of its funds. Expenses directly attributable to a fund are charged to the
fund, while expenses that are attributable to the Trust are allocated among the
funds in the Trust.
G. ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
--------------------------------------------------------------------------------
14
<PAGE>
International Equity
--------------------------------------------------------------------------------
NOTES TOFINANCIAL STATEMENTS
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"), an indirect wholly owned subsidiary of Deutsche
Bank AG. Under this agreement, Bankers Trust provides administrative, custody
and shareholder services to the Fund. The Trust has entered into an agreement
with Investment Company Capital Corp., an indirect wholly owned subsidiary of
Deutsche Bank AG, to provide transfer agency services to the Trust. All of these
services are provided 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 contractually agreed to waive its fees and reimburse expenses
of the Fund through February 28, 2002, 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.
ICC Distributors, Inc., provides distribution services to the Fund.
NOTE 3 -- SHARES OF BENEFICIAL INTEREST
At October 31, 2000, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
FOR THE FOR THE PERIOD
YEAR ENDED OCTOBER 1, 1999 TO
OCTOBER 31, 2000 OCTOBER 31, 1999 1
------------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- -------------
Sold 148,734,586 $ 4,341,550,311 9,872,995 $ 242,653,438
Reinvested -- -- -- --
Redeemed (140,998,341) (4,148,886,702) (10,768,927) (265,880,726)
------------ --------------- ----------- -------------
Net increase
(decrease) 7,736,245 $ 192,663,609 (895,932) $ (23,227,288)
============ =============== =========== =============
FOR THE
YEAR ENDED
SEPTEMBER 20, 1999
------------------------------
SHARES AMOUNT
------------ ---------------
Sold 91,035,744 $ 2,139,841,944
Reinvested 129,786 3,024,024
Redeemed (75,245,376) (1,776,650,526)
------------ ---------------
Net increase 15,920,154 $ 366,215,442
============ ===============
--------------------------------------------------------------------------------
1 On September 8, 1999, the Board of Trustees approved the change of the fiscal
year end from September 30 to October 31.
--------------------------------------------------------------------------------
15
<PAGE>
International Equity
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of the BT Investment Funds and
Shareholders of International Equity:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
International Equity (one of the funds comprising the BT Investment Funds,
hereafter referred to as the "Fund") at October 31, 2000, the results of its
operations, the changes in its net assets and the financial highlights for each
of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the transfer agent, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 20, 2000
--------------------------------------------------------------------------------
TAX INFORMATION (Unaudited) For the Year Ended October 31, 2000
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund hereby designates the following earned amount as 20% rate capital gain
dividends for the fiscal year ended October 31, 2000, $119,234,977.
During the year ended October 31, 2000, the Fund received income from foreign
sources in the amount of $29,126,621 or $0.350 per share. The Fund has paid
foreign taxes in the amount of $2,705,553 or $0.033 per share. Such amounts are
eligible for the foreign tax credit. You should consult your tax advisor
relating to the appropriate treatment of foreign taxes paid.
--------------------------------------------------------------------------------
16
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS October 31, 2000
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
INVESTMENTS IN UNAFFILIATED ISSUERS
COMMON STOCKS -- 95.24%
AUSTRALIA -- 2.02%
848,383 Brambles Industries Ltd.
(Industrials) .............$ 21,988,386
771,972 News Corporation Ltd. ADR
(Consumer Discretionary) .. 28,952,162
4,355,240 Qantas Airways Ltd.2
(Industrials) ............. 8,756,090
-------------
59,696,638
-------------
BRAZIL -- 0.94%
601,720 Petroleo Brasileiro SA ADR 1
(Energy) .................. 17,487,487
469,808 Tele Norte Leste Participacoes
ADR (Telecommunication
Services) ................. 10,394,502
-------------
27,881,989
-------------
CANADA -- 5.82%
2,001,268 Bombardier Inc. "B"
(Industrials) ............. 31,383,734
173,900 C-Mac Industries Inc.1
(Information Technology) .. 9,651,450
284,100 Canada Life Financial Corp.
(Financials) .............. 6,622,395
383,679 Celestica Inc.1 (Information
Technology) ............... 27,333,218
684,025 Manulife Financial Corp.
(Financials) .............. 17,736,218
704,859 Nortel Networks Corp.
(Information Technology) .. 31,891,441
235,900 Seagram Co. Ltd.
(Consumer Discretionary) .. 13,475,787
1,658,251 Sun Life Financial Services 1
(Financials) .............. 34,202,249
-------------
172,296,492
-------------
CHINA -- 0.79%
427,046 China Unicom ADR 1
(Telecommunication
Services) ................. 8,754,443
69,759,700 PetroChina Co. Ltd., H
(Energy) .................. 14,669,600
-------------
23,424,043
-------------
FINLAND -- 0.62%
429,904 Nokia OYJ ADR
(Information Technology) .. 18,378,396
-------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
FRANCE -- 13.70%
397,207 Alcatel 2 (Information
Technology) ............... $ 24,566,873
71,160 Altran Technologies SA
(Information Technology) .. 14,530,707
863,331 Aventis SA (Health Care) .... 62,202,847
320,601 AXA 2 (Financials) .......... 42,393,910
446,280 Banque Nationale de Paris
(Financials) .............. 38,433,960
295,005 Business Objects SA ADR 1
(Information Technology) .. 23,245,472
331,930 Christian Dior
(Consumer Discretionary) .. 16,853,392
140,300 France Telecom SA
(Telecommunications
Services) ................. 14,651,510
606,630 Societe Generale -- A
(Financials) .............. 34,400,441
339,758 STMicroelectronics NV
(Information Technology) .. 17,646,181
231,162 Suez Lyonnaise des Eaux
(Utilities) ............... 35,230,608
452,598 Total Fina Elf (Energy) ..... 64,682,114
233,425 Vivendi SA (Utilities) ...... 16,758,872
-------------
405,596,887
-------------
GERMANY -- 5.61%
96,300 Comverse Technology Inc.1
(Information Technology) .. 10,761,525
845,018 Deutsche Lufthansa
(Industrials) ............. 16,689,214
623,230 Dresdner Bank AG
(Financials) .............. 25,859,198
911,140 E.ON AG (Utilities) ......... 46,262,164
217,390 Epcos AG 1 (Information
Technology) ............... 16,492,124
386,940 Intershop Communications AG 1,2
(Information Technology) .. 16,727,376
51,963 Muenchener Rueckversicherungs-
Gesellschaft AG
(Financials) .............. 16,385,178
5,027 Porsche AG Pfd.
(Consumer Discretionary) .. 16,831,390
-------------
166,008,169
-------------
HONG KONG -- 2.88%
4,778,200 China Telecom Ltd.1
(Telecommunication
Services) ................. 30,787,201
1,882,800 HSBC Holdings PLC 2
(Financials) .............. 26,194,116
1,947,330 Hutchison Whampoa
(Financials) .............. 24,157,965
2,869,500 MTR Corp.1 (Industrials) .... 4,249,698
-------------
85,388,980
-------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
17
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS October 31, 2000
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
HUNGARY -- 0.29%
185,280 OTP Bank Rt (Financials) ....$ 8,583,428
-------------
INDIA -- 0.00%
50 Niit Ltd. (Information
Technology) ............... 1,683
-------------
IRELAND -- 4.68%
5,855,616 Bank of Ireland
(Financials) .............. 45,068,431
2,376,131 CRH PLC (Materials) ......... 36,012,386
1,106,790 Elan Corp. PLC ADR 1,2
(Health Care) ............. 57,483,906
-------------
138,564,723
-------------
ITALY -- 8.69%
769,100 Assicurazioni Generali
(Financials) .............. 25,262,046
2,280,170 Banca Intesa SPA
(Financials) .............. 9,451,268
9,306,744 ENI SPA (Energy) ............ 50,330,640
3,230,849 Riunione Adriatica di
Sicurta SPA
(Financials) .............. 42,366,343
2,001,370 Saipem (Energy) ............. 10,416,211
1,879,600 San Paolo -- IMI SPA 1
(Financials) .............. 30,430,761
3,803,609 Telecom Italia SPA
(Telecommunication
Services) ................. 44,009,104
8,864,634 Unicredito Italiano SPA 2
(Financials) .............. 45,084,376
-------------
257,350,749
-------------
JAPAN -- 9.53%
303,500 Fanuc Ltd. (Industrials) .... 27,240,602
1,514,000 Fujitsu Ltd.2 (Information
Technology) ............... 26,955,914
1,623 Nippon Telegraph & Telephone
Corp. (Telecommunication
Services) ................. 14,760,453
1,506,000 Nissan Motor Co. Ltd.1
(Consumer Discretionary) .. 10,330,913
818,000 Pioneer Corp.2
(Consumer Discretionary) .. 25,322,229
102,644 Rohm Company Industries
(Information Technology) .. 25,861,641
161,600 Sony Corp.2
(Consumer Discretionary) .. 12,905,944
985,900 Takeda Chemical Industries Ltd.
(Health Care) ............. 64,922,268
1,379,000 The Furukawa Electric Co. Ltd.2
(Industrials) ............. 36,247,503
5,293,000 Toshiba Corporation
(Information Technology) .. 37,811,893
-------------
282,359,360
-------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
NETHERLANDS -- 11.48%
1,533,997 ABN Amro Holdings NV 2
(Financials) ..............$ 35,497,777
1,969,748 Buhrmann NV (Industrials) ... 53,762,635
911,610 Fortis (NL) NV (Financials) . 27,817,980
677,070 Hagemeyer NV (Consumer
Discretionary) ............ 15,983,533
1,117,640 ING Groep NV (Financials) ... 76,660,530
1,911,835 Koninklijke Ahold NV 2
(Consumer Staples) ........ 55,471,679
472,554 Koninklijke Numico NV 2
(Consumer Staples) ........ 22,070,748
1,343,587 Phillips Electronics NV 2
(Consumer Discretionary) .. 52,741,755
-------------
340,006,637
-------------
NORWAY -- 0.18%
393,860 Petroleum Geo-Services ASA 1,2
(Energy) .................. 5,420,761
-------------
POLAND -- 0.44%
276,168 Bank Pekao 144a 3
(Financials) .............. 2,782,393
2,058,291 Telekomunikacja Polska SA GDR
Rule 144A 3 (Telecommunication
Services) ................. 10,239,998
-------------
13,022,391
-------------
SINGAPORE -- 0.57%
1,426,000 DBS Group Holdings Ltd.
(Financials) .............. 16,815,109
-------------
SOUTH KOREA -- 0.64%
282,600 Korea Electric Power Corp.
(Utilities) ............... 6,310,580
345,972 Korea Telecom Corp ADR 1
(Telecommunication
Services) ................. 12,757,718
-------------
19,068,298
-------------
SPAIN -- 4.36%
2,191,194 Altadis SA 2 (Consumer
Staples) ................... 32,782,309
2,546,696 Banco Bilbao Vizcaya Argenta
(Financials) ............... 33,891,498
1,195,950 Banco Popular Espanol
(Financials) ............... 35,734,372
1,398,013 Telefonica SA 1
(Telecommunication
Services) .................. 26,627,371
-------------
129,035,550
-------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS October 31, 2000
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
SWITZERLAND -- 3.49%
17,946 Nestle SA (Consumer
Staples) ..................$ 37,177,803
3,152 Roche Holding AG --
Genusscheine
(Health Care) ............. 28,783,867
6,292 Schweizerische
Ruckversicherungs-
Gesellschaft (Financials) . 12,404,942
9,621 Serono SA 2 (Health Care) ... 8,652,070
33,629 Zurich Financial Services Group
(Financials) .............. 16,271,328
-------------
103,290,010
-------------
TAIWAN -- 0.31%
5,178,600 United Microelectronics Corp.
(Information Technology) .. 9,121,792
-------------
TURKEY -- 0.22%
75,792,021 Yapi Ve Kredi Bankasi
(Financials) .............. 6,548,994
-------------
UNITED KINGDOM -- 17.98%
7,151,617 BAE Systems PLC
(Industrials) ............. 40,812,540
1,627,960 Barclays PLC (Financials) ... 46,570,058
466,136 BP Amoco PLC ADR (Energy) ... 23,743,803
1,310,520 British Telecommunications PLC
(Telecommunications
Services) ................. 15,395,330
1,383,770 Celltech Group PLC 1
(Healthcare) .............. 27,689,171
1,339,190 Energis PLC
(Telecommunications
Services) ................. 11,424,755
1,471,620 Glaxo Wellcome PLC
(Health Care) ............. 42,332,799
1,029,520 Logica PLC (Information
Technology) ............... 30,198,334
4,256,560 Reckitt Benckiser PLC (Consumer
Staples) .................. 56,092,167
2,764,621 Royal Bank of Scotland 1
(Financials) .............. 3,271,825
2,813,691 Royal Bank of Scotland Group PLC
(Financials) .............. 63,288,477
7,964,355 Shell Transport & Trading Co. PLC
(Energy) .................. 64,186,016
25,741,535 Vodafone Group PLC
(Telecommunications
Services) ................. 107,372,064
-------------
532,377,339
-------------
TOTAL COMMON STOCKS
(Cost $2,629,124,487) ................2,820,238,418
-------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
OPTION -- 0.42%
133,000,000 Euro FX Nov 00.86
(Strike Price of
.86 and Expiration
11/27/00) .................$ 3,305,981
66,022,587 Japan Bank Index Option
(Strike Price of 74.1477 and
Expiration 3/9/01) ........ 3,021,194
66,022,587 Japan Bank Index Option
(Strike Price of 78.0649 and
Expiration 3/9/01) ........ 3,182,289
665,081 Nikkei 225 Index (Options on
Nikkei Exchange with Strike
Price of 153.39 and
Expiration 12/8/00) ....... 142,992
763,906 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
154.2354 and Expiration
12/8/00) .................. 98,162
462,714 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
155.9718 and Expiration
12/8/00) .................. 40,719
620,685 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
156.9378 and Expiration
12/8/00) .................. 44,131
679,309 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
174.1110 and Expiration
12/8/00) .................. 679
7,774 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
177.034 and Expiration
12/8/00) .................. 10,054
725,546 Nikkei 225 Index (Options on Nikkei
Exchange with Strike Price of
147.5900 and Expiration
3/8/01) ................... 2,540,937
-------------
TOTAL OPTION
(Cost $39,443,304) ................... 12,387,138
-------------
TOTAL INVESTMENTS IN UNAFFILIATED ISSUERS
(Cost $2,668,567,791) ................2,832,625,556
-------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
19
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS October 31, 2000
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED
INVESTMENT COMPANIES
SHORT-TERM INSTRUMENTS -- 6.87%
MUTUAL FUNDS -- 6.87%
203,485,701 Cash Management
Institutional ............$ 203,485,701
--------------
TOTAL SHORT-TERM INSTRUMENTS
(Cost $203,485,701) ................. 203,485,701
--------------
TOTAL INVESTMENTS
(Cost $2,872,053,492) .......102.53% 3,036,111,257
LIABILITIES IN EXCESS
OF OTHER ASSETS .............. (2.53) (74,791,610)
------ --------------
NET ASSETS .....................100.00% $2,961,319,647
====== ==============
----------
1 Non-income producing security.
2 Securities on loan.
3 This security may be resold in transactions exempt from registrations,
normally to qualified institutional buyers.
Abbreviations
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
INDUSTRY DIVERSIFICATION
(as a percent of Total Investments in the Portfolio)
--------------------------------------------------------------------------------
Financials ................................... 30.15%
Information Technology ....................... 12.10
Telecommunications Services .................. 10.89
Health Care .................................. 10.36
Energy ....................................... 8.90
Industrials .................................. 8.55
Consumer Staples ............................. 7.22
Consumer Discretionary ....................... 6.85
Utilities .................................... 3.70
Materials .................................... 1.28
------
100.00%
======
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 2000
-----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in unaffiliated issuers, at value (cost $2,668,567,791) ........ $2,832,625,556
Investments in affiliated investment companies, at value (cost $203,485,701) 203,485,701
--------------
Total investments, at value ................................................... 3,036,111,257
Cash 1 ..................................................................... 26,626,119
Receivable for securities sold ............................................. 62,954,505
Collateral under securities lending agreements ............................. 111,939,340
Unrealized appreciation on forward foreign currency contracts .............. 5,325,983
Dividends and interest receivable .......................................... 2,180,936
Receivable for foreign taxes withheld ...................................... 4,439,306
Receivable for shares of beneficial interest subscribed .................... 11,185,345
Prepaid expenses and other ................................................. 61,999
--------------
Total assets .................................................................. 3,260,824,790
--------------
LIABILITIES
Payable for options sold (cost $1,323,350) ................................. 1,652,991
Payable for securities purchased ........................................... 179,104,308
Payable for collateral under securities lending agreements ................. 111,939,340
Unrealized depreciation on forward foreign currency contracts .............. 5,096,089
Payable for shares of beneficial interest redeemed ......................... 4,228
Due to Bankers Trust ....................................................... 1,690,751
Accrued expenses and other ................................................. 17,436
--------------
Total liabilities ............................................................. 299,505,143
--------------
NET ASSETS .................................................................... $2,961,319,647
==============
COMPOSITION OF NET ASSETS
Paid-in capital ............................................................ $2,798,983,614
Net unrealized appreciation on investments and foreign currencies .......... 162,336,033
--------------
NET ASSETS .................................................................... $2,961,319,647
==============
<FN>
-------
1 Includes foreign cash of $25,078,895 with a cost of $25,167,979.
</FN>
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------------------------------------
21
<PAGE>
International Equity Portfolio
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 2000
-----------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $4,159,803) .................... $ 49,346,482
Interest .................................................................... 557,607
Securities lending income ................................................... 1,864,852
-------------
TOTAL INVESTMENT INCOME ........................................................ 51,768,941
-------------
EXPENSES
Advisory fees ............................................................... 23,413,787
Administration and services fees ............................................ 5,427,579
Professional fees ........................................................... 82,222
Trustees fees ............................................................... 5,375
Printing and shareholder reports ............................................ 823
Miscellaneous ............................................................... 71,317
-------------
Total expenses ................................................................. 29,001,103
Less: fee waivers or expense reimbursements .................................... (3,779,381)
-------------
Net expenses ................................................................... 25,221,722
-------------
NET INVESTMENT INCOME .......................................................... 26,547,219
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) from:
Investment transactions ................................................... 422,025,517
Option transactions ....................................................... (14,932,190)
Foreign futures transactions .............................................. (28,337,693)
Foreign currency transactions ............................................. (4,969,209)
Forward foreign currency transactions ..................................... 26,331,329
Net change in unrealized appreciation/depreciation on
investments and foreign currencies ........................................ (327,798,168)
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES ......... 72,319,586
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..................................... $ 98,866,805
=============
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD FOR THE
YEAR ENDED OCTOBER 1, 1999 YEAR ENDED
OCTOBER 31, TO OCTOBER 31, SEPTEMBER 30,
2000 1999 1 1999
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment (expenses in excess of)
income ............................... $ 26,547,219 $ (323,887) $ 26,238,345
Net realized gain (loss) from investment
and foreign currency transactions .... 400,117,754 (9,960,988) 4,300,697
Net change in unrealized appreciation/
depreciation on investments and
foreign currencies ................... (327,798,168) 146,111,035 345,753,008
--------------- --------------- ---------------
Net increase in net assets from operations 98,866,805 135,826,160 376,292,050
--------------- --------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from capital invested ......... 6,227,652,526 340,860,574 3,135,914,534
Value of capital withdrawn ............. (6,382,560,518) (357,182,232) (2,446,602,079)
--------------- --------------- ---------------
Net increase (decrease) in net assets from
capital transactions ................... (154,907,992) (16,321,658) 689,312,455
--------------- --------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ... (56,041,187) 119,504,502 1,065,604,505
NET ASSETS
Beginning of period .................... 3,017,360,834 2,897,856,332 1,832,251,827
--------------- --------------- ---------------
End of period .......................... $ 2,961,319,647 $ 3,017,360,834 $ 2,897,856,332
=============== =============== ===============
<FN>
-----------
1 On September 8, 1999, the Board of Trustees approved the change of the fiscal
year end from September 30 to October 31.
</FN>
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
23
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR PERIOD
ENDED OCT. 1, 1999 FOR THE YEARS ENDED SEPTEMBER 30,
OCT. 31, TO OCT. 31, -------------------------------------------
2000 1999 2 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period
(000s omitted) ................... $2,961,320 $3,017,361 $2,897,856 $1,832,252 $572,405 $164,813
Ratios to average net assets:
Net investment (expenses
in excess of) income .......... 0.74% (0.13)%1 1.00% 1.52% 1.35% 1.76%
Expenses after waivers ........... 0.70% 0.70%1 0.70% 0.66% 0.65% 0.65%
Expenses before waivers .......... 0.80% 0.83%1 0.80% 0.81% 0.82% 0.85%
Portfolio turnover rate ............ 140% 5% 106% 65% 63% 68%
<FN>
---------
1 Annualized.
2 On September 8, 1999, the Board of Trustees approved the change of the fiscal
year end from September 30 to October 31.
</FN>
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
24
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 as an unincorporated
trust under the laws of New York and began operations on August 4, 1992. The
Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
beneficial interests in the Portfolio.
B. VALUATION OF SECURITIES
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
securities 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. SECURITIES TRANSACTIONS AND INTEREST INCOME
Securities 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 accretion of 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 and foreign currency transactions of the Portfolio are
allocated pro rata among the investors in the Portfolio at the time of such
determination.
D. FOREIGN CURRENCY TRANSACTIONS
The books and records of the Portfolio are maintained in US dollars. All assets
and liabilities initially expressed in foreign currencies are converted into US
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.
E. 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 US dollar value
of foreign currencies underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation are
determined using prevailing exchange rates. With respect to forward foreign
currency contracts, losses in excess of amounts recognized in the Statement of
Assets and Liabilities may arise due to changes in the value of the foreign
currencies or if the counterparty does not perform under the contract.
F. OPTION CONTRACTS
Upon the purchase of a put option or a call option by the 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.
G. FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts, which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Variation margin payments are made
or received by the Portfolio each day, depending on the daily fluctuations in
the value of the underlying securities, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
--------------------------------------------------------------------------------
25
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
H. FEDERAL INCOME TAXES
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
I. 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.
J. ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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"), an indirect wholly owned subsidiary of
Deutsche Bank AG. Under this agreement, Bankers Trust provides administrative
and custody services to the Portfolio. These services are provided 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 agreement, the Portfolio pays Bankers Trust a fee computed daily and paid
monthly at an annual rate of 0.65% of the Portfolio's average daily net assets.
Bankers Trust has contractually agreed to waive its fees and reimburse expenses
of the Portfolio, through February 28, 2002, to the extent necessary, to limit
all expenses to 0.70% of the average daily net assets of the Portfolio.
The Portfolio may invest in Cash Management Institutional ("Cash Management"),
an open-end management investment company managed by Bankers Trust. Cash
Management is offered as a cash management option to the Portfolio and other
accounts managed by Bankers Trust. Distributions from Cash Management to the
Portfolio for the year ended October 31, 2000, amounted to $8,717,662 and are
included in dividend income.
At October 31, 2000, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $200,000,000, which
expires April 27, 2001. A commitment fee on the average daily amount of the
available commitment is payable on a quarterly basis and apportioned among all
participants based on net assets. No amounts were drawn down or outstanding for
this Portfolio under the credit facility for the year ended October 31, 2000.
The Portfolio may use cash collateral from its securities lending transactions,
described in Note 1.I. to purchase shares of an affiliated fund and may pay fees
generated from those transactions to Bankers Trust.
For the year ended October 31, 2000, affiliates of Deutsche Bank AGreceived
$80,614 in brokerage commissions from the Portfolio as a result of executing
agency transactions in portfolio securities.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended October 31, 2000, were
$4,715,457,241 and $4,888,426,453, respectively.
For Federal income tax purposes, the tax basis of investments held at October
31, 2000, was $2,886,184,610. The aggregate gross unrealized appreciation for
all investments at October 31, 2000, was $268,397,859 and the aggregate gross
unrealized depreciation for all investments was $118,800,853.
--------------------------------------------------------------------------------
26
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- OPEN FORWARD FOREIGN CURRENCY CONTRACTS
On October 31, 2000 the Portfolio had the following open forward foreign
currency contracts outstanding:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/
CONTRACT DEPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR SETTLEMENT DATE VALUE (US$) (US$)
---------------------------------------------------------------------------------------------------------------------
SALES
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
British Pound 3,580,000 US Dollar $ 5,196,800 11/2/00 $ 5,198,522 $ (1,722)
Hong Kong Dollar 6,700,000 US Dollar 859,018 11/1/00 859,102 (83)
Hong Kong Dollar 6,781,000 US Dollar 869,448 11/2/00 869,488 (40)
Japanese Yen 7,316,741,250 US Dollar 68,250,000 11/16/00 67,011,544 1,238,456
Japanese Yen 14,830,042,500 US Dollar 138,469,118 11/16/00 135,823,314 2,645,804
---------------------------------------------------------------------------------------------------------------------
Total Sales $3,882,415
---------------------------------------------------------------------------------------------------------------------
PURCHASES
---------------------------------------------------------------------------------------------------------------------
Swiss Franc 38,822,000 US Dollar $ 21,480,662 11/1/00 $ 21,590,748 $ 110,086
Swiss Franc 12,901,000 US Dollar 7,171,206 11/2/00 7,174,855 3,649
Swiss Franc 113,738,625 US Dollar 65,000,000 11/16/00 63,255,422 (1,744,578)
Swiss Franc 113,723,350 US Dollar 65,000,000 11/16/00 63,246,927 (1,753,073)
Swiss Franc 114,236,850 US Dollar 65,000,000 11/16/00 63,532,508 (1,467,492)
Swiss Franc 116,678,900 US Dollar 65,000,000 11/16/00 64,890,648 (109,352)
Euro 3,000,000 US Dollar 2,529,600 11/1/00 2,542,935 13,335
Euro 25,000,000 US Dollar 21,190,000 11/2/00 21,191,125 1,125
Euro 77,325,581 US Dollar 64,276,889 11/29/00 65,544,642 1,267,753
British Pound 2,100,000 US Dollar 3,010,140 11/1/00 3,049,412 39,272
British Pound 8,060,000 US Dollar 11,716,016 11/3/00 11,703,934 (12,082)
BritishPound 9,620,000 US Dollar 13,962,709 11/6/00 13,969,212 6,503
Japanese Yen 357,347,000 US Dollar 3,280,218 11/1/00 3,272,820 (7,399)
Japanese Yen 68,997,000 US Dollar 632,188 11/2/00 631,920 (268)
---------------------------------------------------------------------------------------------------------------------
Total Purchases $(3,652,521)
---------------------------------------------------------------------------------------------------------------------
Total Unrealized Appreciation $ 229,894
---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 -- CALL AND PUT OPTIONS
Call and Put Options written and related premiums received during the period
were as follows:
<TABLE>
<CAPTION>
CALLS -- ACTUAL PUTS -- ACTUAL
-----------------------------------------------------------------------------------------------------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding, October 31, 1999 8,643 7,766,496 -- --
Options written 5,116,964 65,675,821 1,878,372 13,155,196
Options closed (581,977) (11,886,877) (644,972) (6,492,491)
Options expired (416,969) (21,962,366) (413,800) (359,775)
Options exercised (69,600) (675,120) (620,100) (4,454,230)
-------------------------------------------------------------------------------------------------------------------
Options outstanding, October 31, 2000 4,057,061 38,917,954 199,500 1,848,700
-------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
27
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 6 -- LENDING OF PORTFOLIO SECURITIES
The Portfolio has the ability to lend its securities to brokers, dealers and
other financial organizations. Loans of portfolio securities are collateralized
by cash and/or government securities that are maintained at all times in an
amount equal to 102% and 105% of the current market value of the loaned
securities for domestic and international securities, respectively.
At October 31, 2000
MARKET VALUE MARKET VALUE % OF PORTFOLIO
OF LOANED SECURITIES OF COLLATERAL ON LOAN
-------------------- ------------- --------------
$106,043,552 $111,939,340 3.74
NOTE 7 -- RISKS OF INVESTING IN FOREIGN SECURITIES
The Portfolio invests in foreign securities. Investing in securities of foreign
companies and foreign governments involves special risks and considerations not
typically associated with investing in securities of US companies and the US
government. These risks include devaluation of currencies and future adverse
political and economic developments. Lack of liquidity and greater volatility in
market prices. This is particularly true with respect to emerging markets in
developing countries.
--------------------------------------------------------------------------------
28
<PAGE>
International Equity Portfolio
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Holders of Beneficial Interest of
International Equity Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the International Equity Portfolio
(hereafter referred to as the "Portfolio") at October 31, 2000, the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 20, 2000
--------------------------------------------------------------------------------
29
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
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:
DEUTSCHE ASSET MANAGEMENT SERVICE CENTER
P.O. BOX 219210
KANSAS CITY, MO 64121-9210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management,Inc., and Deutsche Asset
Management Investment Services Limited.
International Equity CUSIP #055922868
1663ANN (10/00)
Distributed by:
ICC Distributors, Inc.
