March 31, 1999
[LOGO TO COME]
BT Mutual Funds
Institutional
International
Equity Fund
Semi-Annual Report
TRUST: BT INSTITUTIONAL FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
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International Equity Fund
Table of Contents
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Letter to Shareholders........................................ 3
International Equity Fund
Statement of Assets and Liabilities........................ 7
Statement of Operations.................................... 8
Statements of Changes in Net Assets........................ 9
Financial Highlights....................................... 10
Notes to Financial Statements.............................. 11
International Equity Portfolio
Schedule of Portfolio Investments........................... 13
Statement of Assets and Liabilities......................... 15
Statement of Operations..................................... 16
Statements of Changes in Net Assets......................... 17
Financial Highlights........................................ 17
Notes to Financial Statements............................... 18
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The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
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2
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International Equity Fund
Letter to Shareholders
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We are pleased to present you with this semi-annual report for the Institutional
International Equity Fund (the "Fund"), providing a review of the markets, the
Portfolio, and our outlook, as well as a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
World markets in general rebounded sharply from last summer's painful sell-off.
o Unexpected interest rate reductions by the U.S. Federal Reserve Board
relieved emerging market tensions.
o Congressional approval of International Monetary Fund (IMF) rescue funds for
Brazil was seen as helpful in restoring confidence.
o Initial pessimism that Japan would endure a deep and prolonged recession took
the Nikkei index to 13 year lows. But even there, the subsequent flow of
restructuring announcements by Japanese corporations combined with bank
capital injections led foreign investors to return to Japan despite anemic
economic conditions.
o Emerging markets as a whole reversed their sharp losses of the previous
half-year, staging a broad recovery as a result of a more favorable interest
rate environment and evidence that economic conditions have bottomed,
particularly in Asia.
Europe
European markets shook off their poor performance for the prior six month period
by rising 16.4% during the half year ended March 31, 1999.
o Interest rate cuts led to a rebound in continental markets as the launch of
the new European currency gained support from investors.
o Euromarkets responded with trepidation when then German Finance Minister
Oskar Lafontaine feuded publicly with the newly-established European Central
Bank (ECB), suggesting that politics would interfere with the bank's
independence. His subsequent resignation allowed the ECB to move toward a
more accommodating stance.
o France led core equity markets with a 19.8% gain in U.S. dollar terms,
followed by the United Kingdom with 19.3% as Germany lagged with 2.1%.
o The continent's periphery delivered strong performance with the Nordic
leaders Finland and Sweden up 67.5% and 21.2%, respectively. Other market
leaders included Italy with 23.5%, Ireland 22.8% and Spain 19.4%.
Asia
Despite renewed and unprecedented foreign buying, the Nikkei index ended the
Japanese fiscal year on March 31, 1999 at the worst close seen in 13 years and
its fourth consecutive closing low.
o Still, Japanese stocks rose 42.4% during the semi-annual period with the
sharp appreciation of the yen accounting for nearly half of the gains.
o Indeed, the yen appreciated a staggering 16% over just one 36-hour period as
hedge fund managers covered short positions and domestic investors
repatriated foreign funds.
o Investors responded to a Tankan survey indicating improved business sentiment
while choosing to ignore the bleak prospects implied by the underlying
numbers.
Ten Largest Stock Holdings % of Net Assets
Telecom Italia SPA (Telecommunications) 2.19%
Unicredito Italiano SPA (Finance) 1.93%
Canal Plus (Television) 1.85%
Societe Generale d'Entreprises SA
(Engineering and Construction) 1.79%
Suez-Lyonnaise Des Eaux (Utility) 1.73%
Vivendi (Utility) 1.65%
Fomento de Construcciones y Contratas, SA
(Building and Construction) 1.63%
Banca Commerciale Italia (Banks) 1.56%
Vodafone Group PLC
(Telecommunications) 1.54%
Koninklijke Ahold NV (Retail--Food) 1.49%
Asia ex-Japan markets experienced a stunning recovery after the massive declines
seen previously. The initial surge was based on:
o lower interest rates globally and particularly in Asia where rates dropped to
pre-crisis levels
o sustained strengthening of the yen
o signs that some economies like Thailand and South Korea are bottoming, and
o short-covering by hedge funds as those funds experienced their own credit
crunch.
After initial nervousness during the corporate results season and short-term
resumption of yen weakness, the rally continued into the first quarter of 1999.
Fears of an imploding yen subsided as the equity market focused on positives,
including:
o Japan's reflation efforts and restructuring initiatives
o interest rates that continued to fall in Asia, despite the backup in U.S.
bond yields
o more signs of regional recovery, such as positive growth in industrial
output, bottoming retail sales, and resumption of import growth for the
crisis countries.
Other Markets
After an extended period of underperformance, emerging markets as a whole
surprised investors by delivering unusually strong performance during the six
months ended March 31, up 32.7% in U.S. dollar terms, outpacing even the S&P 500
Index's return of 27.3%.
Reflecting recognition that the emerging market crises over the past two years
are nearing an end, Latin American markets returned 24.1%. This strong
performance was powered primarily by Mexico's 44.0% gain. Even Brazil's equity
market index delivered a 6.1% return, despite initiating the most recent
emerging market crisis with its January 1999 currency devaluation. Confidence in
the Latin American region was buoyed by:
o lower than expected inflation in Brazil and Mexico
o the appointment of an ex-Wall Street fund manager as Brazil's Central Bank
governor
3
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International Equity Fund
Letter to Shareholders
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o declining interest rates in the region
o firming oil and commodity prices, and
o surprisingly strong growth in the U.S. economy.
Emerging Europe was even more impressive, up 43.6% for the semi-annual period.
Interestingly, the worst hit markets from the previous year experienced the
largest rebounds, with Russia and Turkey up 174.7% and 58.4%, respectively.
Greece, still on track to join European economic and monetary union (EMU) in
2001, returned 40.0%. Hungary and Poland during these six months gave back part
of their early gains due to currency pressures and concerns over deteriorating
current account deficits.
INVESTMENT REVIEW
During the Fund's semi-annual period, we maintained our preference toward
continental European equities, favoring smaller equity markets over most of the
region's larger markets. While remaining underweight in the United Kingdom as
compared with the MSCI EAFE benchmark, we increased the Fund's exposure to about
15.5%, equal to its overweight position in France. Similarly, although we
increased investment in Japan to 8.25% of the portfolio, the Fund remains
significantly underweight relative to the nearly 23% benchmark weighting.
Excellent opportunities in emerging markets prompted us to take the Fund's
emerging market position to 4.5%.
Europe continues to offer the most attractive valuations and performance
potential in the Fund's equity universe. Many of the Fund's holdings are
beneficiaries of the restructuring and consolidation underway in specific
industries as well as of the economic growth we will likely witness as part of
European economic and monetary union.
In the U.K., we added several stocks to the Fund's portfolio. These included the
world's most efficient steel producer, British Steel, and automation engineering
leader BTR-Siebe. We purchased shares in retailer Marks & Spencer and media
bellwether Pearson to capture strong consumer demand. We purchased ferry and
cruise line operator P&O and Sema Group, one of the world's leading information
technology companies, and we sold oil & gas exploration firm Soco International.
Exciting opportunities in telecommunications stocks led to additional purchases
of Vodafone Group, which recently bid for U.S. cellular giant AirTouch
Communications, and cable television/telephony firm Telewest.
The consumer-led recovery in France highlighted several stocks to which we
increased the Fund's exposure or added outright. For example, we added to the
portfolio's holdings in media company Canal Plus and bought food retailing giant
Carrefour. We increased the Fund's weighting in data networker Equant, took
profits in CAD/CAM software developer Dassault Systemes, and trimmed
construction company Eiffage. We sold positions in automaker Renault on concerns
over the impact of their investment in Nissan Motors, and in pharmaceutical/
chemical company Rhone-Poulenc, preferring to retain Hoechst, Rhone-Poulenc's
merger partner in Aventis. We made significant additions to the Fund's positions
in the integrated oil firm Total and urban service and communications company
Vivendi.
Elsewhere among core European markets, we were also actively buying and selling.
o Germany - We bought Deutsche Telecom, one of the world's largest
telecommunications companies and domestic retailer Metro. Weak demand in
international markets led to the sale of athletic shoemaker Adidas-Salomon.
We added to positions in insurer Allianz and regional bank Bayerische
Hypo-und Vereinsbank on weakness as well as to recently merged global car
manufacturer DaimlerChrysler. Volkswagen was sold on revenue concerns and
management's intention to raise capital, and air carrier Lufthansa was sold
on light demand. We purchased restructuring chemical/life sciences company
Hoechst and industrial handling firm Linde, while trading out of utility
conglomerate Viag.
o The Netherlands - We increased existing positions in food retailer Ahold,
took profits in telecom company KPN, and added new positions in consumer
electronics leader Philips and temporary employment firm Vedior.
<TABLE>
<CAPTION>
Periods ended March 31, 1999 Cumulative Total Returns Average Annual Total Returns
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Past 6 Past 1 Since Past 1 Since
months year inception year inception
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<S> <C> <C> <C> <C> <C>
BT Institutional International
Equity Fund(1) (inception 4/1/97)
Class I 12.23% (2.60)% 33.44% (2.60)% 15.57%
Class II 12.07% (1.90)% 34.59% (1.90)% 16.07%
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Morgan Stanley Capital
International ("MSCI")
EAFE Index(2) 22.34% 6.06% 25.80% 6.06% 12.16%
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Lipper International Equity
Funds Average(3) 18.22% 0.02% 19.54% 0.02% 9.18%
</TABLE>
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(1) Investment return and principal value will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
(2) Indexes are unmanaged, and investments cannot be made in an index. During
the period the Fund waived certain fees and expenses. Had these fees and
expenses not been waived, the Fund's return would have been lower.
(3) Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
4
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International Equity Fund
Letter to Shareholders
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Diversification of Portfolio Investments
By Country as of March 31, 1999
(percentages are based on net assets)
The printed document contains a pie chart depicting the following percentages:
Sweden 4%
Other(1) 13%
Australia 3%
United Kingdom 16%
Ireland 3%
France 16%
Germany 7%
Switzerland 5%
Spain 7%
Portugal 2%
Netherlands 6%
Japan 8%
Italy 10%
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(1) Includes countries with weightings of less than 2%.
o Switzerland - With signs of recovery evident, we returned Credit Suisse to
the portfolio, trimmed telephone company Swisscom after sizable gains, and
added to an existing position in financial company UBS.
Although slightly lighter than in the past, we continue to maintain an emphasis
on Europe's smaller markets.
o Italy - We increased the Fund's exposure to Italy's quickly consolidating
banking sector through Banca Popolare di Bergamo, Banca Popolare di Milano
and Banca Commerciale Italiana, while taking profits in privatizing Banca
Nazionale del Lavoro.
o Spain - We sold the Fund's position in Banco Popular, added Banco Central
Hispanoamericano, whose excellent management will operate the new BSCH formed
by a merger with Banco Santander, and enlarged our positions in Argentaria
and Telefonica.
o Portugal - We reduced the portfolio's exposure to this market through the
sale of Cimentos de Portugal and Electridade de Portugal and a trim of
Telecel, the cellular operator.
o Sweden - We increased exposure to strong cyclical companies with machinery
maker Atlas Copco as well as to two firms with excellent exposure to the
U.S., namely appliance manufacturer Electrolux and paper and packaging
company SCA. We also purchased leading telecom equipment maker Ericsson and
money center bank Skandinaviska Enskilda Banken. Sweden is on a probable EMU
convergence path.
o Finland - We sold crane maker KCI, cellular handset manufacturer Nokia, food
company Raisio and telecom provider Sonera, while adding pulp & paper company
UPM-Kymmene.
o Ireland - We added to the portfolio's holdings in Bank of Ireland and ESAT
Telecom, while building materials company CRH was trimmed.
We added several new names in Japan in key sectors we believe to be insulated
from a weak domestic economy. These included Subaru car maker Fuji Heavy,
computer giant Fujitsu, household products manufacturer Kao, and electronic
components leader Murata. We sold Nintendo and began selling Fuji Photo Film on
weaker earnings prospects.
With signs evident that recovery and restructuring is underway, we re-entered
Asia ex-Japan, focusing on South Korea, Singapore, Hong Kong, and to a minor
extent, Thailand. Financial and property companies such as Overseas Chinese
Bank, Shinhan Bank, Samsung Securities, Thai Farmers Bank, Bangkok Bank, and Sun
Hung Kai Properties should benefit from the sharp contraction in local interest
rates and the peaking of bad debts. Preferred holdings in the technology sector
include Samsung Electronics, South Korea's DRAM producer, and Natsteel
Electronics, Singapore's contract manufacturer. China Telecom, the dominant
cellular service provider in southern China, prospers from sharply growing
demand. Other purchases include conglomerate Hutchison Whampoa, Korea Electric
Power, and Pohang Iron & Steel. In Australia, we added to the Fund's holding in
diversified industrial company Brambles and switched out of insurer AMP in favor
of Westpac Bank.
Favorable domestic developments in Latin America highlighted attractive
valuations in the region even amidst the Brazilian crisis. In Mexico, we
purchased media company Grupo Televisa and telecom leader Telmex, which, in our
opinion, offer ample cost efficiency and growth opportunities. We also added
Brazilian telecom holding company Telebras for its resilient position in the
post-devaluation environment.
In emerging Europe, we trimmed portfolio exposure to Greece and Poland on
valuation grounds. Still, we find these markets attractive long term for future
European economic and monetary union convergence.
MANAGER OUTLOOK
We continue to believe that economic and monetary union (EMU) provides an
unprecedented catalyst for European earnings and for industrial consolidation.
Recent interest rate cuts offer a benign environment for consumers and an
attractive source of capital for the corporate sector. Heightened merger and
acquisition activity, both domestically and cross border, further underscores
attractive valuations and the need to meet competitive pressures with innovative
strategies. However, optimism near term must be tempered by the crisis in
Kosovo. A prolonged military engagement, beyond the human hardship, could
undermine consumer confidence and be detrimental to stability and growth in the
region.
We remain highly doubtful that Japan's economy has bottomed and that
restructuring of a significant nature is underway. Recent announcements that the
corporate sector has embraced the need to cut costs, particularly through
headcount reductions, appear spurious at best. Indeed, the majority of
restructuring plans have been of a vague nature spanning several years to
implement fully and involving attrition rather than more pro-active measures. We
believe that government spending to bolster ailing banks is not only wasteful,
it preserves and rewards poorly managed institutions at the expense of those
which have operated responsibly. It is difficult to find conviction in an
environment where consumer confidence is falling
5
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International Equity Fund
Letter to Shareholders
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from already low levels, unemployment is rising from post-war highs, and
thinly-focused stimulus measures are intended to serve political rather than
economic needs.
Confidence has returned to Asia ex-Japan markets as these economies begin to
bottom and attract capital. European and North American investors have quickly
supplanted Japanese investment into the region, indirectly through security
purchases and directly through acquisition of real assets. We remain optimistic
for the region despite ongoing concerns over the Japanese economy and currency.
We believe Asian reflation will continue due to strong liquidity resulting from
expansionary monetary policy, large current account surpluses, and increasing
capital inflows. Restructuring at the macro and micro levels will likely provide
profitability improvements even if overall global growth is weak.
In short, worldwide financial markets have become more risk tolerant with
cyclicals and emerging markets performing again. While the global economic
environment is not ideal, what is important is that global liquidity is strong,
OECD GDP upgrades have begun to come through, and commodity prices have
bottomed.
We will, of course, continue to monitor economic conditions and political
initiatives and their effect on financial markets as we seek long-term capital
appreciation.
We value your support of the BT Institutional International Equity Fund and look
forward to continuing to serve your investment needs in the years ahead.
/s/ Michael Levy, Robert Reiner and Julie Wang
------------------------------------------
Michael Levy, Robert Reiner and Julie Wang
Portfolio Managers of the
International Equity Portfolio
March 31, 1999
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Performance Comparison
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Comparison of Change in Value of a $10,000 Investment in the BT Institutional
International Equity Fund - Class I and Class II, with the MSCI EAFE Index since
April 1, 1997.
Total Return for the Periods
Ended March 31, 1999(3)
Class I Class II
Since 4/1/97(1) Since 4/1/97(1)
15.57%(2) 16.07%(2)
One Year One Year
(2.60)% (1.90)%
(1) The Fund's inception date.
(2) Annualized
(3) Unaudited
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
The printed document contains a line graph depicting the following plot points:
BT Institutional International Equity Fund - Class I - $13,344
MSCI EAFE Index - $12,580
April-97 10000 10000
Jun-97 11298 11238
Sep-97 11860 11218
Sep-98 11890 10283
Mar-99 13344 12580
BT Institutional International Equity Fund - Class II - $13,459
MSCI EAFE Index - $12,580
April-97 10000 10000
Jun-97 11298 11238
Sep-97 11860 11218
Sep-98 11890 10283
Mar-99 13459 12580
Past performance is not indicative of future performance. The Fund is not
insured by the FDIC and is not a deposit, obligation of or guaranteed by Bankers
Trust Company. The Fund is subject to investment risks, including possible loss
of principal amount invested. Performance figures assume the reinvestment of
dividends and capital gain distributions.
6
<PAGE>
<TABLE>
<CAPTION>
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International Equity Fund
Statement of Assets and Liabilities March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<S> <C>
Assets
Investment in International Equity Portfolio, at Value .............. $ 848,911,046
Receivable for Shares of Beneficial Interest Subscribed ............. 13,945,350
Prepaid Expenses and Other .......................................... 26,016
-------------
Total Assets ........................................................... 862,882,412
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Liabilities
Payable for Shares of Beneficial Interest Redeemed .................. 1,019,156
Accrued Expenses and Other .......................................... 9,225
Due to Bankers Trust ................................................... 193,183
-------------
Total Liabilities ...................................................... 1,221,564
-------------
Net Assets ............................................................. $ 861,660,848
=============
Composition of Net Assets
Paid-in Capital ..................................................... $ 844,395,291
Undistributed Net Investment Income ................................. 480,018
Accumulated Net Realized Loss from Investment, Option, Foreign
Currency, Forward Foreign Currency and Foreign Futures Transactions (50,875,208)
Net Unrealized Appreciation on Investment, Foreign Currency
and Forward Foreign Currency Contracts ............................ 67,660,747
-------------
Net Assets ............................................................. $ 861,660,848
=============
Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding)
Class I(1) ............................................................. $ 13.25
=============
Class II(2) ............................................................ $ 13.35
=============
</TABLE>
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(1) Net asset value, redemption price and offering price per share (based on net
assets of $788,459,745 and 59,490,693 shares of beneficial interest
outstanding and .001 par value, unlimited number of shares of beneficial
interest authorized).
(2) Net asset value, redemption price and offering price per share (based on net
assets of $73,201,103 and 5,482,406 shares of beneficial interest
outstanding and .001 par value, unlimited number of shared beneficial
interest authorized).
See Notes to Financial Statements.
7
<PAGE>
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International Equity Fund
Statement of Operations For the six months ended March 31, 1999 (unaudited)
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<TABLE>
<CAPTION>
Investment Income
<S> <C>
Income Allocated from International Equity Portfolio, net ............................ $ 1,205,357
------------
Expenses
Administration and Services Fees-- Class I ........................................... 1,376,386
Administration and Services Fees-- Class II .......................................... 148,277
Registration Fees-- Class I .......................................................... 28,956
Registration Fees-- Class II ......................................................... 1,542
Professional Fees .................................................................... 7,902
Trustees Fees ........................................................................ 2,139
Miscellaneous ........................................................................ 18,324
------------
Total Expenses ....................................................................... 1,583,526
Less Expenses absorbed by Bankers Trust -- Class I ................................... (571,937)
Expenses absorbed by Bankers Trust -- Class II .................................. (34,845)
------------
Net Expenses ...................................................................... 976,744
------------
Net Investment Income ................................................................... 228,614
------------
Realized and Unrealized Gain (Loss) on Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Contracts
Net Realized Loss from:
Investment Transactions ........................................................... (2,485,933)
Options Transactions .............................................................. (1,593,146)
Foreign Currency Transactions ..................................................... (214,375)
Forward Foreign Currency Transactions ............................................. (5,128,545)
Foreign Futures Transactions ...................................................... (9,615,720)
Net Change in Unrealized Appreciation/Depreciation on Investment, Foreign Currency and
Forward Foreign Currency Contracts ................................................ 89,758,528
------------
Net Realized and Unrealized Gain on Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Contracts ............................... 70,720,809
------------
Net Increase in Assets from Operations .................................................. $ 70,949,423
============
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
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International Equity Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, 1999(1) September 30, 1998
----------------- ------------------
Increase (Decrease) in Net Assets from:
Operations
<S> <C> <C>
Net Investment Income ................................................... $ 228,614 $ 5,164,700
Net Realized Loss from Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Transactions ............. (19,037,719) (16,559,316)
Net Change in Unrealized Appreciation/Depreciation on Investment, Option,
Foreign Currency and Forward Foreign Currency Contracts .............. 89,758,528 (23,262,874)
------------- -------------
Net Increase (Decrease) in Net Assets from Operations ...................... 70,949,423 (34,657,490)
------------- -------------
Distributions to Shareholders
Net Investment Income
Class I ............................................................... (4,876,459) --
Class II .............................................................. (238,402) --
------------- -------------
Total Distribution ......................................................... (5,114,861) --
------------- -------------
Capital Transactions in Shares of Beneficial Interest
Net Increase Resulting from Class I Shares .............................. 166,446,043 548,604,135
Net Increase Resulting from Class II Shares ............................. 64,467,433 189,409
------------- -------------
Net Increase from Capital Transactions in Shares of Beneficial Interest .... 230,913,476 548,793,544
------------- -------------
Total Increase in Net Assets ............................................... 296,748,038 514,136,054
Net Assets
Beginning of Period ........................................................ 564,912,810 50,776,756
------------- -------------
End of Period (including undistributed net investment income of $480,018 and
$5,366,265, respectively) ............................................... $ 861,660,848 $ 564,912,810
============= =============
</TABLE>
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(1) Unaudited
See Notes to Financial Statements.
9
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International Equity Fund
Financial Highlights
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Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the International Equity Fund.
<TABLE>
<CAPTION>
Class I Shares Class II Shares
------------------------------------------------------------------------------
For the For the Period For the For the Period
Six Months For the April 1, 1997(1) Six Months For the April 1, 1997(1)
Ended Year Ended through Ended Year Ended through
March 31, Sept. 30, Sept. 30, March 31, Sept. 30, Sept. 30,
1999(4) 1998 1997 1999(4) 1998 1997
--------- ---------- --------------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period....... $ 11.89 $ 12.24 $ 10.00 $ 12.01 $12.25 $10.00
-------- -------- ------- ------- ------ ------
Income from Investment Operations
Net Investment Income (Expenses in
Excess of Investment Income).......... 0.00(3) 0.10 0.00(3) (0.09) 0.14 0.04
Net Realized and Unrealized Gain (Loss)
on Investment, Option, Foreign Currency,
Forward Foreign Currency and
Foreign Futures Contracts............. 1.46 (0.45) 2.24 1.54 (0.38) 2.21
-------- -------- ------- ------- ------ ------
Total from Investment Operations........... 1.46 (0.35) 2.24 1.45 (0.24) 2.25
-------- -------- ------- ------- ------ ------
Distributions to Shareholders
Net Investment Income................... (0.10) -- -- (0.11) -- --
Net Realized Gains...................... -- -- -- -- -- --
-------- -------- ------- ------- ------ ------
Total Distributions........................ (0.10) -- -- (0.11) -- --
-------- -------- ------- ------- ------ ------
Net Asset Value, End of Period............. $13.25 $11.89 $12.24 $13.35 $12.01 $12.25
======== ======== ======= ======= ====== ======
Total Investment Return.................... 12.23% (2.86)% 22.40% 12.07% (1.96)% 22.50%
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted)........................ $788,460 $556,180 $42,566 $73,201 $8,733 $8,211
Ratios to Average Net Assets:
Net Investment Income................ 0.08%(2) 1.40% 0.20%(2) (0.16)%(2) 1.89% 0.85%(2)
Expenses, Including Expenses of the
International Equity Portfolio..... 0.95%(2) 0.95% 0.95%(2) 1.25%(2) 0.75% 0.80%(2)
Decrease Reflected in Above Expense
Ratio Due to Absorption
of Expenses by Bankers Trust....... 0.27%(2) 0.32% 0.67%(2) 0.27%(2) 0.36% 0.64%(2)
</TABLE>
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(1) Commencement of operations
(2) Annualized
(3) Less than $.01
(4) Unaudited
See Notes to Financial Statements.
10
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International Equity Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
BT Institutional Funds Trust (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 March 26, 1990, as a business
trust under the laws of the Commonwealth of Massachusetts. The International
Equity Fund (the "Fund") is offered to investors by its respective Trust.
The Fund offers two classes of shares to investors: Class I and Class II shares
(the "Classes"). Both classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its own expenses
directly attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class.
The Class I and Class II shares commenced operations and began offering shares
of beneficial interest on April 1, 1997.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the International Equity Portfolio (the "Portfolio"). The
Portfolio is an open-end management investment company registered under the Act.
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 32% of the Portfolio.
The financial statements of the Portfolio, including a list of assets held are
contained elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
B. Investment Valuation
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. Investment Income
The Fund's income, net of expenses, is earned daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from security transactions of the Portfolio are allocated pro rata
among the investors in the Portfolio at the time of such determination. Net
investment income is allocated daily to each class of shares based upon its
relative proportion of net assets.
D. Organizational Expenses
Costs incurred by the Fund in connection with its organization and initial
registration is being amortized over a five-year period.
E. Distributions
It is the Fund's policy to declare and distribute dividends annually to
shareholders from net investment income. Distributions of net realized
short-term and long-term capital gains, if any, earned by the Fund will also be
made annually to the extent they are not offset by any capital loss
carryforwards. Dividends and distributions payable to shareholders are recorded
by the Fund on the ex-dividend date.
F. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute substantially all of its 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
gain distributions determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles. The
Fund has capital loss carryover of $1,302,651 and $599,872 expiring 2005 and
2006, respectively. In addition the Fund has deferred post October currency
losses of $3,818,000 and post October capital losses of $29,934,965 to the
current year.
G. Other
The Trust accounts separately for the assets, liabilities and operations of each
Fund and each Class. Expenses directly attributable to each Fund or Class are
charged to that Fund or Class, while expenses, which are attributable to all of
the Trust's funds are allocated among them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of .40% and .70% of average daily net assets for Class
I and Class II, respectively. Prior to August 13, 1998, the Administrative and
Service Fee for Class II was 0.15% of average daily net assets.
ICC Distributors, Inc., a member of the Forum Group of Companies, provides
distribution services to the Fund.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of each Class of Shares, to the extent necessary, to limit all expenses
as follows: International Equity Fund Class I shares to 0.25 of 1% of the
average daily net assets of the Class, excluding expenses of the Portfolio and
.95% of the average daily net assets of the Class, including expenses of the
Portfolio; International Equity Fund Class II shares to .55% of the average
daily net assets of the Class, excluding expenses of the Portfolio, and 1.25% of
the average daily net assets of the Class, including expenses of the Portfolio.
Prior to August 13, 1998, Bankers Trust voluntarily waived and reimbursed
expenses for Class I at a rate of 0.30% of the average daily net assets of the
Class, excluding expenses of the Portfolio and 0.95% of the average daily net
assets of the Class, including expenses of the Portfolio; Class II at a rate of
0.15% of the average daily net assets of the Class, excluding expenses of the
Portfolio, and 0.80% of the average daily net assets of the Class, including
expenses of the Portfolio.
11
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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:
Class I Shares Class I Shares
For the Six Months For the Year
Ended March 31, 1999(1) Ended September 30, 1998
---------------------------------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Sold 32,377,519 $427,349,940 62,156,856 $797,499,509
Reinvested 184,582 2,637,345 -- --
Redeemed (19,848,221) 263,541,242 (18,857,253) (248,895,374)
----------- ------------ ----------- ------------
Net Increase 12,713,880 $166,446,043 43,299,603 $548,604,135
=========== ============ =========== ============
Class II Shares Class II Shares
For the Six Months For the Year
Ended March 31, 1999(1) Ended September 30, 1998
---------------------------------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Sold 6,146,321 $ 86,724,652 727,688 $ 9,444,662
Reinvested 277,037 236,766 -- --
Redeemed (1,668,248) 22,493,985 (670,710) (9,255,253)
----------- ------------ ----------- ------------
Net Increase 4,755,110 $ 64,467,433 56,978 $ 189,409
=========== ====---===== =========== ============
- ----------
1 Unaudited
Note 4--Risks of Investing in Foreign Securities
The Portfolio invests in foreign securities. Investing in foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in securities of U.S. companies and the U.S.
government. These risks include devaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies and
the U.S. government. This is particularly true with respect to emerging markets
in developing countries.
12
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
COMMON STOCKS - 99.1%
Australia - 2.9%
1,030,200 Brambles Industries(2) (Transportation) ............ $26,078,151
2,862,234 Cable Wireless Optus Ltd.(1)
(Telecommunications) ............................. 6,633,528
2,087,600 TABCORP Holdings Ltd. (Leisure Related) ............ 15,819,833
1,567,600 Telstra Corp. Ltd. (Telecommunications) ............ 8,171,950
2,910,000 Westpac Banking Corp. Ltd.(2) (Banks) .............. 21,133,147
-----------
77,836,609
-----------
Austria - 0.7%
388,787 Erste Bank Common (Banks) .......................... 19,727,519
-----------
Botswana - 0.2%
5,817,600 Sechaba Breweries Ltd. (Brewery) ................... 6,295,894
-----------
Brazil - 0.4%
132,500 Telebras (Telecommunications) ...................... 10,682,812
-----------
Canada - 1.8%
448,500 Northern Telecom Ltd.(1)
(Telecommunications) ............................. 27,868,191
1,070,000 Rogers Communication B(1)
(Telecommunications) ............................. 19,379,958
-----------
47,248,149
-----------
Finland - 1.2%
433,800 Helsinki Telecom (Telecommunications) .............. 21,215,371
149,250 KCI Konecranes Intl. PLC(2) (Manufacturing) ........ 5,156,170
245,160 UPM-Kymmene Corp. (Paper) .......................... 6,775,673
-----------
33,147,214
-----------
France - 16.3%
709,100 Alstom(1) (Machinery) .............................. 21,052,470
245,700 AXA-UAP (Insurance) ................................ 32,573,648
229,400 Banque Nationale de Paris (Banks) .................. 19,961,415
167,500 Canal Plus(2) (Television) ......................... 49,096,159
27,400 Carrefour Supermarche SA (Retail-Food) ............. 21,120,863
76,194 Eiffage (Building and Construction) ................ 5,042,479
408,000 Equant N.V.(1) (Computer Services) ................. 31,009,567
612,021 Neopost SA(1) (Machinery) .......................... 9,844,994
403,055 SEITA (Tobacco) .................................... 27,391,948
1,006,520 Societe General d'Entreprises SA
(Engineering and Construction) ..................... 47,377,460
106,776 Societe Generale Paris (Banks) ..................... 20,519,016
247,600 Suez Lyonnaise Des Eaux (Utility) .................. 45,816,756
321,100 Total SAB (Oil-International) ...................... 39,553,856
144,630 Unibail (Real Estate) .............................. 18,112,536
178,200 Vivendi (Utility) .................................. 43,844,478
-----------
432,317,645
-----------
Germany - 7.3%
86,500 Allianz AG (Insurance) ............................. 26,334,683
544,050 Bayerische Hypo-Und Vereinsbank AG(2)
(Banks) .......................................... 32,539,543
315,919 Daimler-Chrysler AG (Autos and Trucks) ............. 27,489,932
748,200 Hoechst AG(2) (Chemical-Specialty) ................. 32,431,432
24,400 Linde AG(2) (Engineering) .......................... 13,935,045
278,400 Mannesmann AG (Machinery) .......................... 35,556,324
388,629 Metro AG (Retail) .................................. 24,322,117
-----------
192,609,076
-----------
Shares Description Value
------ ----------- -----
Greece - 1.0%
202,000 Alpha Credit Bank (Banks) .......................... $13,403,002
298,121 Hellenic Telecommunication Organization
SA (Telecommunications) .......................... 7,229,296
192,640 Panafon SA(1) (Telecommunications) ................. 4,999,418
-----------
25,631,716
-----------
Hong Kong - 1.2%
7,658,000 China Telecommunications(1,2)
(Telecommunications) ............................. 12,747,522
663,000 Hutchison Whampoa Ltd. (Diversified) ............... 5,218,721
1,757,400 Sun Hung Kai Properties Ltd. (Real Estate) ......... 13,152,834
-----------
31,119,077
-----------
Hungary - 0.4%
252,829 Otp Bank Rt. (Banks) ............................... 9,792,012
-----------
India - 0.0%
975 NIIT Ltd. (Computer Software) ...................... 43,086
-----------
Ireland - 3.2%
1,816,300 Bank of Ireland (Finance) .......................... 38,041,023
1,902,870 CRH PLC (Materials-Frgn.) .......................... 32,848,872
315,600 Esat Telecom Group PLC ADR
(Telecommunications) ............................. 13,215,750
-----------
84,105,645
-----------
Italy - 10.1%
805,925 Assicurazioni Generali (Insurance) ................. 32,279,843
5,060,800 Banca Commerciale Italiana(2) (Banks) .............. 41,523,662
793,500 Banca Popolare di Bergamo(2) (Banks) ............... 20,131,571
2,188,400 Banca Popolare di Milano (Banks) ................... 20,389,209
168,950 Ducati Motor Holding SPA(1) (Manufacturing) ........ 494,300
4,237,300 ENI SPA (Oil-International) ........................ 26,990,076
37,600 ENI SPA ADR (Oil-International) .................... 2,373,500
10,488,800 Parmalat Finanziaria SPA(2) (Food/Dairy Products) .. 14,947,295
5,467,500 Telecom Italia SPA(2) (Telecommunications) ......... 58,082,696
9,505,900 Unicredito Italiano SPA (Finance) .................. 51,312,848
-----------
268,525,000
-----------
Japan - 8.3%
1,927,000 Fujitsu Ltd.(2) (Electronics) ...................... 30,947,851
4,111,000 Fuji Heavy Industry(2) (Autos and Trucks) .......... 25,444,254
1,454,600 Kao Corp.(2) (Cosmetics and Toiletries) ............ 32,118,374
494,000 Murata Manufacturing Co. Ltd.
(Electrical Equipment) ........................... 26,278,814
32,500 Nippon Telegraph & Telephone Corp.
(Telecommunications) ............................. 31,833,150
5,270 Ntt Docomo (Telecommunications) .................... 26,031,833
696,900 Takeda Chemical Industries
(Pharmaceuticals) ................................ 27,009,803
630,000 Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals) ................................ 19,948,493
-----------
219,612,572
-----------
Mexico - 0.6%
334,200 Grupo Televisa SA GDR(1) (Broadcasting) ............ 10,485,525
68,100 Telefonos de Mexico SA ADR
(Telecommunications) ............................. 4,460,550
-----------
14,946,075
-----------
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
Netherlands - 5.9%
387,661 Benckiser NV B Shares(2)
(Soaps and Toiletries) ........................... $21,742,052
636,584 ING Groep NV (Finance) ............................. 35,084,423
1,035,000 Koninklijke Ahold NV (Retail-Food) ................. 39,667,203
652,248 Nutreco Holding NV (Foods) ......................... 26,863,969
246,500 Philips Electronics NV
(Consumer Goods) ................................. 20,078,860
615,600 Vedior Nv CVA (Miscellaneous) ...................... 14,255,708
-----------
157,692,215
-----------
Poland - 0.3%
1,357,193 Telekom Polska GDR(1) (Telecommunications) ......... 7,369,558
-----------
Portugal - 2.3%
670,400 Banco Comercial Portugues, SA (Banks) .............. 20,265,388
496,600 BPI - SGPS, SA (Banks) ............................. 15,092,041
160,100 Telecel - Comunicacados Pessoasis SA
(Telecommunications) ............................. 25,494,484
-----------
60,851,913
-----------
Singapore - 0.9%
2,608,200 Natsteel Electronics Ltd.
(Electrical Equipment) ........................... 7,122,189
2,400,800 Overseas-Chinese Banking Corp. Ltd.
(Banks) .......................................... 16,250,714
-----------
23,372,903
-----------
South Korea - 1.4%
706,200 Kepco ADR .......................................... 8,959,913
186,643 Samsung Electronics (Electronics) .................. 14,450,762
404,069 Samsung Securities Co. (Securities Brokerage) ...... 10,735,656
504,600 Shinhan Bank (Banks) ............................... 4,091,907
-----------
38,238,238
-----------
Spain - 6.9%
1,355,560 Argentaria SA (Banks) .............................. 32,576,677
1,588,500 Banco Central Hispanoamericano(2) (Banks)........... 19,910,507
1,274,832 Endesa SA (Utility) ................................ 32,178,096
704,891 Fomento de Construccione y Contratas, SA
(Building and Construction) ...................... 43,377,018
1,216,673 Tabacalera SA A Shares (Tobacco) ................... 24,654,774
699,822 Telefonica Compania d' Espana
(Telecommunications) ............................. 29,684,688
-----------
182,381,760
-----------
Sweden - 4.6%
831,550 Atlas Copco AB A Shares(2) (Machinery) ............. 22,550,851
1,851,810 Castellum AB(2) (Real Estate) ...................... 17,227,711
1,816,920 Electrolux AB Series B(2)
(Household Furnishings) .......................... 36,015,804
558,900 Ericsson Lm B Shares (Telecommunications) .......... 13,593,579
2,218,900 Skandinaviska Enskilda Banken A Shares(2)
(Banks) .......................................... 27,118,989
330,200 Svenska Cellulosa AB B Shares
(Forest Products and Paper) ...................... 7,167,785
-----------
123,674.719
-----------
Switzerland - 5.0%
16,300 Compagnie Financiere Richemont
(Tobacco) ........................................ 27,091,413
67,400 Credit Suisse Group (Banks) ........................ 12,568,340
85,250 Swisscom AG - Registered
(Telecommunications) ............................. 33,291,332
Shares/
Par Value Description Value
--------- ----------- -----
104,000 UBS AG - Registered (Banks) .............. $ 32,673,468
41,500 Zurich Allied Ltd. (Insurance) ........... 26,552,598
--------------
132,177,151
--------------
Thailand - 0.1%
1,907,200 Thai Farmers Bank(2) (Banks) ............. 3,858,570
--------------
United Kingdom - 16.1%
1,084,200 Barclays PLC (Banks) ..................... 31,521,535
3,409,300 British Land Co. PLC (Real Estate) ....... 29,361,882
6,383,550 British Steel PLC (Iron and Steel) ....... 12,932,731
2,052,100 COLT Telecom Group PLC(1)
(Telecommunications) ................... 36,174,739
3,126,800 Compass Group PLC (Catering) ............. 36,468,861
849,500 Glaxo Wellcome PLC (Pharmaceuticals) ..... 28,428,041
285,800 Global Crossing Ltd.(1)
(Telecommunications) ................... 13,218,250
232,600 Global Telesystems Group, Inc.(2)
(Telecommunications) ................... 13,011,063
2,963,540 Marks & Spencer PLC (Retail) ............. 19,351,452
1,374,200 Orange PLC(1) (Telecommunications) ....... 19,322,012
969,300 Pearson PLC (Communication) .............. 22,234,969
1,680,300 Peninsular & Orient Steam Navigation
Co. (Transportation) ................... 24,548,200
1,560,100 Railtrack Group PLC (Railroads) .......... 35,711,897
1,918,272 Sema Group PLC(1) (Computer Services) .... 21,661,182
5,843,350 Siebe PLC (Diversified) .................. 26,011,277
3,896,200 Telewest Communications PLC(1)
(Communication) ........................ 16,982,016
2,189,826 Vodafone Group PLC (Telecommunications) .. 40,900,368
--------------
427,840,475
--------------
Total Common Stock
(Cost $2,352,129,888) ................................ 2,631,097,603
--------------
SHORT TERM INSTRUMENT
MUTUAL FUND - 0.0%
68,000 BT Institutional Cash Management Fund
Mutual Fund
(Cost $68,001) .......................... 68,001
--------------
Total Investments (Cost $2,352,197,889) ............. 99.1% $2,631,165,604
Other Assets in Excess of Liabilities ............... 0.9% 22,876,960
----- --------------
Net Assets .......................................... 100.0% $2,654,042,564
===== ==============
- ------------------
(1) Non-Income Producing Security
(2) Securities on Loan
Industry Diversification (as a percentage of Net Assets):(unaudited)
Telecommunications ....... 18.26%
Banks .................... 16.39%
Finance .................. 4.69%
Utility .................. 4.59%
Insurance ................ 4.44%
Machinery ................ 3.35%
Tobacco .................. 2.98%
Real Estate .............. 2.93%
Pharmaceuticals .......... 2.84%
Oil - International ...... 2.60%
Engineering & Construction 2.31%
Retail - Food ............ 2.29%
Autos & Trucks ........... 1.99%
Computer Services ........ 1.98%
Transportation ........... 1.91%
Television ............... 1.85%
Building & Construction .. 1.82%
Electronics .............. 1.71%
Retail ................... 1.65%
Electrical Equipment ..... 1.60%
Foods .................... 1.58%
Communication ............ 1.48%
Catering ................. 1.37%
Household Furnishings .... 1.36%
Railroads ................ 1.35%
Materials - Foreign ...... 1.24%
Chemical - Specialty ..... 1.22%
Cosmetics & Toiletries ... 1.21%
Diversified .............. 1.18%
Other Industries(3) ...... 4.97%
------
99.14%
Cash & Cash Equivalents .. 0.86%
------
100.00%
======
(3) No one industry represents more than 1.00% of the Portfolio.
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statement of Assets and Liabilities March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at Value:
Common Stock (Cost $2,352,129,888) ............................ $2,631,097,603
Short Term Instruments (Cost $68,001) ......................... 68,001
--------------
Total Investments, at Value ......................................... 2,631,165,604
Cash(1) .......................................................... 45,226,803
Receivable for Securities Sold ................................... 108,940,549
Collateral for Securities Loaned ................................. 266,796,888
Unrealized Appreciation on Forward Foreign Currency Contracts .... 3,931,397
Dividends and Interest Receivable ................................ 4,239,486
Receivable for Foreign Taxes Withheld ............................ 2,780,953
Securities Lending Income Receivable ............................. 125,246
--------------
Total Assets ........................................................ 3,063,206,926
--------------
Liabilities
Payable for Securities Purchased ................................. 137,548,350
Payable Under Security Loan Agreements ........................... 266,796,888
Unrealized Appreciation on Forward Foreign Currency Contracts .... 3,237,287
Due to Bankers Trust ............................................. 1,559,075
Accrued Expenses and Other ....................................... 22,762
Total Liabilities ................................................... 409,164,362
--------------
Net Assets .......................................................... $2,654,042,564
==============
Composition of Net Assets
Paid-in Capital .................................................. $2,432,093,150
Net Unrealized Appreciation on Investments, Foreign Currencies and
Forward Foreign Currency Contracts ............................ 221,949,414
--------------
Net Assets .......................................................... $2,654,042,564
==============
</TABLE>
- ----------
(1) Includes foreign cash of $51,513,093 with a cost of $51,447,860.
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statement of Operations For the six months ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income
<S> <C>
Dividends (net for foreign withholding tax of $20,651) .............................. $ 11,096,165
Interest ............................................................................ 562,349
Securities Lending Income ........................................................... 345,358
-------------
Total Investment Income ................................................................ 12,003,872
Expenses
Advisory Fees ....................................................................... 7,595,478
Administration and Service Fees ..................................................... 1,752,803
Professional Fees ................................................................... 17,252
Trustees Fees ....................................................................... 1,622
Miscellaneous ....................................................................... 15,096
-------------
Total Expenses ...................................................................... 9,382,251
Less Expenses absorbed by Bankers Trust ............................................. (1,202,506)
-------------
Net Expenses ...................................................................... 8,179,745
-------------
Net Investment Income .................................................................. 3,824,127
-------------
Realized and Unrealized Gain (Loss) on Investments, Options, Foreign Currencies,
Forward Foreign Currency and Foreign Futures Contracts
Net Realized Loss from:
Investment Transactions ........................................................... (8,498,977)
Options Transactions .............................................................. (5,019,494)
Foreign Currency Transactions ..................................................... (656,436)
Forward Foreign Currency Transactions ............................................. (16,787,197)
Foreign Futures Transactions ...................................................... (30,617,052)
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign Currencies
and Forward Foreign Currency Contracts ............................................ 281,434,284
-------------
Net Realized and Unrealized Gain on Investments, Options, Foreign Currencies,
Forward Foreign Currency and Foreign Futures Contracts ............................... 219,855,128
-------------
Net Increase in Net Assets from Operations ............................................. $ 223,679,255
=============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
six months ended year ended
March 31, 1999(1) September 30, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income ............................................ $ 3,824,127 $ 19,824,918
Net Realized Loss from Investment, Option, Foreign Currency,
Forward Foreign Currency and Foreign Futures Transactions ...... (61,579,156) (57,508,505)
Net Change in Unrealized Appreciation/Depreciation on Investments,
Foreign Currencies and Forward Foreign Currency Contracts ...... 281,434,284 (106,649,538)
--------------- ---------------
Net Increase (Decrease) in Net Assets from Operations ............... 223,679,255 (144,333,125)
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested ................................... 1,637,752,297 2,330,783,580
Value of Capital Withdrawn ....................................... (1,039,640,815) (926,603,490)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions ................ 598,111,482 1,404,180,090
--------------- ---------------
Total Increase in Net Assets ........................................ 821,790,737 1,259,846,965
Net Assets
Beginning of Period .............................................. 1,832,251,827 572,404,862
--------------- ---------------
End of Period .................................................... $ 2,654,042,564 $ 1,832,251,827
=============== ===============
</TABLE>
- -----------
(1) Unaudited
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for periods indicated for the International Equity Portfolio.
<TABLE>
<CAPTION>
For the years ended For the period
For the six September 30, January 1, 1995 For the
months ended -------------------------------- to Sept. 30, Year Ended
March 31, 1999(3) 1998 1997 1996 1995(2) Dec. 31, 1994
----------------- ---- ---- ---- --------------- -------------
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $2,654,043 $1,832,252 $572,405 $164,813 $83,313 $56,042
Ratios to Average Net Assets:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income ............... 0.33%(1) 1.52% 1.35% 1.76% 2.39%(1) 1.69%
Expenses ............................ 0.70%(1) 0.66% 0.65% 0.65% 0.65%(1) 0.65%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust .................. 0.10%(1) 0.15% 0.17% 0.20% 0.22%(1) 0.24%
Portfolio Turnover Rate ................ 44% 65% 63% 68% 21% 15%
</TABLE>
- ------------
(1) Annualized
(2) On August 2, 1995, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
(3) Unaudited
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The International Equity Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on December 11, 1991
as an unincorporated trust under the laws of New York and commenced operations
on August 4, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the closing price of the
security traded on that exchange prior to the time when the Portfolio assets are
valued. Short-term debt securities are valued at market value until such time as
they reach a remaining maturity of 60 days, whereupon they are valued at
amortized cost using their value on the 61st day. All other securities and other
assets are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Dividend income,
less foreign taxes withheld, if any, is recorded on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign securities.
Interest income is recorded on the accrual basis and includes amortization of
premium and discount on investments. Expenses are recorded as incurred. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security and foreign currency transactions of the Portfolio are
allocated pro rata among the investors in the Portfolio at the time of such
determination.
D. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisors, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian, and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. Foreign Currency Transactions
The books and records of the Portfolio are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
F. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts for the purpose
of settling specific purchases or sales of securities denominated in a foreign
currency or with respect to the Portfolio's investments. The net U.S. dollar
value of foreign 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 may arise due to
changes in the value of the foreign currency or if the counterparty does not
perform under the contract.
G. Option Contracts
Upon the purchase of a put option or a call option by a Portfolio, the premium
paid is recorded as an investment and marked-to-market daily to reflect the
current market value. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain or
loss depending on whether the sale proceeds from the closing sale transaction
are greater or less than the cost of the option. When the Portfolio exercises a
put option, it realizes a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Portfolio exercises a call option, the cost of the security which
the Portfolio purchases upon exercise will be increased by the premium
originally paid.
H. Futures Contracts
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
I. Federal Income Taxes
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
18
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
J. Security Loans
The Portfolio receives compensation in the form of fees or it retains a portion
of interest on the investment of any cash received as collateral. The Portfolio
also continues to receive interest or dividends on the securities loaned. The
loans are secured by collateral at least equal, at all times, to the fair value
of the securities loaned plus accrued interest. Gain or loss in the fair value
of the securities loaned that may occur during the term of the loan will be for
the account of the Portfolio.
K. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.15% of the Portfolio's average daily net
assets.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of .65% of the Portfolio's
average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
0.70% of the average daily net assets of the Portfolio. Prior to August 13,
1998, Bankers Trust voluntarily waived and reimbursed expenses of the Portfolio
to the extent necessary, to limit all expenses to 0.65% of the average daily net
assets of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund (the
"Fund"), an open-end management investment company managed by Bankers Trust
Company (the "Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio for the six months ended March 31, 1999 amounted to $2,847,623.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility and a discretionary demand line of credit facility (collectively
the "credit facilities") in the amounts of $50,000,000 and $100,000,000,
respectively. A quarterly commitment fee of .07% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and is
apportioned equally among all participants. Amounts borrowed under the credit
facilities will bear interest at a rate per annum equal to the Federal Funds
Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the six months ended March 31, 1999.
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would
merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with Bankers Trust thereafter is subject to the approval of Fund
shareholders. If the transaction is approved and completed, Deutsche Bank AG, as
Bankers Trust's new parent company, will control its operations as investment
adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended March 31, 1999, were
$1,644,260,755 and $971,404,243, respectively.
The tax basis of investments held at March 31, 1999 amounted to $2,351,950,807.
The aggregate gross unrealized appreciation for all investments was $315,763,360
and the aggregate gross depreciation for all investments was $36,548,563.
19
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- --------------------------------------------------------------------------------
International Equity Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 4--Open Forward Foreign Currency Contracts
At March 31, 1999, the International Equity Portfolio had the following open
forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation) (US$)
- ----------------------------------------------------------------------------------------------------------------
Sales
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canadian Dollar 33,971,820 US Dollar 22,300,000 5/18/99 22,508,328 (208,328)
Swiss Franc 33,948,000 US Dollar 23,000,000 5/18/99 22,995,326 4,674
Euro Dollar 5,000,000 US Dollar 5,401,500 4/1/99 5,398,000 3,500
Euro Dollar 73,800,000 US Dollar 80,070,048 4/8/99 79,394,040 676,008
Euro Dollar 73,800,000 US Dollar 80,332,038 4/8/99 79,394,040 937,998
Euro Dollar 74,000,000 US Dollar 80,925,660 4/8/99 79,609,200 1,316,460
Japanese Yen 3,760,950,000 US Dollar 30,000,000 4/8/99 30,889,852 (889,852)
Japanese Yen 5,177,480,000 US Dollar 44,000,000 4/19/99 43,625,548 374,452
Swedish Krona 119,760,900 US Dollar 14,700,000 5/18/99 14,527,038 172,962
Singapore Dollar 29,690,679 US Dollar 17,255,000 5/10/99 17,240,973 14,027
South African Rand 285 US Dollar 46 4/1/99 46 --
- ----------------------------------------------------------------------------------------------------------------
Total Sales 2,401,901
- ----------------------------------------------------------------------------------------------------------------
Purchases
- ----------------------------------------------------------------------------------------------------------------
Canadian Dollar 33,971,820 US Dollar 22,576,238 5/18/99 22,508,328 (67,910)
Euro Dollar 73,800,000 US Dollar 81,465,237 4/8/99 79,394,040 (2,071,197)
Euro Dollar 74,000,000 US Dollar 79,568,500 4/8/99 79,609,200 40,700
Japanese Yen 3,670,950,00 US Dollar 30,584,878 4/8/99 30,889,852 304,974
Norwegian Krone 114,874,620 US Dollar 14,700,000 5/18/99 14,766,894 66,894
Swedish Krona 16,000,000 US Dollar 1,927,014 4/1/99 1,945,762 18,748
- ----------------------------------------------------------------------------------------------------------------
Total Purchases (1,707,791)
- ----------------------------------------------------------------------------------------------------------------
Net Appreciation 694,110
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Note 5--Lending of Portfolio Securities
The International Equity Portfolio has the ability to lend its securities to
brokers, dealers and other financial organizations. Loans of portfolio
securities by the Portfolio are collateralized by cash and/or government
securities that are maintained at all times in an amount equal to 102% and 105%
to the current market value of the loaned securities for both domestic and
international, respectively.
Market Value Market Value % of Portfolio
of Loaned Securities of Collateral on Loan
---------------- ---------- -------
$253,690,016 $266,796,888 1.05
Note 6--Foreign Securities
The Portfolio invests in foreign securities. Investing in foreign companies and
foreign governments involves special risks and considerations not typically
associated with investing in securities of U.S. companies and the U.S.
government. These risks include devaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies and
the U.S. government. This is particularly true with respect to emerging markets
in developing countries.
Note 7--Subsequent Event
Subsequent to period end, the portfolio has entered into a $100,000,000 364-day
senior unsecured committed revolving credit facility ("the facility") with two
lenders. The borrowings shall bear interest at a rate based on the Federal Funds
rate. A commitment fee is charged on the unused portion of the facility. The
facility replaces the revolving credit facility described in footnote 2.
20
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Investment Advisor and Administrator of the Portfolio
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, ME 04101
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
[LOGO]
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-368-4031
This report must be preceded or accompanied by a current prospectus for the
Fund.
Institutional International Equity Fund Class I CUSIP #055924856
BT Institutional Funds Class II CUSIP #055924849
499/500 SA (3/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
