o BT ADVISOR FUNDS o
EAFE EQUITY INDEX FUND
ANNUAL REPORT
-------------
DECEMBER o 1998
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS ................................. 3
EAFE EQUITY INDEX FUND
Statement of Assets and Liabilities ................. 6
Statement of Operations ............................. 6
Statements of Changes in Net Assets ................. 7
Financial Highlights ................................ 8
Notes to Financial Statements ....................... 10
Report of Independent Accountants ................... 12
Tax Information ..................................... 12
EAFE EQUITY INDEX PORTFOLIO
Statement of Net Assets .............................. 13
Statement of Operations .............................. 19
Statements of Changes in Net Assets .................. 20
Financial Highlights ................................. 20
Notes to Financial Statements ........................ 21
Report of Independent Accountants .................... 23
------------------------
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.
------------------------
2
<PAGE>
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EAFE EQUITY INDEX FUND
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to present you with this annual report for the EAFE(R)(1) Equity
Index Fund (the "Fund"), providing a detailed review of the market, the
Portfolio, and our outlook. Included are a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.(2)
MARKET ACTIVITY
Overall, 15 of the 20 EAFE markets posted gains for the annual period ended
December 31, 1998, and five had double-digit returns. Most of the advance of the
MSCI EAFE Index3 took place in the fourth quarter, and, with the exception of
three months out of the year, equities added to performance; currencies overall
did not. Other than August and September, Europe rose each month. The Pacific
Basin rose in January and February and then declined through the middle two
quarters of the year, only to regain investors' confidence with comparatively
strong returns in the fourth quarter.
EUROPE
Regionally, Europe rose 28.5% in U.S. dollar terms during the annual period, as
new record highs were recorded in most European markets. Markets responded to:
o A FAVORABLE LOW INTEREST RATE/LOW INFLATION ENVIRONMENT --Virtually
throughout the year, European governments cut interest rates, including
Denmark, France, Germany, Ireland, Italy, Portugal, Spain, Sweden, and the
United Kingdom. Such concerted effort on the part of the individual central
banks raised optimism that the conversion to the Euro would go off
seamlessly. Economic growth was solid, and inflation continued to edge
lower.
o CONTINUED EUROPEAN MONETARY UNION ENTHUSIASM --On May 2nd, the members of
the EMU were announced. The Euro euphoria, i.e. anticipation of the single
currency's introduction, which buttressed the region's markets through most
of the year also contributed to the overall buoyant end to 1998.
o BETTER THAN EXPECTED EARNINGS AND SIGNIFICANT MERGER AND ACQUISITION
ACTIVITY --For example, Finland was the top-performing market in both April
and July, rising on better than expected earnings for Nokia, the global
telecommunications firm, which accounts for more than half of MSCI Finland.
Belgium was the top performer in June as electricity supplier, Electrabel,
formed a trading joint venture with local Scandinavian partners. Italy did
well in July on an improved outlook for telecommunications stocks and on
rumors of possible bank mergers. Switzerland gained that same month on
expectations of robust drug company earnings. Norway advanced in October,
led by Norsk Hydro, which rose partly in response to a rise in crude oil
prices. Sweden was the top performer in November, advancing on renewed
merger rumors in the drug sector. In Germany, DaimlerChrysler began trading
as one share in November, deleting Chrysler from U.S. indices, but gaining
weighting in international indices.
In August, all of the European countries declined, as a combination of political
turmoil in Russia and continued economic distress in Asia contributed to a
global stock market correction. This lasted through September, when the factors
described above, along with a cut in interest rates by the U.S. Federal Reserve
Board, prompted the European markets to advance once again.
- --------------------------------------------------------------------------------
Ten Largest Stock Holdings
- --------------------------------------------------------------------------------
Novartis AG - Bearer Nippon Telegraph & Telephone Corp.
- --------------------------------------------------------------------------------
Glaxo Wellcome Plc. British Telecommunications Plc.
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co. Nestle SA
- --------------------------------------------------------------------------------
Toyota Motor Corp. Roche Holdings AG - Genusschine
- --------------------------------------------------------------------------------
Daimler-Chrysler AG Allianze AG
- --------------------------------------------------------------------------------
PACIFIC BASIN
The Pacific Basin rose 2.4% in U.S. dollar terms during the annual period.
Australia reached a new, all-time record high in April, as investors anticipated
an interest rate cut there. New Zealand was one of the top performers in July,
as interest rates fell to seven month lows and bond yields dropped to more than
four year lows.
o HONG KONG, MALAYSIA, AND SINGAPORE RODE A PARTICULARLY BUMPY ROLLER COASTER.
--Through the first half of the year, currency concerns, high local interest
rates, political turmoil in Indonesia, balance sheet deficits, and concerns
about a possible U.S. interest rate rise that could further hurt regional
economic growth all led to significant equity market declines. Although all
of the region's markets fell in August, Hong Kong actually fell the least,
placing it as the top performing market that month. Prospects for a rebound
in Asia's emerging economies grew gloomier, however, prompting Malaysia's
Prime Minister to tighten his grip on that nation's economy. It
worked--temporarily. Rising on domestic fund stock buying in response to
interest rate declines, Malaysia was the top performing market in September.
Hong Kong and Singapore also rallied in September, the former gaining after
it instituted policies to strengthen its defense of its dollar and the
latter after banks cut their prime lending rates, thereby relieving
corporations' debt burdens. Still, capital controls imposed on September 1st
by the Malaysian Central Bank resulted in the September 30th removal of
Malaysia from the MSCI EAFE Index.
Hong Kong and Singapore continued to rise through the fourth quarter of 1998, as
investors' confidence in the Southwest Pacific region returned after the U.S.
cut interest rates, the Japanese yen appreciated, and a major U.S. brokerage
firm increased its allocation to the region.
o THE JAPANESE EQUITY MARKET PUT IN A DISMAL YEAR, AS THE NATION SHOWED NO
SIGN OF BREAKING OUT OF ITS SLUMP IN A MEANINGFUL WAY. --Japanese equities
initially rose during the first quarter, as the ruling political party
announced that its fiscal stimulus package was implemented in February, a
month earlier than expected. However, the market closed the quarter down,
with investors waiting for details of the government's proposed $124 billion
economic stimulus package. Once released, stocks fell even further, as the
package included no permanent tax cuts. The economy continued to weaken, as
unemployment hit postwar record highs, concerns about Japanese companies'
earnings continued, and the U.S. dollar weakened against the yen, falling to
its lowest levels in seven years. Bolstered by promises of tax reform and
expectations that the new government elected in July would take stronger
steps to stimulate the economy and resolve the banks' bad loan problems,
Japanese stocks rose in June and July.
3
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
LETTER TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
Diversification of Portfolio Investments
By Theme as of December 31, 1998
(PERCENTAGES ARE BASED ON NET ASSETS)
PIECHART
France 9%
Germany 11%
Japan 20%
United Kingdom 21%
Switzerland 8%
Netherlands 7%
Italy 5%
Spain 3%
Sweden 3%
Australia 3%
Hong Kong 2%
Belgium 2%
Other 6%
- ---------------------
* Consists of countries less than 2%.*
However, the new government disappointed early. Japanese stocks fell in August,
and the market reached a twelve year low in September. With the yen rallying in
October and the government both proposing plans to recapitalize the banks and
also unveiling a package of tax cuts and public spending projects, the market
rose in November, only to be the worst performing market once again in local
terms in December. The Bank of Japan publicly stated that they saw no change in
the overall economy despite "bright signs" in some areas.
INVESTMENT REVIEW
MANAGER OUTLOOK
We remain positive about the European markets, with a few potential concerns. We
will, for instance, watch developments in Germany and Italy in 1999 to see
whether weakness in the industrial sectors in these nations spreads. Also, while
we expect growth in the Euro-zone to decelerate only a little, to about 2.25% in
1999, the new European Central Bank is likely to conclude that the downside
risks have increased. Still, against a backdrop of an economy operating well
below capacity, favorable inflation prospects, and a recently somewhat stronger
currency, there is hope for further interest rate cuts in Europe. In this
context, and given the generally upbeat assessments of Euroland's longer-term
prospects under the single currency, equity markets there are likely to perform
strongly. In Asia, investors are gradually edging back into the equity markets,
but the ongoing malaise in Japan will likely continue to hinder those markets.
As an index fund, designed to replicate as closely as possible, before expenses,
the broad diversification and total return of the MSCI EAFE Index with net
dividends, we neither evaluate short-term fluctuations in the Fund's performance
nor manage according to a given outlook for the equity markets or the economies
in general. Still, we will continue monitoring economic conditions and how they
affect the financial markets.
We appreciate your ongoing support of the EAFE Equity Index Fund and look
forward to serving your investment needs for many years ahead.
/s/ Richard J. Vella
--------------------
Richard J. Vella
Portfolio Manager of the EAFE Equity Index Portfolio
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------------------------------------------
Past 1 Since Past 1 Since
Periods ended December 31, 1998 year inception year inception
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BT Advisor EAFE(R) Equity Index Fund(4)
Institutional Class Shares
(inception 1/24/96) 19.81% 31.17% 19.81% 9.69%
- ---------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(3) 20.00% 31.00% 20.00% 9.70%
- ---------------------------------------------------------------------------------------------------------------------------
Lipper International Equity Average5 13.02% 30.88% 13.02% 9.46%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
1 The EAFE Index is the exclusive property of Morgan Stanley. Morgan Stanley
Capital International is a service mark of Morgan Stanley and has been
licensed for use by Bankers Trust Company.
2 Foreign investing involves special risks, including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
3 The MSCI EAFE Index is an unmanaged capitalization-weighted index containing
approximately 1,100 equity securities of companies located outside the
United States. Investments cannot be made in an index.
4 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.
5 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. 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.
4
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE EAFE EQUITY INDEX
FUND - INSTITUTIONAL CLASS, WITH THE MSCI EAFE INDEX SINCE JANUARY 31, 1996.
Total Return
December 31, 1998
One Year Since 1/24/96*
19.81% 9.69%**
* The Fund's inception date.
** Annualized.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
[GRAPH]
EAFE Equity Index Fund - $13,117 MSCI EAFE Index - $13,100
Jan-96 10000 10000
Jun-96 10404 10409
Dec-96 10553 10561
Jun-97 11805 11745
Dec-97 10949 10920
Jun-98 12715 12659
Dec-98 13117 13100
Past performance is not indicative of future results. The MSCI EAFE Index is
unmanaged and investments may not be made in an index. The index return does not
reflect expenses, which have been deducted from the Fund's return. 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.
5
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investment in EAFE Equity Index Portfolio, at Value ......................................................... $ 42,205,168
Receivable for Shares of Beneficial Interest Subscribed ..................................................... 40,470
Due from Bankers Trust ...................................................................................... 214,246
Prepaid Expenses and Other .................................................................................. 14,288
------------
Total Assets ................................................................................................... 42,474,172
------------
LIABILITIES
Accrued Expenses ............................................................................................ 12,045
------------
Net Assets ..................................................................................................... $ 42,462,127
============
COMPOSITION OF NET ASSETS
Paid-in Capital ............................................................................................. $ 34,314,098
Distributions in Excess of Net Investment Income ............................................................ (540,222)
Accumulated Net Realized Loss from Investment, Futures, Foreign Currencies and
Forward Foreign Currency Transactions .................................................................... (559,037)
Net Unrealized Appreciation on Investment, Futures, Foreign Currencies and Forward Foreign Currency Contracts
9,247,288
------------
NET ASSETS ..................................................................................................... $ 42,462,127
============
Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding) .................................................................. $ 11.59
============
SHARES OUTSTANDING ($0.001 par value per share, unlimited number of shares
of beneficial interest authorized) .......................................................................... 3,663,034
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income Allocated from EAFE Equity Index Portfolio, net ...................... $ 629,286
-----------
EXPENSES
Administration and Services Fees
Institutional Class ...................................................... 55,785
Advisor Class ............................................................ 6,605
Professional Fees ........................................................... 35,716
Registration Fees ........................................................... 22,934
Trustees Fees ............................................................... 21,225
Shareholder Reports ......................................................... 20,241
Miscellaneous ............................................................... 9,315
-----------
Total Expenses .............................................................. 171,821
Less Expenses Absorbed by Bankers Trust
Institutional Class ...................................................... (138,798)
Advisor Class ............................................................ (7,821)
-----------
Net Expenses ................................................................ 25,202
-----------
NET INVESTMENT INCOME .......................................................... 604,084
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT, FUTURES, FOREIGN CURRENCIES
AND FORWARD FOREIGN CURRENCY CONTRACTS
Net Realized Loss from Investment Transactions .............................. (127,623)
Net Realized Gain from Futures, Foreign Currencies and Forward
Foreign Currency Transactions ............................................ 167,267
Net Change in Unrealized Appreciation/Depreciation on Investment,
Futures, Foreign Currencies and Forward Foreign Currency Contracts ....... 6,726,636
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT, FUTURES, FOREIGN CURRENCIES AND
FORWARD FOREIGN CURRENCY CONTRACTS .......................................... 6,766,280
-----------
NET INCREASE IN ASSETS FROM OPERATIONS ......................................... $ 7,370,364
===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net Investment Income ............................................................ $ 604,084 $ 765,179
Net Realized Gain from Investment, Futures, Foreign Currencies and
Forward Foreign Currency Contracts Transactions ............................... 39,644 1,682,611
Net Change in Unrealized Appreciation/Depreciation on Investment, Futures, Foreign
Currencies and ForwardForeign Currency Contracts .............................. 6,726,636 934,766
------------ ------------
Net Increase in Net Assets from Operations .......................................... 7,370,364 3,382,556
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income
Institutional Class ........................................................... (604,084) (791,561)
Advisor Class ................................................................. -- (26,630)
Distributions in Excess of Net Investment Income
Institutional Class ........................................................... (287,215) --
Net Realized Gain from Investment Transactions
Institutional Class ........................................................... (39,644) (1,895,332)
Advisor Class ................................................................. -- (204,211)
Distributions in Excess of Net Realized Gains
Institutional Class ........................................................... (346,658) --
------------ ------------
Total Distributions ................................................................. (1,277,601) (2,917,734)
------------ ------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net Increase (Decrease) Resulting from Institutional Class Shares ................ 1,460,464 (4,930,429)
Net Increase (Decrease) Resulting from Advisor Class Shares ...................... (3,811,950) 2,801,911
------------ ------------
Net (Decrease) from Capital Transactions in Shares of Beneficial Interest ........... (2,351,486) (2,128,518)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. 3,741,277 (1,663,696)
NET ASSETS
Beginning of Year ................................................................... 38,720,850 40,384,546
------------ ------------
End of Year ......................................................................... $ 42,462,127 $ 38,720,850
============ ============
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the Institutional Class of EAFE Equity Index Fund.
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
------------------------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE JANUARY 24, 1996(1)
YEAR ENDED YEAR ENDED TO
DECEMBER 31, 1998(3) DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................... $ 9.98 $ 10.62 $ 10.00
---------- ---------- ----------
Income from Investment Operations
Net Investment Income ........................................... 0.16 0.23 0.12
Net Realized and Unrealized Gain (Loss) from Investment, Futures,
Foreign Currencies and Forward Foreign Currency Transactions . 1.81 (0.02) 0.60
---------- ---------- ----------
Total from Investment Operations ................................... 1.97 0.21 0.72
---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ........................................... (0.16) (0.24) (0.08)
In Excess of Net Investment Income .............................. (0.09) -- --
Net Realized Gain from Investment Transactions .................. (0.01) (0.61) (0.02)
In Excess of Net Realized Gains ................................. (0.10) -- --
---------- ---------- ----------
TOTAL DISTRIBUTIONS ................................................ (0.36) (0.85) (0.10)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ..................................... $ 11.59 $ 9.98 $ 10.62
========== ========== ==========
TOTAL INVESTMENT RETURN ............................................ 19.81% 2.11% 7.22%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s omitted) ........................ $ 42,462 $ 35,509 $ 39,667
Ratios to Average Net Assets:
Net Investment Income ........................................ 1.50% 1.70% 1.64%(2)
Expenses, Including Expenses of the EAFE
Equity Index Portfolio ..................................... 0.40% 0.40% 0.40%(2)
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust ................. 0.43% 0.33% 0.48%(2)
</TABLE>
- -------------------
1 Commencement of operations.
2 Annualized.
3 Advisor Class shareholders were converted to Institutional Class on July 10,
1998.
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the Advisor Class of EAFE Equity Index Fund.
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
-----------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1998 FOR THE JUNE 21, 19961
THROUGH YEAR ENDED TO
JULY 10, 19984 DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................... $ 9.63 $ 10.14 $ 10.00
------ --------- -------
INCOME FROMINVESTMENT OPERATIONS
Net Investment Income ........................................... 0.10 0.05 0.02
Net Realized and Unrealized Gain (Loss) from Investment, Futures,
Foreign Currencies and Forward Foreign Currency Transactions . 1.54 0.13 0.12
------ --------- -------
Total from Investment Operations ................................... 1.64 0.18 0.14
------ --------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ........................................... -- (0.08) (0.00)(3)
Net Realized Gain from Investment Transactions .................. -- (0.61) (0.00)(3)
------ --------- -------
TOTAL DISTRIBUTIONS ................................................ -- (0.69) (0.00)(3)
------ --------- -------
NET ASSET VALUE, END OF PERIOD ..................................... $11.27 $ 9.63 $ 10.14
====== ========= =======
TOTAL INVESTMENT RETURN ............................................ 17.03% 1.89% 1.57%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s omitted) ........................ $ -- $ 3,212 $ 717
Ratios to Average Net Assets:
Net Investment Income ........................................ 2.06%(2) 1.17% 0.67%(2)
Expenses, Including Expenses of the EAFE
Equity Index Portfolio ..................................... 0.65%(2) 0.65% 0.65%(2)
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust ................. 0.42%(2) 0.33% 1.70%(2)
</TABLE>
- -------------------
1 Commencement of operations.
2 Annualized.
3 Less than $0.01.
4 Advisor Class shareholders were converted to Institutional Class on July 10,
1998.
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES.
A. ORGANIZATION
BT Advisor 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 24, 1995, as a business trust under the laws of the
Commonwealth of Massachusetts. The EAFE Equity Index Fund (the "Fund") is one of
the funds offered to investors by the Trust.
The EAFE Equity Index Fund offered two classes of shares to investors:
Institutional Class and Advisor Class shares (the "Classes"). Both Classes of
shares have identical rights to earnings, assets and voting privileges, except
that each class has its own expenses and exclusive voting rights with respect to
matters affecting a single class. The Institutional and Advisor shares commenced
operations and began offering shares of beneficial interest on January 24, 1996
and June 21, 1996, respectively. Effective July 10, 1998 the Fund's Advisor
Class was closed and all Advisor Class shares were exchanged into the Fund's
Institutional Class based on a 1 to 1.0382 exchange ratio. As a result of the
exchange, 438,740 shares of the Institutional Class representing $5,133,257 in
net assets were issued at the net asset value of $11.70 per share.
The EAFE Equity Index Portfolio (the "Portfolio") is an open-end management
investment company registered under the Act. The Fund seeks to achieve its
investment objective by investing all of its investable assets in the Portfolio.
At December 31, 1998, the Fund's proportionate interest in the Portfolio's net
assets was approximately 100%.
The financial statements of the Portfolio, including the Statement of Net
Assets, are contained elsewhere in this report, and should be read in
conjunction with the Fund's financial statement.
B. VALUATION
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from security transactions of the Portfolio are allocated pro rata
among the investors in the Portfolio at the time of such determination.
D. ORGANIZATION EXPENSES
Costs incurred by the fund in connection with its organization and initial
registration are being amortized evenly over a five-year period.
E. DISTRIBUTIONS
It is the Fund's policy to declare and distribute dividends annually to
shareholders from net investment income. 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 also made annually to the extent they are not offset by any capital loss
carryforwards.
F. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute 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 the 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 a deferred post October currency
loss of $16,745 and post October capital loss of $502,454 to next year.
G. OTHER
The Trust accounts separately for the assets, liabilities and operations of the
Fund and its Classes. Expenses directly attributable to each Class are charged
to that Class, while expenses which are attributable to the Trust's Funds are
allocated among them. Investment transactions are accounted for on a trade date
basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of .15% and .30% of average daily net assets for the
Institutional Class and Advisor Class, respectively.
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: EAFE Equity Index Fund Institutional Class of Shares to .05% of the
average daily net assets of the Class, excluding expenses of the Portfolio and
.40% of the average daily net assets of the Class, including expenses of the
Portfolio; EAFE Equity Index Advisor Class of shares to .30% of the average
daily net assets of the Class, excluding expenses of the Portfolio, and .65% of
the average daily net assets of the Class, including expenses of the Portfolio.
ICC Distributors, Inc., a member of the Forum Group of Companies, provides
distribution services to the Fund. For the year ended December 31, 1998, there
were no reimbursable expenses incurred under this agreement.
The EAFE Equity Index Fund's two Classes of shares impose a shareholder
transaction fee paid when investors buy, sell or exchange shares of the Fund.
Institutional Class Shares deducted a transaction fee of 0.25% on all redemption
and exchange redemption transactions. Advisor Class Shares deducted a
transaction fee of 0.50% on all purchase, redemption and exchange transactions.
These transaction fees are paid directly to the Fund and are deducted
automatically from the amount invested, exchanged or redeemed (with the
exception of reinvested dividends or capital gain distributions).
10
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
The Portfolio in which the Fund invests is a participant with other affiliated
entities in a revolving credit facility and a discretionary demand line of
credit facility (collectively the "credit facilities") in the amounts of
$50,000,000 and $100,000,000, respectively, which expires March 15, 1999. A
commitment fee of .07% per annum on the average daily amount of the available
commitment is payable on a quarterly basis and apportioned equally among all
participants. Amounts borrowed under the credit facilities will bear interest at
a rate per annum equal to the Federal Funds Rate plus .45%. No amounts were
drawn down or outstanding under the credit facilities as of and for the year
ended December 31, 1998.
NOTE 3--SHARES OF BENEFICIAL INTEREST
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES(1)
---------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 190,462 $ 2,131,517 1,767,703 $ 18,359,793
Reinvested 109,811 1,258,105 269,018 2,686,886
Redeemed (632,885) (7,062,415) (2,215,503) (25,977,108)
Exchanged 438,740 5,133,257 -- --
------------ ------------ ------------ ------------
Increase (Decrease) 106,128 $ 1,460,464 (178,782) $ (4,930,429)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES(1)
------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 1998 THROUGH FOR THE YEAR ENDED
JULY 10, 1998 DECEMBER 31, 1997
------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 211,779 $ 2,284,004 345,960 $ 3,634,709
Reinvested -- -- 18,203 173,760
Redeemed (89,978) (962,697) (101,210) (1,006,558)
Exchanged (455,480) (5,133,257) -- --
----------- ----------- ----------- -----------
Increase (Decrease) (333,679) $(3,811,950) 262,953 $ 2,801,911
=========== =========== =========== ===========
</TABLE>
- ------------------
(1) On July 10, 1998 shareholders of the Advisor Class exchanged their shares
into the Institutional Class and the Advisor Class ceased operations.
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.
11
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of BT Advisor Funds and Shareholders of EAFE Equity
Index Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the EAFE Equity Index Fund (one of the Funds comprising BT Advisor Funds,
hereafter referred to as the "Fund") at December 31, 1998, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
- --------------------------------------------------------------------------------
TAX INFORMATION (Unaudited) For the Tax Year Ended December 31, 1998
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts may differ from those elsewhere in this report because of differences
between tax and financial statement reporting requirements.
The Fund's distributions to shareholders included $78,526 from Long Term Capital
Gains, all of which was taxed at the 20% capital gains rate.
12
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
COMMON STOCKS - 97.0%
AUSTRALIA - 2.3%
4,000 Amcor Ltd. ....................................... $ 17,056
5,400 AMP Ltd. (a) ..................................... 68,271
6,976 Boral Ltd. ....................................... 9,897
1,300 Brambles Industries .............................. 31,599
11,491 Broken Hill Proprietary Co. Ltd. ................. 84,454
4,831 Coca-Cola Amatil Ltd. ............................ 17,961
6,994 Coles Myer Ltd. .................................. 36,567
7,900 CSR Ltd. ......................................... 19,275
12,740 Foster's Brewing Group ........................... 34,434
7,453 General Property Trust ........................... 13,900
2,413 Gio Australia Holdings ........................... 7,909
2,970 Lend Lease Corp. Ltd. ............................ 39,955
18,512 M.I.M. Holdings Ltd. ............................. 8,150
7,979 National Australia Bank .......................... 120,028
1,545 Newcrest Mining Ltd.(a) .......................... 2,137
10,832 News Corporation ................................. 71,404
20,473 Normandy Mining Ltd. ............................. 18,904
6,301 North Ltd. ....................................... 10,249
3,513 Orica Ltd. ....................................... 18,238
10,600 Pacific Dunlop ................................... 17,112
8,900 Pioneer International ............................ 18,776
1,900 Rio Tinto Ltd. ................................... 22,488
6,613 Santos Ltd. ...................................... 17,712
4,732 Southcorp Holdings Ltd. .......................... 15,061
1,700 TABCORP Holdings Ltd. ............................ 10,396
26,800 Telstra Corp. Ltd. ............................... 125,043
16,786 Westfield Trust - Units .......................... 36,953
539 Westfield Trust Units New ........................ 1,187
10,600 Westpac Banking Corp., Ltd. ...................... 70,782
6,319 WMC Ltd. ......................................... 19,011
--------
984,909
--------
AUSTRIA - 0.3%
550 Bank Austria AG .................................. 27,991
70 Boehler-Uddeholm AG .............................. 3,261
60 Ea-Generali AG ................................... 14,750
100 Flughafen Wien AG ................................ 4,911
260 Oesterreichisch Elektriztaetswirtschafts
AG-A ............................................. 39,771
160 OMV AG ........................................... 15,092
90 VA Technologie AG ................................ 7,805
90 Weinerberger Baustoffindustrie AG ................ 17,915
--------
131,496
--------
BELGIUM - 1.9%
50 Barco NV ....................................... 14,097
12 Bekaert NV ..................................... 5,964
150 Cimenteries CBR ................................ 14,823
22 Colruyt NV ..................................... 18,416
307 Delhaize-Le Lion, SA ........................... 27,126
302 Electrabel SA .................................. 132,545
442 Fortis AG ...................................... 159,945
210 Fortis AG CVG (a) .............................. 946
247 Fortis AG-Strip VVPR ........................... 14
10 Generale de Banque SA-Strip VVPR ............... 0
150 Groupe Bruxelles Lamber SA ..................... 30,519
1,588 KBC Bancassurance Holding ...................... 125,545
141 Union Miniere SA ............................... 5,361
150 PetroFina SA ................................... 68,667
Shares Description Value
------ ----------- -----
29 D'Ieteren SA ................................. $ 15,973
464 Solvay SA-A .................................. 34,930
450 Tractebel .................................... 87,240
8 UCB SA ....................................... 49,295
--------
791,406
--------
DENMARK - 0.9%
200 Carlsberg-AS A ............................... 11,584
300 Carlsberg AS B ............................... 17,282
5 D/S 1912 B ................................... 34,831
5 D/S Svendborg B .............................. 50,485
464 Danisco AS ................................... 25,059
300 Den Danske Bank .............................. 40,153
500 FLS Industries AS B .......................... 10,175
445 Novo Nordisk AS-B ............................ 58,516
777 Tele Denmark AS-B ............................ 104,485
400 Uni-Danmark AS-A ............................. 36,005
--------
388,575
--------
FINLAND - 1.5%
800 Cultor Oyj ................................... 8,162
1,100 Kemira Oy .................................... 7,878
900 Kesko ........................................ 13,421
4,900 Merita Ltd.-A ................................ 30,959
200 Metra Oy - A ................................. 3,520
200 Metra Oy - B ................................. 3,453
2,600 Nokia Oyj-A .................................. 316,296
800 Nokia Oyj-K .................................. 97,322
800 Outokumpu Oy-A ............................... 7,346
1,100 Raisio Group PLC ............................. 12,087
400 Sampo Insurance Co. Ltd.-A ................... 15,187
3,300 Sonera Group Oyj ............................. 58,275
300 Stockmann AB-A ............................... 7,364
50 Stockmann AB-B ............................... 937
1,500 UPM-Kymmene Corp. ............................ 41,793
--------
624,000
--------
FRANCE - 9.1%
198 Accor SA ..................................... 42,869
901 Alcatel Alsthom .............................. 110,273
1,832 AXA-UAP ...................................... 265,522
165 AXA-UAP New .................................. 23,914
33 AXA CVG (a) .................................. 159
1,193 Banque Nationale de Paris .................... 98,237
300 Societe BIC SA ............................... 16,641
206 Buoygues ..................................... 42,463
228 Canal Plus ................................... 62,215
444 Cap Gemini SA ................................ 71,263
213 Carrefour Supermarche SA ..................... 160,797
600 Casino Guichard Perracho ..................... 62,483
33 Coflexip ..................................... 2,238
493 Compagnie de Saint-Gobain .................... 69,601
200 Eridania Beghin-Say SA ....................... 34,606
50 Essilor International ........................ 19,683
4,529 France Telecom SA ............................ 359,811
404 Groupe Danone ................................ 115,662
3 Havas SA ..................................... 306
100 Imetal SA .................................... 10,020
454 L'Air Liquide ................................ 83,266
373 L'OREAL ...................................... 269,636
566 Lafarge SA ................................... 53,777
867 Lagardere SCA ................................ 36,844
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
200 Legrand SA ................................... $ 53,000
484 LVMH ......................................... 95,783
697 Suez Lyonnaise des Eaux-Dumez ................ 143,174
852 Michelin-B ................................... 34,073
920 Paribas ...................................... 79,955
50 Pathe SA ..................................... 13,957
188 Pechiney SA-A ................................ 6,139
450 Pernod Ricard ................................ 29,229
685 Pinault-Printemps-Redoute SA ................. 130,903
127 Promodes ..................................... 92,352
300 PSA Peugeot Citroen .......................... 46,433
1,993 Rhone-Poulenc-A .............................. 102,562
708 Sanofi SA .................................... 116,549
908 Schneider SA ................................. 55,078
250 Sidel SA ..................................... 21,204
100 Simco SA ..................................... 9,072
545 Societe Generale Paris ....................... 88,254
1,516 Societe Nationale ELF ........................ 175,235
220 Sodexho ...................................... 49,206
950 Thomson CSF .................................. 40,797
1,350 Total SA-B ................................... 136,722
1,800 Usinor Sacilor ............................... 19,985
510 Valeo SA ..................................... 40,189
923 Vivendi ...................................... 239,474
---------
3,831,611
---------
GERMANY - 10.4%
315 Adidas AG .................................... 34,237
1,291 Allianze AG .................................. 473,669
350 AMB Aachener & Muench Beteil ................. 51,492
3,420 BASF AG ...................................... 130,614
3,995 Bayer AG ..................................... 166,848
2,733 Bayerische Vereinsbank ....................... 214,189
400 Beiersdorf AG ................................ 27,623
550 Continental AG ............................... 15,192
5,510 Daimler-Chrysler AG .......................... 544,330
760 Degussa AG ................................... 41,781
2,915 Deutsche Bank AG ............................. 171,630
2,875 Deutsche Lufthansa AG ........................ 63,532
12,115 Deutsche Telekom ............................. 398,668
2,708 Dresdner Bank AG ............................. 113,829
412 Heidelberger Zement AG ....................... 31,668
500 Hochtief AG .................................. 19,516
60 Karstadt AG .................................. 31,346
65 Linde AG ..................................... 40,008
55 MAN AG ....................................... 16,183
2,150 Mannesmann AG ................................ 246,592
990 Merck KGAA ................................... 44,587
1,592 Metro AG ..................................... 127,146
468 Muenchener Rueckversicherungs-
Gesellschaft AG ............................ 226,792
120 Preussag AG .................................. 54,260
1,850 RWE AG ....................................... 101,371
1,485 RWE AG ....................................... 53,058
325 SAP AG ....................................... 140,515
210 SAP AG-Vorzug ................................ 100,277
505 Shering AG ................................... 63,455
3,135 Siemens AG ................................... 202,373
190 Thyssen AG ................................... 35,266
2,725 VEBA AG ...................................... 163,143
Shares Description Value
------ ----------- -----
158 Viag AG ........................................ $ 92,696
1,830 Volkswagen AG .................................. 146,154
---------
4,384,040
---------
HONG KONG - 2.0%
11,421 Bank of East Asia Ltd. ......................... 19,903
22,000 Cathay Pacific Airways ......................... 21,868
13,000 Cheung Kong Holdings Ltd. ...................... 93,557
13,500 CLP Holdings Ltd. .............................. 67,268
11,000 Hang Lung Development Co, ...................... 11,786
10,600 Hang Seng Bank Ltd. ............................ 94,758
24,164 Hong Kong and China Gas Co. Ltd. ............... 30,725
67,809 Hong Kong Telecommunications Ltd. .............. 118,608
13,000 Hong Kong & Shanghai Hotels Ltd. ............... 9,230
7,600 Hopewell Holdings Ltd. ......................... 4,145
21,000 Hutchison Whampoa Ltd. ......................... 148,420
11,131 Hysan Development Co. Ltd. ..................... 16,596
11,800 New World Development Co. Ltd. ................. 29,703
12,000 Shangri-La Asia Ltd. ........................... 10,224
22,522 Sino Land Co. .................................. 12,065
13,156 Sun Hung Kai Properities Ltd. .................. 95,954
9,500 Swire Pacific Ltd.-A ........................... 42,554
5,000 Television Broadcasts Ltd. ..................... 12,909
14,000 Wharf Holdings Ltd. ............................ 20,422
---------
860,695
---------
IRELAND - 0.5%
4,848 Allied Irish Banks Plc ......................... 86,724
2,572 CRH Plc ........................................ 44,365
1,315 Greencore Group Plc ............................ 6,062
1,274 Independent Newspapers Plc ..................... 5,115
1,854 Irish Life Plc ................................. 17,424
576 Irish Permanent Plc ............................ 8,651
948 Kerry Group Plc ................................ 12,899
965 Ryanair Holdings(a) ............................ 6,888
7,342 Jefferson Smurfit Group Plc .................... 13,210
53 Waterford Wedgwood Plc ......................... 95
5,107 Waterford Wedgwood Units ....................... 4,329
---------
205,762
---------
ITALY - 5.0%
5,649 Assicurazioni Generali ......................... 236,031
9,913 Banca Commerciale Italiana ..................... 68,432
5,660 Banca Intesa SPA ............................... 33,983
22,250 Bennetton Group SPA ............................ 44,866
4,810 Edison SPA ..................................... 56,695
44,181 ENI SPA ........................................ 288,940
24,966 Fiat SPA ....................................... 86,778
10,354 Fiat SPA ....................................... 19,969
24,686 Istituto Nazionale delle Assicurazioni ......... 65,250
9,114 Bancario San Paolo di Torino ................... 161,156
5,851 Italgas SPA .................................... 31,693
8,876 Mediaset SPA ................................... 72,023
4,899 Mediobanca SPA ................................. 68,083
40,486 Montedison SPA ................................. 53,813
12,576 Olivetti Group (a) ............................. 43,788
9,197 Parmalat Finanziaria SPA ....................... 17,599
13,436 Pirelli SPA .................................... 43,081
3,362 Riunione Adriatica di Sicurta SPA .............. 48,759
36,669 Telecom Italia Mobile SPA ...................... 270,899
8,838 Telecom Italia New ............................. 55,659
20,393 Telecom Italia SPA ............................. 174,120
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
4,617 Telecom Italia Mobile SPA .................... $ 21,751
22,313 Unicredito Italiano SPA ...................... 132,346
24,686 Unione Immobiliare SPA (a) ................... 12,886
---------
2,108,600
---------
JAPAN - 20.3%
1,000 Acom Co. Ltd. ................................ 64,146
4,000 Ajinomoto Co., Inc. .......................... 42,410
3,000 Amada Co. Ltd. ............................... 14,499
14,000 Asahi Bank Ltd. .............................. 51,210
3,000 Asahi Breweries Ltd. ......................... 44,133
8,000 Asahi Chemical Industry Co. Ltd. ............. 38,099
7,000 Asahi Glass Co. Ltd. ......................... 43,356
26,000 Bank of Tokyo-Mitsubishi Ltd. ................ 268,775
14,000 Bank of Yokohama Ltd. ........................ 33,522
4,000 Bridgestone Corp. ............................ 90,652
5,000 Canon, Inc. .................................. 106,688
3,000 Casio Computer Co. Ltd. ...................... 22,106
5,000 Chiba Bank Ltd. .............................. 19,836
8,000 Chichibu Onoda Cement ........................ 20,004
4,000 Citizen Watch Co. Ltd. ....................... 24,033
7,000 Cosmo Oil Co. Ltd. ........................... 10,576
800 Credit Saison Co Ltd. ........................ 19,685
4,000 Dai Nippon Printing Co. Ltd. ................. 63,686
4,000 Daiei, Inc. .................................. 10,850
2,000 Daiichi Pharmaceutical ....................... 33,734
5,000 Daikin Industries Ltd. ....................... 49,479
9,000 Dainippon Ink & Chemicals, Inc. .............. 24,571
3,000 Daiwa House Industry Co. Ltd. ................ 31,887
8,000 Daiwa Securities Co. Ltd. .................... 27,284
6,000 Denso Corp. .................................. 110,797
22 East Japan Railway Co. ....................... 122,654
2,000 Ebara Corp. .................................. 17,194
2,000 Eisai Co. Ltd. ............................... 38,876
1,400 Fanuc ........................................ 47,871
16,000 Fuji Bank Ltd. ............................... 58,809
3,000 Fuji Photo Film Co. .......................... 111,327
5,000 Fujikura Ltd. ................................ 26,772
1,000 Fujita Kanko, Inc. ........................... 8,862
10,000 Fujitsu Ltd. ................................. 132,974
9,000 Furukawa Electric Co. Ltd. ................... 30,615
3,000 Gunma Bank ................................... 23,776
5,000 Hankyu Corp. ................................. 21,912
18,000 Hitachi Ltd. ................................. 111,327
6,000 Hitachi Zosen Corp. .......................... 8,270
5,000 Honda Motor Co. Ltd. ......................... 163,898
1,000 House Foods Industry ......................... 16,876
1,000 Hoya Corp. ................................... 48,595
2,000 INAX ......................................... 12,900
14,000 Industrial Bank of Japan ..................... 64,446
2,000 Ito-Yokado Co. Ltd. .......................... 139,601
8,000 Itochu Corp. ................................. 15,409
10,000 Japan Airlines (a) ........................... 26,330
18,000 Japan Energy Corp. ........................... 17,017
4,000 Joyo Bank .................................... 15,621
2,000 JUSCO Co. .................................... 40,378
6,000 Kajima Corp. ................................. 15,639
2,000 Kandenko Co. Ltd. ............................ 13,501
5,800 Kansai Electric Power Co., Inc. .............. 126,833
3,000 Kao Corp. .................................... 67,591
8,000 Kawasaki Heavy Industries Ltd. ............... 18,731
Shares Description Value
------ ----------- -----
19,000 Kawasaki Steel Corp. ............................. $ 28,371
2,000 Kinden Corp. ..................................... 30,359
10,000 Kinki Nippon Railway ............................. 53,455
6,000 Kirin Brewery Co. Ltd. ........................... 76,339
2,000 Kokuyo ........................................... 26,878
6,000 Komatsu Ltd. ..................................... 31,437
8,000 Kubota Corp. ..................................... 23,820
11,000 Kumagai Gumi Co. Ltd. (a) ........................ 8,456
4,000 Kuraray Co. Ltd. ................................. 44,071
2,000 Kurita Water Industries .......................... 29,298
1,000 Kyocera Corp. .................................... 52,748
3,000 Kyowa Hakko Kogyo ................................ 14,791
11,000 Marubeni Corp. ................................... 18,855
2,000 Marui Co. Ltd. ................................... 38,434
12,000 Matsushita Electric Industrial Co. Ltd. .......... 211,946
5,000 Meiji Seika ...................................... 19,880
2,000 Minebea Co. Ltd. ................................. 22,866
13,000 Mitsubishi Chemical Corp. ........................ 27,337
9,000 Mitsubishi Corp. ................................. 51,688
13,000 Mitsubishi Electric Corp. (a) .................... 40,776
8,000 Mitsubishi Estate Co. Ltd. ....................... 71,603
25,000 Mitsubishi Heavy Industires Ltd. ................. 97,190
7,000 Mitsubishi Materials Corp. ....................... 11,751
7,000 Mitsubishi Trust & Banking Corp. ................. 44,964
9,000 Mitsui & Co. ..................................... 50,177
5,000 Mitsui Fudosan Co. Ltd. .......................... 37,772
7,000 Mitsui Marine & Fire Insurance Co. Ltd. .......... 36,800
6,000 Mitsui O.S.K. Lines Ltd. ......................... 9,648
7,000 Mitsui Trust & Banking Co. Ltd. .................. 7,978
8,000 Mitsukoshi Ltd. .................................. 21,205
1,000 Murata Manufacturing Co. Ltd. .................... 41,438
2,000 Mycal Corp. ...................................... 11,910
9,000 NEC Corp. ........................................ 82,700
6,000 New Oji Paper Co. Ltd. ........................... 31,119
8,000 Nichirei Corp. ................................... 19,014
5,000 Nikon Corp. ...................................... 48,595
6,000 Nippon Express Co. Ltd. .......................... 33,716
2,000 Nippon Meat Packers, Inc. ........................ 32,161
7,000 Nippon Oil Co. Ltd. .............................. 24,368
6,000 Nippon Paper Industries Co. ...................... 27,249
41,000 Nippon Steel Corp. ............................... 74,262
70 Nippon Telegraph & Telephone Corp. ............... 539,317
12,000 Nippon Yusen Kabushiki kaisha .................... 37,851
4,000 Nishimatsu Construction .......................... 23,326
15,000 Nissan Motor Co. Ltd. ............................ 45,856
2,000 Nisshinbo Industries, Inc. ....................... 6,962
2,000 Nissin Food Products Co. Ltd. .................... 50,274
21,000 NKK Corp. ........................................ 14,287
11,000 Nomura Securities Co. Ltd. ....................... 95,732
6,000 NSK Ltd. ......................................... 22,371
4,000 NTN Corp. ........................................ 12,864
10,000 Obayashi Corp. ................................... 47,888
7,000 Odakyu Electric Railway .......................... 24,430
2,000 Olympus Optical Co. Ltd. ......................... 22,955
1,000 Omron Corp. ...................................... 13,677
2,000 Onward Kashiyama Co. Ltd. ........................ 26,825
15,000 Osaka Gas Co. Ltd. ............................... 51,555
1,000 Pioneer Electronic Corp. ......................... 16,743
20,000 Sakura Bank Ltd. ................................. 45,768
2,000 Sankyo Co. Ltd. .................................. 43,647
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
11,000 Sanyo Electric Co. Ltd. ........................ $ 34,017
4,000 Sapporo Breweries Ltd. ......................... 17,318
1,800 Sega Enterprises ............................... 39,839
3,000 Sekisui Chemical Co. Ltd. ...................... 20,145
4,000 Sekisui House Ltd. ............................. 42,234
7,000 Sharp Corp. .................................... 63,024
5,000 Shimizu Corp. .................................. 16,743
2,000 Shin-Etsu Chemical Co. Ltd. .................... 48,065
4,000 Shiseido Co. Ltd. .............................. 51,316
5,000 Shizuoka Bank .................................. 61,628
12,000 Showa Denko K.K ................................ 10,497
3,000 Snow Brand Milk Products ....................... 13,677
2,200 Sony Corp. ..................................... 159,975
17,000 Sumitomo Bank Ltd. ............................. 174,236
10,000 Sumitomo Chemical Co. .......................... 38,876
6,000 Sumitomo Corp. ................................. 29,157
4,000 Sumitomo Electric Industries ................... 44,920
2,000 Sumitomo Forestry Co. .......................... 14,313
10,000 Sumitomo Marine & Fire ......................... 63,262
19,000 Sumitomo Metal Ind ............................. 21,656
7,000 Sumitomo Metal Mining Co. ...................... 22,698
6,000 Taisei Corp. ................................... 11,504
2,000 Taisho Pharmaceutical Co. ...................... 54,957
2,000 Takashimaya Co. Ltd. ........................... 16,805
5,000 Takeda Chemical Industries ..................... 192,172
16,000 Teijin Ltd. .................................... 58,809
7,000 Tobu Railway Co. Ltd. .......................... 20,410
300 Toho Co. ....................................... 41,032
3,000 Tohoku Electric Power .......................... 53,013
12,000 Tokai Bank ..................................... 56,618
9,000 Tokio Marine & Fire Insurance Co. .............. 107,351
1,000 Tokyo Broadcasting System ...................... 11,159
2,000 Tokyo Dome Corp. ............................... 10,638
8,800 Tokyo Electric Power Co. ....................... 216,929
14,000 Tokyo Gas Co. Ltd. ............................. 36,738
6,000 Tokyu Corp. .................................... 15,745
4,000 Toppan Printing Co. Ltd. ....................... 48,772
8,000 Toray Industries, Inc. ......................... 41,703
1,000 Tostem Corp. ................................... 19,791
5,000 Toto Ltd. ...................................... 40,069
1,000 Toyo Seikan Kaisha ............................. 16,946
8,000 Toyobo Ltd. .................................... 10,320
2,000 Toyoda Automatic Loom Works .................... 35,324
21,000 Toyota Motor Corp. ............................. 569,624
11,000 Ube Industries Ltd. ............................ 16,620
2,000 Uny Co. Ltd. ................................... 36,491
3,000 Wacoal Corp. ................................... 38,514
2,000 Yamaha Corp. ................................... 20,675
14,000 Yamaichi Securities Co. Ltd. (a) ............... 0
2,000 Yamanouchi Pharmaceutical Co. Ltd. ............. 64,322
5,000 Yamato Transport Co. Ltd. ...................... 69,800
2,000 Yamazaki Baking Co. Ltd. ....................... 26,029
4,000 Yasuda Trust & Banking (a) ..................... 3,075
---------
8,589,927
---------
NETHERLANDS - 6.5%
3,087 AEGON NV ....................................... 378,751
1,867 Akzo Nobel ..................................... 84,931
8,574 Algemene Bank Dutch NV ......................... 180,193
3,682 Elsevier NV .................................... 51,523
1,731 Heineken NV .................................... 104,072
Shares Description Value
------ ----------- -----
5,484 ING Groep NV ................................... $ 334,088
796 KLM Royal Dutch Airlines NV .................... 24,056
3,271 Koninklijke Ahold NV ........................... 120,781
3,113 Koninklijke KPN NV ............................. 155,691
307 Oce NV ......................................... 11,026
2,087 Philips Electronics NV ......................... 139,911
12,508 Royal Dutch Petroleum Co. ...................... 622,239
3,359 TNT Post Group NV .............................. 108,124
3,721 Unilever NV .................................... 317,755
494 Wolters Kluwer NV-CVA .......................... 105,607
---------
2,738,748
---------
NEW ZEALAND - 0.2%
20,319 Brierley Investments Ltd. ...................... 4,593
10,803 Carter Holt Harvey Ltd. ........................ 9,655
2,110 Fletcher Challenge Building .................... 3,250
2,042 Fletcher Challenge Energy ...................... 3,865
317 Fletcher Challenge Forests ..................... 105
3,832 Fletcher Challenge Paper ....................... 2,558
5,349 Lion Nathan Ltd. ............................... 13,582
9,676 Telecom Corp. of New Zealand ................... 41,965
---------
79,573
---------
NORWAY - 0.4%
300 Aker RGI ASA-A ................................. 3,145
180 Aker RGI ASA-B ................................. 1,604
500 Bergensen d.y. ASA - A ......................... 5,963
3,250 Christiania Bank Og Kreditkasse ................ 11,245
4,300 Den Norske Bank ASA ............................ 14,822
600 Hafslund ASA-A ................................. 3,775
200 Kvaerner ASA ................................... 3,932
1,600 NCL Holdings ASA (a) ........................... 3,775
1,500 Norsk Hydro ASA ................................ 50,524
200 Norske Skogindustrier ASA-A .................... 5,819
1,000 Orkla ASA-A .................................... 14,875
700 Petroleum Geo-Services ASA (a) ................. 8,899
500 Schibsted ASA .................................. 6,291
300 Tomra Systems ASA .............................. 9,830
1,650 Uni-Storebrand ASA-A ........................... 12,434
---------
156,933
---------
PORTUGAL - 0.6%
1,197 Banco Comercial Portugues, SA .................. 36,745
795 Banco Espirito Santo e Comercial de
Lisboa, SA ................................... 24,637
400 BPI - SGPS, SA ................................. 13,554
400 Brisa Auto Estradas de Portugal SA ............. 23,510
600 Cimentos de Portugal ........................... 19,124
2,000 Electricidade de Portugal, SA .................. 43,967
500 Jeronimo Martins, SGPS, SA ..................... 27,312
1,100 Portugal Telecom SA ............................ 50,359
300 Sonae Investimentos - Sociedade Gestor
a de Participacoes Sociais, SA ............... 14,562
---------
253,770
---------
SINGAPORE - 0.8%
4,000 City Developments Ltd. ......................... 17,339
2,000 Cycle & Carriage Ltd. .......................... 6,851
7,000 DBS Land Ltd. .................................. 10,312
3,900 Development Bank of Singapore Ltd. ............. 35,229
3,000 Fraser & Neave Ltd. ............................ 8,766
6,750 Keppel Corp. Ltd. .............................. 18,087
6,798 Overseas-Chinese Banking Corp. Ltd. ............ 46,158
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
4,000 Parkway Holdings Ltd. ............................ $ 7,129
10,332 Sembcorp Industries Ltd. (a) ..................... 11,776
6,000 Singapore Airlines Ltd. .......................... 44,013
2,552 Singapore Press Holdings Ltd. .................... 27,694
13,000 Singapore Technologies Industrial Corp. .......... 12,137
34,000 Singapore Telecommunications Ltd. ................ 51,943
12,000 United Industrial Corp. Ltd. ..................... 4,801
4,000 United Overseas Bank Ltd. ........................ 25,705
---------
327,940
---------
SPAIN - 3.1%
490 Acerinox SA ...................................... 11,412
2,888 Argentaria SA .................................... 74,790
2,692 Autopistas Concesionaria Espanola SA ............. 44,772
11,208 Banco Bilbao Vizcaya SA .......................... 175,730
7,194 Banco Central Hispanoram ......................... 85,420
5,440 Banco Santander SA ............................... 108,116
5,744 Endesa Empresa Nac Elec .......................... 152,191
1,072 Gas Natural SDG, NA .............................. 116,711
475 General de Aguas D'barce ......................... 31,798
4 General de Aguas de Barcelona - New (a) .......... 231
4,979 Iberdrola SA ..................................... 93,152
860 Corporacion Mapfre ............................... 23,332
1,657 Repsol SA ........................................ 88,390
1,485 Tabacalera SA-A .................................. 37,462
5,660 Telefonica de Espana ............................. 251,671
2,023 Union Electrica Fenosa SA ........................ 34,997
---------
1,330,175
---------
SWEDEN - 2.7%
4,000 ABB AB - A ....................................... 42,611
1,400 ABB AB - B ....................................... 14,828
800 AGA AB - A ....................................... 10,591
400 AGA AB - B ....................................... 5,246
7,766 Astra AB - A ..................................... 158,285
1,866 Astra AB - B ..................................... 37,917
800 Atlas Copco AB - A ............................... 17,537
300 Atlas Copco AB - B ............................... 6,502
700 Drott AB-B (a) ................................... 6,422
2,500 Electrolux AB - B ................................ 42,950
11,400 Ericsson Lm-B .................................... 270,961
2,200 ForeningsSparbanken AB ........................... 56,897
1,400 Hennes & Mauritz AB - B .......................... 114,138
110 Mandamus Fastigheter AB (a) ...................... 616
600 Netcom Systems AB - B (a) ........................ 24,384
300 Om Gruppen AB .................................... 3,768
1,300 Sandvik AB - A ................................... 22,574
300 Sandvik AB - B ................................... 5,172
2,000 Securitas AB - B ................................. 31,034
3,000 Skandia Forsakrings AB ........................... 45,813
3,500 Skandinaviska Enskilda Banken - A ................ 36,853
700 Skanska AB - B ................................... 19,397
400 SKF AB - B ....................................... 4,655
1,200 Svenska Cellulosa AB - B ......................... 26,158
1,300 Svenska Handelsbanken - A ........................ 54,754
600 Svenskt Stal AB - A .............................. 5,727
1,900 Swedish Match AB ................................. 6,903
400 Trelleborg AB - B ................................ 3,251
800 Volvo AB - A ..................................... 17,882
1,900 Volvo AB - B ..................................... 43,522
300 Wm-Data AB - B ................................... 12,783
---------
1,150,131
---------
Shares Description Value
------ ----------- -----
SWITZERLAND - 7.7%
55 ABB AG-Bearer .................................... $ 64,470
100 Adecco SA ........................................ 45,650
25 Alusuisse-Lonza Holding AG ....................... 29,123
1,590 Credit Suisse Group .............................. 248,890
40 Holderbank Financiere Glarus AG - B .............. 47,353
235 Nestle SA ........................................ 511,576
37 Novartis AG ...................................... 72,734
341 Novartis AG-Bearer ............................... 670,331
10 Roche Holding AG - Bearer ........................ 181,107
39 Roche Holdings AG - Genusschine .................. 475,893
100 Societe Suisse pour la Microelectronique
et l'Hogeric AG ................................ 14,980
100 Sairgroup ........................................ 24,827
10 Schindler Holding AG ............................. 17,037
90 Schweizerische Ruckversicherungs-
Gesellschaft ................................... 234,649
15 SGS Societe Generale de Surveillance
Holding SA ..................................... 14,689
25 Societe Suisse pour la Microelectronique
et l'Hogeric AG - Bearer ....................... 15,471
15 Sulzer AG ........................................ 9,130
2 Sulzer Medica AG ................................. 383
1,213 UBS AG ........................................... 372,721
255 Zurich Versicherungs Gesellchaft ................. 191,227
---------
3,242,241
---------
UNITED KINGDOM - 20.4%
8,050 Abbey National Plc ............................... 171,733
8,625 Allied Zurich Plc. (a) ........................... 128,600
2,698 Anglian Water Plc ................................ 37,302
2,891 Anglian Water Plc.-B ............................. 2,492
3,286 Arjo Wiggins Appleton Plc ........................ 6,019
6,034 Associated British Foods Plc ..................... 56,111
8,436 Barclays Plc ..................................... 180,807
4,381 Bass Plc. New .................................... 61,400
4,344 BBA Group Plc .................................... 26,966
21,468 BG Plc ........................................... 135,135
2,793 BICC Group Plc ................................... 3,264
4,385 Blue Circle Industries Plc ....................... 22,533
2,690 BOC Group Plc .................................... 39,239
5,026 Boots Co. Plc .................................... 85,102
5,493 BPB Plc .......................................... 19,576
9,528 British Aerospace Plc ............................ 80,626
4,120 British Airport Author ........................... 47,669
5,945 British Airways Plc .............................. 40,108
8,625 British American Tobacco ......................... 76,273
2,953 British Land Co. Plc ............................. 21,758
31,839 British Petroleum Co. Plc ........................ 473,404
9,500 British Sky Broadcasting Group Plc ............... 72,555
14,109 British Steel Plc ................................ 21,458
35,121 British Telecommunications Plc ................... 526,569
18,354 BTR Plc .......................................... 37,421
2,079 Burmah Castrol Plc ............................... 29,758
12,512 Cable & Wireless Plc ............................. 153,372
5,530 Cadbury Schweppes Plc ............................ 93,865
2,073 Caradon Plc ...................................... 3,505
3,997 Carlton Communications Plc ....................... 36,506
31,610 Centrica Plc ..................................... 63,269
6,709 CGU Plc .......................................... 104,480
2,730 Compass Group Plc ................................ 31,134
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
19,254 Diageo Plc. New .................................... $215,589
2,789 Electrocomponents Plc .............................. 18,538
4,339 EMI Group Plc ...................................... 28,913
3,338 FKI Plc ............................................ 7,442
14,964 General Electric Co. Plc ........................... 133,943
4,184 GKN Plc ............................................ 55,726
19,583 Glaxo Wellcome Plc ................................. 669,017
6,030 Granada Group Plc .................................. 106,600
5,555 Great Universal Stores Plc ......................... 57,964
5,021 Guardian Royal Exchange Plc ........................ 27,965
13,096 Halifax Plc ........................................ 185,060
6,318 Hanson Plc ......................................... 49,772
5,469 HSBC Holdings Plc. (75p) ........................... 148,401
10,097 HSBC Holdings Plc .................................. 254,232
4,537 Imperial Chemical Industries Plc ................... 39,032
10,324 Kingfisher Plc ..................................... 111,235
6,487 Ladbroke Group Plc ................................. 25,807
4,062 Land Securities Plc ................................ 48,479
7,401 Legal & General Group Plc .......................... 95,996
29,808 Lloyds TSB Group Plc ............................... 421,465
8,505 LucasVarity Plc .................................... 27,914
15,721 Marks & Spencer Plc ................................ 106,973
4,322 MEPC Plc ........................................... 29,015
8,596 National Grid Group Plc ............................ 68,109
8,431 National Power Plc ................................. 74,208
3,386 Pearson Plc ........................................ 67,239
3,409 Peninsular & Orient Steam Navigation Co. ........... 40,120
5,737 Pilkington Plc ..................................... 5,658
10,625 Prudential Corp. Plc ............................... 160,005
2,986 Railtrack Group Plc ................................ 77,808
4,961 Rank Group Plc ..................................... 18,831
6,776 Reed International Plc ............................. 53,745
17,492 Rentokil Initial Plc ............................... 130,331
8,083 Reuters Group Plc .................................. 84,477
3,294 Rexam Plc .......................................... 9,257
6,352 Rio Tinto Plc ...................................... 73,072
1,863 RMC Group Plc ...................................... 25,322
8,753 Rolls-Royce Plc .................................... 35,837
8,712 Royal & Sun Alliance Insurance Group Plc ........... 70,256
2,748 Royal Bank of Scotland Group Plc ................... 44,048
6,035 Safeway Plc ........................................ 29,986
12,423 Sainsbury (J.) Plc ................................. 96,321
2,248 Schroders Plc ...................................... 40,476
3,645 Scottish & Newcastle Plc ........................... 41,176
6,848 Scottish Power Plc ................................. 69,867
9,464 Siebe Plc .......................................... 37,023
30,388 Smithkline Beecham Plc ............................. 424,881
2,841 Smiths Industries Plc .............................. 39,652
4,430 Stagecoach Holdings Plc ............................ 17,954
3,272 Tate & Lyle Plc .................................... 18,169
7,494 Taylor Woodrow Plc ................................. 18,695
36,132 Tesco Plc .......................................... 103,314
1,964 Thames Water Plc ................................... 37,316
2,143 Thames Water Plc. - B .............................. 2,504
4,356 TI Group Plc ....................................... 23,412
18,080 Unilever Plc ....................................... 202,443
3,122 United Utilities Plc ............................... 43,108
16,987 Vodafone Group ..................................... 274,256
7,189 Williams Holding Plc ............................... 40,223
3,569 Wolseley Plc ....................................... 22,451
Shares/
Par (000) Description Value
- --------- ----------- -----
5,230 Zeneca Group Plc. .................................. $ 227,568
-----------
8,604,205
-----------
UNITED STATES - 0.4%
2,600 Amoco Corp. 155,675
-----------
TOTAL COMMON STOCKS (Cost $31,732,903) ........................... 40,940,412
-----------
PREFERRED STOCK - 0.1%
AUSTRALIA - 0.1%
9,021 News Corp. Ltd.- Preferred ......................... 54,777
-----------
TOTAL PREFERRED STOCKS (Cost $35,394) ............................ 54,777
-----------
SHORT TERM INSTRUMENTS - 2.5%
U.S.A. - 2.5%
932,409 BT Institutional Cash Management Fund .............. 932,410
$115,000 U.S. Treasury Bill, (b) 4.965%, 2/4/99 ............. 114,575
-----------
TOTAL SHORT TERM INSTRUMENTS (Cost $1,046,933) ................... 1,046,985
-----------
OTHER SECURITIES - 0.0%
BELGIUM - 0.0%
100 Generale de Banque SA Warrants (a) ................. 15
-----------
HONG KONG - 0.0%
1,098 Hong Kong and China Gas Warrants (a) ............... 72
1,000 Hong Kong and Shang Hai Hotel Warrants (a) ......... 1
1,100 Hysan Development Co. Warrants (a) ................. 23
700 Wharf Holdings Ltd. Warrants (a) ................... 58
-----------
154
-----------
ITALY - 0.0%
2,302 Banca Intesa SPA Warrants (a) ...................... 2,906
-----------
SPAIN - 0.0%
113 Telefonica de Espana Rights (a) .................... 100
-----------
TOTAL OTHER SECURITIES (Cost $0) ................................. 3,175
-----------
TOTAL INVESTMENTS (Cost $32,815,230) ......... 99.6% $42,045,349
OTHER ASSETS LESS LIABILITIES ................ 0.4% 159,831
----- -----------
NET ASSETS ................................... 100.0% $42,205,180
===== ===========
- -----------------
(a) Non-income producing security
(b) Held as collateral for Futures Contracts
INDUSTRY DIVERSIFICATION (AS A PERCENTAGE OF NET ASSETS):
(UNAUDITED)
% OF NET ASSETS
Banks ...................................................... 13.75%
Capital Equipment .......................................... 2.06
Chemicals .................................................. 2.18
Consumer Goods & Services .................................. 8.46
Construction ............................................... 1.75
Electronics ................................................ 5.01
Financial Services ......................................... 2.67
Food & Beverage ............................................ 6.60
Insurance .................................................. 6.61
Oil & Gas .................................................. 7.05
Other ...................................................... 10.23
Pharmaceuticals ............................................ 7.30
Real Estate ................................................ 1.49
Retail ..................................................... 2.16
Telecommunications ......................................... 10.49
Transportation ............................................. 7.11
Utilities .................................................. 4.70
------
Total Investments .......................................... 99.62%
Other Assets Less Liabilities .............................. 0.38
------
100.00%
======
- ------------------
* No one industry represents more than 2% of Portfolio holdings.
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENT OF OPERATIONS For the year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign withholding tax of $82,443) ......................................... $ 762,944
Interest ...................................................................................... 3,960
-----------
TOTAL INVESTMENT INCOME .......................................................................... 766,904
-----------
EXPENSES
Advisory Fees ................................................................................. 98,260
Administration and Services Fees .............................................................. 39,304
Professional Fees ............................................................................. 15,474
Trustees Fees ................................................................................. 3,018
Miscellaneous ................................................................................. 4,245
-----------
Total Expenses ................................................................................ 160,301
Less: Expenses Absorbed by Bankers Trust ...................................................... (22,682)
-----------
Net Expenses ............................................................................... 137,619
-----------
NET INVESTMENT INCOME ............................................................................ 629,285
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES, FOREIGN CURRENCIES AND FORWARD
FOREIGN CURRENCY CONTRACTS
Net Realized Loss from Investment Transactions ............................................. (127,646)
Net Realized Gain from Futures, Foreign Currencies and Forward Foreign Currency Transactions 167,290
Net Change in Unrealized Appreciation/Depreciation on Investments .......................... 6,709,949
Net Change in Unrealized Appreciation/Depreciation on Futures, Foreign Currencies and Forward
Foreign Currency Contracts .............................................................. 16,689
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FUTURES, FOREIGN CURRENCIES AND FORWARD
FOREIGN CURRENCY CONTRACTS .................................................................... 6,766,282
-----------
NET INCREASE IN ASSETS FROM OPERATIONS ........................................................... $ 7,395,567
===========
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1998 December 31, 1997
----------------- ------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
Operations
<S> <C> <C>
Net Investment Income ......................................................... $ 629,285 $ 792,942
Net Realized Gain from Investment Transactions, Futures, Foreign Currencies and
Forward Foreign Currency Transactions ...................................... 39,644 1,682,611
Net Change in Unrealized Appreciation/Depreciation on Investments, Futures,
Foreign Currencies and Forward Foreign Currency Transactions ............... 6,726,638 934,774
------------ ------------
Net Increase in Net Assets from Operations ....................................... 7,395,567 3,410,327
------------ ------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested ................................................ 7,492,584 22,906,366
Value of Capital Withdrawn .................................................... (9,414,873) (29,976,630)
------------ ------------
Net Increase (Decrease) in Net Assets from Capital Transactions .................. (1,922,289) (7,070,264)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 5,473,278 (3,659,937)
NET ASSETS
Beginning of Year ................................................................ 36,731,902 40,391,839
------------ ------------
End of Year ...................................................................... $ 42,205,180 $ 36,731,902
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected supplemental data and ratios to average net assets
for periods indicated for the EAFE Equity Index Portfolio.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE JANUARY 24, 1996(1)
YEAR ENDED YEAR ENDED TO
DEC. 31, 1998 DEC. 31, 1997 DEC. 31, 1996
------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Year (000s omitted) ............. $ 42,205 $ 36,732 $ 40,392
Ratios to Average Net Assets:
Net Investment Income ........................... 1.60% 1.74% 1.69%(2)
Expenses ........................................ 0.35% 0.35% 0.35%(2)
Decrease Reflected in the Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust .... 0.06% 0.06% 0.11%(2)
Portfolio Turnover Rate ............................ 12% 44% 4%
</TABLE>
- ---------------------
1 Commencement of operations.
2 Annualized.
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The EAFE Equity Index 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 January 24, 1996,
as an unincorporated trust under the laws of New York, and commenced operations
on January 24, 1996. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue shares of beneficial interest in the Portfolio.
B. SECURITY VALUATION
The Portfolio's investments are valued each business day by an independent
pricing service approved by the Trustees. Securities traded on National
Exchanges or foreign exchanges are valued based on the closing price of the
security on that exchange prior to the time when the Portfolio's assets are
valued. Short-term obligations with remaining maturities of 60 days or less are
valued at amortized cost. 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. 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. 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
to 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.
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 U.S. dollar
value of foreign currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation are
determined using prevailing exchange rates. With respect to forward foreign
currency contracts, losses in excess of amounts recognized in the Statement of
Net Assets may arise due to changes in the value of the foreign currency or if
the counterparty does not perform under the contract.
F. OPTION CONTRACTS
The Portfolio may enter into option contracts. Upon the purchase of a put option
or a call option by a Portfolio, the premium paid is recorded as an investment,
the value of which is 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, 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. The Portfolio's
investment in the financial futures contracts is designed to closely replicate
the benchmark index used 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.
H. ORGANIZATION EXPENSES
Costs incurred by the Portfolio in connection with its organization and initial
registration are being amortized evenly over a five-year period.
I. FEDERAL INCOME TAXES
The Portfolio is considered a partnership under the Internal Revenue Code.
Therefore no federal income tax is required.
J. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody and shareholder
services to the Portfolio in return for a fee computed daily and paid monthly at
an annual rate of .10% of the average daily net assets. At December 31, 1998,
administrative and service fees payable to Bankers Trust amounted to $2,637.
21
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
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 .25% of the average daily
net assets. At December 31, 1998, advisory fees payable to Bankers Trust
amounted to $6,594.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.35% of the average daily net assets of the Portfolio.
The EAFE Equity Index 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 equity fund and other accounts managed by the Company.
Distributions from the Fund to the Portfolio as of December 31, 1998 amounted to
$46,772 and are included in dividend income.
The EAFE Equity Index Portfolio is a participant with other affiliated entities
in a revolving credit facility and a discretionary demand line of credit
facility (collectively the "credit facilities") in the amounts of $50,000,000
and $100,000,000, respectively, which expire March 15, 1999. A commitment fee of
.07% per annum on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned equally among all participants.
Amounts borrowed under the credit facilities will bear interest at a rate per
annum equal to the Federal Funds Rate plus .45%. No amounts were drawn down or
outstanding under the credit facilities as of and for the year ended December
31, 1998.
NOTE 3--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 1998 were
$4,304,624 and $6,348,691, respectively. For federal income tax purposes, the
tax basis of investments held at December 31, 1998 was $33,451,180. The
aggregate gross unrealized appreciation was $13,835,522, and the aggregate gross
unrealized depreciation for all investments was $4,605,403 as of December 31,
1998.
NOTE 4--FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1998
is as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
TYPE OF FUTURE EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- -------------- ---------- --------- -------- --------------
<S> <C> <C> <C> <C>
EAFE Aust All Ords
Index Futures January 1999 1 Long $ 4,079
EAFE Hang Seng
Index Futures January 1999 1 Long 1,794
IBEX plus IDX Futures January 1999 1 Long (44)
CAC 40 Index Futures March 1999 4 Long 7,382
EAFE DAX Index Futures March 1999 1 Long 21,019
EAFE FTSE 100
Index Futures March 1999 3 Long 12,811
EAFE Nikki 300
Index Futures March 1999 8 Long (8,122)
Topix Index Futures March 1999 1 Long (5,766)
</TABLE>
At December 31, 1998, the Portfolio segregated approximately $115,000 of
investment securities to cover margin requirements on open futures contracts.
- --------------------------------------------------------------------------------
NOTE 5--OPEN FORWARD FOREIGN CURRENCY CONTRACTS
As of December 31, 1998, the EAFE Equity Index Portfolio had the following open
forward foreign currency contracts outstanding:
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT CONTRACT APPRECIATION
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE VALUE (US$) (DEPRECIATION) (US$)
- ---------------------------------------------------------------------------------------------------------------------------
Purchases
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
German Deutschemark 530,000 U.S. Dollars $318,519 1/26/99 $317,613 $ (906)
British Pound 130,000 U.S. Dollars 217,347 1/26/99 216,073 (1,274)
Japanese Yen 20,300,000 U.S. Dollars 175,675 1/26/99 179,424 3,749
- ---------------------------------------------------------------------------------------------------------------------------
Total Purchases $ 1,569
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Unrealized Appreciation $ 1,569
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 6--NET ASSETS
At December 31, 1998, net assets consisted of:
Paid-in Capital ................................................. $32,957,881
Net Unrealized Appreciation on Investments, Futures, Foreign
Currencies and Forward Foreign Currency Contracts ............ 9,247,299
-----------
$42,205,180
===========
NOTE 7--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.
22
<PAGE>
- --------------------------------------------------------------------------------
EAFE EQUITY INDEX PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of BT Investment Portfolios and Holders of Beneficial Interest
of EAFE Equity Index Portfolio:
In our opinion, the accompanying statement of net assets 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
EAFE Equity Index Portfolio (one of the Portfolios comprising BT Investment
Portfolios, hereafter referred to as the "Portfolio") at December 31, 1998, and
the results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
23
<PAGE>
BT ADVISOR FUNDS
EAFE EQUITY INDEX FUND
INVESTMENT ADVISOR AND ADMINISTRATOR OF THE PORTFOLIO
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
DISTRIBUTOR
ICC DISTRIBUTORS, INC.
P.O. Box 7558
Portland, ME 04112-9892
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
COUNSEL
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
---------------------
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or the BT
Mutual Fund Service Center at (800) 730-1313. This must be preceded or
accompanied by a current prospectus for the Fund.
---------------------
EAFE Equity Index Fund - Institutional Class Cusip #05576L874
STA514200 (12/98)