-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OWybJu3sUuqV7YXMU8nm7/EIWIvRA2s7KJf4PnIIhCoqn7LXc4Labxh25XwV8slP R4zJQhanaVBA0Ece4jWsaw== 0000797657-96-000007.txt : 19961203 0000797657-96-000007.hdr.sgml : 19961203 ACCESSION NUMBER: 0000797657-96-000007 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961129 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BT INVESTMENT FUNDS CENTRAL INDEX KEY: 0000797657 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04760 FILM NUMBER: 96674432 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWERS CITY: PITTSBURGH STATE: PA ZIP: 15222-3770 BUSINESS PHONE: 412881401 FORMER COMPANY: FORMER CONFORMED NAME: BT TAX FREE INVESTMENT TRUST DATE OF NAME CHANGE: 19880530 N-30D 1 BT INVESTMENT FUNDS International Equity Fund ANNUAL REPORT SEPTEMBERo1996 International Equity Fund Table of Contents Letter to Shareholders 3 International Equity Fund Statement of Assets and Liabilities6 Statement of Operations 6 Statement of Changes in Net Assets 7 Financial Highlights 7 Notes to Financial Statements 8 Report of Independent Accountants 9 International Equity Portfolio Schedule of Portfolio Investments 10 Statement of Assets and Liabilities12 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 13 Notes to Financial Statements 14 Report of Independent Accountants 16 International Equity Fund Letter to Shareholders We are pleased to present you with this annual report for the BT Investment International Equity Fund, providing a review of the market, the portfolio, and our outlook as well as a complete financial summary of the Fund's operations and a listing of the Portfolio's holdings. The International Equity Fund (the "Fund") had a total return of 13.42% for the twelve months ending September 30, 1996, as compared to 8.61% for the Morgan Stanley Capital International ("MSCI") EAFE Index and 9.36% for the Lipper International Equity Funds Average. Since its inception on August 4, 1992, the Fund has returned 83.17%, cumulatively. MARKET ACTIVITY Europe Continental Europe performed well for the year, although in the six months ending September 30, 1996, the upsurge in the U.S. dollar depressed the returns of these markets. In contrast, the sterling rallied on the back of dollar strength, bringing the United Kingdom to equal performance with the continent in dollar terms. Still, a number of peripheral markets outperformed the U.K. in both local currency and dollar terms. These include the devaluers-Spain, Sweden, and Italy-where markets benefitted from both dollar and bond market strength, as well as Ireland and Finland, which outperformed on the back of superior GDP performance. In contrast to the previous six months, Switzerland underperformed due to the weak domestic economy and currency volatility. The European markets as a whole have become increasingly sensitive to currency fluctuations, as the arrival of the new common tender "Euro" nears and deutschemark hardness comes into question. The process of European monetary convergence actually propelled many of Europe's markets in the latest six months, notably on the periphery where bond market rallies and decreasing interest rates helped interest-sensitive sectors. At the same time, the convergence hurt many exporters and domestic economy sensitive stocks, as the drive toward fiscal discipline continues to restrain economic activity. Much of this same dichotomous influence was felt in the European core countries as well. For much of the latest six-month period, the European market hinged on expectations of a U.S. Federal Reserve Board tightening, which never materialized. However, the U.S. and its G3 partners have succeeded in talking up the U.S. dollar and cooling down the U.S. economy. This has been a different form of monetary tightening, and it has helped prospects in Europe and Japan. With U.S. inflation in check and real rates fairly high, European markets seem to have concluded that the Bundesbank is not even close to reversing its interest rate cycle. Asia The Japanese equity market has been relatively flat in local currency terms since we last reported, but due to significant softening of the yen, it was down in dollar terms. In fact, the Japanese market was the worst performing major EAFE market for both the six months and year ending September 30, 1996. Concerns abound over the sustainability of its economic recovery, especially in light of the fiscal contraction underway. Asia ex-Japan outperformed the EAFE Index overall for the year but underperformed the Index over the latest six-month period. Performance throughout the region was mixed. More specifically, in the six months ending September 30, Hong Kong, the Philippines, Australia and Malaysia modestly outperformed. Singapore and Thailand, on the other hand, gave up the progress they made in the first half of the Fund's fiscal year, as they were rocked in the second six months by fears of a hard economic landing and by concerns over weak exports. Government efforts to restrain property market speculation compounded liquidity problems. South Africa Weakness in the rand continued to lead to underperformance in this market in dollar terms, though the market has reached new highs in local currency terms. INVESTMENT REVIEW Overall, the Fund added to its holdings in continental Europe during the latest six-month period, staying significantly overweight in the peripheral markets. The Fund remained Objective Seeks long term capital appreciation from investments in foreign equity securities or other securities with equity characteristics. Investment Instruments Equity securities of foreign issuers, consisting of common stock and other securities with equity characteristics; the investments are diversified among several regions. Ten Largest Stock Holdings Internationale Nederlanden Groep KCI Konecranes Intl. Corp adidas AG ABB AG Dassault Systemes SA Philips Electronics Barclays Plc Toyota Motor Corp Volkswagen AG CRH Plc International Equity Fund Letter to Shareholders (continued) underweight in the U.K., although it has increased its exposure to this market, and reduced its weightings in Japan and in South Africa. We also increased the Fund's cash exposure to approximately 9%, due to increased cash flows, interest rate uncertainty, and high market volatility. In Europe's peripheral markets, the Fund is focused primarily on defensive and interest-sensitive sectors, such as utilities, energy, and financials. We believe these areas should benefit the most from EMU convergence. These selections were supplemented by such stocks as Acerinox, the lowest cost global producer of stainless steel, and by such luxury goods stocks as Gucci Group. We took profits in both Sweden's Astra, as concerns heightened over the company's longer-term drug pipeline, and in Finland's UPM-Kymmene, as weakness in the pulp and paper industry became evident. We added a restructuring play in Germany, namely SGL Carbon, a world leader in graphite manufacturing. We also purchased shares of Koninklijke Ahold, a leading Dutch retailer, while we reduced holdings in Dutch airline company KLM, as a reflection of Europe's sluggish economy. Telecommunication stocks underperformed, weighed down by large privatizations in France, Italy and Germany as well as by heightened competition in the current deregulated environment. The Fund's sole exposure to the sector is STET, the Italian telecom holding company, after we sold TeleDanmark and Orange Plc. While remaining underweight in the United Kingdom, we are taking advantage of the market's excellent yield support by gradually increasing the Fund's exposure. We are focusing on shareholder friendly companies, adding positions in Barclays and NatWest, both of which are generating significant cash and are committed to enhancing shareholder value; Rolls Royce and British Aerospace, both expected to benefit from further restructuring in the European aerospace industry; and Millenium & Copthorne Hotels and British Land Company, both late- cycle plays in the property and hotel sectors. We also concentrated exposure in utilities, selling PowerGen, adding to National Power, which has a superior international business strategy, and purchasing United Utilities, which is the best positioned pure play, dual water/electric utility in the U.K. In Japan, we established exposure to the blue chip office and commercial property sector, where long-term post-bubble declines in prices have begun to turn. Specifically, we purchased Sumitomo Realty and Development and Mitsubishi Estate. We also added Takashimaya, a high-end department store, which opened the largest store in Japan with no new employee hires. We purchased Takeda Chemical Industries, a global pharmaceutical company with a strong drug pipeline, scope for operating margin improvement, and a shareholder friendly management team. We took profits in Toshiba. The Fund continues to avoid the troubled financial sector. The Fund remains overweighted in Hong Kong, which benefitted the Fund's performance in the latest six month period. Our position is primarily in "red chips," positioned to leverage Mainland China economic growth, including regional conglomerates, strong specialty clothing concepts, and infrastructure plays. We established a presence in Korea and in Taiwan, and in Australia, we took profits in National Australia Bank to establish more balance through the resource and gaming operator sectors. We reduced our exposure to the Thai market, which suffered from a deteriorating trade balance and growing foreign debt exposure, and we remained underweighted in Singapore. As a whole in Asia, we are looking for companies catering to growing domestic consumerism, such as those in the leisure and gaming industries. In South Africa, we maintained a core presence in blue chips with excellent prospects. Diversification of Portfolio Investments By Country as of September 30, 1996 (percentages are based on market value) Other 31% Spain 4% Netherlands 6% Italy 6% Hong Kong 7% Germany 7% United Kingdom 10% Switzerland 3% France 11% Japan 15% MANAGER OUTLOOK Going forward, we believe that perceived fiscal restraints in Europe in an effort to meet Maastricht requirements for EMU convergence will keep inflation low but also hold back any opportunity for robust economic activity. Our emphasis will continue to be, then, on beneficiaries of lower interest rates and strong bond markets, such as utilities and financials in the periphery European markets. We also are finding exciting opportunities in special niche sectors such as luxury goods that capture renewed demand in both domestic and International Equity Fund Letter to Shareholders (continued) foreign markets and are relatively insensitive to sluggish European economies. In the European core, we are focusing on companies motivated by the need to restructure their operations and demonstrating management sensitivity to minority shareholder interests. Ultimately, we believe the EMU will happen, and that as those nations who want to participate try to get their economies in order to qualify, the equity markets in those nations will benefit. In Japan, we believe there are still compelling opportunities from a bottom-up perspective, though the prognosis here is still cloudy. We are skeptical about the financial sector, in particular, as capital adequacy requirements will likely depress stock prices. We continue to find value in those companies benefitting from a weak yen regime, successfully restructuring operations, focusing on global growth, and delivering value to Japanese consumers. As for Asia ex-Japan, we remain positive on Hong Kong, the Philippines, Malaysia, and Australia, and we remain cautious on Thailand. We also stay concerned and cautious about South Africa, especially when the Central Bank raised rates to defend its currency, rather than removing exchange controls. We will, of course, continue monitoring economic conditions and how they affect the financial markets, as we seek long-term capital appreciation. Michael Levy and Robert Reiner Portfolio Managers of the International Equity Portfolio September 30, 1996 Comparison of Change in Value of a $10,000 Investment in the BT Investment International Equity Fund and the Morgan Stanley Capital International EAFE Index since August 31, 1992. Total Return Ended September 30, 1996 One Year Since 8/4/92* 13.42% 83.17% * The Fund's inception date. Investment return and principal value may fluctuate so that shares, when redeemed, may be worth more or less than their original cost. BT International Equity $18,057 MSCI EAFE Index $15,630 Aug-92 10000 10000 Sep-92 9665 9803 Dec-92 9606 9424 Mar-93 10424 10554 Jun-93 11084 11615 Sep-93 11944 12386 Dec-93 13196 12493 Mar-94 13717 12930 Jun-94 13266 13590 Sep-94 13977 13603 Dec-94 13738 13465 Mar-95 14046 13715 Jun-95 14961 13815 Sep-95 15911 14391 Dec-95 15950 14974 Mar-96 16862 15406 Jun-96 17881 15650 Sep-96 18057 15630 Past performance is not indicative of future performance. International Equity Fund Statement of Assets and Liabilities September 30, 1996 Assets Investments in International Equity Portfolio, at Value $ 161,678,276 Receviable for Shares of Beneficial Interest Subscribed 166,693 Prepaid Expenses and Other 9,547 Total Assets 161,854,516 Liabilities Due to Bankers Trust 80,666 Payable for Shares of Beneficial Interest Redeemed 43,077 Accrued Expenses and Other 39,127 Total Liabilities 162,870 Net Assets ($0.001 par value per share, unlimited number of shares of beneficial interest authorized) $ 161,691,646 Composition of Net Assets Paid-in Capital $ 135,977,614 Accumulated Net Investment Income 1,972,372 Accumulated Net Realized Gain from Investment and Foreign Currency Transactions 3,984,951 Net Unrealized Appreciation on Investments, Foreign Currencies and Forward Foreign Currency Contracts 19,756,709 Net Assets, September 30, 1996 $ 161,691,646 Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares outstanding) $ 16.77 Shares Outstanding 9,641,288 Statement of Operations For the year ended September 30, 1996 Investment Income Income Allocated from International Equity Portfolio, net $ 2,033,530 Expenses Administration and Services 982,662 Shareholder Reports 16,059 Registration 40,624 Professional 13,029 Trustees 2,875 Miscellaneous 1,906 Total Expenses 1,057,155 Less: Expenses Absorbed by Bankers Trust (74,494) Net Expenses 982,661 Net Investment Income 1,050,869 Realized and Unrealized Gain on Investments, Foreign Currencies and Forward Foreign Currency Contracts Net Realized Gain from: Investment Transactions 5,057,199 Foreign Currency Transactions 1,023,498 Net Unrealized Appreciation on Investments, Foreign Currencies and Forward Foreign Currency Contracts 7,989,401 Net Realized and Unrealized Gain on Investments, Foreign Currencies and Forward Foreign Currency Contracts 14,070,098 Net Increase in Net Assets from Operations $ 15,120,967 See Notes to Financial Statements on Page 8 International Equity Fund Statement of Changes in Net Assets For the For the period Year Ended January 1, 1995 to September 30, 1996 September 30, 1995** Increase in Net Assets from: Operations Net Investment Income $ 1,050,869 $ 767,061 Net Realized Gain from Investment and Foreign Currency Transactions 6,080,697 1,956,485 Net Change in Unrealized Appreciation on Investments, Foreign Currencies and Forward Foreign Currency Contracts 7,989,401 6,955,090 Net Increase in Net Assets from Operations 15,120,967 9,678,636 Distributions to Shareholders Net Investment Income (1,680,074) (16,362) Net Realized Gain from Investment Transactions (2,218,709) (62,809) Total Distributions (3,898,783) (79,171) Capital Transactions in Shares of Beneficial Interest Proceeds from Sales of Shares 98,926,188 35,856,451 Dividend Reinvestments 2,166,771 42,076 Cost of Shares Redeemed (33,430,708) (18,711,160) Net Increase from Capital Transactions in Shares of Beneficial Interest 67,662,251 17,187,367 Total Increase in Net Assets 78,884,435 26,786,832 Net Assets Beginning of Period 82,807,211 56,020,379 End of Period (includes accumulated net investment income of $1,972,372 and $799,626, respecitvely) $ 161,691,646 $ 82,807,211 Financial Highlights Contained below are selected data for a share outstanding, total investment return, ratios to average net assets and other supplemental data for each of the periods indicated for the International Equity Fund. For the period For the August 4, 1992 For the For the period year ended (Commencement year ended January 1, 1995 to December 31, of Operations) to September 30, 1996 September 30, 1995** 1994 1993 December 31, 1992 Per Share Operating Performance: Net Asset Value, Beginning of Period $15.47 $13.37 $13.18 $9.75 $10.00 Income from Investment Operations Net Investment Income 0.18 0.14 0.10 0.05 0.03 Net Realized and Unrealized Gain on Investments, Foreign Currencies and Forward Foreign Currency Contracts 1.80 1.97 0.44 3.60 (0.28) Total from Investment Operations 1.98 2.11 0.54 3.65 (0.25) Distributions to Shareholders Net Investment Income (0.31) (0.00) (0.09) (0.15) -- Net Realized Gain from Investment Transactions (0.37) (0.01) (0.26) (0.07) -- Total Distributions (0.68) (0.01) (0.35) (0.22) -- Net Asset Value, End of Period $16.77 $15.47 $13.37 $13.18 $9.75 Total Investment Return 13.42% 15.82% 4.12% 37.38% (6.01)%* Supplemental Data and Ratios: Net Assets, End of Period (000's omitted) $161,692 $82,807 $56,020 $33,869 $8,218 Ratios to Average Net Assets: Net Investment Income 0.91% 1.55%* 0.84% 0.79% 0.97%* Expenses, including Expenses of the International Equity Portfolio 1.50% 1.50%* 1.50% 1.50% 1.50%* Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses by Bankers Trust 0.26% 0.33%* 0.37% 0.62% 1.36%* * Annualized ** On August 2, 1995, the Board of Trustees approved the change of the fiscal year end from December 31 to September 30. See Notes to Financial Statements on Page 8 International Equity Fund Notes to Financial Statements Note 1-Organization and Significant Accounting Policies A. Organization BT Investment Funds (the "Trust") is registered under the Investment Company Act of 1940 (the "Act"), as amended, as an open-end management investment company. The Trust was organized on July 21, 1986, as a business trust under the laws of the Commonwealth of Massachusetts. The International Equity Fund (the "Fund") is one of the funds offered to investors by the Trust. The Fund commenced operations and began offering shares of beneficial interest on August 4, 1992. The Fund invests substantially all of its assets in the International Equity Portfolio (the "Portfolio"). The Portfolio is an open-end management investment company registered under the Act. The Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio. The value of such investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. At September 30, 1996, the Fund's investment was approximately 98.10% of the Portfolio. The financial statements of the Portfolio, including the Schedule of Portfolio Investments, are contained elsewhere in this report. B. Investment Income The Fund earns income, net of expenses, daily on its investment in the Portfolio. All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the investors in the Portfolio at the time of such determination. C. Dividends It is the Fund's policy to declare and distribute dividends annually to shareholders from net investment income, if any. Dividends and distributions payable to shareholders are recorded by the Fund on the ex-dividend date. Distributions of net realized short-term and long-term capital gains, if any, earned by the Fund will also be made annually. D. Federal Income Taxes It is the Fund's policy to comply with the requirements of the Internal Revenue Code. 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 timing and characterization of certain income and capital gains distributions determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. For the year ended September 30, 1996, $1,801,951 was reclassified from net realized capital gain to undistributed net investment income. E. Other The Trust accounts separately for the assets, liabilities, and operations of the Fund. Expenses directly attributable to the Fund are charged to that Fund, while expenses which are attributable to all of the Trust's Funds are allocated among them. 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. 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 0.85 of 1% of the Fund's average daily net assets. For the year ended September 30, 1996, this fee aggregated $982,662. On September 30, 1996, the Trust entered into a Distribution Agreement with Edgewood Services, Inc. (`Edgewood''). Prior to September 30, Signature Broker- Dealer Services, Inc. (`Signature'') was the Trust's distributor. Under the Distribution Agreement with the Trust, pursuant to Rule 12b-1 of the 1940 Act, Edgewood may seek reimbursement, at an annual rate not exceeding 0.20 of 1% of the Fund's average daily net assets, for expenses incurred in connection with any activities primarily intended to result in the sale of the Fund's shares. For the year ended September 30, 1996, there were no reimbursable expenses incurred under this agreement. Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the Fund, to the extent necessary, to limit all expenses to 0.85 of 1% of the average daily net assets of the Fund, excluding expenses of the Portfolio and 1.50 of 1% of the average daily net assets of the Fund, including expenses of the Portfolio. For the year ended September 30, 1996, expenses of the Fund have been reduced by $74,494. The Fund is subject to such limitations as may from time to time be imposed by the Blue Sky laws of states in which of the Fund sells its shares. Currently, the most restrictive jurisdiction imposes expense limitations of 2.5% of the first $30,000,000 of the average daily net assets, 2.0% of the next $70,000,000, and 1.5% of any excess over $100,000,000. Certain trustees and officers of the Fund are also directors, officers and/or employees of Edgewood and/or Signature. None of the trustees so affiliated received compensation for services as trustee of the Fund. Similarly, none of the Fund's officers received compensation from the Fund. Note 3-Shares of Beneficial Interest At September 30, 1996, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows: For the For the period year ended January 1, 1995 September 30, 1996 September 30, 1995 Shares Amount Shares Amount Sold 6,278,513 $98,926,188 2,458,261 $35,856,451 Reinvested 146,008 2,166,771 2,716 42,076 Redeemed (2,134,450) (33,430,708) (1,298,482) (18,711,160) Net Increase 4,290,071 $67,662,251 1,162,495 $17,187,367 International Equity Fund Report of Independent Accountants To the Trustees and Shareholders of BT Investment Funds: We have audited the accompanying statement of assets and liabilities of the International Equity Fund (one of the Funds comprising BT Investment Funds) as of September 30, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for the year ended September 30, 1996 and the nine months ended September 30, 1995, and the financial highlights for the year ended September 30, 1996, the nine months ended September 30, 1995, for each of the two years in the period ended December 31, 1994 and for the period August 4, 1992 (commencement of operations) to December 31, 1992. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 1996 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the International Equity Fund of BT Investment Funds as of September 30, 1996, the results of its operations, the changes in its net assets and the financial highlights for the periods referred to above, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Kansas City, Missouri October 29, 1996 International Equity Fund Schedule of Portfolio Investments September 30, 1996 Shares Description Value COMMON STOCKS - 90.24% Australia - 2.62% 265,000 Aristocrat Leisure (Entertainment) $ 744,415 307,300 Capral Aluminum Ltd. (Metals-Diversified) 936,191 206,960 News Corporation (Services) 1,085,778 140,000 TABCORP Holdings Ltd. (Capital Equipment) 691,280 134,000 WMC Ltd. (Mining) 862,058 4,319,722 Austria - 0.61% 10,000 OMV AG (Energy) 1,006,421 Brazil - 0.34% 8,600,000 Telec Brasileiras-Telebras"ON" (Telecommunication) 561,877 Canada - 0.33% 24,800 Canadian Natural Resources Ltd. (Energy) (a) 549,776 Finland - 2.34% 79,900 KCI Konecranes International Corp. (Capital Equipment) (a) 2,221,631 36,800 Nokia AB ADR-A (Consumer Goods) 1,628,400 3,850,031 France - 11.62% 14,889 Accor SA (Diversified) 1,840,463 67,100 Assurances Generales de France (Finance) 1,879,887 22,000 Chargeurs International SA (Diversified) 814,136 11,750 Christian Dior (Consumer Goods) 1,375,041 13,987 Club Mediterranee (Services) 1,002,691 6,117 Compagnie Generale des Eaux (Diversified) 664,878 2,200 Comptoirs Modernes (Retail-Grocery) 1,043,458 66,700 Dassault Systemes SA (Computer Software) (a) 2,793,063 21,200 Genset ADR (Biopharmaceuticals) (a) 365,700 7,000 Groupe Danone (Food Processing) 1,022,611 20,944 Lyonnaise des Eaux-Dumez (Diversified) 1,874,746 7,900 Pathe SA (Services) (a) 2,018,891 29,800 SGS-Thomson Microelectronics N.V. (Consumer Goods) (a) 1,411,775 13,251 Total SA - B (Energy) 1,043,639 19,150,979 Germany - 7.13% 31,000 adidas AG (Consumer Goods) (b) 2,822,986 40,600 BASF AG (Diversified) 1,277,650 6,500 Berliner Kraft & Licht (Utilities) 1,768,504 10,344 SAP AG - Vorzug (Computer Software) 1,739,485 16,000 SGL Carbon AG (Diversified) 1,867,174 6,100 Volkswagen AG (Consumer Goods) 2,275,552 11,751,351 Hong Kong - 6.91% 797,000 CDL Hotels International (Services) 432,872 127,000 Cheung Kong Holdings, Ltd. (Finance) 977,176 687,000 China Resources Enterprises, Ltd. (Real Estate) 692,952 2,000,000 China Travel International Investment Hong Kong Ltd. (Transportation) 594,853 500,000 First Pacific Co. (Diversified) (b) 756,498 2,412,000 First Sign International Holdings Ltd. (Textile) 647,213 672,000 Founder Hong Kong Ltd. (Services) (a) 262,873 662,000 Giordano International Ltd. (Diversified) 582,129 770,000 Goldlion Holdings Ltd. (Consumer Goods) 652,205 806,000 Guangnan Holdings, Ltd. (Services) 536,778 28,200 Guangshen Railway Company Ltd. (Transportation) (a) 535,800 138,000 Guoco Group (Finance) 674,564 166,000 Hutchison Whampoa Ltd. (Diversified) 1,116,255 133,000 Jardine Matheson Holdings (Diversified) $ 831,250 114,000 Pico Far East Holdings (Diversified) 25,061 626,000 Shanghai Industrial Holdings Ltd. (Diversified) (a) 1,436,894 1,856,000 Theme International Holdings Ltd. (Consumer Goods) 630,027 11,385,400 India - 0.37% 46,000 Tata Engineering and Locomotive Company Ltd. (Diversified) (b) 603,750 Indonesia - 1.16% 217,500 Bukaka Teknik Utama PT (Capital Equipment) 175,570 332,000 Ciputra Development PT (Real Estate) 264,422 498,000 Citra Marga Nusaphala Persada PT (Capital Equipment) 337,674 545,000 Fiskaragung Perkasa PT (Consumer Goods) (a) 404,738 207,000 Kalbe Farma PT (Pharmaceuticals) 494,597 265,200 Steady Safe PT (Transportation) 242,617 1,919,618 Ireland - 2.20% 192,600 Bank of Ireland (Finance) 1,517,663 207,300 CRH Plc. (Materials) 2,101,634 3,619,297 Italy - 5.34% 75,000 Bulgari SPA (Consumer Goods) 1,396,965 1,400,000 Credito Italiano (Finance) 1,608,751 246,700 Ente Nazionale Idrocarburi SPA (Oil) 1,261,824 1,020,000 Parmalat Finanziaria SPA (Finance) 1,467,626 62,000 Safilo SPA (Consumer Goods) 1,380,901 486,700 Societa Finanziaria Telefonica (Services) 1,689,964 8,806,031 Japan - 15.44% 92,600 AJL Peps Trust (Consumer Goods) 1,828,850 68,000 Canon Inc.(Capital Equipment) 1,337,104 51,000 Daimaru Inc. (Services) 337,939 280 East Japan Railway Co. (Transportation) 1,352,548 163,000 Hitachi Ltd. (Capital Equipment) 1,580,606 58,000 Jusco Co. (Services) 1,765,387 204,000 Mitsubishi Electric Corp. (Capital Equipment) 1,392,054 64,000 Mitsubishi Estate Co. (Finance) 879,192 237,000 Mitsubishi Heavy Industry (Capital Equipment) 1,930,047 200,000 Obayashi Corp. (Capital Equipment) 1,641,302 75,000 Sankyo Co. (Health & Personal) 1,919,192 30,000 Sony Corp. (Consumer Goods) 1,893,603 440,000 Sumitomo Metal Industries (Steel) 1,248,395 114,000 Sumitomo Realty & Development (Finance) 878,222 108,000 Takashimaya Co. (Retail) 1,609,697 94,000 Takeda Chemical Industries (Pharmaceuticals) 1,721,751 83,000 Toyota Motor Corp. (Consumer Goods) 2,123,906 25,439,795 Malaysia - 2.49% 76,000 Edaran Otomobil Nasional (Consumer Goods) 748,933 97,000 Jaya Tiasa Holdings (Materials) 603,710 183,337 Kentucky Fried Chicken (Consumer Goods) 797,276 102,000 Perusahaan Otomobil Nasional BHD (Consumer Goods) 553,441 127,000 Sungei Way Holdings (Diversified) 678,955 188,000 UMW Holdings BHD (Diversified) 723,798 4,106,113 Netherlands - 5.98% 18,000 Gucci Group (Consumer Goods) 1,305,000 See Notes to Financial Statements on Pages 14-15 International Equity Fund Schedule of Portfolio Investments September 30, 1996 Shares Description Value 97,250 Internationale Nederlanden Group NV (Finance) $ 3,035,332 32,200 KLM Royal Dutch Airlines (Transportation) 861,979 28,140 Koninklijke Ahold NV (Retail) 1,593,761 60,300 Philips Electronics (Consumer Goods) 2,178,117 18,750 Toolex Alpha NV ADR (Diversified) (a) 421,875 20,500 Toolex Alpha NV (Diversified) (a) 467,298 9,863,362 Philippines - 1.48% 3,720,000 Belle Corp. (Real Estate) (a) 1,091,824 1,270,100 Mondragon International Philippines (Consumer Goods) (a) 726,187 1,232,400 Universal Robina Corp. (Consumer Goods) 622,424 2,440,435 Singapore - 0.52% 86,000 Far East Levingston Shipbuilding Ltd. (Capital Equipment) 406,150 73,000 Singapore Land Ltd. (Finance) 443,257 849,407 South Africa - 0.53% 53,960 Fedsure Holdings Ltd. (Finance) (b) 392,522 6,932 Liberty Life Association of Africa (Services) 209,725 19,600 Metro Cash and Carry Ltd. (Services) (b) 267,050 169 South African Breweries (Diversified) 4,508 873,805 South Korea - 0.60% 65,000 Korea Mobile Telecommunications (Telecommunications) (a) 983,125 Spain - 4.25% 9,932 Acerinox (Steel) 1,156,368 61,204 Autopistas Concesionaria Espanola SA (Diversified) 731,655 9,635 Banco Popular Espanol (Finance) 1,770,850 20,200 Fomento de Construcciones y Contratas (Capital Equipment) 1,596,745 180,100 Iberdrola SA (Utilities) 1,746,229 7,001,847 Sweden - 2.02% 79,000 Nordbanken AB (Finance) 2,027,476 74,800 Svedala Industries (Capital Equipment) 1,298,611 3,326,087 Switzerland - 3.12% 1,791 ABB AG - Bearer (Machinery) 2,191,603 794 Ciba-Geigy AG, - B (Consumer Goods) 1,011,501 9,841 TAG Heuer International SA (Consumer Goods) 1,931,147 5,134,251 Taiwan - 0.39% 28,130 Taiwan Fund, Inc. (Diversified) 650,506 Thailand - 0.66% 41,300 PTT Exploration & Production (Energy) 610,949 135,500 Thai Military Bank (Finance) 482,453 1,093,402 United Kingdom - 10.13% 170,000 Barclays Plc. (Finance) 2,495,656 98,600 British Aerospace Plc. (Aerospace) 1,628,608 160,000 British Land Company Plc. (Real Estate) 1,140,657 692,500 Iceland Group (Services) 936,496 560,700 Lonrho (Diversified) 1,494,600 210,000 Millennium & Copthorne Hotels Plc. (Services) 1,025,981 Shares Description Value 231,000 National Power Plc. (Utilities) $ 1,421,107 108,500 National Westminster Bank Plc. (Finance) 1,151,780 96,600 Powerscreen International Plc. (Diversified) 829,879 307,000 Rolls-Royce Plc. (Aerospace) 1,149,513 427,100 Storehouse Plc. (Services) 2,013,201 157,000 United Utilities Plc. (Utilities) 1,400,314 16,687,792 Venezuela - 1.10% 822,688 Electricidad de Caracas (Utilities) 816,585 155,902 Mavesa SA, ADR (Consumer Goods) (b) 1,004,009 1,820,594 Other - 0.56% 63,500 Latin American Equity Fund (Diversified) 928,688 Total Common Stocks (Cost $128,783,890) $ 148,723,462 PREFERRED STOCK CONVERTIBLE - 0.25% South Africa - 0.25% 16,000 South African Breweries (Diversified) (Cost $594,485) $ 423,234 Principal Amount CORPORATE DEBT CONVERTIBLE - 0.65% South Africa - 0.65% $280,000 Investec O/S Finance BVI, 6.375% 11/30/02 (Finance) 302,750 590,000 Liberty Life International, 6.50%, 9/30/04 (Finance) 772,900 Total Corporate Debt Convertible (Cost $1,084,333) $ 1,075,650 SOVEREIGN DEBT - 0.66% Italy - 0.66% 1,075,000 Republic of Italy, 5.00%, 6/28/01 (Finance) (Cost $1,083,701) $ 1,088,437 SHORT TERM INSTRUMENTS - 10.78% U.S. Treasury Bills - 10.78% 18,030,0005.36%, 1/16/97 (Cost $17,754,106) $ 17,759,911 Total Investments (Cost $149,300,515) - 102.58% $ 169,070,694 Liabilities in Excess of Other Assets - (2.58%) (4,257,333) Net Assets - 100% $ 164,813,361 (a) Non-Income Producing Security (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. This Security may be resold in transactions exempt from registrations, normally to qualified institutional buyers. Industry Diversification (as a percentage of Total Investments): Consumer Goods 20.84% Finance 14.10% Diversified 12.45% Services 11.13% U.S. Treasury 10.50% Capital Equipment 9.94% Utilities 4.23% Transportation 3.77% Energy 2.64% Retail 2.51% Metals Diversified 2.49% Materials 1.98% Real Estate 1.89% Other* 1.53% 100.00% * No one industry represents more than 1.50% of Portfolio holdings. See Notes to Financial Statements on Pages 14-15 11 International Equity Portfolio Statement of Assets and Liabilities September 30, 1996 Assets Investment at Value (Cost $149,300,515) $ 169,070,694 Cash* 369,172 Receivable for Foreign Taxes Withheld 152,263 Dividends and Interest Receivable 238,301 Net Unrealized Appreciation on Forward Foreign Currency Contracts 143,547 Prepaid Expenses and Other 12,855 Total Assets 169,986,832 Liabilities Due to Bankers Trust 60,426 Due to Custodian 707,593 Payable for Securities Purchased 4,314,462 Net Unrealized Depreciation on Forward Foreign Currency Contracts 65,575 Accrued Expenses and Other 25,415 Total Liabilities 5,173,471 Net Assets $ 164,813,361 Composition of Net Assets Paid-in Capital $ 145,003,353 Net Unrealized Appreciation on Investments, Foreign Currencies and Forward Foreign Currency Contracts 19,810,008 Net Assets, September 30, 1996 $ 164,813,361 Statement of Operations For the year ended September 30, 1996 Investment Income Dividends (net of foreign withholding tax of $271,374) $ 2,358,966 Interest 457,553 Total Investment Income 2,816,519 Expenses Advisory 759,552 Administration and Services 175,281 Professional 35,044 Trustees 3,004 Transfer Tax 14,335 Miscellaneous 1,633 Total Expenses 988,849 Less: Expenses Absorbed by Bankers Trust (229,297) Net Expenses 759,552 Net Investment Income 2,056,967 Realized and Unrealized Gain on Investments, Forward Currencies and Forward Foreign Currency Contracts Net Realized Gain from: Investment Transactions 5,103,507 Foreign Currency Transactions 1,024,419 Net Change in Unrealized Appreciation of Investments, Foreign Currencies and Forward Foreign Currency Contracts 8,042,701 Net Realized and Unrealized Gain on Investments, Foreign Currencies and Forward Foreign Currency Contracts 14,170,627 Net Increase in Net Assets from Operations $ 16,227,594 * Includes foreign cash of $369,172 with a cost of $327,112. See Notes to Financial Statements on Pages 14-15 International Equity Portfolio Statement of Changes in Net Assets For the For the period year ended January 1, 1995 to September 30, 1996 September 30, 1995# Increase in Net Assets from Operations: Net Investment Income $ 2,056,967 $ 1,188,602 Net Realized Gain from Investment and Foreign Currency Transactions 6,127,926 1,956,124 Net Change in Unrealized Appreciation on Investments, Foreign Currencies and Forward Foreign Currency Contracts 8,042,701 6,955,471 Net Increased in Net Assets from Operations 16,227,594 10,100,197 Capital Transactions Proceeds from Capital Invested 104,050,782 35,819,720 Value of Capital Withdrawn (38,778,446) (18,648,629) Net Increase in Net Assets from Capital Transactions 65,272,336 17,171,091 Total Increase in Net Assets 81,499,930 27,271,288 Net Assets Beginning of Period 83,313,431 56,042,143 End of Period $ 164,813,361 $ 83,313,431 Financial Highlights Contained below are selected supplemental data and ratios for each of the periods indicated for the International Equity Portfolio.
For the period For the August 4, 1992 For the For the period year ended (Commencement year ended January 1, 1995 to December 31, of Operations) to September 30, 1996 September 30, 1995# 1994 1993 December 31, 1992 Supplemental Data and Ratios: Net Assets, End of Period (000s) omitted $164,813 $83,313 $56,042 $33,907 $8,225 Ratios to Average Net Assets: Net Investment Income 1.76% 2.39%* 1.69% 1.64% 1.87%* Expenses 0.65% 0.65%* 0.65% 0.65% 0.60%* Decrease Reflected in Above Expense Ratios Due to Absorption of Expenses by Bankers Trust 0.20% 0.22%* 0.24% 0.39% 0.93%* Portfolio Turnover Rate 68% 21% 15% 17% 7% Average Commission per Share** $0.01
#On August 2, 1995, the Board of Trustees approved the change of the fiscal year end from December 31 to September 30. *Annualized **For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. See Notes to Financial Statements on Pages 14-15 International Equity Portfolio Notes to Financial Statements Note 1-Organization and Significant Accounting Policies A. Organization The International Equity Portfolio (the "Portfolio") is registered under the Investment Company Act of 1940 (the "Act"), as amended, as open-end management investment company. The Portfolio was organized on December 11, 1991 as an unincorporated trust under the laws of New York and commenced operations on August 4, 1992. The Declaration of Trust permits the Board of Trustees (the "Trustees") to issue beneficial interests in the Portfolio. B. Security Valuation The Portfolio's investments listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the closing price of the security traded on that exchange prior to the time when the Portfolio assets are valued. Short-term obligations with remaining maturities of 60 days or less are valued at amortized cost. Other short-term debt securities are valued on a mark- to-market basis until such time as they reach a remaining maturity of 60 days, whereupon they will be valued at amortized cost using their value on the 61st day. All other securities and other assets are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Trustees. C. Security Transactions and Interest Income Security transactions are accounted for on a trade date basis. Dividend income, less foreign taxes withheld, if any, is recorded on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income is recorded on the accrual basis and includes amortization of premium and discount on investments. Realized gains and losses from securities transactions are recorded on the identified cost basis. All of the net investment income and realized and unrealized gains and losses from the security and foreign currency transactions of the Portfolio are allocated pro rata among the investors in the Portfolio at the time of such determination. D. Repurchase Agreements The Portfolio may enter into repurchase agreements with financial institutions deemed to be creditworthy by the Portfolio's Investment Advisers, subject to the seller's agreement to repurchase such securities at a mutually agreed upon price. Securities purchased subject to repurchase agreements are deposited with the Portfolio's custodian, and pursuant to the terms of the repurchase agreement must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. If the value of the underlying securities falls below the value of the repurchase price plus accrued interest, the Portfolio will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults on its repurchase obligation, the Portfolio maintains the right to sell the underlying securities at market value and may claim any resulting loss against the seller. E. Foreign Currency Transactions The books and records of the Portfolio are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. F. Forward Foreign Currency Contracts The Portfolio may enter into forward foreign currency contracts for the purpose of settling specific purchases or sales of securities denominated in a foreign currency or with respect to the Portfolio's investments. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Portfolio and the resulting unrealized appreciation or depreciation are determined using prevailing exchange rates. With respect to forward foreign currency contracts, losses in excess of amounts recognized in the Statement of Assets and Liabilities may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. G. Option Contracts Upon the purchase of a put option or a call option by a Portfolio, the premium paid is recorded as an investment, 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. H. Futures Contracts The Portfolio may enter into financial futures contracts which are contracts to buy a standard quantity of securities at a specified price on a future date. The Portfolio is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Portfolio each day, dependent on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. I. Federal Income Taxes It is the Portfolio's policy to comply with the requirements of the Internal Revenue Code. Therefore, no federal income tax provision is required. International Equity Portfolio Notes to Financial Statements 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. Note 2-Fees and Transactions with Affiliates The Portfolio has entered into an Administration and Services Agreement with Bankers Trust Company ("Bankers Trust"). Under this Administration and Services Agreement, Bankers Trust provides administrative, custody, transfer agency and shareholder services to the Portfolio in return for a fee computed daily and paid monthly at an annual rate of 0.15 of 1% of the Portfolio's average daily net assets. For the year ended September 30, 1996, this fee aggregated $175,281. 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 0.65 of 1% of the Portfolio's average daily net assets. For the year ended September 30, 1996, this fee aggregated $759,552. Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the Portfolio, to the extent necessary, to limit all expenses to 0.65 of 1% of the average daily net assets of the Portfolio. For the year ended September 30, 1996, expenses of the Portfolio have been reduced $229,297. On September 30, 1996, the Trust entered into a Distribution Agreement with Edgewood Services, Inc. (`Edgewood''). Prior to September 30, Signature Broker-Dealer Services, Inc. (`Signature'') was the Trust's Distributor. Certain trustees and officers of the Portfolio are also directors, officers and/or employees of Edgewood and/or Signature. None of the trustees so affiliated received compensation for services as trustee of the Portfolio. Similarly, none of the Portfolio's officers received compensation from the Portfolio. For the year ended September 30, 1996, the Portfolio paid brokerage commissions of $603,995. 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 September 30, 1996, were $132,762,664 and $75,463,529, respectively. For federal income tax purposes, the tax basis of investments held at September 30, 1996 was $149,313,524. The aggregate gross unrealized appreciation for all investments was $23,947,591 and the aggregate gross unrealized depreciation for all investments was $4,190,151. Note 4-Open Forward Foreign Currency Contracts As of September 30, 1996, the International Equity Portfolio had the following open forward foreign currency contracts outstanding: Net Unrealized Appreciation Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation) (US$) Sales AUD 41,746 USD 32,993 10/01/96 33,135 (142) AUD 3,289,201 USD 2,597,378 10/01/96 2,610,771 (13,393) AUD 3,267,343 USD 2,572,897 10/08/96 2,585,416 (12,519) AUD 3,396,879 USD 2,713,261 10/01/96 2,696,239 17,022 JPY 296,683,411 USD 2,677,658 10/01/96 2,661,315 16,343 JPY 286,594,676 USD 2,625,452 10/01/96 2,570,817 54,635 JPY 286,594,676 USD 2,690,090 1/06/97 2,608,489 81,601 Total Sales 143,547 Purchases USD 2,677,657 AUD 3,396,879 10/01/96 2,696,238 18,581 USD 2,625,452 AUD 3,330,947 10/01/96 2,643,905 18,453 USD 2,690,090 AUD 3,396,879 1/06/97 2,680,715 (9,375) USD 465,179 FRF 2,400,000 10/01/96 468,365 3,186 USD 1,175,398 GBP 750,325 10/01/96 1,174,483 (915) USD 394 IDR 915,000 10/02/96 394 - USD 188,815 ITL 287,000,000 10/01/96 188,258 (557) USD 2,597,377 JPY 286,594,676 10/01/96 2,570,816 (26,561) USD 2,572,897 JPY 286,595,000 10/08/96 2,572,897 - USD 10,978 JPY 1,209,289 10/01/96 10,847 (131) USD 2,713,261 JPY 295,474,118 10/01/96 2,650,468 (62,793) USD 7,000,000 JPY 779,751,000 10/09/96 6,994,537 (5,463) Total Purchases (65,575) Net Appreciation 77,972 International Equity Portfolio Report of Independent Accountants To the Trustees and Holders of Beneficial Interest of the International Equity Portfolio: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the International Equity Portfolio (one of the Portfolios comprising BT Investment Portfolios) as of September 30, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for the year ended September 30, 1996, and the nine months ended September 30, 1995, and the financial highlights for the year ended September 30, 1996, the nine months ended September 30, 1995, for each of the two years in the period ended December 31, 1994 and for the period August 4, 1992 (commencement of operations) to December 31, 1992. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the International Equity Portfolio as of September 30, 1996, the results of its operations, the changes in its net assets and the financial highlights for the periods referred to above, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Kansas City, Missouri October 29, 1996 16 This page intentionally left blank. BT INVESTMENT FUNDS International Equity Fund For shareholder account information and current price and yield quotations, shareholders may call their relationship manager or servicing agent. Prospectuses containing more extensive information regarding the BT Investment Funds may be obtained by calling or writing to Investors Fiduciary Trust Company or Edgewood Services, Inc., the primary Servicing Agent and Distributor, respectively, of BT Investment Funds: BT Pyramid Mutual Funds DST Systems, Inc. 210 West 10th St. Kansas City, MO 64105 BT Investment Funds Edgewood Securities, Inc. Clearing Operations P.O. Box 897 Pittsburgh, PA 15230-0897 You may write to the International Equity Fund at the following address: BT Investment Funds Clearing Operations P.O. Box 897 Pittsburgh, PA 15230-0897 Intermational Equity Fund Appendix Pie Chart- Page 4 The graphic representation here displayed consists of a pie chart representing the Diversification of Portfolio Investments by Country in the International Equity Portfolio as of September 30, 1996. Each slice of the pie represents an investment Country and is sized according to the percentage of the Fund's investment in that Country. The Countries and their percentages, starting at the top of the pie and moving clockwise, are: Japan-15%; France-11%; Switzerland-3%; United Kingdom-10%; Germany-7%; Hong Kong-7%; Italy-6%; Netherlands-6%; Spain- 4%; and Other-31%. Line Graph-Page 5 The graphic representation here displayed consists of a boxed legend in the upper left-hand corner of the corresponding line graph. The solid black line represents BT Investment International Equity Fund (the `Fund''); the dashed line represents the MSCI EAFE Index. The graph represents a comparison of change in value of a $10,000 investment in the Fund and in the MSCI EAFE Index begining August 31, 1992. The `y'' axis reflects quarterly computation periods from August 1992 to September 1996. The `x'' axis reflects investment values in $2,000 increments ranging from $8,000 to $20,000. -----END PRIVACY-ENHANCED MESSAGE-----