-----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, LA3/nfup74MI3iz9lg9/GIeUqQ4MQFG4FYb+g7smP2+CGAs09w7EkYzHaLsT/9fY peJK4kcZm/60Ohxf1M0FmA== 0000950115-99-001186.txt : 19990831 0000950115-99-001186.hdr.sgml : 19990831 ACCESSION NUMBER: 0000950115-99-001186 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990830 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: SEC FILE NUMBER: 811-04760 FILM NUMBER: 99702509 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 SEMI-ANNUAL REPORT June 30, 1999 [GRAPHIC] BT Mutual Funds Quantitative Equity Fund Semi-Annual Report TRUST: BT INVESTMENT FUNDS INVESTMENT ADVISOR: BANKERS TRUST COMPANY - -------------------------------------------------------------------------------- Quantitative Equity Fund Table of Contents - -------------------------------------------------------------------------------- Letter to Shareholders ........................................... 3 Quantitative Equity Fund Schedule of Investments ....................................... 6 Statement of Assets and Liabilities ........................... 7 Statement of Operations ....................................... 7 Statement of Changes in Net Assets ............................ 8 Financial Highlights .......................................... 8 Notes to Financial Statements ................................. 9 --------------------- 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 - -------------------------------------------------------------------------------- Quantitative Equity Fund Letter to Shareholders - -------------------------------------------------------------------------------- We are pleased to present you with this first semi-annual report for the Quantitative Equity Fund (the "Fund"), providing a review of the markets, the portfolio, and our outlook. Included are a complete financial summary of the Fund's operations and a listing of the portfolio's holdings. Since the Fund has not been in operation for a full six months, performance is being reported for the life of the Fund as of June 30, 1999. MARKET ACTIVITY As the global economy started to improve, the domestic stock market continued a volatile, but record-breaking run during the second quarter of 1999. The S&P 500 Index advanced past the 1,300 mark it had first closed above late in the first quarter. The Dow Jones Industrial Average rose to new highs, passing the 11,000 level within weeks after reaching the 10,000 milestone. Large cap value stocks outperformed their growth brethren for the first time in nearly 1 1/2 years. Stronger performance in value stocks can be attributed, in part, to stronger performance in energy-related stocks, rebounding with higher oil prices. Additionally, positive corporate earnings surprises and a rotation into cyclicals led to stronger returns in sectors that have long been out of favor. While technology stocks pushed large cap growth stocks back on top for the month of June, the value sectors' strength for the second quarter was enough to give them the lead for the semi-annual period as a whole. As investor sentiment shifted, small and mid capitalization stocks also got a boost in the second quarter, outperforming large cap stocks for the first time in seven quarters. The merger market experienced a banner quarter with one of the most active markets since the late 1980s. While headlines in the financial press were dominated by concerns over rising interest rates and Internet-dominated initial public offering activity, merger and acquisition activity during the second quarter of 1999 advanced to the second best quarter ever. The volume of announced U.S. merger and acquisition transactions reached over $540 billion, as compared to $340 billion in the first calendar quarter. INVESTMENT REVIEW The Fund seeks a total return greater than that of the S&P 500 Index by following a quantitative strategy that integrates an exposure to the S&P 500 Index with investments in the stocks of acquisition targets. To track the S&P 500 Index, the Fund invests in derivatives or common stocks of S&P 500 companies. To seek returns in excess of the S&P 500 Index, the Fund buys shares of companies that are acquisition targets based on specific events that trigger a merger arbitrage opportunity. The goal is to capture the difference between the target's post-bid share price and the target's expected fixed payout. These investments are made based on our own proprietary quantitative models. These shares are sold when the acquisition is consummated or the transaction is abandoned. Cumulative Total Returns - --------------------------------------------------------------- Periods ended June 30, 1999 Since inception - --------------------------------------------------------------- Quantitative Equity Fund(1) 13.90% (inception 3/31/99) - --------------------------------------------------------------- S&P 500 Index(2) 7.06% - --------------------------------------------------------------- Lipper Growth & Income Average(3) 9.03% The Fund has had an exciting initial period, marking its first quarter by outperforming the S&P 500 Index by a margin of 6.84%. The Fund's strong returns relative to the Index were primarily fueled by the numerous deals closed in the second calendar quarter of 1999. The following is a list of merger deals that the Fund invested in during the second quarter of 1999, all of which were completed successfully. Acquired Acquirer - ------------------------------------------------------- XYLAN Alcatel - ------------------------------------------------------- U.S. Filter Vivendi - ------------------------------------------------------- CMP Media United News & Media - ------------------------------------------------------- VLSI Technology, Inc. Royal Phillips Electronics - ------------------------------------------------------- Morton International Rohm & Haas - ------------------------------------------------------- Sunstrand United Apparel Group - ------------------------------------------------------- Fore Systems GEC PLC - ------------------------------------------------------- Platinum Technology Computer Associates - ------------------------------------------------------- AeroQuip-Vickers Eaton Corporation - ------------------------------------------------------- Nine West Jones Apparel The Fund has established strict criteria in its disciplined merger arbitrage investment approach. For example, the Fund: o only purchases the stock of an announced target company, referred to as "acquired" in the table above o invests only in merger deals that are generally made with financing of at least 50% cash o usually invests in acquisition targets with a minimum market capitalization of $500 million, although shares of smaller companies may be purchased. - --------------- (1) 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. 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) The S&P 500 is an index of common stocks in industry, transportation, and financial and public utility companies. This index is unmanaged, and investments cannot be made in an index. (3) Lipper figures represent the average of the total returns, reported by all of the mutual funds designated by Lipper Analytical Services, Inc. as falling into the respective categories indicated. These figures do not reflect sales charges. 3 - -------------------------------------------------------------------------------- Quantitative Equity Fund Letter to Shareholders - -------------------------------------------------------------------------------- Diversification of Portfolio Investments By Sectors as of June 30, 1999 (percentages are based on net assets) In the printed version there appears a pie chart with the following percentages depicted: Other 11.7% U.S. Treasury Bills 56.2% Short-term Instrument 6.1% Stocks 26.0% MANAGER OUTLOOK U.S. economic growth is showing no signs of slowing and labor markets are still extremely tight. Thus, the pick-up in the rest of the world, as the global economic outlook improves, raises the risks of inflation pressures here at home. To guard against those risks, the Federal Reserve Board raised the targeted fed funds rate by 0.25% to 5% at their meeting on June 30th. Although the Fed declared a bias toward a neutral stance, we expect continued strong growth and some pick-up in inflation to prompt a modest degree of additional Fed tightening and some further backup in Treasury yields going forward. This backdrop might temper the equity markets' enthusiasm a bit, but a serious correction is, in our opinion, unlikely unless the economy really overheats, provoking aggressive Fed tightening and imperiling the economic expansion the U.S. has enjoyed for more than eight years. Looking ahead, we believe the environment for mergers remains strong. We appreciate your ongoing support of the Quantitative Equity Fund and look forward to serving your investment needs in the years ahead. /s/ Manish Keshive ------------------------ Manish Keshive Portfolio Manager of the Quantitative Equity Fund June 30, 1999 4 - -------------------------------------------------------------------------------- Quantitative Equity Fund Performance Comparison - -------------------------------------------------------------------------------- In the printed version there appears a line graph with the following plot points decpicted: Quantitative Equity Fund $11,390 S&P 500 Index $10,706 Quantitative S&P 500 Equity Fund Index ------------ ------- March 1999 $10,000 $10,000 June 1999 $11,390 $10,706 Comparison of Change in Value of a $10,000 Investment in the Quantitative Equity Fund since March 31, 1999. Total Return for the Period March 31, 1999(1) through June 30, 1999 Since Inception 13.90% (1) 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. Past performance is not indicative of future performance. Performance figures assume the reinvestment of dividends and capital gain distributions. 5 - -------------------------------------------------------------------------------- Quantitative Equity Fund Schedule of Investments June 30, 1999 (unaudited) - -------------------------------------------------------------------------------- Shares Security Value - ------ -------- ----- COMMON STOCKS - 26.0% Environmental Control - 6.8% 1,100 Browning-Ferris Industries, Inc. ............................ $ 47,300 -------- Foods - 2.5% 1,000 Richfood Holdings, Inc. ...................................... 17,625 -------- Machinery - 6.2% 900 Case Corp. .................................................. 43,312 -------- Metals - 5.6% 2,000 Wyman/Gordon Corp. .......................................... 38,625 -------- Transportation - 2.8% 500 Avondale Industries, Inc. ................................... 19,500 -------- Wholesale Distributor - 2.1% 400 VWR Scientific Products Corp. ............................... 14,675 -------- Total Common Stocks (Cost $178,167) ................................................... 181,037 -------- SHORT-TERM INSTRUMENT - 6.1% 42,441 Institutional Cash Management Fund .......................... 42,441 -------- Total Short-Term Instrument (Cost $42,441) .................................................... 42,441 -------- Principal Amount Security Value - --------- -------- ----- U.S. TREASURY BILLS - 56.2% $ 25,000 4.45%, 8/19/99 ............................................ $ 24,855 20,000 4.46%, 8/19/99 ............................................ 19,880 350,000 4.61%, 9/16/99 ............................................ 346,587 -------- Total U.S. Treasury Bills (Amortized Cost $391,289) ......................................... 391,322 -------- Total Investments (Cost $611,897) ............................................ 88.3% 614,800 Other Assets in Excess of Liabilities ........................ 11.7% 81,786 ----- -------- Net Assets ................................................... 100.0% $696,586 ===== ======== See Notes to Financial Statements. 6 - -------------------------------------------------------------------------------- Quantitative Equity Fund Statement of Assets and Liabilities June 30, 1999 (unaudited) - -------------------------------------------------------------------------------- Assets Investment, at Value (Cost of Investments of $611,897) ......... $614,800 Receivable for Fund Shares Sold ................................ 2,142 Receivable for Securities Sold ................................. 30,000 Receivable for Variation Margin ................................ 12,500 Dividends and Interest Receivable .............................. 631 Due from Bankers Trust ......................................... 6,915 Prepaid Expenses and Other ..................................... 68,982 -------- Total Assets ........................................................ 735,970 -------- Liabilities Payable for Securities Purchased ............................... 26,303 Accrued Expenses and Other ..................................... 13,081 -------- Total Liabilities ................................................... 39,384 -------- Net Assets .......................................................... $696,586 ======== Shares Outstanding ($0.001 par value per share, unlimited number of shares of beneficial interest authorized) ................... 61,168 -------- Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares outstanding) ..................... $ 11.39 ======== Composition of Net Assets Paid-in Capital ................................................ 635,198 Undistributed Net Investment Income ............................ 1,221 Accumulated Net Realized Gain from Investment Transactions and Futures Contracts ........................................... 31,713 Net Unrealized Appreciation on Investments and Futures Contracts ........................................... 28,454 -------- Net Assets .......................................................... $696,586 ======== - -------------------------------------------------------------------------------- Statement of Operations (unaudited) - -------------------------------------------------------------------------------- For the Period March 31, 1999(1) through June 30, 1999 ----------------- Investment Income Dividends ..................................................... $ 1,593 Income ........................................................ 636 -------- Total Investment Income .......................................... 2,229 Expenses Professional Fees ............................................. 8,322 Registration Fees ............................................. 7,241 Shareholder Report Expenses ................................... 4,345 Trustees Fees ................................................. 1,203 Administration and Service Fees ............................... 616 Advisory Fees ................................................. 560 Miscellaneous Expenses ........................................ 1,222 -------- Total Expenses ................................................ 23,509 Less Expenses Reimbursed and Fees Waived by Bankers Trust ..... (22,501) -------- Net Expenses .................................................. 1,008 -------- Net Investment Income ............................................ 1,221 -------- Realized and Unrealized Gain on Investments and Futures Contracts Net Realized Gain from Investment Transactions and Futures Contracts .......................................... 31,713 Net Change in Unrealized Appreciation/Depreciation on Investments and Futures Contracts .......................... 28,454 -------- Net Realized and Unrealized Gain on Investments and Futures Contracts .......................................... 60,167 -------- Net Increase in Net Assets from Operations ....................... $ 61,388 ======== - ---------- (1) Commencement of operations See Notes to Financial Statements. 7 - -------------------------------------------------------------------------------- Quantitative Equity Fund Statement of Changes in Net Assets (unaudited) - -------------------------------------------------------------------------------- For the Period March 31, 1999(1) through June 30, 1999 ----------------- Increase (Decrease) in Net Assets from: Operations Net Investment Income ...................................... $ 1,221 Net Realized Gain from Investments and Futures Contracts ... 31,713 Net Change in Unrealized Appreciation/Depreciation on Investments and Futures Contracts ....................... 28,454 -------- Net Increase in Net Assets Resulting from Operations ....... 61,388 -------- Capital Transactions Proceeds from Sale of Shares ............................... 635,198 Cost of Shares Redeemed .................................... -- -------- Net Increase in Net Assets from Capital Transactions .......... 635,198 -------- Total Increase in Net Assets .................................. 696,586 Net Assets Beginning of Period ........................................... -- -------- End of Period (including undistributed net investment income of $1,221) .......................................... $696,586 ======== - ---------- (1) Commencement of operations - -------------------------------------------------------------------------------- Financial Highlights (unaudited) - -------------------------------------------------------------------------------- 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 Period March 31, 1999(1) through June 30, 1999 ----------------- Per Share Operating Performance: Net Asset Value, Beginning of Period ............................. $10.00 ------ Income from Investment Operations Net Investment Income ......................................... 0.03(2) Net Realized and Unrealized Gain on Investment Transactions and Futures Contracts ....................................... 1.36 ------ Total from Investment Operations ................................. 1.39 ------ Net Asset Value, End of Period ................................... $11.39 ====== Total Investment Return .......................................... 13.90% Supplemental Data and Ratios: Net Assets, End of Period (000s omitted) ...................... $ 697 Ratios to Average Net Assets: Net Investment Income ...................................... 1.05%(3) Net Expenses ............................................... 0.90%(3) Decrease Reflected in Above Expense Ratios Due to Expenses Reimbursed and/or Fees Waived by Bankers Trust .. 19.27%(3) Portfolio Turnover Rate ....................................... 256% - ---------- (1) Commencement of operations. (2) Calculated using average shares for the period. (3) Annualized. 8 - -------------------------------------------------------------------------------- Quantitative Equity Fund Notes to Financial Statements (unaudited) - -------------------------------------------------------------------------------- Note 1 -- Organization and Significant Accounting Policies A. Organization 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 February 28, 1992, as a business trust under the laws of the Commonwealth of Massachusetts. The Quantitative 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 March 31, 1999. B. Security Valuation The Fund's investments listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on their closing price. Short-term debt securities are valued at market value until such time as they reach a remaining maturity of 60 days, whereupon they are valued at amortized cost using their value on the 61st day. All other securities and other assets are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Trustees. C. 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. D. Security Transactions and Interest Income Security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. 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. 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, are made annually to the extent they exceed 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 to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required on a pro rata basis. 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. G. 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 on a pro rata 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 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 .55% of the Fund's average daily net assets. The Fund has entered into an Advisory Agreement in which the Fund pays Bankers Trust an advisory fee computed daily and paid monthly at an annual rate of .50% of the Fund's average daily net assets. Bankers Trust has voluntarily undertaken to waive its fees and reimburse expenses of the Fund, to the extent necessary, to limit all expenses to .90% of the average daily net assets of the Fund. The Fund may invest in the BT Institutional Cash Management Fund (the "Cash Management Fund"), an open-end management investment company managed by Bankers Trust Company (the "Company"). The "Cash Management Fund" is offered as a cash management option to the Fund and other accounts managed by the Company. Distributions from the "Cash Management Fund" to the Fund for the period ended June 30, 1999, amounted to $1,149 and are included in dividend income. ICC Distributors, Inc., a member of the Forum Group of Companies, provides distribution services to the Fund. 9 - -------------------------------------------------------------------------------- Quantitative Equity Fund Notes to Financial Statements (unaudited) - -------------------------------------------------------------------------------- The Quantitative Equity Fund is a participant with other affiliated entities in a revolving credit facility in the amount of $100,000,000, which expires April 29, 2000. A commitment fee of .10% 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 .50%. No amounts were drawn down or outstanding under the credit facilities as of and for the period ended June 30, 1999. Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation. In November 1998 Bankers Trust Corporation ("BT Corp.") and Deutsche Bank AG ("Deutsche Bank") entered into an Agreement and Plan of Merger which was consummated on June 4, 1999. As a result of the transaction, BT Corp. became a wholly-owned subsidiary of Deutsche Bank. Note 3 -- Shares of Beneficial Interest At June 30, 1999, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows: For the period March 31, 1999(1) through June 30, 1999(2) ------------------------ Shares Amount ------ -------- Sold ................... 61,168 $635,198 Reinvested ............. -- -- Redeemed ............... -- -- ------ -------- Net Increase ........... 61,168 $635,198 ====== ======== - ---------- (1) Commencement of operations. (2) Unaudited. Note 4 -- Purchases and Sales of Investment Securities The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the period ended June 30, 1999 were $796,233 and $650,000, respectively. For federal income tax purposes, the tax basis of investments held at June 30, 1999 was $611,897. The aggregate gross unrealized appreciation was $3,355, and the aggregate gross unrealized depreciation for all investments was $452 as of June 30, 1999. Note 5 -- Futures Contracts A summary of obligations under these financial instruments at June 30, 1999 is as follows: Market Unrealized Type of Future Expiration Contracts Position Value Appreciation - -------------- ---------- --------- -------- ------ ------------ S&P 500 Index Futures Sept. 1999 500 Long $690,850 $25,551 10 This page intentionally left blank. Investment Advisor and Administrator of the Portfolio BANKERS TRUST COMPANY 130 Liberty Street New York, NY 10006 Distributor ICC DISTRIBUTORS, INC. Two Portland Square Portland, ME 04101 Custodian and Transfer Agent BANKERS TRUST COMPANY 130 Liberty Street New York, NY 10006 Independent Auditors ERNST & YOUNG LLP 2001 Market Street Philadelphia, PA 19103 Counsel WILLKIE FARR & GALLAGHER 787 7th Avenue New York, NY 10019 [LOGO] For information on how to invest, shareholder account information and current price and yield information, please contact your relationship manager or write to us at: BT Service Center P.O. Box 419210 Kansas City, MO 64141-6210 or call our toll-free number: 1-800-730-1313 This report must be preceded or accompanied by a current prospectus for the Fund. Quantitative Equity Fund CUSIP #55922652 BT Investment Funds 812SA (6/99) Distributed by: ICC Distributors, Inc. Two Portland Square Portland, ME 04101 -----END PRIVACY-ENHANCED MESSAGE-----