-----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, WyktyD5/KkrVLCE6Qgp4mAZiiXok60FS2dr7q7q7f1nwiGTaLwAnEw6MVnDxsJXN 1vM0GGjNzHaEIRP988+5ug== 0000935069-01-500143.txt : 20010516 0000935069-01-500143.hdr.sgml : 20010516 ACCESSION NUMBER: 0000935069-01-500143 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1637706 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 midcap.txt MID CAP FUND SEMI-ANNUAL REPORT Deutsche Asset Management Mutual Fund Semi-Annual Report March 31, 2001 Mid Cap Fund A Member of the Deutsche Bank Group [logo omitted] Mid Cap Fund - -------------------------------------------------------------------------------- Table of Contents Letter to Shareholders ...................................... 3 Mid Cap Fund Statement of Assets and Liabilities ...................... 8 Statement of Operations .................................. 9 Statements of Changes in Net Assets ...................... 10 Financial Highlights ..................................... 11 Notes to Financial Statements ............................ 13 Capital Appreciation Portfolio Schedule of Portfolio Investments ........................ 15 Statement of Assets and Liabilities ...................... 17 Statement of Operations .................................. 18 Statements of Changes in Net Assets ...................... 19 Financial Highlights ..................................... 20 Notes to Financial Statements ............................ 21 ----------------------------------- The Fund is not insured by the FDIC and is not a deposit, obligation of or guaranteed by Deutsche Bank. The Fund is subject to investment risks, including possible loss of principal amount invested. ----------------------------------- - -------------------------------------------------------------------------------- 2 Mid Cap Fund - -------------------------------------------------------------------------------- Letter to Shareholders We are pleased to present you with this semi-annual report for Deutsche Asset Management Mid Cap Fund (the `Fund'), providing a review of the markets, the Portfolio (the Fund invests all of its assets in a master portfolio with the same goal as the Fund), and our outlook as well as a complete financial summary of the Fund's operations and a listing of the Portfolio's holdings. MARKET REVIEW MID CAPITALIZATION STOCKS OUTPERFORMED THEIR LARGE CAP COUNTERPARTS DURING THE SIX MONTHS ENDED MARCH 31, 2001. Still, the semi-annual period proved to be difficult for equities across all market capitalizations. The S&P MidCap 400 Index returned -14.21% for the semi-annual period as compared to the large cap S&P 500 Index return of -18.75%. Mid cap stocks underperformed their small cap peers, as the Russell 2000 Index had a semi-annual return of -12.96%. In contrast to the financial market's recent years, value stocks significantly outperformed growth stocks within all equity capitalization sectors during this semi-annual period. For example, in the mid cap area, the Russell MidCap Value Index fell 3.53% while the Russell MidCap Growth Index was off 25.09% for the quarter. EQUITY MARKETS BEGAN THE FOURTH CALENDAR QUARTER WITH A CONTINUATION OF THE SEPTEMBER 2000 SELL-OFF. A dramatic slowdown in US GDP growth to approximately 1% in the fourth quarter versus 2.2% in the third quarter of 2000 and 5.6% in the second quarter particularly impacted the equity markets. Other factors weighing on the equity markets included a prolonged presidential election, higher fuel prices and a weak euro. Technology was the hardest hit sector, as concerns about corporate earnings and revenue growth, valuations and overall capital spending dominated. The Information Technology sector's weakness was enough to outweigh the eight of eleven sectors that outpaced the S&P MidCap 400 Index as a whole. AFTER A DIFFICULT START, THE FIRST QUARTER OF 2001 EXPERIENCED A BRIEF, SHARP RALLY IN RESPONSE TO A SURPRISE INTEREST RATE CUT OF 0.50% BY THE FEDERAL RESERVE BOARD IN EARLY JANUARY. Weakness across all segments of the equity markets quickly resumed, however, and continued through the quarter despite two additional interest rate cuts of 0.50% each on January 31 and March 20. Investors remained cautious, as US economic growth remained slow and corporate earnings announcements and forecasts continued to be revised downward. Signs of a slowdown in global economic growth also negatively impacted the equity markets. As in the preceding months, technology stocks were impacted hardest. It had become increasingly clear that the rapid pace of growth in the Information Technology and Telecommunications sectors over the past few years, driven in large part by Y2K and Internet spending, was not sustainable. While every sector in the S&P MidCap 400 Index posted negative returns for the quarter, performance remained broad, as eight of the eleven sectors outpaced the Index as a whole. INVESTMENT STRATEGY The Fund outperformed its category average but underperformed its benchmark for the six month period. Specific stock selection and sector positioning had mixed results. As value stocks significantly outperformed growth stocks, weighing on performance for the period overall were the Fund's more growth-oriented holdings in the Information Technology and Capital Goods sectors as well as the Fund's growth bias versus the benchmark. More specifically, fourth quarter 2000 performance was impacted by the Fund's overweight position in the Information Technology sector. Also affecting the Fund were underweight positions in Materials, Financials, Consumer Staples and Transportation, the four best - -------------------------------------------------------------------------------- TEN LARGEST STOCK HOLDINGS As of March 31, 2001 (percentages are based on total net assets of the Portfolio) - -------------------------------------------------------------------------------- North Fork Bancorporation ................... 2.34% Dime Bancorp, Inc. .......................... 2.29 AMBAC Financial Group Inc. .................. 2.29 Banknorth Group Inc. ........................ 1.87 Astoria Financial Corp. ..................... 1.86 Williams-Sonoma, Inc. ....................... 1.80 Bed, Bath & Beyond, Inc. .................... 1.77 TECO Energy, Inc. ........................... 1.75 Golden State Bancorp, Inc. .................. 1.70 Family Dollar Stores ........................ 1.69 - -------------------------------------------------------------------------------- 3 Mid Cap Fund - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS performing sectors for the quarter. On the other hand, an overweight position in the Energy sector, an underweight position in Communication Services and strong stock selection in the Health Care sector aided Fund performance. During the first quarter of 2001, performance was primarily hindered by an overweight position in the Health Care sector. Underweight positions in Materials, Consumer Staples, Consumer Discretionary and Capital Goods also impacted the Fund. Positively affecting Fund performance was an overweight position in Energy, an underweight position in Communications Services and strong stock selection in the Consumer Discretionary and Financials sectors. Among the Fund's best specific stock performers for the semi-annual period were Dime Bancorp Inc., Astoria Financial Corp. and Ambac Financial Group, Inc. in the Financials Services sector; BJ's Wholesale Club, Inc. and Family Dollar Stores in the Consumer Discretionary sector; BJ Services Co. and Mitchell Energy & Development Corp. in the Energy sector; and Caremark RX Inc. in the Health Care sector. MANAGER OUTLOOK Our outlook for the equity markets in general is cautiously optimistic. The question remains whether the US is currently experiencing an economic `soft landing' or is headed for a recession. At present, the economic data seems to point to moderate economic growth, contained inflationary pressures, the possibility of a near-term tax cut for the consumer and an accommodative Federal Reserve Board expected to lower interest rates through the second quarter of 2001. In our view, most economic indicators have not yet declined to levels that would qualify as a recession. For the mid cap equity market, we anticipate future periods of volatility while global and domestic economic and political events run their course, but the outlook for profit growth, as well as relative valuations, appears to remain attractive versus other segments of the market. - --------------------------------------------------------------------------------
CUMULATIVE AVERAGE ANNUAL TOTAL RETURNS TOTAL RETURNS Periods Ended 6 Months 1 Year 3 Years 5 Years Since 1 Year 3 Years 5 Years Since March 31, 2001 Inception Inception - --------------------------------------------------------------------------------------------------------------------------- Mid Cap Fund 1 Institutional Class (inception 10/12/93) 2 (31.91)% (33.24)% 26.86% 78.03% 151.37% (33.24)% 8.25% 12.23% 13.14% Investment Class (inception 3/9/93) (32.03)% (33.98)% 26.46% 75.49% 194.88% (33.98)% 8.14% 11.91% 14.36% - ----------------------------------------------------------------------------------------------------------------------------- S&P MidCap 400 Index 3 (14.21)% (6.96)% 29.06% 112.77% 214.64%5 (6.96)% 8.87% 16.30% 15.41%5 - ----------------------------------------------------------------------------------------------------------------------------- Lipper Mid Cap Growth Funds Average 4 (36.93)% (37.79)% 17.39% 62.06% 155.84%5 (37.79)% 4.71% 8.97% 11.62%5
- -------------------------------------------------------------------------------- 1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT TERM PERFORMANCE. RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL PERFORMANCE. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. All performance assumes the reinvestment of dividend and capital gain distributions. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain fees and expenses had not been waived by the Advisor and Administrator. 2 At the close of business on August 31, 2000, shares of Equity Appreciation--Institutional Class converted to Institutional Class shares of Mid Cap. Equity Appreciation--Institutional Class was managed by the same investment management team with the same objectives, policies and strategies as Mid Cap. The performance shown reflects Equity Appreciation--Institutional Class shares' actual returns from its inception on October 12, 1993. Performance for periods after August 31, 2000 reflect the performance of the Mid Cap--Institutional Class. 3 S&P MidCap 400 Index is an unmanaged index used to portray the pattern of common stock movement of 400 publicly held midsize US companies. Benchmark returns do not reflect expenses that have been deducted from the Fund's returns. 4 Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Inc. as falling into the category indicated. These figures do not reflect sales charges. On March 31, 2001, Lipper reclassified Mid Cap Fund from the Lipper Multi Cap Growth Funds category to the Lipper Mid CapGrowth Funds category. 5 Since Inception benchmark returns are for comparative purposes relative to Investment Class Shares and are for the periods beginning March 31, 1993. - -------------------------------------------------------------------------------- 4 Mid Cap Fund - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS At the same time, we believe that there are several risks to the equity markets in general, including the mid cap market, over the rest of the year. These include: o ongoing deterioration in business capital spending and consumer spending o persistent weakness in investor and consumer sentiment, as companies continue to report uneven and negative data, including weak profit forecasts and lay-off announcements, and o uncertainty over energy prices and the global manufacturing slowdown. Earnings disappointments continue to present the primary investment risk. Given the recent high volatility in the stock market, it is important to keep in mind that we remain disciplined in our process, and we continue to: o focus on companies we believe offer compelling valuations relative to their growth rates o focus on companies that historically have strong, consistent earnings and revenue growth o use extensive fundamental research to identify attractive investment opportunities in unrecognized growth companies and sectors o strictly adhere to our sell discipline seeking to help mitigate risk, and o seek to use the volatility of the marketplace to our investors' advantage by initiating or adding to positions based on weakness. - -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION By Sector as of March 31, 2001 (percentages are based on market value of total investments in the Portfolio) - -------------------------------------------------------------------------------- Financials ................................. 18.27% Consumer Discretionary ..................... 16.01 Information Technology ..................... 14.63 Health Care ................................ 12.79 Cash ....................................... 10.56 Energy ..................................... 10.13 Utilities .................................. 7.54 Industrials ................................ 6.76 Materials .................................. 1.88 Consumer Staples ........................... 1.43 ------ 100.00% ====== - -------------------------------------------------------------------------------- It is important to remember that investors should take a long-term view when investing in this segment of the market, as returns can be volatile in the short term. We will continue to monitor economic conditions and their effect on financial markets as we seek capital growth over the long term. /S/SIGNATURE Mary Dugan Sheridan Mary Dugan Sheridan Portfolio Manager of the CAPITAL APPRECIATION PORTFOLIO March 31, 2001 - -------------------------------------------------------------------------------- 5 Mid Cap Fund - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON Mid Cap Fund--Institutional Class, S&P MidCap 400 Index and Lipper Mid Cap Growth Funds Average Growth of a $250,000 Investment (since October 12, 1993)1 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHICS AS FOLLOWS: Mid Cap Inst. S&P MidCap 400 Index Lipper Mid-Cap Growth Funds Oct-93 $247,500 $250,000 $250,000 Mar-94 $239,000 $246,125 $242,676 Sep-94 $246,000 $253,200 $248,970 Mar-95 $270,000 $266,600 $268,570 Sep-95 $353,500 $318,425 $340,303 Mar-96 $352,975 $342,875 $364,454 Sep-96 $397,525 $363,000 $400,028 Mar-97 $338,550 $379,250 $351,476 Sep-97 $460,425 $504,925 $475,417 Mar-98 $495,375 $565,200 $502,366 Sep-98 $411,250 $473,075 $395,178 Mar-99 $553,700 $567,775 $504,495 Sep-99 $593,550 $593,700 $557,965 Mar-00 $941,350 $784,025 $933,123 Sep-00 $922,975 $765,750 $897,774 1-Mar $628,425 $729,500 $557,554 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS Periods Ended 1 Year 5 Years Since March 31, 2001 10/12/931 - -------------------------------------------------------------------------------- Institutional Class (33.24)% 12.23% 13.14% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 The Fund's inception date. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. All performance assumes the reinvestment of dividend and capital gain distributions. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain fees and expenses had not been waived by the Advisor and Administrator. At the close of business on August 31, 2000, shares of Equity Appreciation--Institutional Class converted to Institutional Class shares of Mid Cap. Equity Appreciation--Institutional Class was managed by the same investment management team with the same objectives, policies and strategies as Mid Cap. The performance shown reflects Equity Appreciation--Institutional Class shares' actual returns from its inception on October 12, 1993. Performance for periods after August 31, 2000 reflect the performance of the Mid Cap--Institutional Class. S&P MidCap 400 Index is an unmanaged index used to portray the pattern of common stock movement of 400 publicly held midsize US companies. Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Inc. as falling into the category indicated. On March 31, 2001, Lipper reclassified Mid Cap Fund from the Lipper Multi Cap Growth Funds category to the Lipper Mid CapGrowth Funds category. Benchmark returns are for the period beginning October 31, 1993. - -------------------------------------------------------------------------------- 6 Mid Cap Fund - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON Mid Cap Fund--Investment Class, S&P MidCap 400 Index and Lipper Mid Cap Growth Funds Average Growth of a $10,000 Investment (since March 9, 1993)1 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: Mid Cap Invst. S&P Mid Cap 400 Index Lipper Mid Cap Growth Funds Mar-93 $10,010 $10,000 $10,000 Sep-93 $11,850 $10,748 $11,529 Mar-94 $11,420 $10,616 $11,363 Sep-94 $11,740 $10,921 $11,692 Mar-95 $12,870 $11,500 $12,543 Sep-95 $16,830 $13,735 $15,867 Mar-96 $16,803 $14,790 $16,809 Sep-96 $18,909 $15,658 $18,348 Mar-97 $15,935 $16,359 $16,320 Sep-97 $21,677 $21,779 $21,973 Mar-98 $23,318 $24,379 $23,306 Sep-98 $19,201 $20,406 $18,252 Mar-99 $26,202 $24,491 $23,176 Sep-99 $28,235 $25,609 $25,626 Mar-00 $44,667 $33,818 $42,319 Sep-00 $43,383 $36,680 $40,866 1-Mar $29,488 $31,464 $25,584 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS Periods Ended 1 Year 5 Years Since March 31, 2001 3/9/931 - -------------------------------------------------------------------------------- Investment Class (33.98)% 11.91% 14.36% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 The Fund's inception date. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. All performance assumes the reinvestment of dividend and capital gain distributions. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain fees and expenses had not been waived by the Advisor and Administrator. S&P MidCap 400 Index is an unmanaged index used to portray the pattern of common stock movement of 400 publicly held midsize US companies. Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Inc. as falling into the category indicated. On March 31, 2001, Lipper reclassified Mid Cap Fund from the Lipper Multi Cap Growth Funds category to the Lipper Mid CapGrowth Funds category. Benchmark returns are for the period beginning March 31, 1993. - -------------------------------------------------------------------------------- 7 Mid Cap Fund - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES (Unaudited) - -------------------------------------------------------------------------------- MARCH 31, 2001 - -------------------------------------------------------------------------------- ASSETS Investment in Capital Appreciation Portfolio, at value ...... $296,856,240 Receivable for capital shares sold .......................... 1,378,244 Prepaid expenses and other .................................. 11,942 ------------ Total assets ................................................... 298,246,426 ------------ LIABILITIES Payable for capital shares redeemed ......................... 102,054 Due to Bankers Trust ........................................ 30,063 Accrued expenses and other .................................. 50,615 ------------ Total liabilities .............................................. 182,732 ------------ NET ASSETS ..................................................... $298,063,694 ============ COMPOSITION OF NET ASSETS Paid-in capital ............................................. $364,973,212 Undistributed net investment income ......................... 198,948 Accumulated net realized loss from investment transactions .. (62,636,985) Net unrealized depreciation on investments .................. (4,471,481) ------------ NET ASSETS ..................................................... $298,063,694 ============ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided by shares outstanding) Institutional Class 1 ....................................... $ 11.58 ============ Investment Class 2 .......................................... $ 11.56 ============ - -------------------------------------------------------------------------------- 1 Net asset value, redemption price and offering price per share (based on net assets of $263,298,362 and 22,744,758 shares outstanding; $0.001 par value, unlimited number of shares authorized). 2 Net asset value, redemption price and offering price per share (based on net assets of $34,765,332 and 3,006,927 shares outstanding; $0.001 par value, unlimited number of shares authorized). See Notes to Financial Statements. - -------------------------------------------------------------------------------- 8 Mid Cap Fund - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (Unaudited) - -------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED MARCH 31, 2001 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income allocated from Capital Appreciation Portfolio ........ $ 992,489 ------------- EXPENSES Administration and services fees ............................ 1,198,540 Professional fees ........................................... 27,434 Registration fees ........................................... 19,884 Printing and shareholder reports ............................ 19,086 Trustees fees ............................................... 3,735 Miscellaneous ............................................... 2,005 ------------- Total expenses ................................................. 1,270,684 Less: fee waivers or expense reimbursements .................... (477,143) ------------- Net expenses ................................................... 793,541 ------------- NET INVESTMENT INCOME .......................................... 198,948 ------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from investment transactions .............. (59,950,203) Net change in unrealized appreciation/depreciation on investments ............................................ (84,386,067) ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ................ (144,336,270) ------------- NET DECREASE IN NET ASSETS FROM OPERATIONS ..................... $(144,137,322) ============= See Notes to Financial Statements. - -------------------------------------------------------------------------------- 9 Mid Cap Fund - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX FOR THE MONTHS ENDED YEAR ENDED MARCH 31, 2001 1 SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment (expenses in excess of) income ..................... $ 198,948 $ (220,060) Net realized gain (loss) from investment transactions ............. (59,950,203) 11,701,577 Net change in unrealized appreciation/depreciation on investments .................................................. (84,386,067) 74,967,361 ------------- ------------ Net increase (decrease) in net assets from operations ................ (144,137,322) 86,448,878 ------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS Net realized gain from investment transactions Institutional Class ............................................. (10,725,713) -- Investment Class ................................................ (1,285,534) (7,759,652) ------------- ------------ Total distributions .................................................. (12,011,247) (7,759,652) ------------- ------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares ..................................... 67,334,708 43,486,787 Value of shares issued in connection with merger 2 ................ -- 363,271,526 Dividend reinvestments ............................................ 11,615,268 5,252,658 Cost of shares redeemed ........................................... (86,878,603) (57,291,310) ------------- ------------ Net increase (decrease) in net assets from capital share transactions ................................................ (7,928,627) 354,719,661 ------------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (164,077,196) 433,408,887 NET ASSETS Beginning of period ............................................... 462,140,890 28,732,003 ------------- ------------ End of period ..................................................... $ 298,063,694 $462,140,890 ============= ============
- -------------------------------------------------------------------------------- 1 Unaudited. 2 See Note 4 to Financial Statements. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 10 Mid Cap Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS FOR THE PERIOD FOR THE SIX AUGUST 31, 2000 MONTHS ENDED THROUGH MARCH 31, 2001 1 SEPTEMBER 30, 2000 - ----------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE, BEGINNING OF PERIOD ................................ $ 17.57 $ 18.60 -------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment (expenses in excess of) income .................... 0.01 (0.00)2 Net realized and unrealized loss on investment transactions ...... (5.53) (1.03) -------- -------- Total from investment operations .................................... (5.52) (1.03) -------- -------- DISTRIBUTIONS TO SHAREHOLDERS Net realized gain from investment transactions ................... (0.47) -- -------- -------- NET ASSET VALUE, END OF PERIOD ...................................... $11.58 $17.57 ======== ======== TOTAL INVESTMENT RETURN ............................................. (31.91)% 55.50%3 SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s omitted) ......................... $263,298 $414,320 Ratios to average net assets: Net investment (expenses in excess of) income .................. 0.14%4 (0.17)%4 Expenses after waivers, including expenses of the Capital Appreciation Portfolio .............................. 1.00%4 1.00%4 Expenses before waivers, including expenses of the Capital Appreciation Portfolio .............................. 1.42%4 1.45%4
- -------------------------------------------------------------------------------- 1 Unaudited. 2 Amount is less than 0.01. 3 At the close of business on August 31, 2000, shares of Equity Appreciation--Institutional Class converted to Institutional Class shares of Mid Cap. Equity Appreciation--Institutional Class was managed by the same investment management team with the same objectives, policies and strategies as Mid Cap. The performance shown reflects Equity Appreciation--Institutional Class shares' actual returns from its inception on October 12, 1993. Performance for periods after August 31, 2000 reflect the performance of the Mid Cap Fund--Institutional Class. 4 Annualized. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 11 Mid Cap Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
INVESTMENT CLASS FOR THE SIX MONTHS ENDED MARCH 31, FOR THE YEARS ENDED SEPTEMBER 30, 2001 1 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 17.57 $ 14.77 $ 11.38 $ 15.72 $ 16.79 $ 16.83 ------- ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Expenses in excess of income .............. (0.01) (0.06) (0.07) (0.12) (0.13) (0.10) Net realized and unrealized gain (loss) on investment transactions .............. (5.53) 6.79 4.99 (1.58) 2.13 1.89 ------- ------- ------- ------- ------- ------- Total from investment operations .......... (5.54) 6.73 4.92 (1.70) 2.00 1.79 ------- ------- ------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS Net realized gain from investment transactions ............................ (0.47) (3.93) (1.53) (2.64) (3.07) (1.83) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD ............... $ 11.56 $ 17.57 $ 14.77 $ 11.38 $ 15.72 $ 16.79 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN ...................... (32.03)% 53.65% 47.05% (11.42)% 14.64% 12.35% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s omitted) .......................... $34,765 $47,820 $28,732 $25,497 $49,002 $67,385 Ratios to average net assets: Expenses in excess of income ............ (0.11)%2 (0.40)% (0.58)% (0.70)% (0.77)% (0.66)% Expenses after waivers, including expenses of the Capital Appreciation Portfolio ............................ 1.25%2 1.25% 1.25% 1.25% 1.25% 1.25% Expenses before waivers, including expenses of the Capital Appreciation Portfolio ............................ 1.67%2 1.70% 1.88% 1.64% 1.54% 1.51%
- -------------------------------------------------------------------------------- 1 Unaudited. 2 Annualized See Notes to Financial Statements. - -------------------------------------------------------------------------------- 12 Mid Cap Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION BT Investment Funds (the `Trust') is registered under the Investment Company Act of 1940 as amended (the `Act'), 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. Mid Cap Fund (the `Fund') is one of the funds offered to investors by the Trust. The Fund began operations and offering shares on March 9, 1993. The Fund offers two classes of shares to investors: the Institutional Class and the Investment Class. The Institutional Class began operations and offering shares of beneficial interest on August 31, 2000 when Equity Appreciation-- Institutional Class, a series of the BT Pyramid Mutual Funds, merged into Mid Cap Fund Institutional Class. Equity Appreciation--Institutional Class began operations and offering shares of beneficial interest on October 12, 1993. The Investment Class began operations and offering shares of beneficial interest on March 9, 1993. 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 it. The Fund seeks to achieve its investment objective by investing substantially all of its assets in the CapitalAppreciation Portfolio (the `Portfolio'). The Portfolio is an open-end management investment company registered under the Act. The value of the investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. At March 31, 2001, the Fund's investment was approximately 100% of the Portfolio. The financial statements of the Portfolio, including a list of assets held, are contained elsewhere in this report and should be read in conjunction with the Fund's financial statements. B. VALUATION OF SECURITIES Valuation of securities by the Portfolio is discussed in Note 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 securities transactions of the Portfolio are allocated pro rata among the investors in the Portfolio at the time of such determination. Net investment income is allocated daily to each class of shares based upon its relative proportion of net assets. D. DISTRIBUTIONS 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 are made at least annually to the extent they exceed capital loss carryforwards. E. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. The Fund may periodically make reclassifications among certain of its capital accounts as a result of the differences in the characterization and allocation of certain income and capital gains distributions determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States. F. OTHER The Trust accounts separately for the assets, liabilities, and operations of each of its funds and each of its classes. Expenses directly attributable to each fund or class are charged to that fund or class, while expenses that are attributable to the Trust or the Fund are allocated among the funds in the Trust or the classes in the Fund, respectively. G. ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 13 Mid Cap Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES The Fund has entered into an Administration and Services Agreement with Bankers Trust Company (`Bankers Trust') an indirect wholly-owned subsidiary of Deutsche Bank AG. Under this agreement, Bankers Trust provides administrative, custody and shareholder services to the Fund. The Trust has entered into an agreement with Investment Company Capital Corp., an indirect wholly-owned subsidiary of Deutsche Bank, AG, to provide transfer agency services to the Trust. All of these services are provided in return for a fee computed daily and paid monthly at an annual rate of .40% for Institutional Class and .65% for Investment Class of the Fund's average daily net assets. The investment advisor and administrator have contractually agreed to waive their fees and/or reimburse expenses of each Class of Shares through January 31, 2002, to the extent necessary, to limit all expenses as follows:Institutional Class Shares to 1.00% of the average daily net assets of the Class, including expenses of the Portfolio; Investment Class Shares to 1.25% of the average daily net assets of the Class, including expenses of the Portfolio. NOTE 3--CAPITAL SHARE TRANSACTIONS At March 31, 2001, there were an unlimited number of shares authorized. Transactions in capital shares were as follows: Institutional Shares ------------------------------------------------------- For the Period August 31, 20002 For the Six Months Ended through March 31, 2001 1 September 30, 2000 ------------------------ ------------------ Shares Amount Shares Amount ------ ------ ------ ------ Sold 3,885,952 $ 54,956,763 834,055 $ 15,119,147 Issued in Merger -- -- 24,799,785 363,271,526 Reinvested 754,226 10,725,095 -- -- Redeemed (5,474,118) (77,446,434) (2,055,142) (36,569,667) ---------- ------------ ---------- ------------ Net increase (decrease) (833,940) $(11,764,576) 23,578,698 $341,821,006 ========== ============ ========== ============ Investment Shares --------------------------------------------------- For the Six Months Ended For the Year Ended March 31, 2001 1 September 30, 2000 ------------------------ ------------------ Shares Amount Shares Amount ------ ------ ------ ------ Sold 876,019 $12,377,945 1,671,890 $ 28,367,640 Reinvested 62,644 890,173 383,966 5,252,658 Redeemed (652,855) (9,432,169) (1,279,979) (20,721,643) -------- ----------- ---------- ------------ Net increase 285,808 $ 3,835,949 775,877 $ 12,898,655 ======== =========== ========== ============ - -------------------------------------------------------------------------------- 1 Unaudited. 2 Inception date. NOTE 4--FUND MERGER On August 31, 2000 the net assets of the Equity Appreciation--Institutional Class, one of the Funds comprising the BT Pyramid Mutual Funds, was merged into Mid Cap, one of the Funds comprising the BT Investment Funds, pursuant to an agreement and plan of reorganization dated July 28, 2000. The transaction was structured to qualify as a tax-free reorganization under the Internal Revenue Code. Prior to reorganization, the Equity Appreciation--Institutional Class had net assets of $461,299,975, shares outstanding of 19,712,720, and a net asset value of $23.40. Mid Cap Fund shares were issued at a conversion factor of 1.25806 shares for each Equity Appreciation--Institutional Class share. Mid Cap Fund was deemed to be the accounting survivor. - -------------------------------------------------------------------------------- 14 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2001 (Unaudited) - -------------------------------------------------------------------------------- SHARES SECURITY VALUE - -------------------------------------------------------------------------------- INVESTMENTS IN UNAFFILIATED ISSUERS COMMON STOCKS--91.46% CONSUMER DISCRETIONARY--16.37% 213,600 Bed, Bath & Beyond, Inc.1 .. $ 5,246,550 99,100 BJ's Wholesale Club, Inc.1 . 4,741,935 89,800 Cheesecake Factory (The)1 .. 3,305,765 124,100 Dollar Tree Stores, Inc.1 .. 2,390,864 27,500 Entercom Communications Corp.1 ................... 1,080,750 195,500 Family Dollar Stores ....... 5,024,350 127,000 Goodyear Tire & Rubber Co. . 3,028,950 49,430 Gucci Group NV ............. 4,134,819 159,300 Hispanic Broadcasting Corp.1 3,042,630 96,630 Jones Apparel Group, Inc.1 . 3,652,614 28,400 Talbots, Inc. .............. 1,206,432 174,500 Tiffany & Co. .............. 4,755,125 127,400 Tommy Hilfiger Corp.1 ...... 1,637,090 203,700 Williams-Sonoma, Inc.1 ..... 5,347,125 ----------- 48,594,999 ----------- CONSUMER STAPLES--1.57% 128,300 Estee Lauder Cos. Inc.-- Class A .................. 4,672,686 ----------- ENERGY--10.25% 61,100 BJ Services Co.1 ........... 4,350,320 25,400 Mitchell Energy & Development Corp.--Class A ............ 1,333,500 45,500 Murphy Oil Corp. ........... 3,029,390 118,900 National-Oilwell, Inc.1 .... 4,117,507 77,110 Noble Drilling Corp.1 ...... 3,559,398 85,400 Precision Drilling Corp.1 .. 3,046,218 129,100 Rowan Cos., Inc.1 .......... 3,550,250 51,500 Smith International, Inc.1 . 3,615,300 84,700 Tidewater, Inc. ............ 3,828,440 ----------- 30,430,323 ----------- FINANCIALS--18.68% 106,950 AMBAC Financial Group, Inc. 6,783,838 103,100 Astoria Financial Corp. .... 5,509,406 279,500 Banknorth Group, Inc. ...... 5,555,062 57,600 Countrywide Credit Industries, Inc. ......... 2,842,560 207,900 Dime Bancorp, Inc. ......... 6,808,725 108,100 Fidelity National Financial, Inc. .......... 2,893,837 181,000 Golden State Bancorp, Inc. . 5,046,280 74,500 Golden West Financial Corp. 4,835,050 77,800 Legg Mason, Inc. ........... 3,275,380 75,800 Metris Companies, Inc. ..... 1,575,124 267,900 North Fork Bancorporation .. 6,952,005 398,600 Sovereign Bancorp, Inc. .... 3,375,644 ----------- 55,452,911 ----------- - -------------------------------------------------------------------------------- SHARES SECURITY VALUE - -------------------------------------------------------------------------------- HEALTH CARE--13.08% 151,100 Alkermes, Inc.1 ............ $ 3,314,756 46,700 Biogen, Inc.1 .............. 2,956,694 372,300 Caremark Rx, Inc.1 ......... 4,854,792 49,000 Enzon, Inc.1 ............... 2,327,500 35,000 Genzyme Corp.1 ............. 3,161,550 51,100 Gilead Sciences, Inc.1 ..... 1,660,750 59,600 IDEC Pharmaceuticals Corp.1 2,384,000 234,600 Immunex Corp.1 ............. 3,357,713 237,200 Manor Care, Inc.1 .......... 4,838,880 73,700 Priority Healthcare Corp.-- Class B1 ................. 2,782,175 22,100 Quest Diagnostics, Inc.1 ... 1,964,027 72,200 Trigon Healthcare, Inc.1 ... 3,718,300 28,500 Watson Pharmaceuticals, Inc.1 1,499,100 ----------- 38,820,237 ----------- INDUSTRIALS--6.91% 226,300 American Power Conversion Corp.1 ................... 2,917,148 62,500 BISYS Group, Inc.1 ......... 3,339,844 320,440 Cendant Corp.1 ............. 4,675,220 44,100 Concord EFS, Inc.1 ......... 1,797,075 38,000 EGL, Inc.1 ................. 926,250 59,800 Paychex, Inc. .............. 2,216,338 208,000 Robert Half International, Inc.1 .................... 4,648,800 ----------- 20,520,675 ----------- INFORMATION TECHNOLOGY--14.97% 42,700 Apogent Technologies, Inc.1 864,248 142,000 Altera Corp.1 .............. 3,044,125 184,200 Applied Micro Circuits Corp.1 3,039,300 129,360 BMC Software, Inc.1 ........ 2,781,240 31,400 Broadcom Corp.--Class A1 ... 907,460 31,200 Cabot Microelectronics Corp.1 1,372,800 148,800 Emulex Corp.1 .............. 2,799,300 36,400 Exar Corp.1 ................ 714,350 211,600 Flextronics International Ltd.1 .................... 3,174,000 48,900 Globespan, Inc.1 ........... 1,069,687 50,800 Intuit, Inc.1 .............. 1,409,700 18,000 Linear Technology Corp. .... 739,125 61,200 Mercury Interactive Corp.1 . 2,562,750 111,800 Micrel, Inc.1 .............. 3,123,413 77,400 Micromuse, Inc.1 ........... 2,924,946 69,500 Plexus Corp.1 .............. 1,780,937 94,200 PMC--Sierra, Inc.1 ......... 2,392,680 39,100 Qlogic Corp.1 .............. 879,750 72,200 Rational Software Corp.1 ... 1,281,550 117,600 Sycamore Networks, Inc.1 ... 1,176,000 55,400 Symantec Corp.1 ............ 2,316,412 111,700 Transwitch Corp.1 .......... 1,466,063 109,400 Vitesse Semiconductor Corp.1 2,605,088 ----------- 44,424,924 ----------- See Notes to Financial Statements. - -------------------------------------------------------------------------------- 15 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2001 (Unaudited) - -------------------------------------------------------------------------------- SHARES SECURITY VALUE - -------------------------------------------------------------------------------- MATERIALS--1.92% 33,800 Albemarle Corp. ......... $ 758,810 131,900 Engelhard Corp. ......... 3,410,934 124,860 Solutia, Inc. ........... 1,523,292 ------------ 5,693,036 ------------ UTILITIES--7.71% 83,900 CMS Energy Corp. ........ 2,482,601 120,100 Keyspan Corp. ........... 4,579,413 58,400 Kinder Morgan, Inc. ..... 3,106,880 139,100 NiSource, Inc. .......... 4,328,792 78,000 ONEOK, Inc. ............. 3,189,420 173,600 TECO Energy, Inc. ....... 5,201,056 ------------ 22,888,162 ------------ TOTAL COMMON STOCKS (Cost $275,969,434) ................ 271,497,953 ------------ TOTAL INVESTMENT IN UNAFFILIATED ISSUERS (Cost $275,969,434) ................ 271,497,953 ------------ - -------------------------------------------------------------------------------- SHARES SECURITY VALUE - -------------------------------------------------------------------------------- INVESTMENT IN AFFILIATED INVESTMENT COMPANIES MUTUAL FUND--10.81% 32,090,482 Cash Management Fund Institutional ......... $ 32,090,482 ------------ TOTAL INVESTMENT IN AFFILIATED INVESTMENT COMPANIES (Cost $32,090,482) ................. 32,090,482 ------------ TOTAL INVESTMENTS (Cost $308,059,916) ....... 102.27% $303,588,435 LIABILITIES IN EXCESS OF OTHER ASSETS .............. (2.27) (6,732,166) ------ ------------ NET ASSETS ................... 100.00% $296,856,269 ====== ============ - -------------------------------------------------------------------------------- 1 Non-income producing security. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 16 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES (Unaudited) - --------------------------------------------------------------------------------
MARCH 31, 2001 - ------------------------------------------------------------------------------------------------------------------- ASSETS Investment in unaffiliated issuers, at value (cost of $275,969,434) ..................... $271,497,953 Investments in affiliated investment companies, at value (cost of $32,090,482) .......... 32,090,482 Receivable for securities sold .......................................................... 4,912,011 Dividends receivable1 ................................................................... 44,172 Receivable for shares of beneficial interest subscribed ................................. 51,300 Prepaid expenses and other .............................................................. 128,822 ------------ Total assets ............................................................................... 308,724,740 ------------ LIABILITIES Payable for securities purchased ........................................................ 11,690,086 Due to Bankers Trust .................................................................... 157,722 Accrued expenses and other .............................................................. 20,663 ------------ Total liabilities .......................................................................... 11,868,471 ------------ NET ASSETS ................................................................................. $296,856,269 ============ COMPOSITION OF NET ASSETS Paid-in capital ......................................................................... $301,327,750 Net unrealized depreciation on investments .............................................. (4,471,481) ------------ NET ASSETS ................................................................................. $296,856,269 ============
- -------------------------------------------------------------------------------- 1 Includes $9,102 from the Portfolio's investment in affiliated investment companies. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 17 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (Unaudited) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED MARCH 31, 2001 - -------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from unaffiliated issuers ....................................... $ 1,058,575 Dividends from affiliated investment companies ............................ 1,039,692 ------------- Total investment income ...................................................... 2,098,267 ------------- EXPENSES Advisory fees ............................................................. 1,198,288 Administration and services fees .......................................... 184,352 Professional fees ......................................................... 14,434 Trustees fees ............................................................. 3,862 Miscellaneous ............................................................. 5,064 ------------- Total expenses ............................................................... 1,406,000 Less: fee waivers or expense reimbursements .................................. (300,222) ------------- Net expenses ................................................................. 1,105,778 ------------- NET INVESTMENT INCOME ........................................................ 992,489 ------------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from investment transactions ............................ (59,950,207) Net change in unrealized appreciation/depreciation on investments ......... (84,751,980) ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS .............................. (144,702,187) ------------- NET DECREASE IN NET ASSETS FROM OPERATIONS ................................... $(143,709,698) =============
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 18 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX FOR THE MONTHS ENDED YEAR ENDED MARCH 31, 20011 SEPTEMBER 30, 2000 - --------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income .............................................. $ 992,489 $ 178,984 Net realized gain (loss) from investment transactions .............. (59,950,207) 11,701,588 Net change in unrealized appreciation/depreciation on investments ................................................... (84,751,980) 74,967,364 ------------ ------------ Net increase (decrease) in net assets from operations ................. (143,709,698) 86,847,936 ------------ ------------ CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Proceeds from capital invested ..................................... 67,013,270 405,848,130 Value of capital withdrawn ......................................... (95,290,329) (52,593,612) ------------ ------------ Net increase (decrease) in net assets from capital transactions in shares of beneficial interest ...................... (28,277,059) 353,254,518 ------------ ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ............................... (171,986,757) 440,102,454 NET ASSETS Beginning of period ................................................ 468,843,026 28,740,572 ------------ ------------ End of period ...................................................... $296,856,269 $468,843,026 ============ ============
- -------------------------------------------------------------------------------- 1 Unaudited. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 19 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED MARCH 31, FOR THE YEARS ENDED SEPTEMBER 30, 2001 1 2000 1999 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s omitted) ......................... $296,856 $468,843 $28,741 $25,689 $48,972 $68,385 Ratios to average net assets: Net investment (expenses in excess of) income ................ 0.54%2 0.23% 0.07% (0.05)% (0.12)% (0.01)% Expenses after waivers ................. 0.60%2 0.60% 0.60% 0.60% 0.60% 0.60% Expenses before waivers ................ 0.76%2 0.79% 0.91% 0.86% 0.81% 0.77% Portfolio turnover rate .................. 176% 146% 155% 145% 167% 271%
- -------------------------------------------------------------------------------- 1 Unaudited. 2 Annualized See Notes to Financial Statements. - -------------------------------------------------------------------------------- 20 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION The Capital Appreciation Portfolio (the `Portfolio') is registered under the Investment Company Act of 1940 as amended (the `Act'), as an open-end management investment company. The Portfolio was organized on August 18, 1992, as an unincorporated trust under the laws of New York and began operations on March 9, 1993. The Declaration of Trust permits the Board of Trustees (the `Trustees') to issue beneficial interests in the Portfolio. B. VALUATION OF SECURITIES The Portfolio's investments listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on 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 under procedures adopted by the Trustees. C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities 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 accretion of discount on investments. Expenses are recorded as incurred. Realized gains and losses from securities transactions are recorded on the identified cost basis. All of the net investment income and realized and unrealized gains and losses from the securities transactions of the Portfolio are allocated pro rata among the investors in the Portfolio at the time of such determination. D. FEDERAL INCOME TAXES The Portfolio is considered a Partnership under the Internal Revenue Code. Therefore, no federal income tax provision is necessary. E. ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES The Portfolio has entered into an Administration and Services Agreement with Bankers Trust Company (`Bankers Trust'), an indirect wholly owned subsidiary of Deutsche Bank AG. Under this agreement, Bankers Trust provides administrative and custody services to the Portfolio. These services are provided in return for a fee computed daily and paid monthly at an annual rate of .10% of the Portfolio's average daily net assets. The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under this agreement, the Portfolio pays BankersTrust a fee computed daily and paid monthly at an annual rate of .65% of the Portfolio's average daily net assets. The Portfolio may invest in Cash Management Fund Institutional (`Cash Management'), currently an open-end management investment company managed by Bankers Trust. After April 30, 2001, Cash Management will be managed by Deutsche Asset Management, Inc. (DeAM,Inc.). Cash Management is offered as a cash management option to the Portfolio and other accounts managed by Bankers Trust. At March 31, 2001, the Portfolio was a participant with other affiliated entities in a revolving credit facility in the amount of $200,000,000, which expires April 26, 2002. A commitment fee on the average daily amount of the available commitment is payable on a quarterly basis and apportioned among all participants based on net assets. No amounts were drawn down or outstanding for this fund under the credit facility for the six months ended March 31, 2001. - -------------------------------------------------------------------------------- 21 Capital Appreciation Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 3--PURCHASES AND SALES OF INVESTMENT SECURITIES The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended March 31, 2001 were $418,058,555 and $433,835,527, respectively. For federal income tax purposes, the tax basis of investments held at March 31, 2001, was $275,969,431. The aggregate gross unrealized appreciation for all investments at March 31, 2001 was $31,479,865 and the aggregate gross unrealized depreciation for all investments was $35,951,346. NOTE 4--SUBSEQUENT EVENT Prior to April 30, 2001, Bankers Trust served as the investment advisor to the Portfolio pursuant to an Advisory Agreement.As of April 30, 2001, Deutsche Asset Management,Inc. (DeAM,Inc.) serves as investment advisor to the Portfolio. - -------------------------------------------------------------------------------- 22 For information on how to invest, shareholder account information and current price and yield information, please contact your relationship manager or write to: DEUTSCHE ASSET MANAGEMENT SERVICE CENTER P.O. BOX 219210 KANSAS CITY, MO 64121-9210 or call our toll-free number: 1-800-730-1313 This report must be preceded or accompanied by a current prospectus for the Fund. Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust Company, Deutsche BancAlex. Brown Inc., Deutsche Asset Management, Inc., and Deutsche Asset Management Investment Services Limited. Mid Cap Fund--Institutional Class CUSIP #055922637 Mid Cap Fund--Investment Class CUSIP #055922819 MIDCAPSA (5/01) Distributed by: ICC Distributors, Inc. -----END PRIVACY-ENHANCED MESSAGE-----