-----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, BHN1RDmG8z3cj4syHa/V5/6IeAPsTz97+OZIWa1KkeFtBLgybYC20mgu012r1daN pQwLAdxh9JnW3Go6ZJ4pYA== 0000935069-01-500155.txt : 20010522 0000935069-01-500155.hdr.sgml : 20010522 ACCESSION NUMBER: 0000935069-01-500155 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010521 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: 1644379 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 smcap.txt DEUTSCHE ASSET MANAGEMENT [GRAPHIC OMITTED] Mutual Fund Semi-Annual Report March 31, 2001 Investment Class Small Cap Fund A Member of the DEUTSCHE BANK GROUP [LOGO OMITTED] Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- TABLE OF CONTENTS LETTER TO SHAREHOLDERS ................................ 3 SMALL CAP FUND--INVESTMENT CLASs Statement of Assets and Liabilities ................ 7 Statement of Operations ............................ 8 Statements of Changes in Net Assets ................ 9 Financial Highlights ............................... 10 Notes to Financial Statements ...................... 11 SMALL CAP PORTFOLIO Schedule of Portfolio Investments .................. 13 Statement of Assets and Liabilities ................ 15 Statement of Operations ............................ 16 Statements of Changes in Net Assets ................ 17 Financial Highlights ............................... 18 Notes to Financial Statements ...................... 19 ----------------------------- 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 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS We are pleased to present you with this semi-annual report for Deutsche Asset Management's Small 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 ACTIVITY Small capitalization stocks outperformed both their large cap and mid cap counterparts during the six months ended March 31, 2001. Still, the semi-annual period proved to be difficult for stocks across all market capitalizations. The Russell 2000 Index returned -12.96% for the semi-annual period as compared to the S&P 500 Index return of -18.75% and the S&P MidCap 400 Index return of - -14.21%. In contrast to recent years, value stocks significantly outperformed growth stocks within the small cap sector during this semi-annual period, as measured by theRussell 2000 ValueIndex versus Russell 2000 Growth Index. 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 Technology sector's weakness carried over to other sectors, as companies pre-announced lowered earnings due to weak demand and higher costs. The first calendar quarter of 2001 experienced a brief, sharp rally in response to two interest rate cuts of 0.50% each by the Federal Reserve Board during January. Also, a true `January Effect' occurred in the small cap market, whereby a large amount of cash flowed into the market following tax loss selling during the previous quarter. The result was that companies with the smallest market capitalizations delivered the best returns during January. Weakness across all segments of the equity markets quickly resumed, however, and continued through the quarter despite an additional interest rate cut of 0.50% on 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 previous months, technology stocks were impacted particularly hard, as were telecommunications stocks. It had become increasingly clear that the rapid pace of growth in these two sectors over the past few years, driven in large part by Y2K and Internet spending, was not sustainable. INVESTMENT REVIEW The Fund outperformed its benchmarks for the six-month period, particularly well worth noting given the extremely high volatility in the small cap equity market during this semi-annual period. Specific stock selection and sector positioning had mixed results. More specifically, among the Fund's best performers during the semi-annual period were D.R. Horton, Inc. in the Producer Durables sector, Resmed, Inc. in the Health Care sector and BJ Services Co. in the Energy sector. Over the semi-annual period, positions in the Transportation and Energy sectors contributed to positive performance, but negative returns from the Technology and Health Care sectors hindered Fund performance. During the fourth quarter of 2000, the Credit Sensitive sector contributed strong returns. During the first quarter of 2001, the Capital Goods sector added to negative performance. - -------------------------------------------------------------------------------- TEN LARGEST STOCK HOLDINGS (percentages are based on total net assets of the Portfolio) - -------------------------------------------------------------------------------- Resmed, Inc. ............................... 3.97% Commercial Federal Corp. ................... 2.41 Barrett Resources Corp. .................... 2.33 USfreightways Corp. ........................ 2.23 LNR Property Corp. ......................... 2.18 Labranche & Company, Inc. .................. 2.15 Accredo Health Inc. ........................ 2.13 Global Industries, Ltd. .................... 2.09 Philadelphia Suburban Co. .................. 2.05 Lennar Corp. ............................... 2.05 - -------------------------------------------------------------------------------- 3 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS 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, 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 accommodating 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. Given this economic view, we believe that profitability and market performance for the small cap equity market should have the potential to compare favorably to the other US equity market segments. A key driver of small cap market performance in the months ahead should be access to and cost of capital. In a declining interest rate environment, the cost of capital spreads between larger and smaller firms usually narrow. As those spreads narrow, the relative access to capital for small cap companies has, from a historical perspective, improved. Should current market weakness persist, however, there could be credit crunch concerns for some smaller firms. The small cap universe, representing well over 90% of all publicly traded domestic companies, continues to provide an excellent source for corporate America and others to recognize value in those companies with solid fundamentals early in their growth cycle. We believe ongoing restructuring and consolidation and increased merger and acquisition activity will continue to create opportunities for small cap investors. Adding to our overall favorable outlook for the small cap equity market in particular are favorable fundamentals. Small cap profit growth estimates are expected to beat their large cap counterparts for the first quarter of 2001, making this the fourth consecutive quarter, if projections are achieved, small caps will have beaten large caps in profit growth. In our view, the relative outperformance of small cap stocks compared to large cap stocks in calendar years 1999 and 2000 and into the first quarter of 2001 may be the beginning of an extended period of outstanding performance. The first quarter of 2001 saw a more disciplined market, as relative valuations impacted market performance. We believe small cap stocks continue to be relatively and attractively undervalued.
- ----------------------------------------------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------------------------------------------- Small Cap Fund 1 Investment Class (inception 10/21/93) (12.42)% (17.79)% 32.93% 68.24% 258.75% (17.79)% 9.95% 10.97% 18.73% - ----------------------------------------------------------------------------------------------------------------- Russell 2000 Index 2 (12.96)% (15.33)% (2.65)% 45.31% 92.63%4 (15.33)% (0.89)% 7.76% 9.24%4 - ----------------------------------------------------------------------------------------------------------------- Russell 2000 Growth Index 2 (32.33)% (39.81)% (14.84)% 13.23% 52.69%4 (39.81)% (5.21)% 2.52% 5.87%4 - ----------------------------------------------------------------------------------------------------------------- Lipper Small Cap Growth Funds Average 3 (30.60)% (33.74)% 9.48% 54.92% 104.78%4 (33.74)% 2.09% 8.40% 9.70%4 - ----------------------------------------------------------------------------------------------------------------- 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 would have been lower during the specified periods if certain fees and expenses had not been waived by the Advisor and Administrator. 2 The Russell 2000 Index is an unmanaged index which tracks the common stock price movement of 2000 of the smallest companies in the Russell 3000 Index which measures the performance of the 3000 largest US companies based on total market capitalization. The Russell 2000 Growth Index is comprised of securities in the Russell 2000 Index with a greater than average growth orientation. Benchmark returns do not reflect expenses that have been deducted from the Fund's returns. 3 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 SmallCap Fund from the Lipper Mid Cap Growth Funds Average to the Lipper SmallCap Growth Funds Average. 4 Benchmark returns are for the period beginning October 31, 1993.
- -------------------------------------------------------------------------------- 4 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS - -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION By Sector as of March 31, 2001 (percentages are based on market value of total investments in the Portfolio) - -------------------------------------------------------------------------------- Health Care .............................. 14.35% Consumer Discretionary ................... 14.31 Other Energy ............................. 11.99 Financial Services ....................... 11.33 Producer Durables ........................ 10.82 Auto and Transportation .................. 9.10 Technology ............................... 7.96 Materials and Processing ................. 7.94 Utilities ................................ 5.19 Cash ..................................... 4.07 Consumer Staples ......................... 2.17 Other .................................... 0.77 ------- 100.00% ======= Still, we believe there are several risks to the equity markets in general, including the small 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 a primary investment risk. However, we expect strong earnings growth to be the key driver of smaller companies' future performance. 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 that we believe offer compelling valuations relative to their growth rates o focus on companies that historically have had 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. 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 long-term capital growth. /S/SIGNATURE Audrey M.T. Jones and Doris R. Klug Portfolio Managers of the SMALL CAP PORTFOLIO March 31, 2001 - -------------------------------------------------------------------------------- 5 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON [LINE GRAPH OMITTED] [PLOT POINTS TO FOLLOW:] SMALL CAP FUND--INVESTMENT CLASS, RUSSELL 2000 INDEX, RUSSELL 2000 GROWTH INDEX AND LIPPER SMALL CAP GROWTH FUNDS AVERAGE GROWTH OF A $10,000 INVESTMENT (SINCE OCTOBER 21, 1993) 1
SMALL CAP FUND - RUSSELL 2000 RUSSELL 2000 GROWTH LIPPER SMALL CAP GROWTH INVESTMENT CLASS $35,875 INDEX $19,263 INDEX $15,269 FUNDS AVERAGE $20,478 10/93 10130 10000 10000 10000 3/94 10510 9736 9568 9736 9/94 11600 10004 9804 9899 3/95 14290 10273 10265 10509 9/95 18500 12347 12567 12989 3/96 21323 13259 13485 14308 9/96 23385 13971 14151 15724 3/97 17744 13938 12701 14330 9/97 27571 18608 17456 19769 3/98 26987 19792 17930 20734 9/98 19745 15066 13121 15256 3/99 26616 16573 15950 17555 9/99 28931 17940 17402 19794 3/00 43639 22752 25368 30267 9/00 40964 22133 22564 28775 3/01 35875 19263 15269 20478
- -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS Periods Ended 1 Year 5 Years Since March 31, 2001 10/21/93 1 - -------------------------------------------------------------------------------- Small Cap Fund--Investment Class (17.79)% 10.97% 18.73% - -------------------------------------------------------------------------------- 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 would have been lower during the specified periods if certain fees and expenses had not been waived by theAdvisor and Administrator. The Russell 2000 Index is an unmanaged index which tracks the common stock price movement of 2000 of the smallest companies in the Russell 3000 Index which measures the performance of the 3000 largest US companies based on total market capitalization. The Russell 2000 Growth Index is comprised of securities in the Russell 2000 Index with a greater than average growth orientation. 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 SmallCap Fund from the Lipper Mid Cap Growth Funds Average to the Lipper SmallCap Growth Funds Average. Benchmark returns are for the period beginning October 31, 1993. - -------------------------------------------------------------------------------- 6 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
MARCH 31, 2001 - ----------------------------------------------------------------------------------------------- ASSETS Investment in Small Cap Portfolio, at value ................................. $251,544,389 Receivable for capital shares sold .......................................... 1,331,814 Prepaid expenses and other .................................................. 16,553 ------------ Total assets ................................................................... 252,892,756 ------------ LIABILITIES Payable for capital shares redeemed ......................................... 254,619 Due to Bankers Trust ........................................................ 134,522 Accrued expenses and other .................................................. 28,418 ------------ Total liabilities .............................................................. 417,559 ------------ NET ASSETS ..................................................................... $252,475,197 ------------ COMPOSITION OF NET ASSETS Paid-in capital ............................................................. $233,028,597 Expenses in excess of income ................................................ (761,748) Accumulated net realized gain from investment transactions .................. 15,321,694 Net unrealized appreciation on investments .................................. 4,886,654 ------------ NET ASSETS ..................................................................... $252,475,197 ============ SHARES OUTSTANDING ($0.001 par value per share, unlimited number of shares authorized) ................................................................. 11,416,048 ============ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided by shares outstanding) .................................. $ 22.12 ============
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 7 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED MARCH 31, 2001 - -------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Income allocated from Small Cap Portfolio, net ..................................... $ 145,426 ------------ EXPENSES Administration and services fees ................................................... 907,153 Professional fees .................................................................. 16,409 Printing and shareholder reports ................................................... 15,612 Registration fees .................................................................. 14,303 Trustees fees ...................................................................... 4,052 Miscellaneous ...................................................................... 1,876 ------------ Total expenses ........................................................................ 959,405 Less: fee waivers or expense reimbursements ........................................... (52,231) ------------ Net expenses .......................................................................... 907,174 ------------ EXPENSES IN EXCESS OF INCOME .......................................................... (761,748) ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain from investment transactions ..................................... 15,638,023 Net change in unrealized appreciation/depreciation on investments .................. (53,323,079) ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ....................................... (37,685,056) ------------ NET DECREASE IN NET ASSETS FROM OPERATIONS ............................................ $(38,446,804) ============
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 8 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- 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 Expenses in excess of income ...................................... $ (761,748) $ (1,640,294) Net realized gain from investment transactions .................... 15,638,023 70,508,721 Net change in unrealized appreciation/depreciation on investments .................................................. (53,323,079) 19,244,310 -------------- ------------- Net increase (decrease) in net assets from operations ................ (38,446,804) 88,112,737 -------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS Net realized gain from investment transactions .................... (17,048,548) (32,546,199) -------------- ------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares ..................................... 337,291,734 622,544,178 Dividend reinvestments ............................................ 12,124,371 22,159,906 Cost of shares redeemed ........................................... (333,915,291) (624,073,187) -------------- ------------- Net increase in net assets from capital share transactions ...................................................... 15,500,814 20,630,897 -------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (39,994,538) 76,197,435 NET ASSETS Beginning of period ............................................... 292,469,735 216,272,300 -------------- ------------- End of period ..................................................... $ 252,475,197 $ 292,469,735 ============== ============= - -------------------------------------------------------------------------------- 1 Unaudited.
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 9 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
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 ........... $26.95 $21.89 $14.96 $23.68 $21.66 $18.50 ------ ------ ------ ------ ------ ------ INCOME FROMINVESTMENT OPERATIONS Expenses in excess of income ................ (0.07) (0.15) (0.15) (0.18) (0.14) (0.12) Net realized and unrealized gain (loss) on investments ........................... (3.19) 8.53 7.13 (6.24) 3.58 4.65 ------ ------ ------ ------ ------ ------ Total from investment operations ............... (3.26) 8.38 6.98 (6.42) 3.44 4.53 ------ ------ ------ ------ ------ ------ DISTRIBUTIONS TO SHAREHOLDERS Net realized gain from investment transactions .............................. (1.57) (3.32) (0.05) (1.04) (1.42) (1.37) In excess of net realized gains ............. -- -- -- (1.26) -- -- ------ ------ ------ ------ ------ ------ Total distributions ............................ (1.57) (3.32) (0.05) (2.30) (1.42) (1.37) ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD ................. $22.12 $26.95 $21.89 $14.96 $23.68 $21.66 ====== ====== ====== ====== ====== ====== TOTAL INVESTMENT RETURN ........................ (12.42)% 41.59% 46.52% (28.38)% 17.90% 26.41% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s omitted) ............................ $252,475 $292,470 $216,272 $172,310 $286,322 $242,236 Ratios to average net assets: Expenses in excess of income ................ (0.55)%2 (0.60)% (0.74)% (0.87)% (0.89)% (0.70)% Expenses after waivers, including expenses of the Small Cap Portfolio .................... 1.25%2 1.25% 1.25% 1.25% 1.25% 1.25% Expenses before waivers, including expenses of the Small Cap Portfolio .................... 1.46%2 1.44% 1.46% 1.44% 1.28% 1.47% - -------------------------------------------------------------------------------- 1 Unaudited. 2 Annualized
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 10 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- 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 (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. Small Cap Fund--Investment Class (the `Fund') is one of the funds offered to investors by the Trust. The Fund began operations and offering shares on October 21, 1993. The Fund seeks to achieve its investment objective by investing substantially all of its assets in the Small Cap Portfolio, a series of BT Investment Portfolios (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. On March 8, 2001, the Trustees of the Trust, on behalf of the Fund, voted to redeem the Funds interest from the portfolio and to operate as a stand alone fund.The redemption will take place if it is determined that the master/feeder structure is no longer required. 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. D. DISTRIBUTIONS It is the Fund's policy to declare and distribute dividends quarterly to shareholders from net investment income. Dividends and distributions payable to shareholders are recorded by the Fund on the ex-dividend date. Distributions of net realized short-term and long-term capital gains, if any, earned by the Fund are made 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 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. Expenses directly attributable to a fund are charged to that fund, while expenses that are attributable to the Trust are allocated among the funds in the Trust. G. ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the UnitedStates 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'), an indirect wholly-owned subsidiary of Deutsche Bank AG. Under this agreement, Bankers Trust provides administrative, custody and other services to the Fund. The Trust has entered into an agreement with InvestmentCompany Capital Corp., an indirect wholly owned subsidiary of Deutsche Bank AG, to - -------------------------------------------------------------------------------- 11 Small Cap Fund--Investment Class - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 .65% of the Fund's average daily net assets. Bankers Trust has contractually agreed to waive its fees and reimburse expenses of the Fund through January 31, 2002 to the extent necessary to limit all expenses to 1.25% of the average daily net assets of the Fund, 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: For the Six Months Ended For the Year Ended March 31, 2001 September 30, 2000 ---------------------- -------------------- Shares Amount Shares Amount ---------- ---------- --------- --------- Sold 13,530,821 $ 337,291,734 24,179,824 $ 622,544,178 Reinvested 521,030 12,124,371 994,610 22,159,906 Redeemed (13,488,272) (333,915,291) (24,203,140) (624,073,187) ---------- ------------- ----------- ------------- Net increase 563,579 $ 15,500,814 971,294 $ 20,630,897 ========== ============= =========== ============= NOTE 4--FUND MERGER At its meeting on August 19, 1999, the Board of Trustees approved a tax-free transfer of substantially all of the assets of Smaller Companies Fund, an affiliate of the Trust, to SmallCap Fund and assumption by Small Cap Fund of all of the liabilities of Smaller Companies Fund, in exchange solely for the shares of common stock of SmallCap Fund and the distribution of shares ofSmall Cap Fund to the shareholders of Smaller Companies Fund in liquidation of Smaller Companies Fund.The merger is expected to occur on or about May 31, 2001. - -------------------------------------------------------------------------------- 12 Small Cap Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2001 (Unaudited) SHARES SECURITY VALUE - -------------------------------------------------------------------------------- INVESTMENTS IN UNAFFILIATED ISSUERS COMMON STOCKS--96.22% AUTOS AND TRANSPORTATION--9.12% 192,200 Atlantic Coast Airlines Holdings, Inc.1 ........... $ 4,036,200 40,900 BorgWarner, Inc. .......... 1,638,863 111,500 Cooper Tire & Rubber ...... 1,265,525 65,300 Oshkosh Truck Corp.--Class B 2,318,150 62,600 Skywest, Inc. ............. 1,455,450 203,000 Swift Transportation Co., Inc.1 ..................... 3,755,500 63,800 Tidewater, Inc. ........... 2,883,760 177,800 USfreightways Corp. ....... 5,600,700 ---------- 22,954,148 ---------- CONSUMER DISCRETIONARY--14.36% 121,300 Bally Total Fitness Holding 1 3,572,285 126,900 Chico's FAS, Inc.1 ........ 4,163,906 92,550 Christopher & Banks Corp.1 2,788,069 114,700 Furniture Brands International, Inc.1 ...... 2,718,390 124,000 Freemarkets, Inc.1 ........ 1,181,875 115,700 Genesco, Inc.1 ............ 3,170,180 238,000 Gildan Activewear, Inc.-- Class A 1 ................. 4,319,700 75,600 Men's Wearhouse, Inc.1 .... 1,631,448 108,400 Mohawk Industries, Inc.1 .. 3,043,872 78,000 Rare Hospitality International, Inc.1 ...... 1,940,250 80,500 Salton, Inc.1 ............. 1,223,600 164,300 Sonic Corp.1 .............. 4,117,769 124,400 WMS Industries, Inc.1 ..... 2,239,200 ---------- 36,110,544 ---------- CONSUMER STAPLES--2.18% 64,800 American Italian Pasta Co.1 2,073,600 47,500 Constellation Brands, Inc.-- Class A 1 ................. 3,408,125 ---------- 5,481,725 ---------- FINANCIAL SERVICES--11.37% 54,700 AmeriCredit Corp.1 ........ 1,773,921 111,600 Annuity and Life Re ....... 3,320,100 18,100 Anthracite Capital, Inc. .. 174,665 69,200 Astoria Financial Corp. ... 3,697,875 271,500 Commercial Federal Corp. .. 6,054,450 174,100 Hibernia Corp.--Class A ... 2,432,177 168,500 Labranche & Company, Inc.1 5,418,960 54,200 Landamerica Financial Group, Inc. ............... 1,928,436 103,200 South Financial Group (The), Inc. ............... 1,470,600 273,700 Sovereign Bancorp, Inc. ... 2,317,897 ---------- 28,589,081 ---------- SHARES SECURITY VALUE - -------------------------------------------------------------------------------- HEALTH CARE--14.39% 163,650 Accredo Health, Inc.1 ..... $ 5,349,309 24,300 Aurora Biosciences Corp.1 . 434,362 238,300 Caremark Rx, Inc.1 ........ 3,107,432 169,700 Cell Genesys, Inc.1 ....... 2,418,225 124,700 Coventry Health Care, Inc.1 2,065,344 121,600 Priority Healthcare Corp.-- Class B 1 ................. 4,590,400 76,750 Province Healthcare Co.1 .. 2,336,078 247,100 Resmed, Inc.1 ............. 9,982,840 73,800 Sonosite, Inc.1 ........... 834,862 53,900 Trigon Healthcare, Inc.1 .. 2,775,850 319,500 Xoma Ltd.1 ................ 2,301,398 ---------- 36,196,100 ---------- MATERIALS AND PROCESSING--7.97% 101,000 Applied Films Corp.1 ...... 1,167,813 56,500 Bowater, Inc. ............. 2,678,100 167,400 Dal-Tile International, Inc.1 2,519,370 24,500 Jacobs Engineering Group, Inc. 1,421,000 193,700 LNR Property Corp.1 ....... 5,491,395 67,300 Lone Star Technologies, Inc.1 2,877,075 56,500 Rayonier, Inc. ............ 2,333,450 123,100 Symyx Technologies Inc.1 .. 1,554,138 ---------- 20,042,341 ---------- OTHER--0.77% 104,200 Aerogen Inc.1 ............. 442,850 20,500 Devx Energy, Inc.1 ........ 172,317 117,600 Oil States International, Inc.1 ..................... 1,323,000 ---------- 1,938,167 ---------- OTHER ENERGY--12.03% 27,900 Arch Coal, Inc. ........... 836,442 97,500 Barrett Resources Corp.1 .. 5,854,875 59,100 Brown (Tom), Inc.1 ........ 1,950,300 361,000 Global Industries, Ltd.1 .. 5,257,062 183,100 Marine Drilling Co., Inc.1 4,879,615 116,700 Massey Energy Co. ......... 2,791,464 136,200 National-Oilwell, Inc.1 ... 4,716,606 124,400 Veritas DGC, Inc.1 ........ 3,974,580 ---------- 30,260,944 ---------- See Notes to Financial Statements. - -------------------------------------------------------------------------------- 13 Small Cap Portfolio - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2001 (Unaudited) SHARES SECURITY VALUE - -------------------------------------------------------------------------------- PRODUCER DURABLES--10.85% 150,800 Belden, Inc. .............. $ 3,023,540 120,900 C&D Technologies, Inc. .... 3,336,840 122,600 Credence Systems Corp.1 ... 2,513,300 47,700 Dupont Photomasks, Inc.1 .. 2,093,028 204,037 D.R. Horton, Inc. ......... 4,315,383 129,100 Lennar Corp. .............. 5,145,926 114,600 Photronics, Inc.1 ......... 2,829,188 129,700 Rayovac Corp.1 ............ 2,263,265 112,200 SBA Communications Corp.1 . 1,774,162 ------------ 27,294,632 ------------ TECHNOLOGY--7.98% 150,000 Avid Technology, Inc.1 .... 2,006,250 70,500 Bottomline Technologies, Inc.1 ..................... 513,328 154,900 Computer Network Technology Corp.1 .................... 1,723,262 76,600 Documentum, Inc.1 ......... 842,600 220,400 FileNet Corp.1 ............ 3,457,525 81,700 Intranet Solutions, Inc.1 . 1,955,694 188,500 Keane, Inc.1 .............. 2,450,500 107,300 Mentor Graphics Corp.1 .... 2,213,063 86,950 Park Electrochemical Corp. 1,965,070 620,800 Western Digital Corp.1 .... 2,955,008 ------------ 20,082,300 ------------ UTILITIES--5.20% 88,600 Alamosa Holdings, Inc.1 ... 935,838 213,600 Pac-West Telecomm, Inc.1 .. 747,600 219,250 Philadelphia Suburban Co. . 5,165,530 160,700 Price Communications Corp.1 2,765,658 88,000 RGS Energy Group, Inc. .... 3,256,000 30,600 US Unwired Inc.--Class A 1 206,550 ------------ 13,077,176 ------------ TOTAL COMMON STOCKS (Cost $237,140,504) .................. 242,027,158 ------------ SHARES SECURITY VALUE - -------------------------------------------------------------------------------- INVESTMENT IN AFFILIATED INVESTMENT COMPANIES MUTUAL FUND--4.08% 10,265,320 Cash Management Fund Institutional ............ $ 10,265,320 ------------ TOTAL INVESTMENT IN AFFILIATED INVESTMENT COMPANIES (Cost $ 10,265,320) .................. 10,265,320 ------------ TOTAL INVESTMENTS (Cost 247,405,824) ........... 100.30% $252,292,478 LIABILITIES IN EXCESS OF OTHER ASSETS ................. (0.30) (748,056) ------ ------------ NET ASSETS ...................... 100.00% $251,544,422 ====== ------------ - -------------------------------------------------------------------------------- 1 Non-income producing security. See Notes to Financial Statements. - -------------------------------------------------------------------------------- 14 Small Cap Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
MARCH 31, 2001 - ---------------------------------------------------------------------------------------------------- ASSETS Investment in unaffiliated issuers, at value (cost $237,140,504) ................. $242,027,158 Investments in affiliated investment companies, at value (cost $ 10,265,320) ..... 10,265,320 Dividend receivable 1 ............................................................ 155,550 Receivable for shares of beneficial interest subscribed .......................... 904,104 Receivable for securities sold ................................................... 376,274 Prepaid expenses and other ....................................................... 39 ------------ Total assets ........................................................................ 253,728,445 ------------ LIABILITIES Due to Bankers Trust ............................................................. 129,726 Payable for securities purchased ................................................. 2,030,163 Accrued expenses and other ....................................................... 24,134 ------------ Total liabilities ................................................................... 2,184,023 ------------ NET ASSETS .......................................................................... $251,544,422 ============ COMPOSITION OF NET ASSETS Paid-in capital .................................................................. $246,657,768 Net unrealized appreciation on investments ....................................... 4,886,654 ------------ NET ASSETS .......................................................................... $251,544,422 ============ - -------------------------------------------------------------------------------- 1 Includes $50,160 from the Portfolio's investment in affiliated investment companies.
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 15 Small Cap Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED MARCH 31, 2001 - -------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from unaffiliated issuers ...................................... $ 518,043 Dividends from affiliated investment companies ........................... 465,670 ------------- Total investment income ..................................................... 983,713 ------------- EXPENSES Advisory fees ............................................................ 908,123 Administration and services fees ......................................... 139,711 Professional fees ........................................................ 17,125 Trustees fees ............................................................ 3,947 Miscellaneous ............................................................ 1,802 ------------- Total expenses .............................................................. 1,070,708 Less: fee waivers or expense reimbursements ................................. (232,421) ------------- Net expenses ................................................................ 838,287 ------------- NET INVESTMENT INCOME ....................................................... 145,426 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain from investment transactions ........................... 15,638,025 Net change in unrealized appreciation/depreciation on investments ........ (51,554,625) ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ............................. (35,916,600) ------------- NET DECREASE IN NET ASSETS FROM OPERATIONS .................................. $ (35,771,174) =============
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 16 Small Cap Portfolio - -------------------------------------------------------------------------------- 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 income ............................................. $ 145,426 $ 134,476 Net realized gain from investment transactions .................... 15,638,025 70,508,730 Net change in unrealized appreciation/depreciation on investments .................................................. (51,554,625) 19,244,312 ------------- ------------- Net increase (decrease) in net assets from operations ................ (35,771,174) 89,887,518 ------------- ------------- CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Proceeds from capital invested .................................... 347,514,442 645,704,347 Value of capital withdrawn ........................................ (362,187,178) (648,908,543) ------------- ------------- Net decrease in net assets from capital transactions in shares of beneficial interest .................................. (14,672,736) (3,204,196) ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (50,443,910) 86,683,322 NET ASSETS Beginning of period ............................................... 301,988,332 215,305,010 ------------- ------------- End of period ..................................................... $ 251,544,422 $ 301,988,332 ============= ============= - -------------------------------------------------------------------------------- 1 Unaudited.
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 17 Small Cap 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) ....................... $251,544 $301,988 $215,305 $173,271 $285,878 $245,615 Ratios to average net assets: Net investment (expenses in excess of) income ................. 0.10%2 0.05% (0.09)% (0.22)% (0.24)% (0.05)% Expenses after waivers ............... 0.60%2 0.60% 0.60% 0.60% 0.60% 0.60% Expenses before waivers .............. 0.77%2 0.76% 0.75% 0.77% 0.77% 0.77% Portfolio turnover rate ................ 61% 136% 159% 182% 188% 159% - -------------------------------------------------------------------------------- 1 Unaudited. 2 Annualized.
See Notes to Financial Statements. - -------------------------------------------------------------------------------- 18 Small Cap Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION BTInvestment Portfolios (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 August 6, 1993 as an unincorporated Trust under the laws of New York. Small Cap Portfolio is a series of that Trust and began operations on October 21, 1993. The Declaration of Trust permits the Board of Trustees (the `Trustees') to issue beneficial interests in the Portfolio. On March 8, 2001, the Trustees of theTrust, on behalf of the Portfolio, approved a redemption in kind from the Portfolio to the Small Cap Fund.The redemption will take place if it is determined that the master/feeder structure is no longer required. 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 in good faith under procedures established by and under the general supervision of 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, custody and other 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 Bankers Trust 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. - -------------------------------------------------------------------------------- 19 Small Cap 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 $164,072,022 and $165,365,976, respectively. For federal income tax purposes, the tax basis of investments held at March 31, 2001 was $247,405,824. The aggregate gross unrealized appreciation for all investments at March 31, 2001 was $42,269,432 and the aggregate gross unrealized depreciation for all investments was $37,382,778. 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. - -------------------------------------------------------------------------------- 20 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] 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 Banc Alex. BrownInc., Deutsche Asset Management,Inc., and Deutsche Asset Management Investment Services Limited. Small Cap Fund--Investment Class CUSIP #055922769 1698SA (5/01) Distributed by: ICC Distributors, Inc. -----END PRIVACY-ENHANCED MESSAGE-----