March 31, 1999
BT Mutual Funds
LOGO
Capital Appreciation Fund
Semi-Annual Report
Trust: BT Investment Funds
Investment Advisor: Bankers Trust Company
<PAGE>
Capital Appreciation Fund
Table of Contents
Letter to Shareholders ...................................... 3
Capital Appreciation Fund
Statement of Assets and Liabilities ...................... 6
Statement of Operations .................................. 6
Statements of Changes in Net Assets ...................... 7
Financial Highlights ..................................... 7
Notes to Financial Statements ............................ 8
Capital Appreciation Portfolio
Schedule of Portfolio Investments ......................... 10
Statement of Assets and Liabilities ....................... 12
Statement of Operations ................................... 12
Statements of Changes in Net Assets ....................... 13
Financial Highlights ...................................... 13
Notes to Financial Statements ............................. 14
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The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
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2
<PAGE>
Capital Appreciation Fund
Letter to Shareholders
We are pleased to present you with this semi-annual report for the Capital
Appreciation Fund (the "Fund"), providing a review of the markets, the
Portfolio, and our outlook as well as a complete financial summary of the Fund's
operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
Overall, the six months ended March 31, 1999 witnessed a continuation of the
significant volatility experienced by mid capitalization growth stocks during
the previous year. While equities in general were strong, the midcap sector in
particular still lagged the S&P 500 Index, as concerns over both foreign and
domestic economies kept investor preference toward large-capitalization stocks.
The midcap sector did outperform small cap stocks, as measured by the Russell
2000 Index.
The fourth calendar quarter of 1998 began with a continuation of the summer's
sharp sell off in midcap growth stocks as well as in the broader equity markets.
This was followed by an even more pronounced recovery quickly thereafter.
The rally was furthered by several factors:
o Two quickly successive and surprise interest rate cuts of 25 basis points
each by the Federal Reserve Board on October 15th and then again on
November 17th, following the first of the series of cuts on September 29th
o Overseas developments, including interest rate cuts in a number of other
countries, International Monetary Fund help for Brazil, and the
announcement of a Japanese banking reform bill
o Receding concerns of a global credit crunch and recession
o Regained investor confidence as reported earnings results for the third
calendar quarter were relatively positive
o Sharp improvement in the Internet-related stocks, as these companies
continued to show strong growth, as an Internet Initial Public Offering
(IPO) market had some success, and as Internet-related commerce emerged as
a real factor during the holiday season
o Continuation of a relatively strong overall U.S. economy with low inflation
and bullish consumer spending.
The midcap market rally that began in mid-October continued into the first
calendar quarter of 1999, only to become subject to fears and uncertainty again
in February. As the quarter began, the positive market environment for midcap
stocks was buoyed by strength in economic growth, consumer spending, and fourth
quarter earnings reports as well as by low inflation and interest rates. Many
companies, in the technology arena especially, expressed upbeat outlooks.
Ironically, this very positive environment raised concerns that, at best, the
Federal Reserve Board was on hold and, perhaps, may act to raise interest rates
at the first sign of inflation.
March witnessed a rebound in the midcap equity market.
After the February sell-off, subsequent economic reports pointed to a
continuation of economic growth with little or no evidence of inflation. Such
data was interpreted as neutral to positive for interest rates, propelling the
equity markets higher. Investors continued to be attracted to companies and
industries exhibiting strong growth trends, such as those in the technology and
Internet sectors.
Ten Largest Stock Holdings
PSINET, Inc. Genstar International Group, Inc.
Univision Communications Global Crossing Ltd.
Safeguard Scientific, Inc. RSL Communications CL-A
Quest Telecommunications Winstar Communications
Clear Channel Communications Abercrombie & Fitch
Throughout the semi-annual period, midcap companies exhibited strong earnings
growth, positive fundamentals, and attractive relative valuations. In fact,
midcap relative valuations as compared to large cap stocks remain at
multi-decade lows.
INVESTMENT REVIEW
The Fund significantly outperformed its category average and its benchmark
for the six month period, particularly well worth noting given the extremely
high volatility in the midcap equity market during these months. Specific stock
selection and, to an even greater degree, sector positioning bolstered Fund
performance.
For example, in the fourth quarter of 1998, the Fund was overweight the
best performing sector, i.e. technology, and underweight the worst performing
sector, i.e. energy. In the first quarter of 1999, the Fund held an overweight
positions in two of the top four performing sectors--communications services and
technology. Also benefiting performance were underweight
3
<PAGE>
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Capital Appreciation Fund
Letter to Shareholders
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positions in the three poorest performing sectors for the first quarter--capital
goods, utilities, and basic materials.
<TABLE>
<CAPTION>
Periods ended March 31, 1999 Cumulative Total Returns Average Annual Total Returns
- -------------------------------------------------------------------------------------------------------------------
Past 6 Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
months year years years inception year years years inception
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund(1)
(inception 3/9/93) 36.46% 12.37% 55.93% 129.44% 162.02% 12.37% 15.96% 18.07% 17.23%
- -------------------------------------------------------------------------------------------------------------------
S&P Midcap 400 Index(2) 20.02% 0.45% 65.61% 130.72% 143.79% 0.45% 18.31% 18.20% 15.77%
- -------------------------------------------------------------------------------------------------------------------
Lipper MidCap Average(3) 23.42% 0.24% 49.37% 111.63% 127.57% 0.24% 13.95% 15.79% 14.31%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
MANAGER OUTLOOK
Although we expect future periods of volatility in the marketplace while global
and domestic economic and political events run their course, we remain
optimistic regarding midcap stocks in general. Midcap fundamentals remain solid,
earnings growth superior, and relative valuations attractive. In particular, the
companies in the Fund's portfolio are, overall, experiencing strong fundamental
growth in revenues and earnings and are expressing upbeat outlooks for the
remainder of 1999.
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. Given the recent high volatility in the stock market, it is also
important to keep in mind that at Bankers Trust we remain disciplined in our
process, and we continue to:
o focus on companies that offer compelling valuations relative to their
growth rates
o focus on companies that have strong, consistent earnings and revenue growth
o use extensive fundamental research--as well as our thematic approach and
screening process--to identify attractive investment opportunities in
unrecognized growth companies and sectors
o strictly adhere to our sell discipline to help mitigate risk, and
o use the volatility of the marketplace to our investors' advantage by
initiating or adding to positions on weakness.
We will continue to monitor economic conditions and their effect on financial
markets, as we seek capital growth over the long term.
Mary P. Dugan
Portfolio Manager of the
Capital Appreciation Portfolio
March 31, 1999
- ----------------
1 Performance quoted represents past 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.
2 Indices are unmanaged, and investments cannot be made in an index. The S&P
MidCap 400 Index consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation. During the period the Fund waived
certain fees and expenses. Had these fees and expenses not been waived, the
Fund's return would have been lower.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
4
<PAGE>
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Capital Appreciation Fund
Letter to Shareholders
- --------------------------------------------------------------------------------
Diversification of Portfolio Investments
By Theme as of March 31, 1999
(percentages are based on market value)
Life on the Net 11%
Energizing the Globe 4%
New Healthcare Paradigm 4%
Managing the Information Age 4%
Life Sciences Revolution 6%
Our Strengthening Financial Structure 8%
Telecommunications 11%
America's Changing Leisure Time 4%
The Ubiquitous Semiconductor 7%
Stores of Values 6%
Interactive Media 5%
Other(1) 4%
Money Market Fund 6%
Consolidating America 8%
New Consumer 5%
Client Server Computing 7%
- ---------------
(1) Includes themes with weightings of less than 3%.
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Performance Comparison
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in the Capital
Appreciation Fund and the S&P MidCap 400 Index since March 31, 1993.
Capital Appreciation Fund - $26,202
S&P MidCap 400 Index - $24,379
Mar-93 10000 10000
Sep-93 11838 10747
Mar-94 11409 10614
Sep-94 11728 10920
Mar-95 12857 11498
Sep-95 16813 13734
Mar-96 16786 14788
Sep-96 18890 15657
Mar-97 15919 16358
Sep-97 21655 21779
Mar-98 23318 24380
Sep-98 19201 20460
Mar-99 26202 24379
Total Return for the Periods
Ended March 31, 1999(3)
One Year Five Years Since 3/9/93(1)
12.37% 18.07%(2) 17.23%(2)
- ---------------
(1) The Fund's inception date.
(2) Annualized.
(3) Unaudited.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
5
<PAGE>
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Capital Appreciation Fund
Statement of Assets and Liabilities March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment in Capital Appreciation Portfolio, at Value ........................ $ 23,810,386
Prepaid Expenses and Other .................................................... 9,180
------------
Total Assets ..................................................................... 23,819,566
------------
Liabilities
Due to Bankers Trust .......................................................... 9,318
Accrued Expenses and Other .................................................... 14,308
------------
Total Liabilities ................................................................ 23,626
------------
Net Assets ....................................................................... $ 23,795,940
============
Composition of Net Assets
Paid-in Capital ............................................................... $ 12,858,385
Expenses in Excess of Income .................................................. (76,543)
Undistributed Net Realized Gain from Investment Transactions .................. 5,089,137
Net Unrealized Appreciation on Investment ..................................... 5,924,961
------------
Net Assets ....................................................................... $ 23,795,940
============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by
shares outstanding) $ 13.66
============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) ................................................ 1,741,597
============
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Operations For the six months ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<S> <C>
Investment Income
Income in Excess of Expenses Allocated from Capital Appreciation Portfolio, net $ 2,198
------------
Expenses
Administration and Services Fees .............................................. 78,742
Printing and Shareholder Reports .............................................. 7,631
Professional Fees ............................................................. 13,131
Registration Fees ............................................................. 4,397
Trustees Fees ................................................................. 2,870
Miscellaneous ................................................................. 3,757
------------
Total Expenses ................................................................ 110,528
Less Expenses absorbed by Bankers Trust ....................................... (31,787)
------------
Net Expenses ............................................................... 78,741
------------
Expenses in Excess of Investment Income .......................................... (76,543)
------------
Realized and Unrealized Gain on Investment
Net Realized Gain from Transactions .............................................. 5,250,573
Net Change in Unrealized Appreciation/Depreciation on Investment .............. 2,403,861
Net Realized and Unrealized Gain on Investment ................................ 7,654,434
------------
Net Increase in Net Assets from Operations ....................................... $ 7,577,891
============
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
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Capital Appreciation Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
six months ended year ended
March 31, 1999(1) September 30, 1998
---------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Expenses in Excess of Income ....................................... $ (76,543) $ (272,218)
Net Realized Gain from Investment Transactions ..................... 5,250,573 4,677,566
Net Change in Unrealized Appreciation/Depreciation on Investment ... 2,403,861 (8,470,353)
------------ ------------
Net Increase (Decrease) in Net Assets from Operations ................. 7,577,891 (4,065,005)
------------ ------------
Distributions to Shareholders
Net Realized Gain from Investment Transactions ..................... (3,057,167) (7,936,407)
------------ ------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares ...................................... 4,287,785 57,990,982
Dividend Reinvestments ............................................. 1,940,215 4,263,959
Cost of Shares Redeemed ............................................ (12,449,520) (73,759,183)
------------ ------------
Net Decrease from Capital Transactions in Shares of Beneficial Interest (6,221,520) (11,504,242)
------------ ------------
Total Decrease in Net Assets .......................................... (1,700,796) (23,505,654)
Net Assets
Beginning of Period ................................................... 25,496,736 49,002,390
------------ ------------
End of Period ......................................................... $ 23,795,940 $ 25,496,736
============ ============
</TABLE>
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Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the Capital Appreciation Fund.
<TABLE>
<CAPTION>
For the For the period For the
six months ended For the years ended Jan. 1, 1995 year ended
March 31, September 30, to Sept. 30, Dec. 31,
----------------
1999(1) 1998 1997 1996 1995(3) 1994
------- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period ............ $ 11.38 $ 15.72 $ 16.79 $ 16.83 $ 12.10 $ 11.72
-------- -------- -------- -------- -------- --------
Income (Loss) from Investment Operations
Expenses in Excess of Income ................. (0.04) (0.12) (0.13) (0.10) (0.07) (0.04)
Net Realized and Unrealized Gain (Loss) from
Investment Transactions ...................... 3.85 (1.58) 2.13 1.89 4.80 0.42
-------- -------- -------- -------- -------- --------
Total Income/(Expenses in Excess of Income)
from Investment Operations ................... 3.81 (1.70) 2.00 1.79 4.73 0.38
-------- -------- -------- -------- -------- --------
Distributions to Shareholders
Net Realized Gain from Investment Transactions (1.53) (2.64) (3.07) (1.83) -- --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period .................. $ 13.66 $ 11.38 $ 15.72 $ 16.79 $ 16.83 $ 12.10
======== ======== ======== ======== ======== ========
Total Investment Return ......................... 36.46% (11.42)% 14.64% 12.35% 39.09% 3.24%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ..... $ 23,796 $ 25,497 $ 49,002 $ 67,385 $ 57,380 $ 42,737
Ratios to Average Net Assets:
Expenses in Excess of Income .............. (0.63)%(2) (0.70)% (0.77)% (0.66)% (0.65)%(2) (0.57)%
Expenses, Including Expenses of the Capital
Appreciation Portfolio .................. 1.25%(2) 1.25% 1.25% 1.25% 1.25%(2) 1.25%
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses
by Bankers Trust ........................ 0.59%(2) 0.39% 0.29% 0.26% 0.32%(2) 0.54%
</TABLE>
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(1) Unaudited.
(2) Annualized
(3) Board of Trustees approved the change of the fiscal year end from
December 31 to September 30.
See Notes to Financial Statements.
7
<PAGE>
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Capital Appreciation 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 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The Capital Appreciation Fund (the "Fund") is
one of the funds offered to investors by the Trust. The Fund commenced
operations and began offering shares of beneficial interest on March 9, 1993.
The Fund invests substantially all of its assets in the Capital Appreciation
Portfolio (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio. The value
of such investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio. At March 31, 1999, 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
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements.
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 the security 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 also made annually to the extent they are not offset by any 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 all of its
taxable income to shareholders. Therefore, no federal income tax provision is
required. The Fund may periodically make reclassifications among certain of its
capital accounts as a result of the differences in the characterization and
allocation of certain income and capital gain distributions determined annually
in accordance with federal tax regulations which may differ from generally
accepted accounting principles.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of
each Fund. Expenses directly attributable to the Fund are charged to that Fund,
while expenses which are attributable to all of the Trust's funds are allocated
among the Funds. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Agreement, Bankers Trust provides
administrative, custody, transfer agency and shareholder services to the Fund in
return for a fee computed daily and paid monthly at an annual rate of .65% of
the Fund's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to .65% of
the average daily net assets of the Fund, excluding expenses of the Portfolio,
and 1.25% of the average daily net assets of the Fund, including expenses of the
Portfolio.
ICC Distributors, Inc., a member of the Forum Group of Companies, provides
distribution services to the Fund.
The Fund is a participant with other affiliated entities in a revolving credit
facility and a discretionary demand line of credit facility, (collectively the
"credit facilities") in the amounts of $50,000,000 and $100,000,000,
respectively. A commitment fee of .07% per annum on the average daily amount of
the available commitment is payable on a calendar quarter basis and apportioned
equally among all participants. Amounts borrowed under the credit facilities
will bear interest at a rate per annum equal to the Federal Funds Rate plus
.45%. No amounts were drawn down or outstanding under the credit facilities as
of and for the six month period ended March 31, 1999.
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would
merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds,
8
<PAGE>
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Capital Appreciation Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
retail and commercial banking, investment banking and insurance. The transaction
is contingent upon various regulatory approvals, and continuation of the Fund's
advisory relationship with Bankers Trust thereafter is subject to the approval
of Fund shareholders. If the transaction is approved and completed, Deutsche
Bank AG, as Bankers Trust's new parent company, will control its operations as
investment adviser. Bankers Trust believes that, under this new arrangement, the
services provided to the Fund will be maintained at their current level.
Note 3--Shares of Beneficial Interest
At March 31, 1999, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
For the For the
six months ended year ended
March 31, 1999(1) September 30, 1998
-------------------- ------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sold 340,352 $ 4,287,785 4,302,213 $ 57,990,982
Reinvested 173,543 1,940,215 361,352 4,263,959
Redeemed (1,012,480) (12,449,520) (5,540,913) (73,759,183)
---------- ------------ ---------- -----------
Net Decrease (498,585) $ (6,221,520) (877,348) $(11,504,242)
========== ============ ========== ===========
- ------------
(1) Unaudited
9
<PAGE>
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Capital Appreciation Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
- ------ ----------- -----
Common Stocks - 92.8%
America's Changing Leisure & Time - 3.5%
6,400 Gemstar International Group Ltd.(1) ........... $481,600
6,200 Sotheby's Holdings, Inc. - Class A ............ 200,725
5,600 Starbucks Corp.(1)............................. 157,150
-----------
839,475
-----------
America's Industrial Renaissance - 1.2%
4,900 Black & Decker Corp. ......................... 271,644
-----------
Client Server Computing - 7.0%
8,600 Citrix Systems, Inc.(1) ...................... 327,875
1,800 Lexmark International Group, Inc. -
Class A(1) ................................... 201,150
3,800 Network Solutions, Inc.(1) ................... 401,850
7,800 Safeguard Scientifics, Inc.(1) ............... 528,937
7,300 Seagate Technology, Inc.(1) .................. 215,806
-----------
1,675,618
-----------
Consolidating America - 7.3%
7,300 Clear Channel Communications, Inc. (1) ....... 489,556
6,700 Heftel Broadcasting Corp. - Class A(1) ....... 290,612
13,384 Outdoor Systems, Inc.(1) ..................... 401,520
11,200 Univision Communications, Inc.(1) ............ 560,000
-----------
1,741,688
-----------
Energizing The Globe - 3.9%
3,200 Allegheny Energy, Inc. ....................... 94,400
3,200 DQE, Inc. .................................... 122,800
12,800 Noble Drilling Corporation ................... 221,600
13,000 Sante Fe International Corp. ................. 242,937
6,300 Smith International, Inc.(1) ................. 252,000
-----------
933,737
-----------
Interactive Media - 4.8%
13,700 CBT Group PLC-ADR(1) ......................... 156,694
9,700 General Instrument Corporation (1) ........... 294,031
13,100 Snyder Communications, Inc. .................. 365,162
9,100 USA Networks, Inc.(1) ........................ 325,894
-----------
1,141,781
-----------
Life On The Net - 10.5%
2,100 At Home Corp. - Series A(1) .................. 330,750
2,200 Broadcast.com, Inc.(1) ....................... 260,012
2,100 CMG Information Services(1) .................. 384,431
2,700 Exodus Communications, Inc.(1) ............... 363,150
3,000 Infoseek Corp.(1) ............................ 222,000
3,300 Intuit, Inc.(1) .............................. 335,775
200 Priceline.com, Inc. .......................... 16,575
13,300 PSINet, Inc.(1) .............................. 566,081
700 Ziff Davis - ZDNet, Inc. ..................... 25,200
-----------
2,503,974
-----------
Life Sciences Revolution - 6.2%
4,282 Elan Corp. PLC-ADR(1) ........................ 298,669
6,300 Forest Laboratories, Inc.(1) ................. 355,162
2,600 Perkin Elmer Corp. ........................... 252,362
2,700 Sepracor, Inc.(1) ............................ 303,075
6,200 Watson Pharmaceuticals(1) .................... 273,575
-----------
1,482,843
-----------
Managing The Information Age - 3.9%
6,400 Flextronics International(1) ................. 326,400
3,900 Sanmina Corp.(1) ............................. 248,625
4,200 Veritas Software Corp.(1) .................... 339,150
-----------
914,175
-----------
Shares Description Value
- ------ ----------- -----
New Consumer - 5.2%
4,500 Abercrombie & Fitch Co. - Class A(1) ......... $ 414,000
2,565 Gucci Group NV ............................... 206,483
9,700 TJX Companies, Inc. .......................... 329,800
4,100 Tommy Hilfiger Corp.(1) ...................... 282,388
-----------
1,232,671
-----------
New Health Paradigm - 4.3%
8,600 AmeriSource Health Corp. - Class A(1) ........ 294,013
1,700 MiniMed, Inc.(1) ............................. 172,763
20,600 Oxford Health Plans Corp.(1) ................. 321,875
3,100 Wellpoint Health Networks, Inc.(1) ........... 235,019
-----------
1,023,670
-----------
Our Strengthening Financial Structure - 7.5%
11,400 ACE Ltd. ..................................... 355,538
2,200 Ambac Financial Group ........................ 118,800
6,000 Astoria Financial Corp. ...................... 300,000
9,500 Charter One Financial, Inc. .................. 274,164
11,900 Concord EFS, Inc.(1) ......................... 327,994
4,700 Metris Companies, Inc. ....................... 189,763
5,300 PartnerRe, Ltd. .............................. 214,650
-----------
1,780,909
-----------
Return To Home Ownership - 1.3%
6,900 Linens 'N Things, Inc.(1) .................... 313,088
-----------
Special Situations - 1.8%
6,000 Dial Corporation ............................. 206,250
6,600 Suiza Foods Corp.(1) ......................... 222,338
-----------
428,588
-----------
Stores of Value - 6.3%
9,100 BJ's Wholesale Club(1) ....................... 240,581
4,500 Consolidated Stores(1) ....................... 136,406
17,100 Family Dollar Stores, Inc. ................... 393,300
8,200 Office Depot, Inc.(1) ........................ 301,863
5,200 U.S. Foodservice, Inc.(1) .................... 241,800
6,700 Williams-Sonoma, Inc.(1) ..................... 189,275
-----------
1,503,225
-----------
Telecommunications - 11.3%
10,000 Global Crossing Ltd.(1) ...................... 462,500
6,400 Globalstar Telecom Ltd. ...................... 88,800
9,600 Newbridge Networks Corp.(1) .................. 297,600
2,200 Qualcomm, Inc.(1) ............................ 273,625
7,200 Qwest Communications International, Inc.(1) .. 519,075
12,100 RSL Communications - Class A(1) .............. 434,844
5,200 Western Wireless Corp. - Class A(1) .......... 188,500
11,800 WinStar Communications, Inc.(1) .............. 428,856
-----------
2,693,800
-----------
The Ubiquitous Semiconductor - 6.8%
3,200 Broadcom Corp. - Class A(1) .................. 197,200
11,500 Cadence Design Systems, Inc.(1) .............. 296,125
7,800 Lam Research Corp.(1) ........................ 226,200
5,400 Linear Technology Corp. ...................... 276,750
3,600 Micron Technology, Inc. ...................... 173,700
3,300 Rambus, Inc.(1) .............................. 212,438
4,300 Teradyne, Inc.(1) ............................ 234,619
-----------
1,617,032
-----------
Total Common Stocks (Cost $15,772,946) ............. 22,097,918
-----------
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Capital Appreciation Portfolio
Schedule of Portfolio Investments March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Convertible Preferred Stock - 1.2%
6,200 United Rentals Conv Pfd. (Cost $310,000) $ 275,900
------------
SHORT TERM INSTRUMENT - 6.5%
Mutual Fund
1,553,207 BT Institutional Cash Management Fund .. 1,553,207
------------
Total Investments (Cost $17,636,153) ............. 100.5% $ 23,927,025
Liabilities in Excess of Assets .................. (0.5)% (116,614)
----- ------------
Net Assets ....................................... 100.0% $ 23,810,411
===== ============
</TABLE>
- ---------
(1) Non-Income Producting Security
The following abbreviation is used in portfolio descriptions:
ADR -- American Depository Receipt
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Capital Appreciation Portfolio
Statement of Assets and Liabilities March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Assets
Investments, at Value (Cost of Investments
$17,636,153) ........................................ $23,927,025
Dividends and Interest Receivable(1) .................. 11,513
Prepaid Expenses and Other ............................ 472
-----------
Total Assets ............................................. 23,939,010
-----------
Liabilities
Payable for Securities Purchased ...................... 96,460
Due to Bankers Trust .................................. 8,831
Accrued Expenses and Other ............................ 23,308
-----------
Total Liabilities ........................................ 128,599
-----------
Net Assets ............................................... $23,810,411
===========
Composition of Net Assets
Paid-in Capital ....................................... $17,519,539
Net Unrealized Appreciation on Investments ............ 6,290,872
-----------
Net Assets ............................................... $23,810,411
===========
- ----------
(1) Includes $7,481 from the Portfolio's investment in the BT Institutional Cash
Management Fund.
- --------------------------------------------------------------------------------
Statement of Operations For the period ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Investment Income
Dividends ............................................. $ 74,982
-----------
Expenses
Advisory Fees ......................................... 78,849
Professional Fees ..................................... 19,091
Administration and Services Fees ...................... 12,131
Trustees Fees ......................................... 1,948
Miscellaneous ......................................... 819
-----------
Total Expenses ........................................ 112,838
Less Expenses absorbed by Bankers Trust ............... (40,054)
-----------
Net Expenses ....................................... 72,784
-----------
Net Investment Income .................................... 2,198
-----------
Realized and Unrealized Gain on Investments
Net Realized Gain from Investment
Transactions ........................................ 5,250,578
Net Change in Unrealized
Appreciation/Depreciation on Investments ............ 2,403,864
-----------
Net Realized and Unrealized Gain on Investments .......... 7,654,442
-----------
Net Increase in Assets from Operations ................... $ 7,656,640
===========
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Capital Appreciation Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six For the
months ended year ended
March 31, 1999(1) September 30, 1998
----------------- ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income/(Expenses in Excess of Income) ............. $ 2,198 $ (19,921)
Net Realized Gain from Investment Transactions ................... 5,250,578 4,677,569
Net Change in Unrealized Appreciation/Depreciation
on Investments ................................................. 2,403,864 (8,470,353)
----------- ------------
Net Increase (Decrease) in Net Assets from Operations ............... 7,656,640 (3,812,705)
----------- ------------
Capital Transactions
Proceeds from Capital Invested ................................... 5,404,736 62,320,016
Value of Capital Withdrawn ....................................... 14,940,287) 81,789,768)
----------- ------------
Net Decrease in Net Assets from Capital Transactions ................ (9,535,551) 19,469,752)
----------- ------------
Total Decrease in Net Assets ........................................ (1,878,911) 23,282,457)
Net Assets
Beginning of Period ................................................. 25,689,322 48,971,779
----------- ------------
End of Period ....................................................... $23,810,411 $25,689,322
=========== ============
</TABLE>
- -------------
(1) Unaudited
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for periods indicated for the Capital Appreciation Portfolio.
<TABLE>
<CAPTION>
For the six For the years ended For the period
months ended September 30, Jan. 1, 1995
March 31, ------------------------------ to Sept. 30,
1999(2) 1998 1997 1996 1995(3)
------------ ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Year (000s omitted) ..... $23,810 $25,689 $48,972 $68,385 $149,888
Ratios to Average Net Assets:
Net Investment Income/(Expenses in
Excess of Income) ..................... 0.02%(1) (0.05)% (0.12)% (0.01)% 0.01%(1)
Expenses ................................ 0.60%(1) 0.60% 0.60% 0.60% 0.60%(1)
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses
by Bankers Trust ...................... 0.33%(1) 0.26% 0.21% 0.17% 0.18%(1)
Portfolio Turnover Rate .................... 94% 145% 167% 271% 125%
</TABLE>
- -------------
(1) Annualized
(2) Unaudited
(3) The Board of Trustees approved the change of the fiscal year end from
December 31 to September 30.
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
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 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on October 28, 1992,
as an unincorporated trust under the laws of New York and commenced operations
on March 9, 1993. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on 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. Security Transactions and Investment Income
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discount on investments. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
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. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisor, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. Federal Income Taxes
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio 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 Advisory Agreement, Bankers Trust manages the Portfolio in accordance with
the Portfolio's investment objective and stated investment policies in return
for a fee computed daily and paid monthly at an annual rate of .65% of the
Portfolio's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.60% of the average daily net assets of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund (the
"Fund"), an open-end management investment company managed by Bankers Trust
Company (the "Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio as of March 31, 1999 amounted to $36,183 and are included in
dividend income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility, and a discretionary demand line of credit facility,
(collectively the "credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a calendar quarter basis,
and apportioned equally among all participants. Amounts borrowed under the
credit facilities will bear interest at a rate per annum equal to the Federal
Funds Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the six month period ended March 31, 1999.
14
<PAGE>
- --------------------------------------------------------------------------------
Capital Appreciation Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would
merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance. The transaction is contingent upon
various regulatory approvals, and continuation of the Fund's advisory
relationship with Bankers Trust thereafter is subject to the approval of Fund
shareholders. If the transaction is approved and completed, Deutsche Bank AG, as
Bankers Trust's new parent company, will control its operations as investment
adviser. Bankers Trust believes that, under this new arrangement, the services
provided to the Fund will be maintained at their current level.
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 period ended March 31, 1999 were
$19,396,371 and $28,762,233, respectively.
The tax basis of investments held at March 31, 1999, was $17,636,153. The
aggregate gross unrealized appreciation for all investments was $6,842,550 and
the aggregate gross unrealized depreciation for all investments was $551,678.
Note 4--Subsequent Event
Subsequent to period end, the portfolio has entered into a $100,000,000 364-day
senior unsecured committed revolving credit facility ("the facility") with two
lenders. The borrowings shall bear interest at a rate based on the Federal Funds
rate. A commitment fee is charged on the unused portion of the facility. The
facility replaces the revolving credit facility described in footnote 2.
15
<PAGE>
Investment Advisor and Administrator of the Portfolio
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, ME 04101
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
GRAPHIC
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Capital Appreciation Fund CUSIP #055922819
BT Investment Funds 465 SA (3/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
