BT INVESTMENT FUNDS, 497, 1997-05-20

BT INVESTMENT FUNDS
497, 1997-05-20

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- - BT INVESTMENT FUNDS -

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Capital Appreciation Fund
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Seeks long term capital growth, primarily through investment in medium sized
growth companies.

PROSPECTUS
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JANUARY 31, 1997
Revised May 19, 1997

BT Investment Funds (the "Trust") is an open-end, management investment company
(mutual fund) which consists of a number of separate investment funds.

Please read this Prospectus carefully before investing, and retain it for future
reference. It contains important information about the Capital Appreciation Fund
(the "Fund") that you should know and can refer to in deciding whether the
Fund's goals match your own.

To learn more about the Fund and its investments, investors can obtain a copy of
the Fund's Statement of Additional Information ("SAI"), dated January 31, 1997,
along with the Portfolio's most recent financial report and portfolio listing.
The SAI has been filed with the Securities and Exchange Commission ("SEC"), and
is incorporated herein by reference. You may request a free copy of the SAI by
calling the Fund's Service Agent at 1-800-730-1313.

UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS ("ASSETS") IN THE CAPITAL APPRECIATION
PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY WITH AN IDENTICAL
INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF THE FUND WILL CORRESPOND
DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. SEE "SPECIAL
INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" HEREIN.

BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE U.S. GOVERNMENT, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897

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TABLE OF CONTENTS
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PAGE
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The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who May Want To Invest. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Of Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objectives And Policies. . . . . . . . . . . . . . . . . . . . . .
Risk Factors: Matching The Fund To Your Investment Needs. . . . . . . . . . .
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase And Redemption Of Shares . . . . . . . . . . . . . . . . . . . . . .
Dividends, Distributions And Taxes. . . . . . . . . . . . . . . . . . . . . .
Performance Information And Reports . . . . . . . . . . . . . . . . . . . . .
Management Of The Trust And Portfolios. . . . . . . . . . . . . . . . . . . .
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .
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THE FUND
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CAPITAL APPRECIATION FUND'S investment objective is long-term capital growth;
the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium sized
domestic corporations and, to a lesser extent, foreign corporations. See "Risk
Factors: Matching the Fund to Your Investment Needs" herein.

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WHO MAY INVEST
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The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio.
The Fund is designed for investors who are willing to accept short-term domestic
and/or foreign stock market fluctuations in pursuit of potentially higher
long-term returns. The Fund invests for growth and does not pursue income.

The Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund shares, they may be worth more or less
than what they originally paid for them.

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SUMMARY OF FUND EXPENSES
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The following table provides: (i) a summary of estimated expenses relating to
purchases and sales of shares of the Fund and the annual operating expenses of
the Fund and the expenses of the Portfolio, as a percentage of average net
assets of the Fund, and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in the Fund. THE TRUSTEES OF THE TRUST BELIEVE
THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS
THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE
TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE ASSETS OF THE FUND
WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE PORTFOLIO.
<TABLE>
<CAPTION>

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ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
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<S> <C> <C> <C> <C>
Investment advisory fee (after reimbursement or waivers) 0.58%

12b-1 fee 0.00%

Other expenses (after reimbursement or waivers) 0.67%
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Total operating expenses (after reimbursement or waivers) 1.25%
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EXPENSE TABLE EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
An investor would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end
of each time period: $13 $40 $69 $151
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</TABLE>

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets of the Fund are authorized to be made pursuant to the Plan of
Distribution under Rule 12b-1 of the Investment Company Act of 1940, as amended
(the "1940 Act"), it is not expected that any payments will actually be made
under that plan in the foreseeable future. If the plan were activated,
long-term shareholders may pay more 12b-1 fees than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. Bankers Trust has voluntarily agreed to
waive a portion of its investment advisory fee. Without such waiver, the
Portfolio's investment advisory fee would be equal to 0.65%. The expense table
and example reflect a voluntary undertaking by Bankers Trust to waive or
reimburse expenses such that the total aggregate operating expenses will not
exceed the following 1.25% of the Fund's average net assets annually. In the
absence of this undertaking, for the fiscal year ended September 30, 1996, total
operating expenses would have been equal to approximately 1.51% of the Fund's
average net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.

For more information with respect to expenses of the Fund and the Portfolio, see
"Management of the Trust and Portfolio" herein and in the SAI.

The Fund is distributed by Edgewood Services, Inc. ("Edgewood") (the
"Distributor") to customers of Bankers Trust or to customers of another bank or
a dealer or other institution that has a sub-shareholder servicing agreement
with Bankers Trust (along with Bankers Trust, a "Service Agent"). Some Service
Agents may impose certain conditions on their customers in addition to or
different from those imposed by the Fund and may charge their customers a direct
fee for their services. Each Service Agent has agreed to transmit to
shareholders who are its customers appropriate disclosures of any fees that it
may charge them directly.

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FINANCIAL HIGHLIGHTS
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The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data for
the Fund for each of the periods indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon appears
in the Fund's Annual Report which is incorporated by reference.
<TABLE>
<CAPTION>

FOR THE FOR THE FOR THE PERIOD
SIX MONTHS YEAR ENDED JANUARY 1, 1995 TO
ENDED SEPTEMBER 30, SEPTEMBER 30,
MARCH 31,1997 1996 1995
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<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $16.79 $ 16.83 $12.10
--------- -------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Loss. . . . . . . . . . . . . . . . . . (0.07) (0.10) (0.07)
Net Realized and Unrealized Gain (Loss) on Investments (2.32) 1.89 4.80
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Total income (Loss) from Investment Operations . . . . . (2.39) 1.79 4.73
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DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions . . . . (2.10) (1.63) --
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $12.90 $16.79 $16.83
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TOTAL INVESTMENT RETURNS . . . . . . . . . . . . . . . . (15.73)% 12.35% 39.09%
SUPPLIMENTAL DATA AND RATIOS:
Net Asset Value, End of Period (000s omitted). . . . . $ 45,284 $ 67,385 $ 57,380
Ratio to Average Net Assets:
Net Investment Loss. . . . . . . . . . . . . . . . . (0.78)%* (0.66)% (0.65)%*
Expenses, Including Expenses of the Capital
Appreciation Portfolio . . . . . . . . . . . . . . 1.25% 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.28% 0.26% 0.32%*

FOR THE PERIOD
FOR THE MARCH 9, 1993
YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
1994 DECEMBER 31, 1993
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PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $11.72 $10.00
--------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Loss. . . . . . . . . . . . . . . . . . (0.04) (0.01)
Net Realized and Unrealized Gain (Loss) on Investments 0.42 1.73
--------- ---------
Total income (Loss) from Investment Operations . . . . . 0.38 1.72
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DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions . . . . -- --
--------- ---------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $12.10 $11.72
--------- ---------
--------- ---------
TOTAL INVESTMENT RETURNS . . . . . . . . . . . . . . . . 3.24% 21.54
SUPPLIMENTAL DATA AND RATIOS:
Net Asset Value, End of Period (000s omitted). . . . . $ 42,737 $ 17,573
Ratio to Average Net Assets:
Net Investment Loss. . . . . . . . . . . . . . . . . (0.57)% (0.23)%*
Expenses, Including Expenses of the Capital
Appreciation Portfolio . . . . . . . . . . . . . . 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.54% 0.74%*
</TABLE>

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INVESTMENT OBJECTIVE AND POLICIES
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The Fund's investment objective is long-term capital growth; the production of
any current income is secondary to this objective. The Trust seeks to achieve
the investment objective of the Fund by investing all of the Assets of the Fund
in the Portfolio, which has the same investment objective as the Fund. Since the
investment characteristics of the Fund will correspond directly to those of the
Portfolio, the following is a discussion of the various investments of and
techniques employed by the Portfolio. Additional information about the
investment policies of the Portfolio appears in "Risk Factors: Matching the Fund
to Your Investment Needs" herein and in the SAI. There can be no assurance that
the investment objective of either the Fund or the Portfolio will be achieved.
The investment objective of the Fund and Portfolio is not a fundamental policy
and may be changed upon notice to, but without the approval of, the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" herein.

CAPITAL APPRECIATION PORTFOLIO

The Portfolio invests primarily in growth-oriented common stocks of medium-sized
domestic corporations and, to a lesser extent, foreign corporations.

The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. The Portfolio is not restricted to investments in specific
market sectors. The Portfolio may invest in any market sectors and in companies
of any size and may take advantage of any investment opportunity with attractive
long-term prospects. The Adviser takes advantage of its market access and the
research available to it to select investments in promising growth companies
that are involved in new technologies, new products, foreign markets and special
developments, such as research discoveries, acquisitions, recapitalizations,
liquidations or management changes, and companies whose stock may be

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undervalued by the market. These situations are only illustrative of the type of
investments the Portfolio may make. The Portfolio is free to invest in any
common stock which in the Adviser's judgment provides above average potential
for long-term growth of capital and income.

The Portfolio will generally invest a majority of its assets in equity
securities of medium-sized companies (companies with a market capitalization of
between $500 million and $2 billion), but may invest in securities of companies
having various levels of market capitalization, including smaller companies
whose securities may be more volatile and less liquid than securities issued by
larger companies with higher levels of net worth. Investments will be in
companies in various industries. Industry and company fundamentals along with
key investment themes and various quantitative screens will be used in the
investment process. Criteria for selection of individual securities include the
issuer's competitive environment and position, prospects for growth, managerial
strength, earnings momentum and quality, underlying asset value, relative market
value and overall marketability. The Portfolio will follow a disciplined selling
process to lessen market risks.
The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments see "Risk
Factors: Matching the Fund to Your Investment Needs" and "Additional
Information" herein and in the SAI.

EQUITY SECURITIES. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants to subscribe to or purchase such securities, sponsored or unsponsored
ADRs, EDRs, GDRs, and convertible securities, consisting of debt securities or
preferred stock that may be converted into common stock or that carry the right
to purchase common stock. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation. Although equity securities have a
history of long-term growth in value, their prices fluctuate based on changes in
a company's financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.

SHORT-TERM INSTRUMENTS. The Portfolio intends to stay invested in the securities
described above to the extent practical in light of its objective and long-term
investment perspective. However, the Portfolio's assets may be invested in high
quality short-term investments with remaining maturities of 397 days or less to
meet anticipated redemptions and expenses for day-to-day operating purposes and
when, in Bankers Trust's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the respective
markets.

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: options on
stocks, options on stock indices, futures contracts on stock indices, foreign
investments, options on futures contracts, foreign currency exchange
transactions, options on foreign currencies, Rule 144A securities, when-issued
and delayed delivery securities, securities lending, and repurchase agreements.
See "Risk Factors: Matching the Fund to Your Investment Needs" and "Additional
Information" herein and in the SAI for further information.

ADDITIONAL INVESTMENT LIMITATIONS

As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may be
invested in illiquid or not readily marketable securities (including repurchase
agreements and time deposits with remaining maturities of more than seven
calendar days). Additional investment policies of the Portfolio are contained in
the SAI.

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
Portfolio. See "Investment Objective, Policies and

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Risks" herein for a description of the fundamental policies of the Portfolio
that cannot be changed without approval by the holders of "a majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio.

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective, Policies and Restrictions" in the SAI. For
descriptions of the management and expenses of the Portfolio, see "Management of
the Trust and Portfolio" herein and in the SAI.

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RISK FACTORS: MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
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By itself, the Fund does not constitute a balanced investment plan; the Fund and
the Portfolio seek to provide long-term capital growth, with the production of
any current income being incidental to this objective, by investments primarily
in growth-oriented common stocks of small domestic corporations and, to a
limited extent, foreign corporations. The Fund is designed for those investors
primarily interested in capital growth from investments in medium-sized growth
companies. In view of the long-term capital growth objective of the Fund and the
smaller size of the companies, the risks of investment in the Fund may be
greater than the general equity markets, and changes in domestic and foreign
interest rates may also affect the value of the Portfolio's investments, and
rising interest rates can be expected to reduce the Fund's share value. A
description of a number of investments and investment techniques available to
the Portfolio, including foreign investments and the use of options and futures,
and certain risks associated with these investments and techniques is included
under "Additional Information." The Fund's share price, yield and total return
will fluctuate and your investment may be worth more or less than your original
cost when you redeem your shares.
RISKS OF INVESTING IN FOREIGN SECURITIES

Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of the Portfolio's foreign investments may be adversely affected
by changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations in
foreign countries. In addition, changes in government administrations or
economic or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect the Portfolio's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, whether favorably
or unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by the Portfolio must be made in compliance with
U.S. and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of the Portfolio as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, the Portfolio is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, the Portfolio's
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. The settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. Finally, there may be less
government supervision and regulation of securities exchanges, brokers and
issuers in foreign countries than in the United States. The Portfolio will not
invest more than 5% of the value of its total assets in the securities of
issuers based in developing countries, including Eastern Europe.

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RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS

Historically, medium- and small-capitalization stocks have been more volatile in
price than the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small-size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium- and small-size company stocks may fluctuate independently of
larger company stocks. Medium- and small-size company stocks may decline in
price as large company stocks rise, or rise in price as large company stocks
decline.

DERIVATIVES

The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. Bankers Trust will
use derivatives only in circumstances where they offer the most efficient means
of improving the risk/reward profile of the Portfolio and when consistent with
the Portfolio's investment objective and policies. The use of derivatives for
non-hedging purposes may be considered speculative.

PORTFOLIO TURNOVER

The Portfolio intends to manage its holdings actively to pursue its investment
objective. Since the Portfolio has a long-term investment perspective, it does
not intend to respond to short-term market fluctuations or to acquire securities
for the purpose of short-term trading; however, it may take advantage of
short-term trading opportunities that are consistent with its objective. The
portfolio turnover rates for the Portfolio were 271% for the fiscal year ended
September 30, 1996, and 125% for the period from January 1, 1995 to September
30, 1995. These rates will vary from year to year. High turnover rates increase
transaction costs and may increase investable capital gains. Bankers Trust
considers these effects when evaluating the anticipated benefits of short-term
investing.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE

Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust, as the Administrator, at (800)
730-1313.

The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for

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traditionally structured funds which have large institutional investors).
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk. Also, funds with a greater pro rata ownership in the Portfolio
could have effective voting control of the operations of the Portfolio. Except
as permitted by the SEC, whenever the Trust is requested to vote on matters
pertaining to the Portfolio, the Trust will hold a meeting of shareholders of
the Fund and will cast all of its votes in the same proportion as the votes of
the Fund's shareholders. Fund shareholders who do not vote will not affect the
Trust's votes at the Portfolio meeting. The percentage of the Trust's votes
representing Fund shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Certain changes in the Portfolio's investment objectives, policies
or restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If securities
are distributed, the Fund could incur brokerage, tax or other charges in
converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting redemption requests, such as borrowing.

The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's Assets in accordance with the investment
policies described herein with respect to the Portfolio.

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NET ASSET VALUE
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The net asset value ("NAV") per share of the Fund is calculated on each day on
which the New York Stock Exchange, Inc. (the "NYSE") is open (each such day
being a "Valuation Day"). The NYSE is currently open on each day, Monday through
Friday, except: (a) January 1st, Presidents' Day (the third Monday in February),
Good Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the
first Monday in September), Thanksgiving Day (the last Thursday in November) and
December 25th; and (b) the preceding Friday or the subsequent Monday when one of
the calendar-determined holidays falls on a Saturday or Sunday, respectively.

The NAV per share of the Fund is calculated once on each Valuation Day as of the
close of regular trading on the NYSE (the "Valuation Time"), which is currently
4:00 p.m., Eastern time or in the event that the NYSE closes early, at the time
of such early closing. The NAV per share of the Fund is computed by dividing the
value of the Fund's Assets (i.e., the value of its investment in the Portfolio
and other assets), less all liabilities, by the total number of its shares
outstanding as of the Valuation Time. The Portfolio's securities and other
assets are valued primarily on the basis of market quotations or, if quotations
are not readily available, by a method which the Portfolio's Board of Trustees
believes accurately reflects fair value.

Under procedures adopted by the Board, a NAV for the Fund later determined to
have been inaccurate for any reason will be recalculated. Purchases and
redemptions made at a NAV determined to have been inaccurate will be adjusted,
although in certain circumstances, such as where the difference between the
original NAV and the recalculated NAV divided by the recalculated NAV is 0.005%
( 1/2 of 1%) or less or shareholder transactions are otherwise insubstantially
affected, further action is not required.

<PAGE>

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PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------

HOW TO BUY SHARES

The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. See "Net
Asset Value" herein. Shares of the Fund may be available through Investment
Professionals, such as broker/dealers and investment advisers (including Service
Agents).

Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the "Transfer
Agent"), prior to the Valuation Time on any Valuation Day will be effective at
that day's Valuation Time. The Trust and Transfer Agent reserve the right to
reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to Bankers Trust as the Trust's custodian (the "Custodian") purchase
payments by the following business day (trade date + 1) after an order for
shares is placed. A shareholder must settle with the Service Agent for his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account held with
Bankers Trust to settle transactions with the Fund without incurring the
additional costs or delays associated with the wiring of Federal funds.

Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or theTransfer Agent.

If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
shares to the Transfer Agent before the Valuation Time.

The Transfer Agent must receive payment within one business day after an order
for shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.

MINIMUM INVESTMENTS

TO OPEN AN ACCOUNT $2,500
For retirement accounts 500
Through automatic investment plans 1,000

TO ADD TO AN ACCOUNT $250
For retirement accounts 100
Through automatic investment plan 100

MINIMUM BALANCE $1,000
For retirement accounts None
IF YOU ARE NEW TO BT INVESTMENT FUNDS, complete and sign an account application
and mail it along with your check to the address listed below. If there is no
account application accompanying this Prospectus, call the BT Service Center at
1-800-730-1313.

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

IF YOU ALREADY HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS, you can:

- - Mail an account application with a check,
- - Wire money into your account,
- - Open an account by exchanging from another fund in
the BT Family of Funds, or
- - Contact your Service Agent or Investment Professional.

If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional or BT Retirement Services Center at 1-800-677-7596 for more
information and a retirement account application.

<PAGE>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT BUYING SHARES

TO OPEN AN ACCOUNT

BY WIRE Call the BT Service Center at
1-800-730-1313 to receive wire instructions
for account establishment.

BY PHONE Contact your Service Agent, Investment
Professional, or call BT's Service Center at
1-800-730-1313. If you are an existing
shareholder, you may exchange from
anoher BT account with the same
registration, includint, name, address, and
taxpayer ID number.

BY MAIL Complete and sign the account application.
Make your check payable to the complete
name of the Fund of your choice. Mail to
the appropriate address indicated on the
application.
TO ADD TO AN ACCOUNT

Call your Investment Professional
or wire additional investment to:

ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO.: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: Fund Number
BT Investment Capital Appreciation Fund - 465

Contact your Service Agent, Investment Professional, or
call BT's Service Center at 1-800-730-1313. If you are
an existing shareholder, you may exchange from another
BT account with the same registration, including, name,
address, and taxpayer ID number

Make your check complete name of the
Fund of your choice. Indicate your Fund account number
on you check and mail to the address printed on your
account statement

HOW TO SELL SHARES

You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. Redemption
requests should be transmitted by customers in accordance with procedures
established by the Transfer Agent and the Shareholder's Service Agent.
Redemption requests for shares of the Fund received by the Service Agent and
transmitted to the Transfer Agent prior to the Valuation Time on each Valuation
Day will be effective at that day's Valuation Time and the redemption proceeds
normally will be delivered to the shareholder's account the next day, but in any
event within seven calendar days following receipt of the request.

Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Shareholder Servicing Agent does not do so, it may
be liable for any losses due to unauthorized or fraudulent instructions. Such
procedures may include, among others, requiring some form of personal
identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions and/or tape recording of
telephone instructions.

Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum, but not if an account is below the
minimum due to a change in market value. See "Minimum Investments" above for
minimum balance amounts.

<PAGE>

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- --------------------------------------------------------------------------------

TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions, contact your Service Agent or call the BT Service Center at
1-800-730-1313.

IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, leave
at least $1,000 worth of shares in the account to keep it open.

TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance when completing your account application.

CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:

- - Your account registration has changed within the last 30 days,
- - The check is being mailed to a different address than the one on your
account (record address),
- - The check is being made payable to someone other than the account owner,
- - The redemption proceeds are being transferred to a BT account with a
different registration, or
- - You wish to have redemption proceeds wired to a non-predesignated bank
account.

A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.

You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.

ADDITIONAL INFORMATION ABOUT SELLING SHARES

BY WIRE - You must sign up for the wire feature before using it. To verify that
it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire redemption
request must be received by the Transfer Agent before 4:00 p.m. Eastern time for
money to be wired on the next business day.

IN WRITING - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number of
shares to be redeemed, and mail to one of the following addresses:

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide a
copy of the trust document certified within the last 60 days.

For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.

Unless otherwise instructed, the Transfer Agent will send a check to the account
address of record. The Trust reserves the right to close investor accounts via
30 day notice in writing if the Fund account balance falls below the Fund
minimums.

INVESTOR SERVICES

BT Investment Funds provide a variety of services to help you manage your
account.

INFORMATION SERVICES
STATEMENTS AND REPORTS that your Investment Professional or the Transfer Agent
may send to you include the following:

- - Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration)
- - Account statements (monthly)
- - Financial reports (every six months)

EXCHANGE PRIVILEGE

Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. The Fund reserves the right to
terminate or modify the exchange privilege in the future. To make an

<PAGE>

- --------------------------------------------------------------------------------

exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares" herein. Before making an exchange, please note the
following:

- - Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

- - Your new account will have the identical account registration including the
same name, address and taxpayer identification number as your existing
account(s).

- - Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will receive a written confirmation of each exchange
transaction.

Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you. The Fund reserves the right not to
honor an exchange request when the shares exchanged in a fund have been held for
less than seven calendar days.

SYSTEMATIC PROGRAMS
To move money from your bank account to BT Investment Funds
<TABLE>
<CAPTION>

<S> <C> <C> <C>
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT

$1,000 $100 Monthly, For a new account, complete the
bimonthly, appropriate section on the
quarterly or application.
semi-annually
For existing accounts, call your
Investment Professional for an
application. To change the amount or
frequency of your investment, contact
your Investment Professional directly
or call 1-800-730-1313. Call at least
10 business days prior to your next
scheduled investment date.

</TABLE>

SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic redemptions from your
account.

MINIMUM FREQUENCY SETTING UP OR CHANGING

$100 Monthly, bimonthly, To establish, call your Investment
quarterly or Professional or call 1-800-730-1313
semiannually after your account is open. The
accounts from which the withdrawals
will be processed must have a minimum
balance of $10,000.

TAX-SAVING RETIREMENT PLANS

Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact Bankers Trust for further information. Bankers Trust can
set up your new account in the Fund under a number of several tax-savings or
tax-deferred plans. Minimums may differ from those listed elsewhere in this
Prospectus.

- - Individual Retirement Accounts (IRAs): personal savings plans that offer
tax advantages for individuals to set aside money for retirement and allow
new contributions of $2,000 per tax year.

- - Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

<PAGE>

- --------------------------------------------------------------------------------

- - SIMPLIFIED EMPLOYEE PENSION PLANS (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer
than 25 eligible employees.

- - KEOGH PLANS: defined contribution plans available to individuals with
self-employed income and nonincorporated businesses such as sole
proprietors, professionals and partnerships. Contributions are
tax-deductible to the employer and earnings are tax-sheltered until
distribution.

- - CORPORATE PROFIT-SHARING AND MONEY-PURCHASE PLANS: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.

- - 401(k) PROGRAMS: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.

- - 403(b) CUSTODIAN ACCOUNTS: defined contribution plans open to employees of
most non-profit organizations and educational institutions.

- - DEFERRED BENEFIT PLANS: plan sponsors may invest all or part of their
pension assets in the Fund.

- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
- --------------------------------------------------------------------------------

DISTRIBUTIONS. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Normally, income dividends,
if any, are distributed quarterly.The Fund distributes capital gains annually.
Unless a shareholder instructs the Trust to pay such dividends and distributions
in cash, they will be automatically reinvested in additional shares of the Fund.

FEDERAL TAXES. The Fund intends to qualify as a regulated investment company,
as defined in the Internal Revenue Code of 1986, as amended (the "Code").
Provided the Fund meets the requirements imposed by the Code and distributes all
of its income and gains, the Fund will not pay any Federal income or excise
taxes.

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's capital gain distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional shares.
Distributions declared in December and paid in January are taxable as if paid on
December 31. The Fund will send each shareholder a tax statement by January 31
showing the tax status of the distributions received over the past year.

CAPITAL GAINS. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should keep your regular account statements
to use in determining your tax.

"BUYING A DIVIDEND." On the ex-date for a distribution from capital gains, the
Fund's share value is reduced by the amount of the distribution. If you buy
shares just before the ex-date ("buying a dividend"), you will pay the full
price for the shares and then receive a portion of the price back as a taxable
distribution.

OTHER TAX INFORMATION. You may be subject to state or local taxes on your
investment, depending on the laws in your area. You should consult with your own
tax adviser concerning the application of federal, state and local taxes to your
distributions from the Fund.

<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- --------------------------------------------------------------------------------

The Portfolio's recent strategies and holdings, and the Fund's performance, are
detailed twice a year in the Fund's financial reports, which are sent to all
Fund shareholders.

For current Fund performance or a free copy of the Fund's financial report,
please contact a Service Agent.

Mutual fund performance is commonly measured as total return and/or yield. The
Fund's performance is affected by the expenses of the Fund. The exclusion of any
applicable sales charge from a performance calculation produces a higher return.
EXPLANATION OF TERMS

TOTAL RETURN is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.

YIELD refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders. This difference may be significant for a
Fund investing in a Portfolio whose investments are denominated in foreign
currencies.

Performance information may include comparisons of the Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line, and Morningstar,
Inc.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and changes in the expenses of the Fund or Portfolio. In addition, during
certain periods for which total return may be provided, Bankers Trust may have
voluntarily agreed to waive portions of its fees, or reimburse certain operating
expenses of the Fund or the Portfolio, on a month-to-month basis. Such waivers
will have the effect of increasing the Fund's net income (and therefore its
yield and total return) during the period such waivers are in effect.

TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.

<PAGE>

- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
- --------------------------------------------------------------------------------

BOARD OF TRUSTEES

The Trust and the Portfolio are governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or the Portfolio, as the case may be, have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that some of the same individuals are Trustees of the Trust and the
Portfolio. See "Management of the Trust and the Portfolio" in the SAI for more
information with respect to the Trustees and officers of the Trust and
Portfolio.

INVESTMENT ADVISER

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust as Adviser.

BANKERS TRUST COMPANY AND ITS AFFILIATES

Bankers Trust Company, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.

As of June 30, 1996, Bankers Trust New York Corporation was the seventh largest
bank holding company in the United States with total assets of approximately
$115 billion. Bankers Trust is a worldwide merchant bank dedicated to servicing
the needs of corporations, governments, financial institutions and private
clients through a global network of over 120 offices in more than 40 countries.
Investment management is a core business of Bankers Trust, built on a tradition
of excellence from its roots as a trust bank founded in 1903. The scope of
Bankers Trust's investment management capability is unique due to its leadership
positions in both active and passive quantitative management and its presence in
major equity and fixed income markets around the world. Bankers Trust is one of
the nation's largest and most experienced investment managers with approximately
$215 billion in assets under management globally.

Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise - once available to only the largest
institutions in the U.S. - to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.

The Investment Advisory Agreement provides for the Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to 0.65%
of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this Prospectus and the SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.

<PAGE>

- --------------------------------------------------------------------------------

Anthony Takazawa, CFA, Vice President of Bankers Trust, has senior management
responsibilities for the Portfolio. Mr. Takazawa joined Bankers Trust in 1996.
He has eight years of investment and financial analysis experience. Previously,
he worked at Phoenix Mutual Life Insurance Company as an investment analyst,
portfolio manager and director or research.

Bankers Trust investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.

ADMINISTRATOR

Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Fund. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, accrued daily and paid monthly equal on an annual basis to
0.65% of the average daily net assets of the Fund.

Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees in all aspects of the administration and operation of the
Portfolio. The Administration and Services Agreement provides for the Portfolio
to pay Bankers Trust a fee, accrued daily and paid monthly, equal on an annual
basis to 0.10% of the Portfolio's average daily net assets. Under each
Administration and Services Agreement, Bankers Trust may delegate one or more of
its responsibilities to others, including affiliates of Edgewood, at Bankers
Trust's expense. For more information, see the SAI.
DISTRIBUTOR

Edgewood Services, Inc. is the principal distributor for the shares of the Fund.
In addition, Edgewood and its affiliates provide the Trust with office
facilities, and currently provide administration and distribution services for
other registered investment companies. The principal business address of
Edgewood and its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh,
Pennsylvania 15230-0897.

DISTRIBUTION AND SERVICE PLAN

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Edgewood may seek reimbursement in an amount
not exceeding 0.20% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Edgewood who, as their primary activity, engage in or support
the distribution of shares; printing of prospectuses, statements of additional
information and reports for other than existing Fund shareholders in amounts in
excess of that typically used in connection with the distribution of shares of
the Fund; costs of placing advertising in various media; services of parties
other than Edgewood or its affiliates in formulating sales literature; and
typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the Prospectus and SAI and in connection with printing
them for and distributing them to existing shareholders and regulatory
authorities, which costs and expenses would not be considered distribution
expenses for purposes of the Plan, will also be paid by the Fund. To the extent
expenses of Edgewood under the Plan in any fiscal year of the Trust exceed
amounts payable under the Plan during that year, those expenses may be
reimbursed in a succeeding fiscal year; however, no carrying charge or interest
will be added to the amount of the expense. Expenses incurred in connection with
distribution activities will be identified to the Fund or the other series of
the Trust involved, although it is anticipated that some activities may be
conducted on a Trust-wide basis, with the result that those activities will not
be identifiable to any particular series. In the latter case, expenses will be
allocated among the series of the Trust on the basis of their relative net
assets.

SERVICE AGENT

All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will

<PAGE>

- --------------------------------------------------------------------------------

be paid by Bankers Trust from its fees. The services provided by a Service Agent
may include establishing and maintaining shareholder accounts, processing
purchase and redemption transactions, arranging for bank wires, performing
shareholder sub-accounting, answering client inquiries regarding the Trust,
assisting clients in changing dividend options, account designations and
addresses, providing periodic statements showing the client's account balance,
transmitting proxy statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings of shareholders,
collecting, tabulating and forwarding to the Trust executed proxies and
obtaining such other information and performing such other services as the
Administrator or the Service Agent's clients may reasonably request and agree
upon with the Service Agent. Service Agents may separately charge their clients
additional fees only to cover provision of additional or more comprehensive
services not already provided under the Administration and Services Agreement
with Bankers Trust, or of the type or scope not generally offered by a mutual
fund, such as cash management services or enhanced retirement or trust
reporting. Each Service Agent has agreed to transmit to shareholders, who are
its customers, appropriate disclosures of any fees that it may charge them
directly.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust acts as custodian of the assets of the Trust and the Portfolio and
serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.

ORGANIZATION OF THE TRUST

The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Fund is a separate series of the Trust and was established
and designated as a separate series of the Trust on August 12, 1992. The Trust
offers shares of beneficial interest of separate series, par value $0.001 per
share. The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.

The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.

The Portfolio is organized as a trust under the laws of the State of New York.
The Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio.

Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

As of December 31, 1996, Bartus & Co., New York, New York, and Infid & Co., New
York, New York, owned 32.91% and 41.49%, respectively, of the voting securities

<PAGE>

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of the Fund, and, therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of its shareholders.

The series of BT Investment Portfolios will vote separately or together in the
same manner as the series of the Trust. Under certain circumstances, the
investors in one or more series of BT Investment Portfolios could control the
outcome of these votes.

EXPENSES OF THE TRUST

The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Edgewood,
including administration and service fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by Bankers Trust or
Edgewood including investment advisory and administration and services fees,
fees for necessary professional services, amortization of organizational
expenses, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.

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ADDITIONAL INFORMATION
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CONVERTIBLE SECURITIES. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed income stream--generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security--a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.

In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security) or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

PREFERRED STOCK. Preferred stock has a preference in liquidation (and, generally
dividends) over common stock but is subordinated in liquidation to debt. As a
general rule the market value of preferred stocks with fixed dividend rates and
no conversion rights varies inversely with interest rates and perceived credit
risk, with the price determined by the dividend rate. Some preferred stocks are
convertible into other securities, for example common stock, at a fixed price
and ratio or upon the occurrence of certain events. The market price of
convertible preferred stocks generally reflects an element of conversion value.
Because many preferred stocks lack a fixed maturity date, these securities
generally fluctuate substantially in value when interest rates change; such
fluctuations often exceed those of long-term bonds of the same issuer. Some
preferred stocks pay an adjustable dividend that may be based on an index,
formula, auction procedure or other dividend rate reset mechanism. In the
absence of credit deterioration, adjustable rate preferred stocks tend to have
more stable market values than fixed rate preferred stocks.

All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for the Portfolio. Bankers Trust expects,
however, that generally the preferred stocks in which the Portfolio invests will
be rated at least CCC by S&P or

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Caa by Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust. Preferred stocks rated CCC by S&P are regarded as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations and represent the highest degree of speculation among securities
rated between BB and CCC; preferred stocks rated Caa by Moody's are likely to be
in arrears on dividend payments. Moody's rating with respect to preferred stocks
does not purport to indicate the future status of payments of dividends.

WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant tends to
be more volatile than its underlying securities and ceases to have value if it
is not exercised prior to its expiration date. In addition, changes in the value
of a warrant do not necessarily correspond to changes in the value of its
underlying securities.

FOREIGN INVESTMENTS. The Portfolio may invest in securities of foreign issuers
directly or in the form of American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") or other
similar securities representing securities of foreign issuers. These securities
may not necessarily be denominated in the same currency as the securities they
represent. Designed for use in U.S., and European securities markets,
respectively, ADRs, GDRs and EDRs are alternatives to the purchase of the
underlying securities in their national markets and currencies. ADRs, GDRs and
EDRs are subject to the same risks as the foreign securities to which they
relate.

With respect to certain countries in which capital markets are either less
developed or not easily accessed, investments by the Portfolio may be made
through investment in other investment companies that in turn are authorized to
invest in the securities of such countries. Investment in other investment
companies is limited in amount by the 1940 Act, will involve the indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies and may result in a duplication of fees and expenses.

RULE 144A SECURITIES are securities in the United States that are not registered
for sale under Federal securities laws but which can be resold to institutions
under SEC Rule 144A. Provided that a dealer or institutional trading market in
such securities exists, these restricted securities are treated as exempt from
the 15% limit on illiquid securities. Under the supervision of the Board of
Trustees of the Portfolio, Bankers Trust determines the liquidity of restricted
securities and, through reports from Bankers Trust, the Board will monitor
trading activity in restricted securities. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio segregates with the Custodian liquid
securities in an amount at least equal to these commitments.

REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys a security
at one price and simultaneously agrees to sell it back at a higher price at a
future date. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent.

SECURITIES LENDING. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. During the term of the loan, the Portfolio continues to bear the
risk of fluctuations in the price of the loaned securities. In lending
securities to brokers, dealers and other financial organizations, the Portfolio
is subject to risks, which like those associated with other extensions of
credit, include delays in recovery and possible loss of rights in the collateral
should the borrower fail financially.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Portfolio may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. The
Portfolio either enters into these transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market or uses forward
contracts to purchase or sell foreign currencies.

<PAGE>

A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or to sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the
Portfolio's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.

The Portfolio may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write covered put and call
options and purchase put and call options on foreign currencies for the purpose
of protecting against declines in the U.S. dollar value of portfolio securities
and against increases in the U.S. dollar cost of securities to be acquired. The
Portfolio may use options on foreign currency to cross-hedge, which involves
writing or purchasing options on one currency to hedge against changes in
exchange rates for a different, but related currency. As with other types of
options, however, the writing of an option on a foreign currency will constitute
only a partial hedge up to the amount of the premium received, and the Portfolio
could be required to purchase or sell a foreign currency at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may be used to hedge against fluctuations in exchange rates although,
in the event of exchange rate movements adverse to the Portfolio's position, it
may forfeit the entire amount of the premium plus related transaction costs. In
addition, the Portfolio may purchase call options on a foreign currency when the
investment adviser anticipates that the currency will appreciate in value.

There is no assurance that a liquid secondary market will exist for any
particular option, or at any particular time. If the Portfolio is unable to
effect a closing purchase transaction with respect to covered options it has
written, the Portfolio will not be able to sell the underlying currency or
dispose of assets held in a segregated account until it closes out the options
or the options expire or are exercised. Similarly, if the Portfolio is unable to
close out options it has purchased, it would have to exercise the options in
order to realize any profit and will incur transaction costs. The Portfolio pays
brokerage commissions or spreads in connection with its options transactions.

OPTIONS ON STOCKS. The Portfolio may write and purchase options on stocks. A
call option gives the purchaser of the option the right to buy, and obligates
the writer to sell, the underlying stock at the exercise price at any time
during the option period. Similarly, a put option gives the purchaser of the
option the right to sell, and obligates the writer to buy the underlying stock
at the exercise price at any time during the option period. A covered call
option with respect to which the Portfolio owns the underlying stock sold by the
Portfolio exposes the Portfolio during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
stock or to possible continued holding of a stock which might otherwise have
been sold to protect against depreciation in the market price of the stock. A
covered put option sold by the Portfolio exposes the Portfolio during the term
of the option to a decline in price of the underlying stock.

OPTIONS ON STOCK INDICES. The Portfolio may purchase and write put and call
options on stock indices listed on domestic and foreign stock exchanges, in lieu
of direct investment in the underlying securities or for hedging purposes. A
stock index fluctuates with changes in the market values of the securities
included in the index.

Options on securities indices are generally similar to options on stocks except
that the delivery requirements

21
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are different. Instead of giving the right to take or make delivery of
securities at a specified price, an option on a stock index gives the holders
the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of the exercise, multiplied by (b) a fixed "index
multiplier."

Successful use by the Portfolio of options on security indices will be subject
to Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.

FUTURES CONTRACTS ON STOCK INDICES. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of domestic or foreign securities ("Futures
Contracts"). This investment technique may be used as a low-cost method of
gaining exposure to a particular securities market without investing directly in
those securities or to hedge against anticipated future changes in general
market prices which otherwise might either adversely affect the value of
securities held by the Portfolio or adversely affect the prices of securities
which are intended to be purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset an existing futures
position.
When used for hedging purposes, each transaction in Futures Contracts involves
the establishment of a position which will move in a direction opposite to that
of the investment being hedged. If these hedging transactions are successful,
the futures position taken for the Portfolio will rise in value by an amount
which approximately offsets the decline in value of the portion of the
Portfolio's investments that is being hedged. Should general market prices move
in an unexpected manner, the full anticipated benefits of Futures Contracts may
not be achieved or a loss may be realized.

The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of market movement.

Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good faith deposit against performance of obligations under
Futures Contracts written for the Portfolio. The Portfolio may not purchase or
sell a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts, other than Futures Contracts used for hedging
purposes, would exceed 5% of the market value of the Portfolio's total assets.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may invest in options on futures
contracts for similar purposes.

There can be no assurance that the use of these portfolio strategies will be
successful.

ASSET COVERAGE. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities and foreign
currency exchange transactions, are not used to achieve investment leverage, the
Portfolio will cover such transactions, as required under applicable
interpretations, of the SEC, either by owning the underlying securities,
entering into an off-setting transaction, or by segregating with the Portfolio's
custodian liquid securities in an amount at all times equal to or exceeding the
Portfolio's commitment with respect to these instruments or contracts.

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BT INVESTMENT FUNDS
CAPITAL APPRECIATION FUND

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006

DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105

COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022

-------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE TRUST'S PROSPECTUSES, ITS
STATEMENT OF ADDITIONAL INFORMATION OR THE TRUST'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF THE TRUST'S SHARES AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN
AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY
STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
------------------------------

Cusip #055922819
COMBINV300 (1/97)
(Revised 5/97)