BT INVESTMENT FUNDS, 485BPOS, 1997-01-30

BT INVESTMENT FUNDS
485BPOS, 1997-01-30

Previous: WESTWOOD FUNDS, 485BPOS, 1997-01-30

Next: HERITAGE INCOME GROWTH TRUST, 485BPOS, 1997-01-30

1933 Act File No. 33-07404
1940 Act File No. 811-04760

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ..........

Post-Effective Amendment No. 40 .......... X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 41 ......................... X

BT INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

Jay S. Neuman, Esquire Copies to: Burton M. Leibert, Esq.
Federated Investors Tower Willkie Farr & Gallagher
Pittsburgh, Pennsylvania 15222-3779 One Citicorp Center
(Name and Address of Agent for Service) 153 East 53rd Street
New York, New York 10022

It is proposed that this filing will become effective
(check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 29, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

BT Investment Portfolios, Intermediate Tax Free Portfolio, Global High Yield
Securities Portfolio, Capital Appreciation Portfolio, Small Cap Portfolio,
International Equity Portfolio, Pacific Basin Equity Portfolio and Latin
American Equity Portfolio have also executed this Amendment to the Registration
Statement.

Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:

X filed the Notice required by that Rule on November 26, 1996 or
intends to file the Notice required by that Rule on or about ;
or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and, pursuant to Rule 24f-2(b)(2), need not file the Notice.

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of BT INVESTMENT FUNDS, which
is comprised of eighteen funds, relates only to Intermediate Tax Free Fund,
Global High Yield Securities Fund, Capital Appreciation Fund, Small Cap Fund,
International Equity Fund, Pacific Basin Equity Fund and Latin American Equity
Fund, and is comprised of the following:

PART A INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............Cover Page.
Item 2. Synopsis.................Summary of Expenses.
Item 3. Condensed Financial
Information..............Financial Highlights; Performance
Information and Reports.
Item 4. General Description of
Registrant...............The Funds; Who May Want to Invest; Investment
Principles and Risks; Investment Objectives
and Policies; Risk Factors: Matching the
Fund to Your Investment Needs; Special
Information Concerning Master-Feeder Fund
Structure; Securities and Investment
Practices; Appendix.
Item 5. Management of the Fund...Management of the Trust and the Portfolios.
Item 6. Capital Stock and Other
Securities...............Dividends, Distributions, and Taxes;
Additional Information.
Item 7. Purchase of Securities Being
Offered..................Net Asset Value; Purchase and Redemption of
Shares.
Item 8. Redemption or Repurchase.Purchase and Redemption of Shares.
Item 9. Legal Proceedings........None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page...............Cover Page.
Item 11. Table of Contents........Table of Contents.
Item 12. General Information and
History..................Organization of the Trust
Item 13. Investment Objectives and
Policies.................Investment Objectives, Policies and
Restrictions.
Item 14. Management of the Fund...Management of the Trust and the Portfolios.
Item 15. Control Persons and Principal
Holders of Securities....Fund Ownership.
Item 16. Investment Advisory and Other
Services.................Investment Adviser; Administrator.
Item 17. Brokerage Allocation.....Portfolio Transactions and Brokerage
Commissions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................Valuation of Securities; Redemptions and
Purchases in Kind.
Item 20. Tax Status...............Taxation.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data.....................Performance Information
Item 23. Financial Statements.....Incorporated by reference to the Funds'
Annual
Reports dated September 30, 1996, pursuant to
Rule 411 under the Securities Act of 1933.
(File Nos. 33-07404 and 811-04760).

o BT INVESTMENT FUNDS o
Intermediate Tax Free Fund
Global High Yield Securities Fund
Capital Appreciation Fund
Small Cap Fund
International Equity Fund
Pacific Basin Equity Fund
Latin American Equity Fund
PROSPECTUS

JANUARY 31, 1997
BT Investment Funds (the `Trust'') is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
Each of the funds listed above (each, a `Fund'') is a separate series of BT
Investment Funds.

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

Bankers Trust Company (`Bankers Trust'') is the investment adviser (the
`Adviser'') of each Portfolio.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.

To learn more about a Fund and its investments, investors can obtain a copy of
that Fund's Statement of Additional Information (`SAI''), dated January 31,
1997, along with the corresponding Portfolio's most recent financial report and
portfolio listing. Each SAI has been filed with the Securities and Exchange
Commission (the `SEC'') and is incorporated herein by reference. For a free
copy of this Prospectus or the SAI, call the Trust's Service Agent at 1-800-730-
1313.

SHARES OF THE FUNDS 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.

The Global High Yield Securities Portfolio and Latin American Equity Portfolio
may invest in lower-quality debt securities, sometimes called `junk bonds.''
The Global High Yield Securities Portfolio may invest in these types of
securities without limit. Investors should consider that these securities carry
greater risks, such as the risk of default, than other debt securities. Refer to
`Risk Factors and Certain Securities and Investment Practices-Risks of
Investing in High Yield Securities (`Junk Bonds'') herein for further
information.

The Global High Yield Securities Portfolio and Latin American Equity Portfolio
may borrow money for investment in securities. Such leverage will exaggerate any
increase or decrease the value of shares in the Funds. Borrowing also involves
costs to the Portfolio. See `Risk Factors and Certain Securities and Investment
Practices-Leverage''herein. Each of the corresponding Funds may be considered a
speculative investment and is designed for aggressive investors.

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

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

TABLE OF CONTENTS
PAGE

The Funds 3
Who May Want To Invest 3
Investment Principles and Risks 4
Summary Of Fund Expenses 5
Financial Highlights 7
Investment Objectives And Policies 11
Risk Factors: Matching The
Fund To Your Investment Needs 18
Securities And Investment Practices 21
Performance Information And Reports 28
Management Of The Trust And Portfolios 29
Purchase And Redemption Of Shares 33
Dividends, Distributions And Taxes 38
Additional Information 39
Appendix 41

2
THE FUNDS
Intermediate Tax Free Fund's investment objective is a high level of current
income exempt from Federal income tax consistent with moderate risk of capital.
The Portfolio seeks to maintain a current yield that is greater than that
generally obtainable from a portfolio of short-term tax-exempt obligations,
subject to applicable quality restrictions. See `Risk Factors: Matching the
Fund to Your Investment Needs''herein.

Global High Yield Securities Fund's investment objective is high current income
from investment in a non-diversified portfolio of high yield, non-investment
grade debt securities issued in many of the world's securities markets. Capital
appreciation will be considered when consistent with the primary investment
objective of high current income. See `Risk Factors: Matching the Fund to Your
Investment Needs''herein.

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.

Small Cap Fund's investment objective is long-term capital growth; the
production of any current income is secondary to this objective. The Portfolio
seeks to provide long-term capital growth by investing primarily in equity
securities of smaller sized growth companies. See `Risk Factors: Matching the
Fund to Your Investment Needs''herein.

International Equity Fund's investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio may
also invest in emerging market securities. See `Risk Factors: Matching the Fund
to Your Investment Needs''herein.

Pacific Basin Equity Fund's investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. See `Risk Factors: Matching the
Fund to Your Investment Needs''herein.

Latin American Equity Fund's investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. See `Risk Factors: Matching the Fund to Your Investment
Needs''herein.

WHO MAY WANT TO INVEST
The Trust seeks to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio. The Portfolios are
Intermediate Tax Free Portfolio, Global High Yield Securities Portfolio, Capital
Appreciation Portfolio, Small Cap Portfolio, International Equity Portfolio,
Pacific Basin Equity Portfolio and Latin American Equity Portfolio,
respectively.

The Capital Appreciation Fund, Small Cap Fund, International Equity Fund,
Pacific Basin Equity Fund, and Latin American Equity Fund are 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. These
Funds invest for growth and do not pursue income.

In addition, the International Equity Fund, Global High Yield Securities Fund,
Latin American Equity Fund and Pacific Basin Equity Fund may also be appropriate
for investors who want to pursue their investment goals in markets outside of
the United States. By including international investments in your portfolio, you
can achieve an extra level of diversification and also participate in
opportunities around the world.
The Intermediate Tax Free Fund is designed for conservative investors looking
for a relatively stable, high-grade investment, the income of which is free from
Federal income tax. Because the Fund's Portfolio invests in high-grade tax-
exempt instruments with short to intermediate maturities its share price should
be more stable than that of a long-term bond fund, although it may be less
stable than that of a short-term bond fund.

Each 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.

INVESTMENT PRINCIPLES AND RISKS
The value of each Portfolio's investments varies based on many factors. The
value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.

Stock values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment, especially for securities in emerging markets. Many
investments in emerging markets can be considered speculative, and therefore may
offer higher income (for debt funds) and total return potential, but
significantly greater risk.

Each of the Global High Yield Securities Fund and Portfolio is classified as
a `non-diversified'' investment company under the Investment Company Act of
1940, as amended (the `1940 Act''), and may invest a greater portion of its
assets in a single issuer than a diversified fund. As a result, this Portfolio
may be more susceptible to any single economic, political or regulatory
occurrence than a diversified fund. See `Risk Factors: Matching the Fund to
Your Investments Needs-Non-Diversified Investment Company''for more
information. Each other Fund and Portfolio is classified as `diversified.''

Bankers Trust may use various investment techniques to hedge a Portfolio's
risks, but there is no guarantee that these strategies will work as intended.
When an investor sells their Fund shares (`Shares''), they may be worth more or
less than what they originally paid for them. See `Risk Factors: Matching the
Fund to Your Investment Needs''herein for more information.

SUMMARY OF FUND EXPENSES
ANNUAL OPERATING EXPENSES are paid out of the assets of each Portfolio and Fund.
Each Portfolio pays an investment advisory fee and an administrative services
fee to Bankers Trust. Each Fund incurs expenses such as maintaining shareholder
records and furnishing shareholder statements. Each Fund must provide financial
reports.

The following table provides: (i) a summary of estimated expenses relating to
purchases and sales of Shares of the Funds and the annual operating expenses of
the Funds and the expenses of the corresponding 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 each Fund. THE TRUSTEES OF THE TRUST
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF EACH FUND AND THE CORRESPONDING
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 EACH FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE CORRESPONDING PORTFOLIO.

Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)

Intermediate Tax Free Fund

Investment advisory fee (after reimbursements or waivers) 0.31%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.54

Total operating expenses (after reimbursements or waivers) 0.85%

Global High Yield Securities Fund

Investment advisory fee (after reimbursements or waivers) 0.56%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.94

Total operating expenses (after reimbursements or waivers) 1.50%

Capital Appreciation Fund

Investment advisory fee (after reimbursements or waivers) 0.58%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.67

Total operating expenses (after reimbursements or waivers) 1.25%

Small Cap Fund

Investment advisory fee (after reimbursements or waivers) 0.58%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.67

Total operating expenses (after reimbursements or waivers) 1.25%

International Equity Fund

Investment advisory fee (after reimbursements or waivers) 0.60%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.90

Total operating expenses (after reimbursements or waivers) 1.50%

Pacific Basin Equity Fund

Investment advisory fee (after reimbursements or waivers) 0.89%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.86

Total operating expenses (after reimbursements or waivers) 1.75%

Latin American Equity Fund

Investment advisory fee (after reimbursements or waivers) 0.89%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.11

Total operating expenses (after reimbursements or waivers) 2.00%
Examples

You 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: 1 year 3 years 5 years 10 years

Intermediate Tax
Free Fund $9 $27 $47 $105
Global High Yield
Securities Fund $15 $47 $82 $179
Capital
Appreciation Fund $13 $40 $69 $151
Small Cap Fund $13 $40 $69 $151
International Equity Fund $15 $47 $82 $179
Pacific Basin Equity Fund $18 $55 $95 $206
Latin American Equity Fund $20 $63 $108 $233

The expense tables and the examples above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of each Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: Intermediate Tax Free Portfolio --
0.40%; Global High Yield Securities Portfolio -- 0.80%; Capital Appreciation
Portfolio -- 0.65%; Small Cap Portfolio -- 0.65%; International Equity Portfolio
- -- 0.65%; Pacific Basin Equity Portfolio -- 0.75%; and Latin American Equity
Portfolio -- 1.00%. The expense tables and examples reflect a voluntary
undertaking by Bankers Trust to waive or reimburse expenses such that the total
aggregate operating expenses of each Fund for the fiscal year ended September
30, 1996 (as a percentage of the Fund's average daily net assets) will not
exceed the following: Intermediate Tax Free Fund -- 0.85%; Global High Yield
Securities Fund -- 1.50%; Capital Appreciation Fund -- 1.25%; Small Cap Fund --
1.25%; International Equity Fund -- 1.50%; Pacific Basin Equity Fund -- 1.75%;
and Latin American Equity Fund -- 2.00%. In the absence of this undertaking,
`Total Operating Expenses'' would have been as follows: Intermediate Tax Free
Fund -- 1.23%; Global High Yield Securities Fund -- 2.50%; Capital Appreciation
Fund -- 1.51%; Small Cap Fund -- 1.47%; International Equity Fund -- 1.76%;
Pacific Basin Equity Fund -- 2.06%; and Latin American Equity Fund -- 2.66%. The
examples 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 about each Fund's and each Portfolio's expenses see
`Management of the Trusts and Portfolios'' herein.

The Funds are distributed by Edgewood Services, Inc. (`Edgewood'') (the
`Distributor'') to investors includingcustomers 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 Funds and may
charge their customers a direct fee for their services. Each Service Agent has
agreed to trans-

mit to shareholders who are its customers appropriate disclosures of any fees
that it may charge them directly.

While reimbursement of distribution expenses in amounts up to 0.20% of average
net assets of each Fund are authorized to be made pursuant to the Plan of
Distribution under Rule 12b-1 of the 1940 Act it is not expected that any
payments will actually be made under that plan in the foreseeable future.

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

Intermediate Tax Free Fund

For the period
July 20, 1992
For the Period (Commencement
January 1, 1996 to For the Year Ended December 31, of Operations) to
September 30, 1996** 1995 1994 1993 December 31, 1992

<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.56 $ 9.72 $10.54 $ 9.99 $10.00

Income from Investment Operations
Net Investment Income 0.33 0.47 0.42 0.41 0.16
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.22) 0.84 (0.82) 0.57 (0.01)
Total from Investment Operations 0.11 1.31 (0.40) 0.98 0.15

Distributions to Shareholders
Net Investment Income (0.33) (0.47) (0.42) (0.41) (0.16)
Net Realized Gain from Investment Transactions - - - (0.02) -
Total Distributions (0.33) (0.47) (0.42) (0.43) (0.16)

Net Asset Value, End of Period $10.34 $10.56 $ 9.72 $10.54 $ 9.99
Total Investment Return 4.09% 13.71% (3.81)% 9.94% 3.42%*
Supplemental Data and Ratios
Net Assets, End of Period (000s omitted) $22,008 $22,213 $25,303 $31,709 $9,992
Ratio to Average Net Assets:
Net Investment Income 4.25%* 4.58% 4.20% 3.88% 3.72%*
Expenses, Including Expenses of
the Portfolio*** 0.85%* 0.85% 0.85% 0.85% 0.85%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust 0.38%* 0.28% 0.36% 0.35% 0.80%*
</TABLE>

* Annualized
** The Board of Trustees approved the change of the fiscal year ends from
December 31 to September 30.
***Expenses allocated from the Intermediate Tax Free Portfolio.

Global High Yield Securities Fund
<TABLE>
<CAPTION>
For the period
December 14, 1993
(Commencement
For the Year Ended of Operations) to
September 30, 1996 September 30, 1995 September 30, 1994

<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period 9.78 $10.29 $10.00

Income from Investment Operations
Net Investment Income 0.87 0.77 0.31
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions 1.30 (0.41) (0.02)
Total from Investment Operations 2.17 0.36 0.29

Distributions to Shareholders
Net Investment Income (0.75) (0.87) -
Net Realized Gain from Investment Transactions - - -
Total Distributions (0.75) (0.87) -

Net Asset Value, End of Period $11.20 $ 9.78 $10.29
Total Investment Return 23.31% 4.28% 3.66%*
Supplemental Data and Ratios
Net Assets, End of Period (000s omitted) $19,541 $22,913 $14,738
Ratio to Average Net Assets:
Net Investment Income 8.04% 8.68% 5.44%*
Expenses, Including Expenses of the
Portfolio*** 1.50% 1.74% 1.75%
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers Trust 1.00% 0.87% 1.08%*
</TABLE>

Capital Appreciation Fund
<TABLE>
<CAPTION>
For the period
March 9, 1993
For the For the Period For the (Commencement
Year Ended January 1, 1995 to Year Ended of Operations) to
September 30, 1996 September 30, 1995** December 31, 1994 December 31, 1993

<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value,
Beginning of Period $16.83 $12.10 $11.72 $10.00

Income from Investment Operations
Net Investment Loss (0.10) (0.07) (0.04) (0.01)
Net Realized and Unrealized Gain on
Investment Transactions 1.89 4.80 0.42 1.73
Total from Investment Operations 1.79 4.73 0.38 1.72

Distributions to Shareholders
Net Investment Income - - - -
Net Realized Gain from
Securities Transactions (1.83) - - -
Total Distributions (1.83) - - -

Net Asset Value, End of Period $16.79 $16.83 $12.10 $11.72
Total Investment Return 12.35% 39.09% 3.24% 21.54%*
Supplemental Data and Ratios
Net Assets, End of Period
(000s omitted) $67,385 $57,380 $42,737 $17,573
Ratio to Average Net Assets:
Net Investment Loss (0.66)% (0.65)%* (0.57)% (0.23)%*
Expenses, Including Expenses
of the Portfolio*** 1.25% 1.25%* 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses
by Bankers Trust 0.26% 0.32%* 0.54% 0.74%*
</TABLE>

* Annualized
**The Board of Trustees approved the change of the fiscal year ends from
December 31 to September 30.
*** Expenses allocated from Global High Yield
Securities Portfolio and Capital Appreciation Portfolio, respectively.

Small Cap Fund
<TABLE>
<CAPTION>

For the period
October 21, 1993
(Commencement
For the Year Ended of Operations) to
September 30, 1996 September 30, 1995 September 30, 1994

<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning
of Period $18.50 $11.60 $10.00

Income from Investment Operations
Net Investment Loss (0.12) (0.04) (0.03)
Net Realized and Unrealized
Gain on Investments 4.65 6.94 1.63
Total from Investment Operations 4.53 6.90 1.60

Distributions to Shareholders
Net Realized Gain from
Investment Transactions (1.37) - -

Net Asset Value, End of Period $21.66 $18.50 $11.60
Total Investment Return 26.41% 59.48% 17.06%*
Supplemental Data and Ratios
Net Assets, End of Period
(000s omitted) $242,236 $122,935 $21,332
Ratio to Average Net Assets:
Net Investment Loss (0.70)% (0.46)% (0.58)%*
Expenses, Including Expenses
of the Portfolio*** 1.25% 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses
by Bankers Trust 0.22% 0.34% 0.86%*
</TABLE>

International Equity Fund
<TABLE>
<CAPTION>
For the period
August 4, 1992
For the For the Period For the Year Ended (Commencement
Year Ended January 1, 1995 to December 31, of Operations) to
September 30, 1996 September 30, 1995** 1994 1993 December 31, 1992
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value,
Beginning of Period $15.47 $13.37 $13.18 $ 9.75 $10.00

Income from Investment Operations
Net Investment Income 0.18 0.14 0.10 0.05 0.03
Net Realized and Unrealized
Gain (Loss) on Investments
and Foreign Currency
Transactions 1.80 1.97 0.44 3.60 (0.28)
Total from Investment Operations 1.98 2.11 0.54 3.65 (0.25)

Distributions to Shareholders
Net Investment Income (0.31) (0.00) (0.09) (0.15) -
Net Realized Gain from
Investment Transactions (0.37) (0.01) (0.26) (0.07) -
Total Distributions (0.68) (0.01) (0.35) (0.22) -

Net Asset Value, End of Period $16.77 $15.47 $13.37 $13.18 $ 9.75
Total Investment Return 13.42% 15.82% 4.12% 37.38% (6.01)%*
Supplemental Data and Ratios
Net Assets, End of
Period (000s omitted) $161,692 $82,807 $56,020 $33,869 $8,218
Ratio to Average Net Assets:
Net Investment Income 0.91% 1.55%* 0.84% 0.79% 0.97%*
Expenses, Including Expenses
of the Portfolio*** 1.50% 1.50%* 1.50% 1.50% 1.50%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses
by Bankers Trust 0.26% 0.33% *0.37% 0.62% 1.36%*
</TABLE>

* Annualized
** The Board of Trustees approved the change of the fiscal year ends from
December 31 to September 30.
*** Expenses allocated from Small Cap Portfolio and International Equity
Portfolio, respectively.

Pacific Basin Equity Fund
<TABLE>
<CAPTION>
For the period
November 1, 1993
(Commencement
For the Year Ended of Operations) to
September 30, 1996 September 30, 1995 September 30, 1994
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.96 $11.82 $10.00

Income from Investment Operations
Net Investment Income (Loss) (0.03) 0.01 (0.04)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions 0.87 (0.49) 1.86
Total from Investment Operations 0.84 (0.48) 1.82

Distributions to Shareholders
Net Realized Gain from Investment Transactions - (0.38) -
Total Distributions - (0.38) -

Net Asset Value, End of Period $11.80 $10.96 $11.82
Total Investment Return 7.66% (3.87)% 20.11%*
Supplemental Data and Ratios
Net Assets, End of Period (000s omitted) $29,389 $24,504 $25,362
Ratio to Average Net Assets:
Net Investment Income (Loss) (0.24)% 0.12% (0.59)%*
Expenses, Including Expenses of the
Portfolio*** 1.75% 1.75% 1.75%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers Trust 0.31% 0.52% 0.60%*
</TABLE>

Latin American Equity Fund
<TABLE>
<CAPTION>

For the period
October 25, 1993
(Commencement
For the Year Ended of Operations) to
September 30, 1996 September 30, 1995 September 30, 1994

<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 8.50 $14.59 $10.00

Income from Investment Operations
Net Investment Income 0.02 0.03 -
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions 2.19 (5.92) 4.59
Total from Investment Operations 2.21 (5.89) 4.59

Distributions to Shareholders
Net Realized Gain from Investment
Transactions - (0.20) -

Net Asset Value, End of Period $10.71 $ 8.50 $14.59
Total Investment Return 26.00% (40.68)% 50.01%*
Supplemental Data and Ratios
Net Assets, End of Period (000s omitted) $16,997 $13,624 $27,489
Ratio to Average Net Assets:
Net Investment Income 0.16% 0.29% 0.03%*
Expenses, Including Expenses of
the Portfolio*** 2.00% 2.00% 2.00%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers Trust 0.66% 1.17% 1.27%*
</TABLE>

* Annualized
** The Board of Trustees approved the change of the fiscal year ends from
December 31 to September 30.
*** Expenses allocated from Pacific Basin Equity Portfolio and Latin American
Equity Portfolio, respectively.

INVESTMENT OBJECTIVES AND POLICIES
The Trust seeks to achieve the investment objective of each Fund by investing
all of its Assets in the corresponding Portfolio, which has the same investment
objective as the Fund. Since the investment characteristics of each Fund will
correspond directly to those of the corresponding Portfolio, the following is a
discussion of the various investments of and techniques employed by each
Portfolio. Additional information about the investment policies of each
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 a Fund or the corresponding Portfolio will be achieved.

The Intermediate Tax Free Portfolio's investment objective is a high level of
current income exempt from Federal income tax consistent with moderate risk of
capital. The Portfolio intends to manage its holdings actively. Portfolio
transactions are undertaken principally to accomplish the Portfolio's investment
objective in relation to expected movements in the general level of interest
rates, but the Portfolio may also engage in short-term trading consistent with
its objective.

The Portfolio seeks to maintain a current yield that is greater than that
generally obtainable from a portfolio of short-term tax-exempt obligations,
subject to applicable quality restrictions. The Portfolio seeks to increase
yields by adjusting the average maturity of its portfolio in light of prevailing
market conditions and credit considerations. The Portfolio will normally consist
of a portfolio of securities with a weighted average maturity of three to ten
years. The remaining maturity of securities generally will not exceed 20 years
at the time of investment. The Portfolio adjusts its holdings of long-term and
short-term debt securities to reflect its assessment of prospective changes in
interest rates, which may adversely affect current income. The success of this
strategy depends upon the ability of Bankers Trust to forecast changes in
interest rates.

The value of securities held by the Portfolio will generally fluctuate inversely
with changes in prevailing interest rates and will also be affected by changes
in the creditworthiness of issuers and other market factors. The quality
criteria applied in the selection of Portfolio securities are intended to
minimize adverse price changes due to credit considerations. The value of
municipal securities in the Portfolio can also be affected by market reaction to
legislative consideration of various tax reform proposals. Although the value of
the assets of the Portfolio and the net asset value of the Fund will fluctuate,
the Portfolio attempts to conserve the value of its assets to the extent
consistent with its objective.

Quality Information. The Portfolio will not purchase any municipal obligation
unless it is rated at least A, MIG-1 or Prime-1 by Moody's Investors Service,
Inc. (`Moodys'') or A, SP-1 or A-1 by Standard & Poor's Ratings Group (``S&P'')
or it is unrated and in the Adviser's opinion it is of comparable quality. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines, the Portfolio may continue to hold the
investment.

Taxable Investments. The Portfolio attempts to invest 100% of its assets in tax-
exempt municipal securities; however the Portfolio is permitted to invest up to
20% (or greater while maintaining a temporary defensive position) of the value
of its total assets in securities, the interest income on which is subject to
Federal income or alternative minimum tax. The Portfolio may make taxable
investments pending investment of proceeds of tax-exempt securities, pending
settlement of purchases of portfolio securities, to maintain liquidity to meet
redemptions or when it is advisable in Bankers Trust's opinion because of
adverse market conditions. The taxable investments permitted for the Portfolio
include obligations of the U.S. and its agencies and instrumentalities, bank
obligations, commercial paper and repurchase agreements and other debt
securities which meet the Portfolio's quality requirements.

Municipal Securities. The Portfolio may invest in notes and bonds issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies, authorities and
instrumentalities. These obligations may be general obligation instruments
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest, or they may be revenue instruments
payable from specific revenue sources, but not generally backed by the issuer's
taxing power. These include industrial development bonds where payment is the
responsibility of the private industrial user of the facility financed by the
instruments.

Short-Term Municipal Investments. For temporary defensive purposes or for
purposes of liquidity, the assets of the Portfolio may be invested in short-term
municipal obligations. These short-term obligations include municipal notes of
various types, including notes issued in

anticipation of receipt of taxes, the proceeds of the sale of bonds, other
revenues or grant proceeds and project notes, as well as municipal commercial
paper and municipal demand obligations such as variable rate demand notes and
master demand obligations. The interest rate on variable rate demand notes is
adjustable at periodic intervals as specified in the notes. Master demand
obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. Although master demand obligations are not marketable
to third parties, the Portfolio considers them to be liquid because they are
payable on demand. There is no specific percentage limitation on these
investments. The credit quality of variable rate demand notes and other
municipal obligations is frequently enhanced by various arrangements with
domestic or foreign financial institutions, such as letters of credit,
guarantees and insurance, and these arrangements are considered when investment
quality is evaluated. These obligations will be of comparable quality to
municipal bonds and will be purchased in anticipation of a declining market and
rising interest rates, pending purchase of longer term investments or to
maintain liquidity to meet redemptions. The amortized cost method is used by the
Portfolio to value municipal securities with maturities of less than 60 days;
when these securities are subject to puts separate from the underlying
securities, no value is assigned to the puts. The cost of any such put is
carried as an unrealized loss from the time of purchase until it is exercised or
expires.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: puts, zero coupon
municipal securities, repurchase agreements, Rule 144A securities, when-issued
and delayed delivery securities, and options and futures contracts. See `Risk
Factors: Matching the Fund to Your Investment Needs''herein and in the SAI for
more information.

The Global High Yield Securities Portfolio's investment objective is high
current income from investment in a non-diversified portfolio of high yield non-
investment grade debt securities issued in many of the world's securities
markets. Capital appreciation will be considered when consistent with the
primary investment objective of high current income. The Portfolio intends to
invest in Brady bonds and other sovereign debt and in high risk, lower quality
debt securities commonly referred to as `junk bonds'' and regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation as well as in
the debt securities of issuers located in emerging markets, Brady bonds and
other sovereign debt.

Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in high yield, non-investment grade debt securities of both
governmental and corporate issuers in both the major industrialized markets and
the so-called `emerging markets.'' See ``Risk Factors: Matching the Fund to
Your Investment Needs-Risks of Investing in Foreign Securities''and ``-Risk of
Investing in Emerging Markets''herein.

Although Bankers Trust considers both industrialized and emerging countries
eligible for investment pursuant to the Portfolio's objective, the Portfolio
will not be invested in all such markets at all times. Furthermore, investing in
some emerging markets may be neither feasible nor desirable from time to time,
due to the lack of adequate custodial arrangements for the Portfolio's assets,
exchange controls and overly burdensome repatriation rules, the lack of
organized and liquid securities markets, and unacceptable political risks. Under
normal circumstances, the Portfolio will invest in at least three emerging
markets countries. See `Risk Factors: Matching the Fund to Your Investment
Needs-Risks of Investing in Foreign Securities''and ``-Risk of Investing in
Emerging Markets''herein.

The Portfolio generally invests in securities which are rated BBB or lower by
S&P or Baa or lower by Moody's or, if unrated, of comparable quality in the
opinion of Bankers Trust. Securities which are rated BBB by S&P or Baa by
Moody's possess some speculative characteristics. A description of the rating
categories is contained in the Appendix herein. There is no lower limit with
respect to the rating categories for securities in which the Portfolio may
invest. See `Risk Factors: Matching the Fund to Your Investment Needs-Risks of
Investing In High Yield Securities (`Junk Bonds'') herein.

The Portfolio is not required to dispose of debt securities whose credit quality
declines at some point after the security is purchased; however, no more than
25% of the Portfolio's assets will be invested at any time in securities rated
less than CCC by S&P or Caa by Moody's or, if unrated, of comparable quality in
the opinion of Bankers Trust. S&P's lowest rating for bonds is CI, which is
reserved for income bonds on which no interest is being paid, and D, which is
reserved for debt in default and in respect of which payment of interest or
repayment

of principal is in arrears. Moody's lowest rating is C, which is applied to
bonds which have extremely poor prospects for ever attaining any real investment
standing. The Portfolio may, from time to time, purchase defaulted debt
securities if, in the opinion of Bankers Trust, the issuer may resume interest
payments in the near future. The Portfolio will not invest more than 10% of its
total assets (at the time of purchase) in defaulted debt securities, which may
be illiquid. Other than as set forth above, there is no restriction on the
percentage of the Portfolio's assets which may be invested in bonds of a
particular rating.

Asset Allocation. The Portfolio invests in debt obligations allocated among
diverse markets and denominated in various currencies, including multi-currency
units such as European Currency Units. The Portfolio may purchase securities
that are issued by the government or a company or financial institution of one
country but denominated in the currency (or multi-currency unit) of another
country.

Non-Diversified Investment Company. The Portfolio is classified as a `non-
diversified''investment company under the 1940 Act, which means the Portfolio
is not limited by the 1940 Act in the proportion of its assets that may be
invested in a single issuer. The Portfolio may, therefore, invest in the
securities of individual issuers to a greater degree than a diversified fund and
may be more susceptible to any single economic, political or regulatory
occurrence affecting those issuers. However, in order to enable the Fund (and
other registered investment companies which may in the future invest all their
assets in the Portfolio) to qualify as a regulated investment company (a
`RIC'') the Portfolio must comply with the diversification requirement of
Subchapter M of the Internal Revenue Code of 1986, as amended (the `Code''),
for U.S. Federal income tax purposes. See `Risk Factors: Matching the Fund to
Your Investment Needs-Non-Diversified Investment Company''herein.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
instruments, floating rate bonds, zero coupon bonds, sovereign and supranational
debt obligations, Brady bonds, loan participations and assignments, convertible
bonds, preferred stock, foreign currency exchange transactions, options on
foreign currencies, options on foreign bond indices, futures contracts on
foreign bond indices, options on futures contracts, Rule 144A securities, when-
issued or delayed delivery securities, securities lending, repurchase agreements
and reverse repurchase agreements. See `Risk Factors: Matching the Fund to Your
Investment Needs''herein and in the SAI for further information.

The Portfolio may borrow money for investment purposes. See `Risk Factors and
Certain Securities and Investment Practices''in the SAI.

The Capital Appreciation Portfolio'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.

Bankers Trust 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 undervalued by the market. These situations are only illustrative of the
types of investment 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-Risks of Investing in
Foreign Securities''herein.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
instruments, 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''herein and in the SAI for further information.

The Small Cap Portfolio's investment objective is long-term capital growth; the
production of any current income is secondary to this objective.

The Portfolio seeks to provide long term capital growth by investing
primarily in equity securities of smaller companies. The Portfolio's policy is
to invest in equity securities of smaller companies that Bankers Trust believes
are in an early stage or transitional point in their development and have
demonstrated or have the potential for above average capital growth. The Adviser
will select companies which have the potential to gain market Share in their
industry, achieve and maintain high consistent profitability or produce
increases in earnings. The Adviser also seeks companies with strong company
management and superior fundamental strength.

The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. The Portfolio is free to invest in any common stock which
in the Adviser's judgement provides above average potential for long-term growth
of capital and income.

Under normal market conditions, the Portfolio will invest at least 65% of its
assets in smaller companies (with market capitalizations less than $750 million
at time of purchase) that offer strong potential for capital growth. Small
capitalization companies have the potential to show earnings growth over time
that is well above the growth rate of the overall economy. The Portfolio may
also invest in larger, more established companies that the Adviser believes may
offer the potential for strong capital growth due to their relative market
position, anticipated earnings growth, changes in management or other similar
opportunities. The Portfolio will follow a disciplined selling process to lessen
market risks.
For temporary defensive purposes, when in the opinion of the Adviser that market
conditions so warrant, the Portfolio may invest all or a portion of its Assets
in common stocks of larger, more established companies or in fixed-income
securities or short-term money market securities. To the extent the Portfolio is
engaged in temporary defensive investments, the Portfolio will not be pursuing
its investment objective.

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-Risks of Investing in
Foreign Securities''herein.

Other Investments and Techniques. The Portfolio may also utilize the following
investments and investment techniques and practices: short-term instruments,
options on stocks, options on stock indices, futures contracts on stock indices,
options on future contracts, foreign currency exchange transactions, options on
foreign currencies, Rule 144A securities, when-issued and delayed delivery
securities, securities lending, foreign instruments and repurchase agreements.
See `Risk Factors: Matching the Fund to Your Investment Needs'' herein and in
the SAI for further information.

The International Equity Portfolio's investment objective is long-term
capital appreciation from investment in foreign equity securities (or other
securities with equity characteristics); the production of any current income is
incidental to this objective. The Portfolio invests primarily in established
companies based in developed countries outside the United States, but the
Portfolio also invests in securities of issuers in emerging markets. See `Risk
Factors: Matching the Fund to Your Investment Needs-Risks of Investing in
Foreign Securities''and ``-Risk of Investing in Emerging Markets'' herein.
Under normal circumstances, the Portfolio will invest at least 65% of the value
of its total assets in the equity

securities of issuers based in at least three countries other than the United
States. The Portfolio's investments will generally be diversified among several
geographic regions and countries.

In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Portfolio. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Portfolio may invest in securities of companies
having various levels of net worth, including smaller companies whose securities
may be more volatile than securities offered by larger companies with higher
levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through use of options or futures based on an established local index or through
investment in other registered investment companies rather than investing
directly in individual securities. 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.

The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
instruments, foreign currency exchange transactions, options on foreign
currencies, American Depositary Receipts (`ADRs''), Global Depositary Receipts
(`GDRs''), European Depositary Receipts (``EDRs''), options on stocks, options
on foreign stock indices, futures contracts on foreign stock indices, options on
futures contracts, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See `Risk Factors:
Matching the Fund to Your Investment Needs''herein and in the SAI for further
information.

The Pacific Basin Equity Portfolio's investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. Investment in such securities
involves certain considerations which are not normally involved in investment in
securities of U.S. issuers, and an investment in the Fund may be considered
speculative.

For purposes of this Prospectus, `issuers domiciled in, or doing business in,
the Pacific Basin region (other than Japan)''shall include securities of
issuers: (1) which are organized under the laws of Pacific Basin countries (see
below); (2) for which the principal securities trading market is in a Pacific
Basin country; or (3) which derive a significant proportion (at least 50
percent) of their revenues or profits from goods produced or sold, investments
made, or services performed in the countries of the Pacific Basin or which have
at least 50 percent of their assets situated in the countries of the Pacific
Basin. It is expected under normal conditions that at least 65% of the
Portfolio's assets will be invested in the equity securities of issuers based in
at least three countries in the Pacific Basin.

For the purpose of this Prospectus, the `Pacific Basin'' includes, but is
not limited to, the following countries: Hong Kong, India, Indonesia, Malaysia,
New Zealand, Pakistan, the Philippines, the People's Republic of China
(`China''), Singapore, Sri Lanka, South Korea, Thailand, Taiwan and Vietnam.
See `Risk Factors and Certain Securities and Investment Practices-Risks of
Investing in Foreign Securities''and ``-Risks of Investing in Emerging
Markets''herein and ``Foreign Securities: Special Consideration Concerning
China and China Region''in the SAI.

The Portfolio will be managed using a disciplined, value-oriented investment
philosophy that stresses the inherent value of, and the medium term outlook for,
the companies under examination. Experience has proven that often the real basis
of a business is quite different from that perceived by the market: a
misconception that usually results in its Shares trading below its true business
or replacement value. The exploitation of this `perception/reality'' gap is a
hallmark of the investment style that has been adopted for the Portfolio, and a
potential source of value for its investors.

`Value'' investing means trying to find companies which are mispriced by the
market for reasons of neglect, fashion or misconception. These opportunities
arise out of legislative changes, industrial restructuring and technology
advancements, for example. As a result, Bankers Trust and the sub-investment
adviser attach great importance to analyzing trends and accessing possible
breaks with traditional price patterns. At the company level, the emphasis is
placed on assessing the inherent `business'' value of the firm. While this
often varies from the stock market's valuation, the Adviser and the sub-
investment adviser believe a company's stock price tends to gravitate to their
`business'' value over time.

The Portfolio's investments will generally be diversified among several
geographic regions and countries in the Pacific Basin. Criteria for determining
the appropriate distribution of investment among various countries and regions
include the prospects for relative growth among foreign countries, expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships and the range of alternative opportunities
available to international investors.

The Portfolio will not invest more than 20% of the value of its total assets in
issuers domiciled in China.

In countries and regions where capital markets are underdeveloped or not easily
accessed and information is difficult to obtain, the Portfolio may choose to
invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options on futures based on an established local index or
through investment in other registered investment companies. 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.

Other Investments and Investment Techniques. The Portfolio may also utilize
the following investments and investment techniques and practices: short-term
instruments, foreign currency exchange transactions, options on foreign
currencies, ADRs, GDRs, EDRs, options on stocks, options on foreign stock
indices, futures contracts on foreign stock indices, options on futures
contracts, Rule 144A securities, when-issued and delayed delivery securities,
securities lending and repurchase agreements. See `Risk Factors: Matching the
Fund to Your Investment Needs''herein and in the SAI for further information.

The Latin American Equity Portfolio's investment objective is long-term
capital appreciation from investment primarily in the equity securities (or
other securities with equity characteristics) of companies domiciled in, or
doing business in, Latin America; the production of any current income is
incidental to this objective. Investment in such securities involves certain
considerations which are not normally involved in investment in securities of
U.S. issuers, and an investment in the Fund may be considered speculative. See
`Risk Factors: Matching the Fund to Your Investment Needs-Risks of Investing in
Foreign Securities''and ``-Risk of Investing in Emerging Markets'' herein and
`Foreign Securities: Special Consideration Concerning Latin America'' in the
SAI. It is expected under normal conditions that at least 65% of the Portfolio's
total assets will be invested in the equity securities of Latin American
issuers.

The Portfolio may borrow money for investment purposes. See `Risk Factors:
Matching the Fund to Your Investment Needs''herein.

For purposes of this Prospectus, `Latin America'' is defined as Mexico, and all
countries in Central America and South America, including Argentina, Brazil,
Chile, Colombia, Peru and Venezuela.

As used in this Prospectus, `securities of Latin American issuers'' is defined
as: (i) securities of companies for which the principal securities trading
market is in Latin America; (ii) securities, traded in any market, of companies
that derive 50% or more of their total revenue from either goods or services
produced in Latin America or sales made in Latin America; (iii) securities of
companies organized under the laws of, and with a principal office in, Latin
America; or (iv) securities issued or guaranteed by the government of a country
in Latin America,

16
its agencies or instrumentalities, political subdivisions or the central bank of
such a country. Determinations as to eligibility will be made by Bankers Trust,
under the supervision of the Board of Trustees of BT Investment Portfolios,
based on publicly available information and inquiries made to the issuers.

Bankers Trust intends to consider investment only in those countries in Latin
America in which it believes investing is feasible and does not involve undue
political risks. As of the date of this Prospectus, this list included
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Under normal
circumstances, the Portfolio's investments will be diversified among at least
three Latin American countries.

The Portfolio may invest in securities of companies having various levels of net
worth, including small companies whose securities may be more volatile than
securities offered by larger companies with higher levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options or futures based on an established local index or
through investment in other registered investment companies. 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.

Fixed Income Investments. For purposes of seeking capital appreciation, the
Portfolio may invest up to 35% of its total assets in debt securities of Latin
American issuers which are rated at least C by S&P or Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust. As an operating policy,
which may be changed by the Board of Trustees of BT Investment Portfolios, the
Portfolio will not invest more than 10% of its total assets in debt securities
rated BBB or lower by S&P or Baa or lower by Moody's. Securities which are rated
BBB by S&P or Baa by Moody's possess speculative characteristics. Bonds rated C
by S&P are of the lowest quality and may be used when the issuer has filed a
bankruptcy petition, but debt payments are still being paid. Moody's lowest
rating is C, which is applied to bonds which have extremely poor prospects of
ever attaining any real investment standing. See `Risk Factors and Certain
Securities and Investment Practices-Risks of Investing in High Yield Securities
(Junk Bonds).''Certain debt securities can provide the potential for capital
appreciation based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest and ratings upgrades. Additionally, convertible bonds
offer the potential for capital appreciation through the conversion feature,
which enables the holder of the bond to benefit from increases in the market
price of the securities into which they are convertible.

Other Investments and Investment Techniques. The Portfolio may also utilize
the following investments and investment techniques and practices: Brady bonds,
foreign currency exchange transactions, options on foreign currencies, ADRs,
GDRs, EDRs, options on stocks, options on foreign stock indices, futures
contracts on foreign stock indices, options on futures contracts, when-issued
and delayed delivery securities, Rule 144A securities, short-term instruments,
repurchase agreements, reverse repurchase agreements, leverage and securities
lending. See `Risk Factors: Matching the Fund to Your Investment Needs'' herein
and in the SAI for further information.

Risk Factors: Matching the Fund to Your Investment Needs
The following pages contain more detailed information about types of instruments
in which a Portfolio may invest and strategies Bankers Trust may employ in
pursuit of a Portfolio's investment objective. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well.
Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Portfolio achieve its goal. Holdings and recent investment strategies are
described in the financial reports of a Fund and the corresponding Portfolio,
which are sent to Fund Shareholders twice a year. For a free SAI or financial
report, call an Investment Professional.

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 a 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 a 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, each Portfolio is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, a 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.

Risk of Investing in Emerging Markets

The world's industrialized markets generally include but are not limited to the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States; the world's emerging markets generally include but are not
limited to the following: Argentina, Bolivia, Brazil, Bulgaria, Chile, China,
Colombia, Costa Rica, the Czech Republic, Ecuador, Egypt, Greece, Hungary,
India, Indonesia, Israel, the Ivory Coast, Jordan, Malaysia, Mexico, Morocco,
Nicaragua, Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.

Investment in securities of issuers based in underdeveloped emerging markets
entails all of the risks of investing in securities of foreign issuers outlined
in this section to a heightened degree. These heightened risks include: (i)
greater risks of expropriation, confiscatory taxation, nationalization, and less
social, political and economic stability; (ii) the smaller size of the market
for such securities and a low or nonexistent volume of trading, resulting in
lack of liquidity and in price volatility; (iii) certain national policies which
may restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant

national interests; and (iv) in the case of Eastern Europe and in China and
other Asian countries, the absence of developed capital markets and legal
structures governing private or foreign investment and private property and the
possibility that recent favorable economic and political developments could be
slowed or reversed by unanticipated events.

So long as the Communist Party continues to exercise a significant or, in some
countries, dominant role in Eastern European countries or in China and other
Asian countries, investments in such countries will involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there may be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Portfolio could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund shareholders.

In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of a Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems could result
either in losses to the Portfolio due to subsequent declines in the value of the
security or, if the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser.

Risks of Investing in High Yield Securities (`Junk Bonds'')

Lower-rated long-term securities, including securities rated from BB to D by
S&P or Ba to C by Moody's or, if unrated, of comparable quality in the opinion
of Bankers Trust, will usually offer higher yields than higher-rated securities.
However, there is more risk associated with these investments. This is because
of the reduced creditworthiness and increased risk of default that these
securities carry. Lower-rated long-term securities generally tend to reflect
short-term corporate and market developments to a greater extent than higher-
rated securities which react primarily to fluctuations in the general level of
interest rates. Lower rated long-term securities also involve greater
sensitivity to significant increases in interest rates. Short-term corporate and
market developments affecting the prices and liquidity of lower-rated long-term
securities could include adverse news impacting major issues or underwriters or
dealers in lower-rated long-term or unrated securities. In addition, since there
are fewer investors in lower-rated long-term securities, it may be harder to
sell securities at an optimum time.

An economic downturn may adversely affect the value of some lower-rated long-
term bonds. Such a downturn may especially affect highly leveraged companies or
companies in cyclically sensitive industries, where deterioration in a company's
cash flow may impair its ability to meet its obligation to pay principal and
interest to bondholders in a timely fashion. From time to time, as a result of
changing conditions, issuers of lower-rated long-term bonds may seek or may be
required to restructure the terms and conditions of the securities they have
issued. As a result of these restructurings, holders of lower-rated long-term
securities may receive less principal and interest than originally expected at
the time such bonds were purchased. In the event of a restructuring, the
Portfolio may bear additional legal or administrative expenses in order to
maximize recovery from an issuer. The secondary trading market for lower-rated
long-term bonds is generally less liquid than the secondary trading market for
higher-rated bonds.

The risk of loss due to default by the issuer is significantly greater for the
holders of high yield securities because such securities are generally unsecured
and are often subordinated to other obligations of the issuer. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress and
may not have sufficient revenues to meet their interest payment obligations. An
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, its inability to meet specific projected
business forecasts, or the unavailability of additional financing.

Factors adversely affecting the market value of high yield and other Portfolio
securities will adversely affect

the corresponding Fund's net asset value. In addition, a Portfolio may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings. As a matter
of operating policy, the Global High Yield Securities Portfolio and Latin
American Equity Portfolio will not invest more than 10% of their total assets
(at the time of purchase) in default debt securities, which may be illiquid.

Risks of Investing in Medium- and Small-Capitalization Stocks

Historically, medium- and small-capitalization stocks have been more volatile
in price that 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 prices as large company stocks
decline.

Non-Diversified Investment Company

The Global High Yield Securities Portfolio and Fund are each classified as a
`non-diversified'' investment company so that with respect to 50% of the
Portfolio's assets, it will be able to invest more than 5% of its assets in
obligations of one or more issuers, while being limited with respect to the
other half of its assets to investments not exceeding 5% of the Portfolio's
total assets. (A `diversified'' investment company would be required under the
1940 Act, to maintain at least 75% of its assets in cash (including foreign
currency), cash items, U.S. government securities, and other securities limited
per issuer to not more than 5% of the investment company's total assets.) In
order to enable the Fund to qualify as a regulated investment company under the
Code, the Portfolio, among other things, may not invest more than 25% of its
assets in obligations of any one issuer (other than U.S. government securities).
As a `non-diversified'' investment company, the Portfolio may invest a greater
proportion of its assets in the securities of a smaller number of issuers and
therefore may be subject to greater market and credit risk than a more broadly
diversified fund.

Additional Investment Information. The Portfolio will not have more than 25%
of the current value of its total assets invested in any single industry,
provided that this restriction shall not apply to debt securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.

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, each Fund seeks to
achieve its investment objective by investing all of its Assets in the
corresponding Portfolio, a separate registered investment company with the same
investment objectives as the corresponding Fund. Therefore, an investor's
interest in the Portfolio's securities is indirect. In addition to selling a
beneficial interest to the corresponding Fund, each Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in a Portfolio on the same terms and conditions and will
pay a proportionate Share of the Portfolio's expenses. However, the other
investors investing in a 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 a 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 has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
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 a 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.

A 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 corresponding Portfolio.

Each 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 a 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 each Portfolio is also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of a Fund or the
corresponding Portfolio. See `Risk Factors and Certain Securities and
Investment Practices''in the SAI for a description of the fundamental policies
of each Portfolio that cannot be changed without approval by `the vote 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
each Portfolio, see `Investment Objectives and Policies'' herein and ``Risk
Factors: Matching the Fund to Your Investment Needs''in this Prospectus and in
the SAI. For descriptions of the management of the Trusts and the Portfolios,
see `Management of the Trusts and the Portfolios'' herein and in the SAI. For
descriptions of the expenses of the Portfolio, see `Summary of Fund Expenses''
herein and `Management of the Trust and the Portfolios'' herein and in the SAI.

SECURITIES AND INVESTMENT PRACTICES
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.

Debt Securities. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. Debt securities, loans, and other direct debt
have varying degrees of quality and varying levels of sensitivity to changes in
interest rates. Longer-term bonds are generally more sensitive to interest rate
changes than short-term bonds.

Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.

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 a Portfolio. Bankers Trust expects,
however, that generally the preferred stocks in which a Portfolio invests will
be rated at least CCC by S&P or 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.

U.S. Government Securities are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
government. Not all U.S. government securities are backed by the full faith and
credit of the United States. For example, securities issued by the Farm Credit
Banks or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by other agencies or instrumentalities
are supported only by the credit of the entity that issued them.

ADRs, GDRs and EDRs are certificates evidencing ownership of Shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
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. See `Risk Factors and Certain
Securities and Investment Practices-Risks of Investing in Foreign Securities''
herein.

Puts. The Intermediate Tax Free Portfolio may purchase municipal bonds or notes
together with the right to resell them at an agreed price or yield within a
specified period prior to maturity. This right to resell is known as a put. The
aggregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the investment objectives of the
Portfolio and subject to the supervision of the Trustees of the Portfolio, the
purpose of this practice is to permit the Portfolio to be fully invested in tax-
exempt securities while maintaining the necessary liquidity to purchase
securities on a when-issued basis, to meet unusually large redemptions, to
purchase at a later date securities other than those subject to the put and to
facilitate Bankers Trust's ability to manage the Portfolio actively. The
principal risk of puts is that the put writer may default on its obligation to
repurchase. Bankers Trust will monitor each writer's ability to meet its
obligations under puts.

The amortized cost method is used by the Portfolio to value municipal securities
with maturities of less than 60 days; when these securities are subject to puts
separate from the underlying securities, no value is assigned to the puts. The
cost of any such put is carried as an unrealized loss from the time of purchase
until it is exercised or expires.

Zero Coupon Bonds are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile, and certain zero coupon bonds
move in the same direction as interest rates.

Zero Coupon Municipal Securities. The Intermediate Tax Free Portfolio may invest
in zero coupon municipal securities which are debt securities issued or sold at
a discount from their face value which do not entitle the holder to any periodic
payment of interest prior to maturity or a specified redemption date (or cash
payment date). The amount of the discount varies depending on the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of the
security and perceived credit quality of the issuer. Zero coupon securities also
may take the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The market
prices of zero coupon securities generally are more volatile than the market
prices of interest-bearing securities and are likely to respond to a greater
degree to changes in interest rates than interest-bearing securities having
similar maturities and credit qualities.

Floating Rate Bonds may have interest rates that move in tandem with a
benchmark, helping to stabilize their prices.

Sovereign and Supranational Debt Obligations. Debt instruments issued or
guaranteed by foreign governments, agencies, and supranational organizations
(`sovereign debt obligations''), especially sovereign debt obligations of
developing countries, may involve a high degree of risk, and may be in default
or present the risk of default. The issuer of the obligation or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors.

Brady Bonds. `Brady bonds'' are bonds issued as a result of a restructuring of
a country's debt obligations to commercial banks under the `Brady plan.'' Brady
bonds have been issued by the governments of Argentina, Costa Rica, Mexico,
Nigeria, Uruguay, Venezuela, Brazil and the Philippines, as well as other
emerging market countries. Most Brady bonds are currently rated below BBB by S&P
or Baa by Moody's. While Bankers Trust is not aware of the occurrence of any
payment defaults on Brady bonds, investors should recognize that these debt
securities have been issued only recently and, accordingly, do not have a long
payment history. Brady bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the secondary market for Latin American debt.

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. Each 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 maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.

Repurchase Agreements. In a repurchase agreement, a 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.

Reverse Repurchase Agreements. In a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party in
return for cash. This could increase the risk of fluctuation in the Fund's yield
or in the market value of its assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Portfolio's borrowing
restrictions. See `Risk Factors and Certain Securities and Investment Practices
- -Leverage''herein and in the SAI.
Investment Companies. 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 registered 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.

Short-Term Instruments. Each 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, a 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.

Securities Lending. Each Portfolio (other than the Intermediate Tax Free
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, a 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.

Leverage. The Global High Yield Securities Portfolio and Latin American Equity
Portfolio may each borrow up to one-third of the value of its total assets, from
banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Portfolio is required
to maintain continuous asset coverage of 300% with respect to such borrowings
and to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidations of a Portfolio's holdings may be
disadvantageous from an investment standpoint.

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Portfolio's securities and the corresponding
Fund's net asset value and money borrowed by a Portfolio will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.

Loan Participations and Assignments. The Global High Yield Securities Portfolio
may invest in fixed and floating rate loans (`loans'') arranged through private
negotiations between a borrower and one or more institutions (`lenders''). The
majority of the Portfolio's investments in loans in emerging markets is expected
to be in the form of participations in loans (`participations'') and
assignments of portions of loans from third parties (`assignments''). The
Portfolio may also invest in loans, participations or assignments of loans to
borrowers located in the industrialized world. Participations typically will
result in the Portfolio's having a contractual relationship only with the
lender, not the borrower. The Portfolio will have the right to receive payments
of principal, interest and any fees to which it is entitled only from the lender
selling the participation and only upon receipt by the lender of the payments
from the borrower. In connection with purchasing participations, the Portfolio
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the loan (`loan agreement''), nor any
rights of set-off against the borrower, and the Portfolio may not directly
benefit from any collateral supporting the loan in which it has purchased the
participation. As a result, the Portfolio will assume the credit risk of both
the borrower and the lender that is selling the participation. In the event of
the insolvency of the lender selling the participation, the Portfolio may be
treated as a general creditor of the lender and may not benefit from any set-off
between the lender and the borrower. The Portfolio will acquire participations
only if the lender interpositioned between the Portfolio and the borrower is
determined by Bankers Trust to be creditworthy. When the Portfolio purchases
assignments from lenders, the Portfolio will acquire direct rights against the
borrower on the loan; however, since assignments are arranged through private
negotiations between the potential assignees and assignors, the rights and
obligations acquired by the Portfolio as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender.

The Portfolio may have difficulty disposing of assignments and participations.
The liquidity of such securities is limited and the Portfolio anticipates that
such securities could only be sold to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Portfolio's ability to dispose of
particular assignments or participations when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for assignments and participations also may make it more
difficult in valuing the Portfolio and, therefore, calculating the net asset
value per Share of the Fund. All assignments and participations shall be
considered to be illiquid securities by the Portfolio. The investment by the
Portfolio in illiquid securities, including assignments and participations, is
limited to a total of 15% of net assets.

Derivatives. Each 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 a Portfolio and when consistent with a Portfolio's
investment objective and policies. The use of derivatives for non-hedging
purposes may be considered speculative.

Foreign Currency Exchange Transactions. Each Portfolio (other than the
Intermediate Tax Free 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. A 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.

A forward foreign currency exchange contract is an obligation by a 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 a Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

A 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. Each Portfolio (other than the Intermediate
Tax Free 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. A 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 a Portfolio's position, it may forfeit the entire
amount of the premium plus related transaction costs. In addition, a 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 a 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. Each Portfolio (except the Global High Yield Securities
Portfolio and the Intermediate Tax Free 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 a 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 a Portfolio exposes the Portfolio during
the term of the option to a decline in price of the underlying stock.

Options on Stock and Bond Indices. Each Portfolio may purchase and write put
and call options on stock or bond indices listed on domestic and foreign stock
exchanges, in lieu of direct investment in the underlying securities or for
hedging purposes. A stock or bond 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 are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond 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 a 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 and Bond Indices. Each 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.

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 a Portfolio. A 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. Each 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 a 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, a
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.

Portfolio Turnover

The portfolio turnover rates for each Portfolio for the periods indicated
were as follows: Intermediate Tax Free Portfolio - 130% and 95%, for the period
from January 1, 1996 to September 30, 1996 and for the year ended December 31,
1995, respectively; Global High Yield Securities Portfolio - 207% and 169%, for
the fiscal years ended September 30, 1996, and 1995 respectively; Capital
Appreciation Portfolio - 271% and 125%, for the fiscal year ended September 30,
1996, and for the period from January 1, 1995 to September 30, 1995,
respectively; Small Cap Portfolio - 159% and 161%, for the fiscal years ended
September 30, 1996, and 1995, respectively; International Equity Portfolio - 68%
and 21%, for the fiscal year ended September 30, 1996, and for the period from
January 1, 1995 to September 30, 1995, respectively; Pacific Basin Equity
Portfolio - 118% and 104%, for the fiscal years ended September 30, 1996, and
1995, respectively; Latin American Equity Portfolio - 171% and 161%, for the
fiscal years ended September 30, 1996, and 1995, respectively. 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.

PERFORMANCE INFORMATION AND REPORTS
Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports, which are
sent to all Fund shareholders.

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

Mutual fund performance is commonly measured as total return and/or yield. Each
Fund's performance is affected by the expenses of that 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 a 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 a 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 a 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 a Fund will vary depending upon
interest rates, the current market value of the securities held by the
corresponding 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 their fees, or reimburse
certain operating expenses of a Fund or 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.

MANAGEMENT OF THE TRUST AND THE PORTFOLIOS
Board of Trustees

The Trust and each Portfolio is 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
Portfolios, up to and including creating separate boards of trustees. See
`Management of the Trusts and the Portfolios'' in the SAI for more information
with respect to the Trustees and officers of the Trust and each Portfolio.

Investment Adviser

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of each of its Funds by investing all
the Assets of the Fund in the corresponding Portfolio. Each 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 each Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each 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 a 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 each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the average daily net assets of the Portfolio for its
then-current fiscal year: Intermediate Tax Free Portfolio, 0.40%; Global High
Yield Securities Portfolio, 0.80%; Capital Appreciation Portfolio, 0.65%;

Small Cap Portfolio, 0.65%; International Equity Portfolio, 0.65%; Pacific Basin
Equity Portfolio, 0.75%; and Latin American Equity Portfolio, 1.00%. With
respect to Global High Yield Securities Portfolio, Pacific Basin Equity
Portfolio, and Latin American Equity Portfolio, the investment advisory fee is
higher than that of most funds, but not necessarily higher than that of a
typical international fund, due to the greater complexity, expense and
commitment of resources involved in international investing.

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
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations.

Sub-Investment Adviser-Pacific Basin Equity Portfolio

Bankers Trust has entered into a sub-investment advisory agreement (the `Sub-
Advisory Agreement') with BT Fund Managers International Limited (``BT Fund
Managers International'), a wholly owned registered investment advisory
subsidiary of Bankers Trust Australia Limited (`BTAL''). BTAL is a wholly owned
subsidiary of Bankers Trust New York Corporation. Under the Sub-Advisory
Agreement, Bankers Trust may receive investment advice and research services
with respect to companies based in the Pacific Basin and may grant BT Fund
Managers International investment management authority as well as the authority
to buy and sell securities if Bankers Trust believes it would be beneficial to
the Pacific Basin Equity Portfolio. Under the Sub-Advisory Agreement, BT Fund
Managers International receives a fee from Bankers Trust for providing
investment advice and research services, accrued daily and paid monthly, at the
annual rate of 0.60% of the average daily assets of the Portfolio.

Portfolio Managers

Gary Pollack is responsible for the day-to-day management of the Intermediate
Tax Free Portfolio. Mr. Pollack has been employed by Bankers Trust since 1989
and has managed the Portfolio's assets since the Portfolio's commencement of
operations.

David A. Reiss, Managing Director of Bankers Trust and Stephen C. Freidheim,
Managing Director of Bankers Trust are responsible for the day-to-day management
of the Global High Yield Securities Portfolio. Mr. Reiss has been employed by
Bankers Trust since March, 1994 and has managed the Portfolio's assets since
March, 1994. From September, 1989 to March, 1994, Mr. Reiss was a Portfolio
Manager at Kidder Peabody Asset Management. Prior to September, 1989, he was an
associate in Mortgage Research at Goldman, Sachs & Co. Mr. Freidheim has been
employed by Bankers Trust since August, 1993 and has managed the Portfolio's
assets since December, 1993. From July, 1990 to July, 1993 he was a Senior Vice
President and Director of Research and Trading at Nomura Securities
International. Mr. Freidheim was also on the Board of Directors of Nomura
Corporate Research and Asset Management. Prior to July, 1990, he was Director of
Research at Kidder, Peabody High Yield Asset Management.

Bluford Putnam, Ph.D., Managing Director of Bankers Trust and Chief Investment
Officer of Equity and Balanced Portfolios, is responsible for the management
oversight investment products specializing in small and medium sized U.S.
companies. The Small Cap and Capital Appreciation Portfolios investment
management includes seven investment professionals headed by the team leader,
Mr. Tim Woods (CFA), Vice President of Bankers Trust. Mr. Putnam has been
employed by Bankers Trust since 1994. His previous experience includes
economist at the Federal Reserve Bank of New York, principal at Morgan Stanley
and Chief Economist at Kleinwort Benson, Ltd. He was also a founding partner of
Stern Stewart and Co., in 1982, a leading corporate finance advisory firm and is
the author of `The Blackwell Guide to Wall Street,'' which focused, in part, on
equity valuation.

Mary P. Dugan, CFA, Vice President of Bankers Trust, and Mr. Timothy Woods, CFA,
Vice President of Bankers Trust, share senior portfolio management
responsibilities of the Small Cap Portfolio. Ms. Dugan joined Bankers Trust in
1994. She has thirteen years of investment analysis experience. Previously,
she worked at Fred Alger Management, Dean Witter, Integrated Resources and
Equitable Investment Management Corporation. Mr. Woods joined Bankers Trust in
1992. He has twelve years of investment and financial experience. Previously,
he worked at Prudential Securities, Chase Manhattan Bank and Bank of Boston.

Anthony Takazawa, CFA, Vice President of Bankers Trust, has senior management
responsibilities for the Capital Appreciation 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.

Michael Levy has been the primary portfolio manager for the International Equity
Portfolio since August 1995. He also heads the international active equity team,
which is responsible for the day to day management of the Portfolio. Mr. Levy
has been the head of this team since joining Bankers Trust in March, 1993, and
is a Managing Director and International Equity Strategist of Bankers Trust. The
international active equity team has provided input into the management of the
Portfolio since the Portfolio's commencement of operations. Prior to joining
Bankers Trust, Mr. Levy was an investment banker and an equity analyst with
Oppenheimer & Company. He has twenty-four years of business experience, of which
fourteen years have been in the investment industry.

Robert Reiner has been the co-manager of the International Equity Portfolio
since joining Bankers Trust in 1994. Mr. Reiner is responsible for managing
global portfolios and developing analytical and investment tools for the group's
global equity team. As a member of the international active equity team, he
focuses on Japanese and European markets. Prior to joining Bankers Trust, he was
an equity analyst and also provided macroeconomic coverage for Scudder, Stevens
and Clark. He previously served as Senior Analyst at Sanford C. Bernstein & Co.
and was instrumental in the development of Bernstein's International Value Fund.
For more than nine years, Mr. Reiner was employed by Standard & Poor's
Corporation in its ratings group. His tenure included managing the day to day
operations of Standard & Poor's Corporation's Tokyo office for three years.
Paul Durham, Vice President of BTAL, is responsible for the day-to-day
management of the Pacific Basin Equity Portfolio. Mr. Durham has been employed
by Bankers Trust since January, 1988 and has managed the Portfolio's assets
since November, 1993.

Maria-Elena Carrion, CFA, Vice President of Bankers Trust, is primarily
responsible for the day-to-day management of the Latin American Equity
Portfolio. Ms. Carrion has been employed by Bankers Trust since April, 1993 and
has managed the Portfolio's assets since the Portfolio commenced operations.
Prior to April, 1993, Ms. Carrion was employed by Latin American Securities
(London) (from June, 1991 to April, 1993). Prior to June, 1991, Ms. Carrion was
employed by US Trust Company (from September, 1986 to June, 1991).

Julie Wang, Vice President of Global Investment Management, is a portfolio
manager with primary focus on the Asia-Pacific region. She is part of the
International Equity Fund portfolio management team. Before joining Bankers
Trust in 1994, Julie was an investment manager at American International Group,
where she advised in the management of $7 billion of assets in Southeast Asia,
including private and listed equities, bonds, loans and structured products. She
was also an associate at Donaldson, Lufkin & Jenrette, where she worked on all
phases of merger and LBO analyses and advised clients on shareholder value
maximization and tender defense strategies. Julie received her B.A. (economics)
from Yale University and her MBA from the Wharton School.

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 each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. 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
the following percentages of the average daily net assets of the Fund for its
then-current fiscal year: Intermediate Tax Free Fund, 0.40%; Global High Yield
Securities Fund, 0.95%; Capital Appreciation Fund, 0.65%; Small Cap Fund, 0.65%;
International Equity Fund, 0.85%; Pacific Basin Equity Fund, 0.75%; and Latin
American Equity Fund, 0.95%.

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay

Bankers Trust a fee, accrued daily and paid monthly, equal on an annual basis to
the following percentages of the Portfolio's average daily net assets for its
then-current fiscal year: Intermediate Tax Free Portfolio, 0.05%; Global High
Yield Securities Portfolio, 0.20%; Capital Appreciation Portfolio, 0.10%; Small
Cap Portfolio, 0.10%; International Equity Portfolio, 0.15%; Pacific Basin
Equity Portfolio, 0.25%; and Latin American Equity Portfolio, 0.20%. 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
Funds. 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 each 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 Funds. 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 each 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 Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will 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 each Portfolio
and serves as the transfer agent (the `Transfer Agent'') for the Trust and each
Portfolio under the Administration and Services Agreement with the Trusts and
each Portfolio.

NET ASSET VALUE

The net asset value (`NAV'') per Share of each 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 each 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 a 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 a 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.

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 Transfer 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 4:00 p.m. Eastern 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:

o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT Family of Funds,
or
o 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.

Additional Information About Buying Shares

To Open an Account To Add to an Account

By Wire Call the BT Service Center at Call your Investment Professional
or wire additional investment to:
1-800-730-1313 to receive wire
instructions for account establishment.

Routing No.: 021001033
Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: Fund Number (see table below)
Investment Intermediate Tax Free Fund - 467
Investment Global High Yield Securities Fund - 478
Investment Capital Appreciation Fund - 465
Investment Small Cap Fund - 498
Investment International Equity Fund - 463
Investment Pacific Basin Equity Fund - 496
Investment Latin American Equity Fund - 497

Specify the complete name of the Fund of
your choice, and include your account number
and your name.

34
<TABLE>
<S> <C> <C>
By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or call
BT's Service Center at 1-800-730-1313. BT's Service Center at 1-800-730-1313.
If you are an existing shareholder, If you are an
you may exchange from another BT existing shareholder, you may
account with the same registration, exchange from another BT account
including, name, address, and taxpayer with the same registration, including,
ID number. name, address, and taxpayer ID number.

By Mail Complete and sign the account appli- Make your check payable to the complete
cation. Make your check payable to name of the Fund of your choice. Indicate
the complete name of the Fund of your Fund account number on your check
your choice. Mail to the appropriate and mail to the address printed on your
address indicated on the application. account statement.
</TABLE>
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.

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:

o Your account registration has changed within the last 30 days,
o The check is being mailed to a different address than the one on your
account (record address),
o The check is being made payable to someone other than the account owner,
o The redemption proceeds are being transferred to a BT account with a
different registration, or
o 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:

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

To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment
Professional or the BT Service Center at 1-800-730-3131 if you need additional
copies of financial reports.

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 exchange,
follow the procedures indicated in `Purchase of Shares'' and ``Redemption of
Shares''herein. Before making an exchange, please note the following:
o Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

o 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.

Systematic Programs
To move money from your bank account to BT Investment Funds
<TABLE>
<CAPTION>

Minimum Minimum Frequency Setting up or changing
Initial Subsequent
<S> <C> <C> <C>
$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate section
quarterly or semi- on the application.
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 bus-
ness days prior to your next scheduled investment date.
</TABLE>

Systematic Withdrawal Program lets you set up periodic redemptions from your
account.

<TABLE>
<CAPTION>
Minimum Frequency Setting up or changing

<S> <C> <C>
$100 Monthly, quarterly, semi-annually or To establish, call your Investment Professional or call
annually 1-800-730-1313 after your account is open. The
accounts from which the withdrawals will be
processed must have a minimum balance of $10,000.
</TABLE>

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.

o 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.

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

o 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.

o 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.

o 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.

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

o Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS, AND TAXES
Each Fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Each Fund distributes capital gains annually.
Normally, income dividends for the Global High Yield Securities Fund, Small Cap
Fund and the Capital Appreciation Fund are distributed quarterly; income
dividends for the International Equity Fund, Pacific Basin Equity Fund and the
Latin American Equity Fund are distributed annually. Income dividends for the
Intermediate Tax Free Fund are declared daily and paid monthly. Unless a
Shareholder instructs a Trust to pay such dividends and distributions in cash,
they will be automatically reinvested in additional Shares of the Fund.

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

Distributions from each Fund's income and short-term capital gains are taxes as
dividends, and long-term capital gain distributions are taxes as long-term
capital gains. Each 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 to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. Each Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received on the past year.

The Intermediate Tax Free Fund intends to qualify to pay exempt-interest
dividends to its shareholders by having, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets invested in tax-
exempt securities. An exempt-interest dividend is that part of dividend
distributions made by the Intermediate Tax Free Fund which consists of interest
received by the Intermediate Tax Free Fund derived from tax-exempt securities
held by the Intermediate Tax Free Portfolio. Exempt-interest dividends received
from the Intermediate Tax Free Fund will be treated for Federal income tax
purposes as tax-exempt interest income. In view of the Intermediate Tax Free
Portfolio's investment policies, it is expected that substantially all the
Intermediate Tax Free Fund's dividends will be exempt-interest dividends,
although the Intermediate Tax Free Fund may from time to time distribute net
short-term capital gains or other minor amounts of taxable income.

Interest on certain tax-exempt municipal obligations issued after August 7, 1986
is a preference item for purposes of the Federal alternative minimum tax
applicable to individuals and corporations. Under tax regulations to be used,
the portion of an exempt-interest dividend of a regulated investment company
that is allocable to these obligations will be treated as a preference item for
purposes of the alternative minimum tax. The Intermediate Tax Free Portfolio
has limited its investment to those securities the interest on which will not be
treated as preference items for purposes of the alternative minimum tax in the
opinion of bond counsel for the issuer. The Intermediate Tax Free Portfolio
currently has no intention of investing in obligations subject to the
alternative minimum tax under normal market conditions.

Corporations should, however, be aware that interest on all municipal securities
will be included in calculating: (i) adjusted current earning for purposes of
the alternative minimum tax applicable to them; (ii) the additional tax imposed
on certain corporations by the Superfund Revenue Act of 1986; and (iii) the
foreign branch profits tax imposed on effectively connected earnings and profits
of United States branches of foreign corporations. Furthermore, special tax
provisions may apply to certain financial institutions and property and casualty
insurance companies, and they should consult their tax advisors before
purchasing Shares of the Intermediate Tax Free Fund.

Certain provisions in the Tax Reform Act of 1986, as amended, relating to
issuance of municipal obligations, have reduced the volume of municipal
obligations qualifying for Federal tax exemption and may continue to do so.

Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry Shares of these Funds is not
deductible. The U.S. Department of the Treasury has been given authority to
issue regulations which would disallow the interest deduction if incurred to
purchase or carry Share of the Fund owned by the taxpayer's spouse, minor child
or entity controlled by the taxpayer. Entities or persons who are `substantial
users''(or related persons) of facilities financed by tax-exempt bonds should
consult their tax advisers before purchasing Shares of the Fund.

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,
each 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 each Fund.

ADDITIONAL INFORMATION

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund is a separate series of BT
Investment Funds, a Massachusetts business trust. Each of the Global High Yield
Securities Portfolio, Small Cap Portfolio, Pacific Basin Equity Portfolio and
Latin American Equity Portfolio is a separate subtrust of BT Investment
Portfolios, a New York master trust fund. Each of the Capital Appreciation
Portfolio, International Equity Portfolio, and Intermediate Tax Free Portfolio
is a New York trust.

The Trust and BT Investment Portfolios reserves the right to add additional
series in the future. The Trust also reserves the right to issue more than one
class of Shares of each Fund.

The Trust or a Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio's investment advisory agreement, or for other
purposes. Shareholders not attending these meetings are encouraged to vote by
proxy. The Trust's Transfer Agent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.

When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full Share held and proportionate, fractional votes for
fractional Shares held. A separate vote of one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of
the Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. 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 Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.

Each series of the BT Investment Portfolios will vote separately on any matter
involving the corresponding Portfolio. Shareholders of all of 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. The series of BT
Investment Portfolios will vote together or separately on matters in the same
manner, and in the same circumstances, as do the series of the Trust. As with
the Trust, the investors in one or more series of BT Investment Portfolios could
control the outcome of these votes.

As of December 31, 1996, Henry Shotmeyer, Sr., New York, New York, owned
26.89% of the voting securities of the Intermediate Tax Free 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. As of December 31, 1996, Infid & Co., New York, New York, owned
83.49% of the voting securities of the Global High Yield Securities 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. As of December 31, 1996, Bartrus & Co., New York, New York, and
Infid & Co., New York, New York, owned 32.91% and 41.49%, respectively, of the
voting securities of the Capital Appreciation 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. As of December 31, 1996, Bankers Trust Co., New York, New York,
owned 32.37% of the voting securities of the Small Cap 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. As of
December 31, 1996, Infid & Co., New York, New York, owned 27.01% of the voting
securities of the International Equity 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. As of December 31,
1996, Infid & Co., New York, New York, owned 58.50% of the voting securities of
the Pacific Basin Equity 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. As of December 31, 1996, Charles
Schwab & Co., San Francisco, California, and Infid & Co., New York, New York,
owned 25.04% and 50.00%, respectively, of the voting securities of the Latin
American Equity 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.

Each Trust is an entity of the type 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.

Each Portfolio was organized as a trust under the laws of the State of New York.
Each Portfolio's Declaration of Trust provides that each Fund and other entities
investing in a Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and a Portfolio itself was unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Funds nor their shareholders will be adversely affected by reason of the Funds'
investing in the Portfolios. No series of BT Investment Portfolios has any
preference over any other series.
40

APPENDIX

Description of Moody's Corporate Bond Ratings:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as `gilt
edge.''Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future). Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P Corporate Bond Ratings:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Description of S&P commercial paper ratings:
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.

Description of Moody's commercial paper ratings:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.

Description of S&P Municipal Bond Ratings:
AAA - Prime - These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.

General Obligations Bonds - In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.

Revenue Bonds - Debt service coverage has been, and is expected to remain,
substantial, stability of the pledged rev-

enues is also exceptionally strong due to the competitive position of the
municipal enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds and
debt service reserve requirements) are rigorous. There is evidence of superior
management.

AA - High Grade - The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.

A - Good Grade - Principal and interest payments on bonds in this category are
regarded as safe although the bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. This rating describes the third strongest capacity for payment
of debt service. Regarding municipal bonds, the rating differs from the two
higher ratings because:

General Obligation Bonds - There is some weakness, either in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.

Revenue Bonds - Debt service coverage is good, but not exceptional. Stability of
the pledged revenues could show some variations because of increased competition
or economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appearance appears
adequate.

S&P's letter ratings may be modified by the addition of a plus or a minus sign,
which is used to show relative standing within the major rating categories,
except in the AAA rating category.

Description of Moody's Municipal Bond Ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as `gilt
edge'. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Moody's may apply the numerical modifier in each generic rating classification
from Aa through B. The modifier 1 indicates that the security within its generic
rating classification possesses the strongest investment attributes.

Description of S&P Municipal Note Ratings:
Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1, or -2) to distinguish more clearly the credit quality
of notes as compared to bonds. Notes rated SP-1 have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given the designation of SP-1. Notes
rates SP-2 have a satisfactory capacity to pay principal and interest.

Description of Moody's Municipal Note Ratings:
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This

distinction recognizes the differences between short-term credit risk and long-
term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
Loans bearing the designation MIG2/VMIG2 are of high quality, with ample margins
of protection, although not as large as the preceding group.

S&P's Commercial Paper Ratings:
A is the highest commercial paper rating category utilized by S&P, which uses
the numbers 1, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt ratings is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward tread.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

Moody's Commercial Paper Ratings:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound,will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rates Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

(THIS PAGE INTENTIONALLY LEFT BLANK)

BT INVESTMENT FUNDS
Intermediate Tax Free Fund
Global High Yield Securities Fund
Capital Appreciation Fund
Small Cap Fund
International Equity Fund
Pacific Basin Equity Fund
Latin American Equity Fund

Investment Adviser of each Portfolio and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Distributor
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

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 Trusts' Prospectuses, the
corresponding SAIs or the Trusts' 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 a 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 #055922801
#055922777
#055922819
#055922769
#055922868
#055922736
#055922788
COMBINV300 (1/97)

o BT INVESTMENT FUNDS o
International Equity Fund
Seeks long-term capital appreciation primarily from non-U.S. equities, or other
securities with equity characteristics.
PROSPECTUS

JANUARY 31, 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 International Equity
Fund (the `Fund'') that you should know and can refer to in deciding whether
the Fund's goals match your own.

Unlike other mutual funds, the Fund seeks to achieve its investment objective by
investing all of its investable assets (`Assets'') in the International Equity
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.

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

TABLE OF CONTENTS
PAGE
The Fund 3
Who May Want To Invest 3
Summary Of Fund Expenses 4
Financial Highlights 5
Investment Objective And Policies 6
Risk Factors: Matching The Fund To Your Investment Needs 8
Net Asset Value 10
Purchase And Redemption Of Shares 11
Dividends, Distributions And Taxes 16
Performance Information And Reports 17
Management Of The Trust And Portfolio 17
Additional Information 21

THE FUND
The Fund's investment objective is long-term capital appreciation from
investment in foreign equity securities (or other securities with equity
characteristics); the production of any current income is incidental to this
objective. The Portfolio invests primarily in established companies based in
developed countries outside the United States, but the Portfolio may also invest
in emerging market securities.

WHO MAY WANT TO INVEST
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.

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of the 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 BT Investment Funds 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 corresponding
Portfolio.

Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)

Investment advisory fee (after reimbursements or waivers) 0.60%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.90
Total operating expenses (after reimbursements or waivers) 1.50%

Example 1 year 3 Years 5 years 10 years

You 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 $15 $47 $82 $179

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 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. 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 the example reflect
a voluntary undertaking by Bankers Trust to waive or reimburse expenses such
that the total operating expenses will not exceed 1.50% of the Fund's average
net assets annually. In the absence of this undertaking, for the fiscal year
ended September 30, 1996, the total operating expenses would have been equal to
approximately 1.76% 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 the expenses of the Fund and the Portfolio
see `Management of the Trust and Portfolio'' herein.

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.

FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Fund for each period 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 period
For the August 4, 1992
For the For the period year ended (Commencement
year ended January 1, 1995 to December 31, of Operations) to
September 30, 1996 September 30, 1995** 1994 1993 December 31, 1992
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $15.47 $13.37 $13.18 $9.75 $10.00
Income from Investment
Operations
Net Investment Income 0.18 0.14 0.10 0.05 0.03
Net Realized and
Unrealized Gain (Loss)
on Securities and
Foreign Currency
Transactions 1.80 1.97 0.44 3.60 (0.28)
Total from Investment
Operations 1.98 2.11 0.54 3.65 (0.25)
Distributions to
Shareholders
Net Investment Income (0.31) (0.00) (0.09) (0.15) -
Net Realized Gain from
Investment Transactions (0.37) (0.01) (0.26) (0.07) -
Total Distributions (0.68) (0.01) (0.35) (0.22) -
Net Asset Value, End
of Period $16.77 $15.47 $13.37 $13.18 $9.75
Total Investment Return 13.42% 15.82% 4.12% 37.38% (6.01)%*

Ratios and Supplemental Data
Ratios to Average Net Assets:
Net Investment Income 0.91% 1.55%* 0.84% 0.79% 0.97%*
Expenses, including
Expenses of the
International Equity
Portfolio 1.50% 1.50%* 1.50% 1.50% 1.50%*
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by Bankers Trust 0.26% 0.33%* 0.37% 0.62% 1.36%*
Net Assets, End of
Period (000s omitted) $161,692 $82,807 $56,020 $33,869$8,218

</TABLE>

* Annualized
** Board of Trustees approved the change of the fiscal year end from December
31 to September 30.

INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation from
investment in foreign equity securities (or other securities with equity
characteristics); the production of any current income is incidental to this
objective.

The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund. There can be no assurances that the investment objective of either
the Fund or the Portfolio will be achieved. The investment objective of the
Fund and the 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.

International Equity Portfolio

Under normal circumstances, the Portfolio invests at least 65% of the value of
its total assets in the equity securities of foreign issuers, consisting of
common stock and other securities with equity characteristics. These issuers
are primarily established companies based in developed countries outside the
United States. However, the Portfolio may also invest in securities of issuers
in underdeveloped countries. Investments in these countries will be based on an
acceptable degree of risk in anticipation of superior returns. The Portfolio
will at all times be invested in the securities of issuers based in at least
three countries other than the United States. For further discussion of the
unique risks associated with investing in foreign securities in both developed
and underdeveloped countries, see `Risk Factors: Matching the Fund to Your
Investment Needs,''``Additional Information'' herein and the SAI.

The Portfolio's investments will generally be diversified among several
geographic regions and countries. Criteria for determining the appropriate
distribution of investments among various countries and regions include the
prospects for relative growth among foreign countries, expected levels of
inflation, government policies influencing business conditions, the outlook for
currency relationships and the range of alternative opportunities available to
international investors.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, the Portfolio may seek to achieve
country exposure through use of options or futures based on an established local
index. Similarly, country exposure may also be achieved through investments in
other registered investment companies. Restrictions on both these types of
investments are fully explained herein and in the SAI.

The remainder of the Portfolio's assets will be invested in dollar and non-
dollar denominated short-term instruments. These investments are subject to the
conditions described in `Short-Term Instruments'' below.
Equity Investments. The Portfolio invests primarily in common stocks and
other securities with equity characteristics. For purposes of the Portfolio's
policy of investing at least 65% of the value of its total assets in the equity
securities of foreign issuers. Equity securities are defined as common stock,
preferred stock, trust or limited partnership interests, rights and warrants,
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. The Portfolio invests in securities listed on foreign or domestic
securities exchanges and securities traded in foreign or domestic over-the-
counter markets, in addition to investment in restricted or unlisted securities.

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.

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 short-term instruments with remaining maturities of 397 days or less
to meet anticipated redemptions and expenses or 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 equity markets. In addition, when the Portfolio experiences large cash
inflows through the sale of securities and desirable equity securities that are
consistent with the Portfolio's investment objective are unavailable in
sufficient quantities or at attractive prices, the Portfolio may hold short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated Aa or higher by Moody's Investors Service, Inc. (`Moody's'') or AA or
higher by Standard & Poor's Ratings Group (`S&P'') or, if unrated, of
comparable quality in the opinion of Bankers Trust; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and (v) repurchase agreements. At the time the
Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt rated
Aa or higher by Moody's or AA or higher by S&P or outstanding commercial paper
or bank obligations rated Prime-1 by Moody's or A-1 by S&P; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of Bankers Trust. These instruments may be denominated in U.S. dollars
or in foreign currencies and will have been determined to be of high quality by
a nationally recognized statistical rating organization, or if unrated, by
Bankers Trust.

Additional Investment Techniques

The Portfolio may also utilize the following investments and investment
techniques and practices: American Depositary Receipts (`ADRs''), Global
Depositary Receipts (`GDRs''), European Depositary Receipts (``EDRs''), when-
issued and delayed delivery securities, Rule 144A securities, securities
lending, repurchase agreements, foreign currency exchange transactions, options
on foreign currencies, options on stocks, options on foreign stock indices,
futures contracts on foreign stock indices and options on futures contracts.
See `Additional Information'' herein 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 30 days prior written notice to, but without 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.

See `Investment Objective, Policies and Restrictions'' in the SAI for a
description of the additional fundamental policies of the fund that cannot be
changed without approval by a `vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund.

RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced investment plan; the Fund
seeks long-term capital appreciation from investment primarily in the equity
securities (or other securities with equity characteristics) of foreign issuers.
Changes in domestic and foreign interest rates may 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'' herein. The Fund's share
price and total return fluctuate and your investment may be worth more or less
than your original cost when you redeem your shares.

Risk 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. Although the Portfolio
intends to invest primarily in securities of established companies based in
developed countries, investors should realize that the value of the Portfolio's
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 those 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.

The Portfolio may invest in the securities of issuers based in underdeveloped
countries, including those in Eastern Europe. Investment in securities of
issuers based in underdeveloped countries entails all of the risks of investing
in securities of foreign issuers outlined in this section to a heightened
degree. These heightened risks include: (i) greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and economic
stability; (ii) the smaller size of the market for such securities and a low or
nonexistent volume of trading, resulting in lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the Portfolio's
investment opportunities including restrictions on investing in issuers or
industries deemed sensitive to relevant national interests; and (iv) in the case
of Eastern Europe, the absence of developed capital market and legal structures
governing private or foreign investment and private property and the possibility
that recent favorable economic and political developments could be slowed or
reversed by unanticipated events. The Portfolio will not invest more than 5% of
the value of its total assets in securities of issuers based in Eastern Europe.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Portfolio holds various foreign
currencies from time to time, 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. Generally, the Portfolio's currency exchange transactions
will be conducted on a spot (i.e., cash) basis at the spot rate prevailing in
the currency exchange market. The cost of the Portfolio's currency exchange
transactions will generally be the difference between the bid and offer spot
rate of the currency being purchased or sold. In order to protect against
uncertainty in the level of future foreign currency exchange rates, the
Portfolio is authorized to enter into certain foreign currency exchange
transactions. See `Additional Information'' herein.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange, Inc. (the `NYSE''). Accordingly,

8
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.
Moreover, the settlement periods for foreign securities, which are often longer
than those for securities of U.S. issuers, may affect portfolio liquidity. In
buying and selling securities on foreign exchanges, the Portfolio normally pays
fixed commissions that are generally higher than the negotiated commissions
charged in the United States. In addition, there is generally less government
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.

Portfolio Turnover

Bankers Trust intends to manage the Portfolio actively in pursuit of its
investment objective. The Portfolio does not expect to trade in securities for
short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held. The Portfolio's portfolio turnover
rates for the fiscal year ended September 30, 1996, and for the period from
January 1, 1995 to September 30, 1995 were 68% and 21%, respectively.

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 for cash management purposes 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, as the Portfolio's Adviser will use derivatives only in
circumstances where the Adviser believes they offer the most economic means of
improving the risk/reward profile of the Portfolio. Derivatives will not be
used to increase portfolio risk above the level that could be achieved using
only traditional investment securities or to acquire exposure to changes in the
value of assets or indices that by themselves would not be purchased for the
Portfolio. The use of derivatives for non-hedging purposes may be considered
speculative. A description of the derivatives that the Portfolio may use and
some of their associated risks is found under `Additional Information'' herein.

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
objective 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 at (800) 730-1313.

The master-feeder structure has been developed relatively recently, 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

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 the Fund's 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 objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.

NET ASSET VALUE
The net asset value (`NAV'') per share of the Fund is calculated on each day on
which 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 a 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.

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 Transfer 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 4:00 p.m. Eastern time.

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

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:

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 call BT Retirement Services Center at 1-800-677-7596 for more
information and a retirement account application.

Additional Information About Buying Shares
<TABLE>
<CAPTION>

To Open an Account To Add to an Account
<S> <C> <C>
By Wire Call the BT Service Center at Call your Investment Professional or wire
1-800-730-1313 to receive additional investment to:
wire instructions for account
establishment.
Routing No.: 021001033
Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: Fund Number
Investment International Equity Fund - 463

Specify the complete name of the
Fund of your choice, and include
your account number and your name.

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

</TABLE>

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.

cation prior to acting upon instructions received by telephone, providing
written confirmation of such transactions and/or tape recording of telephone
instructions.

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.

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

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 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:

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 exchange,
follow the procedures indicated in `How to Purchase Shares'' and ``How to
Redeem Shares''herein. Before making an exchange, please note the following:
o Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you.

Systematic Programs
To move money from your bank account to BT Investment Funds
<TABLE>
<CAPTION>

Minimum Minimum Frequency Setting up or changing
Initial Subsequent
<S> <C> <C> <C>
$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate section
quarterly or semi- on the application.
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.
<TABLE>
<CAPTION>

Minimum Frequency Setting up or changing
<S> <C> <C>
$100 Monthly, quarterly, semi-annually or To establish, call your Investment Professional or call
annually 1-800-730-1313 after your account is open. The
accounts from which the withdrawals will be
processed must have a minimum balance of $10,000.

</TABLE>

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.

o 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.

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

o 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.

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

o 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. Income dividends and any net
capital gains are normally distributed in December. 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 the Fund 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. The Portfolio will also not be required to 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 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 in 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 income and/or
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. In addition to Federal taxes, you may be subject to state
or local taxes on your investment, depending on the laws in your area. Income
received by the Portfolio from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. Investors should
consult their tax advisor for specific details on state, local or foreign taxes.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Portfolio's assets to be invested
in various countries will vary.

If the Portfolio is liable for foreign taxes, and if more than 50% of the value
of the Portfolio's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, it may make an election pursuant
to which certain foreign taxes paid by it would be treated as having been paid
directly by shareholders of the entities, such as the Fund, which have invested
in the Portfolio. Pursuant to such election, the amount of foreign taxes paid
will be included in the income of Fund shareholders, and Fund shareholders
(except tax-exempt shareholders) may, subject to certain limitations, claim
either a credit or deduction for the taxes. Each Fund shareholder will be
notified after the close of the Portfolio's taxable year whether the foreign
taxes paid will `pass through'' for that year and, if so, such notification
will designate (a) the shareholder's portion of the foreign taxes paid to each
such country and (b) the portion which represents income derived from sources
within each such country.

The amount of foreign taxes for which a shareholder may claim a credit in any
year will generally be subject to a separate limitation for `passive income,''
which includes, among other items of income, dividends, interest and certain
foreign currency gains. Because capital gains realized by the Portfolio on the
sale of foreign securities will be treated as U.S.-source income, the available
credit of foreign taxes paid with respect to such gains may be restricted by
this limitation.

PERFORMANCE AND INFORMATION REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to the MSCI GDP weighted EAFE
Index, MSCI EAFE Index, and the Lipper International Average or other various
unmanaged indices or results of other mutual funds or investment or savings
vehicles. The Fund's investment results as used in such communications will be
calculated on a total rate of return basis in the manner set forth herein. From
time to time, fund rankings may be quoted from various sources, such as Lipper
Analytical Services, Inc., Value Line, and Morningstar, Inc.

The Trust may provide period and average annualized `total return'' quotations
for the Fund. The Fund's `total return'' refers to the change in the value of
an investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends and capital gain distributions are reinvested. An annualized
total return will be higher than a period total return if the period is shorter
than one year, because of the compounding effect.

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 Fund's expenses. In addition, during certain periods for
which total return may be provided, Bankers Trust, as Adviser, Service Agent or
Administrator may have voluntarily agreed to waive portions of their fees on a
month-to-month basis. Such waivers will have the effect of increasing the Fund's
net income (and therefore its total return) during the period such waivers are
in effect.

Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by independent
accountants.

MANAGEMENT OF THE TRUST AND PORTFOLIO
Board of Trustees

The affairs of the Trust and the Portfolio are managed under the supervision of
their respective Boards of Trustees. By virtue of the responsibilities assumed
by Bankers Trust, the administrator of the Trust and Portfolio, neither the
Trust nor the Portfolio requires employees other than its executive officers.
None of the executive officers of the Trust or the Portfolio devotes full time
to the affairs of the Trust or the Portfolio.
The Trustees of the Trust who are not `interested persons'' (as defined in the
1940 Act) (the `Independent Trustees'') or of the Portfolio, as the case may
be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
trustees of the Trust and of the Portfolio. For more information with respect to
the Trustees of both the Trust and the Portfolio, see `Management of the Trust
and Portfolios''in the SAI.

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 investment adviser. Mr. Michael Levy has been the primary
portfolio manager for the International Equity Fund since 1995. He also heads
the international active equity team, which is responsible for the day to day
management of the Portfolio. Mr. Levy has been the head of this team since
joining Bankers Trust in March, 1993, and is Managing Director and International
Equity Strategist of Bankers Trust. The international active equity team has
provided input into the management of the Portfolio since the Portfolio's
commencement of operations. Prior to joining Bankers Trust, Mr. Levy was an
investment banker and an equity analyst with Oppenheimer & Company. He has
twenty-four years of business experience, of which fourteen years have been in
the investment industry.

Robert Reiner has been the co-manager of the Fund since 1995. As Vice President-
Global Investment Management and Bankers Trust, he has been responsible for
managing global portfolios and developing analytical and investment tools for
the group's global equity team. As a member of the Fund's portfolio management
team, he focuses primarily on Japanese and European markets. Prior to joining
Bankers Trust, he was an equity analyst and also provided macroeconomic coverage
for Scudder, Stevens and Clark. He previously served as Senior Analyst at
Sanford C. Bernstein & Co. and was instrumental in the development of
Bernstein's International Value Fund. Mr. Reiner spent more than nine years at
Standard & Poor's Corporation, where he was a member of its international
ratings group. His tenure included managing the day to day operations of
Standard & Poor's Corporation Tokyo office for three years.

Bankers Trust, 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 markets. 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 worldwide
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.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.65% (before
waiver) 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.

Administrator

Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV of the Fund and generally assists the Board of Trustees of
the Trust in all aspects of the administration and operation of the Trust. The
Administration and Services Agreement provides for the Trust to pay Bankers
Trust a fee, computed daily and paid monthly, at the annual rate of 0.85% 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 of the Portfolio 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, computed daily and paid monthly,
at the annual rate of 0.15% of the average daily net assets of the Portfolio.
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 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.

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 Fund's Prospectuses 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 will not be
reimbursed in any succeeding fiscal year. 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. It is not expected that any payments will be made under the Plan in the
foreseeable future.

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 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. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker or
agent. 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. 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, in which all the Assets of the Fund will be invested, 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 of 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, Infid & Co., New York, New York, owned 27.00% of the
voting securities of the International Equity 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.

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 services 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.

ADDITIONAL INFORMATION
American Depositary Receipts, Global Depositary Receipts and European
Depositary Receipts. ADRs, GDRs and EDRs are certificates evidencing ownership
of shares of a foreign-based issuer held in trust by a bank or similar financial
institution. Designed for use in U.S., international 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.

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 maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.
Rule 144A Securities. The Portfolio may purchase securities in the United
States that are not registered for sale under Federal securities laws but which
can be resold to institutions under the SEC Rule 144A. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are treated as exempt from the Portfolio's 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.

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 organizations, the Portfolio is subject
to risk 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.

Repurchase Agreements. In a repurchase agreement the Portfolio buys a
security and simultaneously agrees to sell it back at a higher price at a future
date. In the event of the bankruptcy of the other party to either a repurchase
agreement or a securities loan, the Portfolio could experience delays in
recovering either its cash or the securities it lent. To the extent that, in the
meantime, the value of the securities repurchased had decreased or the value of
the securities lent had increased, the Portfolio could experience a loss. In all
cases, Bankers Trust must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is considered a collateralized
loan under the 1940 Act.

Foreign Currency Exchange Transactions. Because the Portfolio buys and sells
securities denominated in currencies other than the U.S. dollar and receives
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Portfolio from time to time 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.

A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or 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. The Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. 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. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, the Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. 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 dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. The Portfolio
may use options on a 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
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 the options expire or are
exercised. Similarly, if the Portfolio is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying currency. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions.

As in the case of forward contracts, certain options on foreign currencies are
traded over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded currency options. The Portfolio's ability
to terminate over-the-counter options (`OTC Options'') will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in OTC Options transactions will not fulfill their obligations.
Until such time as the staff of the SEC changes its position, the Portfolio will
treat purchased OTC Options and assets used to cover written OTC Options as
illiquid securities. With respect to options written with primary dealers in
U.S. government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.

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. A put option sold by the Portfolio is covered when, among other things,
cash or liquid securities are placed in a segregated account to fulfill the
obligations undertaken.

To close out a position when writing covered options, the Portfolio may make a
`closing purchase transaction,'' which involves purchasing an option on the
same stock with the same exercise price and expiration date as the option which
it has previously written on the stock. The Portfolio will realize a profit or
loss for a closing purchase transaction if the amount paid to purchase an option
is less or more, as the case may be, than the amount received from the sale
thereof. To close out a position as a purchaser of an option, the Portfolio may
make a `closing sale transaction,'' which involves liquidating the Portfolio's
position by selling the option previously purchased.

The Portfolio intends to treat OTC Options purchased and the assets used to
`cover'' OTC Options written as not readily marketable and therefore subject to
the limitations described in `Investment Restrictions'' in the SAI.

Options on Foreign Stock Indices. The Portfolio may purchase and write put and
call options on foreign stock indices listed on domestic and foreign stock
exchanges. A stock index fluctuates with changes in the market values of the
stocks included in the index.

Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder 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 exercise, multiplied by (b) a fixed
`index multiplier.'' Receipt of this cash amount will depend upon the closing
level of the stock index upon which the option is based being greater than, in
the case of a call, or less than, in the case of a put, the exercise price of
the option. The amount of cash received will be equal to such difference between
the closing price of the index and the exercise price of the option expressed in
dollars or a foreign currency, as the case may be, times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or the option may expire unexercised.

To the extent permitted by U.S. federal or state securities laws, the Portfolio
may invest in options on foreign stock indices in lieu of direct investment in
foreign securities. The Portfolio may also use foreign stock index options for
hedging purposes.

Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Portfolio will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of a particular stock. Accordingly,
successful use by the Portfolio of options on stock indices will be subject to
Bankers Trust's ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual stocks.

Futures Contracts on Foreign 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 foreign securities (`Futures
Contracts'). This investment technique is designed only to hedge against
anticipated future change 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.

In general, 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
positions 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 are 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.

Although Futures Contracts would be entered into for hedging purposes only, such
transactions do involve certain risks. These risks could include a lack of
correlation between the Futures Contract and the foreign equity market being
hedged, a potential lack of liquidity in the secondary market and incorrect
assessments of market trends which may result in poorer overall performance than
if a Futures Contract had not been entered into.
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 would exceed 5% of the market value of the
Portfolio's total assets.

Options on Futures Contracts. The Portfolio may invest in options on such
futures contracts for similar purposes.

All options that the Portfolio writes will be covered under applicable
requirements of the SEC. The Portfolio will write and purchase options only to
the extent permitted by the policies of state securities authorities in states
where shares of the Fund are qualified for offer and sale.

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 or by
segregating liquid assets with the Portfolio's Custodian in an amount at all
times equal to or exceeding the Portfolio's commitment with respect to these
instruments or contracts.

(THIS PAGE INTENTIONALLY LEFT BLANK)

25
(THIS PAGE INTENTIONALLY LEFT BLANK)

BT INVESTMENT FUNDS
International Equity Fund

Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Distributor
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

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
Statements 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 #055922868
STA463300 (1/97)

o BT INVESTMENT FUNDS o
Small Cap Fund
Seeks long term capital growth through investment in smaller sized growth
companies.
PROSPECTUS

JANUARY 31, 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 Small Cap Fund (the
`Fund'') that you should know and can refer to in deciding whether the Fund's
goals match your own.

A Statement of Additional Information (`SAI'') with the same date 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 Small Cap 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.

Edgewood Services, Inc.
Clearing Operations o P.O. Box 897 o Pittsburgh, Pennsylvania o 15230-0897

TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE
<S> <C>
The Fund 3
Who May Want To Invest 3
Summary of Fund Expenses 4
Financial Highlights 5
Investment Objective and Policies 6
Risk Factors: Matching The Fund To Your Investment Needs 8
Net Asset Value 10
Purchase and Redemption Of Shares 11
Dividends, Distributions And Taxes 16
Performance Information And Reports 16
Management of the Trust And Portfolio 17
Additional Information 20
</TABLE>

THE FUND
The Fund's investment objective is long-term capital growth; the production of
any current income is secondary to this objective. The Portfolio seeks to
provide long-term capital growth by investing primarily in equity securities of
smaller sized growth companies.

WHO MAY WANT TO INVEST
The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio.

SUMMARY OF FUND EXPENSES
Annual Operating Expenses
<TABLE>
<CAPTION>

<S>
<C>
(as a percentage of the average daily net assets of the Fund)
Investment advisory fee (after reimbursements or waivers) 0.58%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.67
Total operating expenses (after reimbursements or waivers) 1.25%

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 Year 3 Years 5 Years 10 Years

You would pay the
following expenses for
each Fund on a $1,000
investment, assuming
(1) 5% annual return
and (2) redemption
at the end of each
time period $13 $40 $69 $151

</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 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. 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 the example reflect
a voluntary undertaking by Bankers Trust to waive or reimburse expenses such
that the total operating expenses will not exceed 1.25% of the Fund's average
net assets annually. In the absence of this undertaking, for the fiscal year
ended September 30, 1996, the total operating expenses would be equal to
approximately 1.47% 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 the expenses of the Fund and the Portfolio
see "Management of the Trust and Portfolio" herein.

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.

FINANCIAL HIGHLIGHTS
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 period 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 Period
October 21, 1993
For the year ended (Commencement
September 30, of Operations) to
1996 1995 September 30, 1994
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $18.50 $11.60 $10.00
Income from Investment Operations
Net Investment Loss (0.12) (0.04) (0.03)
Net Realized and Unrealized Gain on Investments 4.65 6.94 1.63
Total from Investment Operations 4.53 6.90 1.60
Distributions to Shareholders
Net Realized Gain from Investment Transactions (1.37) - -
Net Asset Value, End of Period $21.66 $18.50 $11.60
Total Investment Return 26.41% 59.48% 17.06%*

Ratios and Supplemental Data
Ratios to Average Net Assets:
Net Investment Loss (0.70)% (0.46)% (0.58)%
Expenses, including Expenses of the
Small Cap Portfolio 1.25% 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.22% 0.34% 0.86%*
Net Assets, End of Period (000's omitted) $242,236 $122,935 $21,332
* Annualized
</TABLE>

INVESTMENT OBJECTIVE AND POLICIES
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
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund. There can be no assurances that the investment objective of either
the Fund or the Portfolio will be achieved. The investment objective of each of
the Fund and the 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.

Small Cap Portfolio

The Portfolio seeks to provide long term capital growth by investing primarily
in equity securities of smaller companies. The Portfolio's policy is to invest
in equity securities of smaller companies that Bankers Trust, as the Portfolio's
Adviser, believes are in an early stage or transitional point in their
development and have demonstrated or have the potential for above average
capital growth. The Adviser will select companies which have the potential to
gain market share in their industry, achieve and maintain high and consistent
profitability or produce increases in earnings. The Adviser also seeks companies
with strong company management and superior fundamental strength.

The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. 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 undervalued
by the market. These situations are only illustrative of the types of investment
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.

For temporary defensive purposes, when in the opinion of the Adviser market
conditions so warrant, the Portfolio may invest all or a portion of its assets
in common stocks of larger, more established companies or in fixed-income
securities or short-term money market securities. To the extent the Portfolio is
engaged in temporary defensive investments, the Portfolio will not be pursuing
its investment objective.

The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments and related
hedging techniques, see "Risk Factors: Matching the Fund to Your Investment
Needs," "Additional Information" herein and the SAI.

Equity Investments. The Portfolio invests primarily in common stock and other
securities with equity characteristics, such as trust or limited partnership
interests, rights and warrants. These investments may or may not pay dividends
and may or may not carry voting rights. The Portfolio may also invest in
convertible securities when, due to market conditions, it is more advantageous
to obtain a position in an attractive company by purchase of its convertible
securities than by purchase of its common stock. The convertible securities in
which the Portfolio invests may include any debt securities or preferred stock
which may be converted into common stock or which carries the right to purchase
common stock. Convertible securities entitle the holder to exchange the
securities for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time and to receive
interest or dividends until the holder elects to exercise the conversion
privilege. Since the Portfolio invests in both common stock and convertible
securities, the risks of the general equity markets may be tempered to a degree
by the Portfolio's investments in convertible securities which are often not as
volatile as equity securities.

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
short-term instruments with remaining maturities of 397 days or less to meet
anticipated redemptions and expenses or for day-to-day operating purposes and
when, in the Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when the Portfolio experiences large cash inflows through the sale
of securities and desirable equity securities that are consistent with the
Portfolio's investment objective are unavailable in sufficient quantities or at
attractive prices, the Portfolio may hold short-term investments for a limited
time pending availability of such equity securities. Short-term instruments
consist of foreign and domestic: (i) short-term obligations of sovereign
governments, their agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated Aa or higher by
Moody's Investors Service, Inc. ("Moody's") or AA or higher by Standard & Poor's
Ratings Group ("S&P") or, if unrated, of comparable quality in the opinion of
Bankers Trust; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. At the time the Portfolio invests in commercial
paper, bank obligations or repurchase agreements, the issuer or the issuer's
parent must have outstanding debt rated Aa or higher by Moody's or AA or higher
by S&P or outstanding commercial paper or bank obligations rated Prime-1 by
Moody's or A-1 by S&P; or, if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S. dollars or in foreign currencies.

Additional Investment Techniques

The Portfolio may also utilize the following investments and investment
techniques and practices: Rule 144A securities, when-issued and delayed delivery
securities, securities lending, repurchase agreements, foreign investments,
options on stocks, options on stock indices, futures contracts on stock indices,
options on futures contracts, foreign currency exchange transactions and options
on foreign currencies. See "Additional Information" 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 Risks" 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 of the Portfolio, see "Management of the Trust
and Portfolios" herein and "Management of the Trust and Portfolios" in the SAI.
For descriptions of the expenses of the Portfolio, see "Management of the Trust
and Portfolios" herein.

RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS.
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 smaller domestic corporations and,
to a limited extent, foreign corporations. The Fund is designed for those
investors primarily interested in capital growth from investments in smaller-
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
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

In seeking its investment objectives, the Portfolio may invest in securities of
foreign issuers. Foreign securities may involve a higher degree of risk and may
be less liquid or more volatile than domestic investments. Foreign securities
usually are denominated in foreign currencies, which means their value will be
affected by changes in the strength of foreign currencies relative to the U.S.
dollar as well as the other factors that affect security prices. Foreign
companies may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there often is less publicly available
information about their operations. Generally, there is less governmental
regulation of foreign securities markets, and security trading practices abroad
may offer less protection to investors such as the Portfolio. The value of such
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 those foreign countries.
Additional risks of foreign securities include settlement delays and costs,
difficulties in obtaining and enforcing judgments, and taxation of dividends at
the source of payment. 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.

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's turnover rates for the fiscal years ended September
30, 1996 and 1995, were 159% and 161%, respectively. Because a higher portfolio
turnover rate increases transaction costs and may increase taxable capital
gains, Bankers Trust carefully weighs the anticipated benefits of short-term
investment against these consequences.

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 for cash management purposes 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. The Adviser will use derivatives only in circumstances where the Adviser

8
believes they offer the most economic means of improving the risk/reward profile
of the Portfolio. Derivatives will not be used to increase portfolio risk above
the level that could be achieved using only traditional investment securities or
to acquire exposure to changes in the value of assets or indices that by
themselves would not be purchased for the Portfolio. The use of derivatives for
non-hedging purposes may be considered speculative. A description of the
derivatives that the Portfolio may use and some of their associated risks is
found under "Additional Information" herein.

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
objective 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 at (800) 730-1313.

The master-feeder structure has been developed relatively recently, 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 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 with respect to the Portfolio.

NET ASSET VALUE
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 a 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.

PURCHASE AND REDEMPTION OF SHARES
How To Buy Shares

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 Transfer 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 4:00 p.m. Eastern 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.
<TABLE>
<CAPTION>
Minimum Investments
<S> <C>
To Open an Account $2,500
For retirement accounts 500
Through automatic investment plans1,000

To Add to an Account $250
For retirement accounts 100
Through automatic investment plan100

Minimum Balance $1,000
For retirement accounts None
</TABLE>

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:

o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT Family
of Funds, or
o 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 call BT Retirement
Services Center at 1-800-677-7596 for more information and a
retirement account application.

Additional Information About Buying Shares
<TABLE>
<CAPTION>
To Open an Account To Add to an Account
<S> <C> <C>
By Wire Call the BT Service Center at Call your Investment Professional or wire
1-800-730-1313 to receive additional investment to:
wire instructions for account
establishment.
Routing No.: 021001033
Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: Fund Number
Investment Small Cap Fund - 498

Specify the complete name of the Fund of
your choice, and include your account number
and your name.

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

How to Sell Shares

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.

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.

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

Additional Information About Selling Shares

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

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:

Exchange Privilege

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

Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you.
<TABLE>
<CAPTION>

Systematic Programs
To move money from your bank account to BT Investment Funds
<S> <C> <C> <C>
Minimum Minimum Frequency Setting up or changing
Initial Subsequent

$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate section
quarterly or semi- on the application.
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>

<TABLE>
<CAPTION>
14

Systematic Withdrawal Program lets you set up periodic redemptions from your account.
<S> <C> <C>
Minimum Frequency Setting up or changing

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

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.

o 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.

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

o 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.

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

o 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. Income dividends if any, are
distributed on the first business day in April, July and October. In December,
another income dividend will be distributed plus any net capital gains. 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.

"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, the Fund's share value is reduced by the amount of the
distribution. If you buy shares just before the record 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.

to withholding and other taxes imposed by such countries. Investors should
consult their tax adviser for specific details on federal, state, local or
foreign taxes.

PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to various unmanaged indices such
as the Russell 2000 Index or Lipper Small Company Growth Funds Average or
results of other mutual funds or investment or savings vehicles. The Fund's
investment results as used in such communications will be calculated on a total
rate of return basis in the manner set forth below. From time to time, Fund
rankings may be quoted from various sources, such as Lipper Analytical Services,
Inc., Value Line, and Morningstar, Inc.

The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends and capital gain distributions are reinvested. An annualized
total return will be higher than a period total return if the period is shorter
than one year, because of the compounding effect.

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 Fund's expenses. In addition, during certain periods for
which total return quotations may be provided, Bankers Trust, as Adviser,
Service Agent or Administrator may have voluntarily agreed to waive portions of
their fees on a month-to-month basis. Such waivers will have the effect of
increasing the Fund's net income (and therefore its total return) during the
period such waivers are in effect.

Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including listings of investment securities
held by the Portfolio at those dates. Annual reports are audited by independent
accountants.

MANAGEMENT OF THE TRUST AND PORTFOLIO
Board of Trustees

The affairs of the Trust and BT Investment Portfolios are managed under the
supervision of their respective Boards of Trustees. By virtue of the
responsibilities assumed by Bankers Trust, as the Administrator of the Trust and
BT Investment Portfolios, neither the Trust nor BT Investment Portfolios
requires employees other than its officers. None of the Trust's or BT Investment
Portfolios' officers devotes full time to the affairs of the Trust or BT
Investment Portfolios.

The Trustees of the Trust who are not "interested persons," (as defined in the
1940 Act) of the Trust or of the BT Investment Portfolios, as the case may be,
(the "Independent Trustees") have adopted written procedures reasonably

appropriate to deal with potential conflicts of interest, up to and including
creating separate boards of trustees, arising from the fact that several of the
same individuals are trustees of the Trust and BT Investment Portfolios. For
more information with respect to the Trustees of both the Trust and the
Portfolio, see "Management of the Trust and Portfolios" in the SAI.

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 investment adviser. Mr. Bluford Putnam, PhD, Managing Director
of Bankers Trust and Chief Investment Officer of Equity and Balanced Portfolios,
is responsible for the management oversight of the Small Cap Portfolio team
which includes seven investment professionals. Mr. Putnam has been employed by
Bankers Trust since 1994. His previous experience includes economist at the
Federal Reserve Bank of New York, principal at Morgan Stanley and Chief
Economist at Kleinwort Benson, Ltd. He was also a founding partner of Stern
Stewart and Co. in 1982, a leading corporate finance advisory firm, and is the
author of `The Blackwell Guide to Wall Street,'' which focused, in part, on
equity valuation.

1992. He has twelve years of investment and financial experience. Previously,
he worked at Prudential Securities, Chase Manhattan Bank and Bank of Boston.

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 BT Investment Portfolios, 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 worldwide subsidiaries and
affiliates to assist it in its role as Adviser.

Under its investment advisory agreement, Bankers Trust receives a fee from the
Portfolio computed daily and paid monthly at the annual rate of 0.65% of the
average daily net assets of the Portfolio.

Administrator

Under an Administration and Services Agreement with BT Investment Portfolios,
Bankers Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio 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, computed daily
and paid monthly, at the annual rate of 0.10% of the average daily net assets of
the Portfolio. 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 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.

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 Fund's 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 will not be
reimbursed in any succeeding fiscal year. 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. It is not
expected that any payment will be made under the Plan in the foreseeable future.

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 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 BT Investment
Portfolios and serves as the Transfer Agent for the Trust and BT Investment
Portfolios 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.

The Portfolio is a series of BT Investment Portfolios, an open-end management
investment company. BT Investment Portfolios was organized as a trust under the
laws of the State of New York. BT Investment Portfolios' 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. The interest in BT

Investment Portfolios are divided into separate series, such as the Portfolio.
No series of BT Investment Portfolios has any preference over any other series.

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, Bankers Trust Co., New York, New York, owned 32.37% of
the voting securities of the Small Cap 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.

ADDITIONAL INFORMATION
Rule 144A Securities. The Portfolio may purchase 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 Portfolio's 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.

extensions of credit, include delays in recovery and possible loss of rights in
the collateral should the borrower fail financially.

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.

Options on Stocks. The Portfolio may write and purchase put and call 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, which is a 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. A put option sold by the Portfolio is covered when, among other things,
cash or liquid securities are placed in a segregated account to fulfill the
obligations undertaken.

To close out a position when writing covered options, the Portfolio may make a
"closing purchase transaction," which involves purchasing an option on the same
stock with the same exercise price and expiration date as the option which it
has previously written on the stock. The Portfolio will realize a profit or loss
for a closing purchase transaction if the amount paid to purchase an option is
less or more, as the case may be, than the amount received from the sale

thereof. To close out a position as a purchaser of an option, the Portfolio may
make a "closing sale transaction," which involves liquidating the Portfolio's
position by selling the option previously purchased.

The Portfolio intends to treat over-the-counter options ("OTC Options")
purchased and the assets used to "cover" OTC Options written as not readily
marketable and therefore subject to the limitations described in "Investment
Restrictions" in the SAI.

Options on Stock Indices. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.

Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder 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 exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or the option may expire unexercised.

prices in the stock market generally or, in the case of certain indices, in an
industry or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Portfolio of options on stock indices
will be subject to Bankers Trust's ability to correctly predict movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

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 securities ("Futures Contracts"). This investment
technique is designed only to hedge against anticipated future change 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.

positions 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 are 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.

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 would exceed 5% of the market value of the
Portfolio's total assets.

Options on Futures Contracts. The Portfolio may invest in options on such
Futures Contracts for similar purposes.

Foreign Currency Exchange Transactions. Because the Portfolio may buy and sell
securities denominated in currencies other than the U.S. dollar and receives
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Portfolio from time to time 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.

in the Portfolio's best interest. 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 dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. The Portfolio
may use options on 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 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 foreign currencies 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 currency when the Adviser anticipates that the
currency will appreciate in value.

There is no assurance that a liquid secondary market on an options exchange 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 the options expire or
are exercised. Similarly, if the Portfolio is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying currency. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions.

As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which may not
be present in the case of exchange-traded currency options. The Portfolio's
ability to terminate OTC Options will be more limited than with exchange-traded
options. It is also possible that broker-dealers participating in OTC Options
transactions will not fulfill their obligations. Until such time as the staff of
the SEC changes its position, the Portfolio will treat purchased OTC Options and
assets used to cover written OTC Options as illiquid securities. With respect to
options written with primary dealers in U.S. government securities pursuant to
an agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.

All options that the Portfolio writes will be covered under applicable
requirements of the SEC.

The Portfolio will write and purchase options only to the extent permitted by
the policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale.

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

Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price at a future date. In
the event of the bankruptcy of the other party to either a repurchase agreement
or a securities loan, the Portfolio could experience delays in recovering either
its cash or the securities it lent. To the extent that, in the meantime, the
value of the securities repurchased had decreased or the value of the securities
lent had increased, the Portfolio could experience a loss. In all cases, Bankers
Trust must find the creditworthiness of the other party to the transaction
satisfactory. A repurchase agreement is considered a collateralized loan under
the 1940 Act.

BT INVESTMENT FUNDS
Small Cap Fund

Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Distributor
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

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
Statements 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 #055922769
STA498300 (1/97)

STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 31, 1997

BT INVESTMENT FUNDS
INTERMEDIATE TAX FREE FUND
GLOBAL HIGH YIELD SECURITIES FUND
CAPITAL APPRECIATION FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
PACIFIC BASIN FUND
LATIN AMERICAN EQUITY FUND

BT Investment Funds (the "Trust") is comprised of a number of separate
investment funds. The shares of the following funds - Intermediate Tax Free
Fund, Global High Yield Securities Fund, Capital Appreciation Fund, Small Cap
Fund, International Equity Fund, Pacific Basin Equity Fund, and Latin American
Equity Fund (each, a "Fund") - are described herein.

As described in the Prospectuses, the Trust seeks to achieve the investment
objectives of each Fund by investing all the investable assets ("Assets") of the
Fund (with the exception of the Global High Yield Securities Fund) in a
diversified open-end management investment company having the same investment
objectives as the Fund. The Global High Yield Securities Fund invests its
Assets in a non-diversified open-end management investment company (or series
thereof). These investment companies (or a series thereof) are, respectively,
Intermediate Tax Free Portfolio, Global High Yield Securities Portfolio, Capital
Appreciation Portfolio, Small Cap Portfolio, International Equity Portfolio,
Pacific Basin Equity Portfolio, and Latin American Equity Portfoio
(collectively, the "Portfolios"). The Global High Yield Securities Portfolio,
Small-Cap Portfolio, Pacific Basin Equity Portfolio, and Latin American Equity
Portfolio are each a series of BT Investment Portfolios.

Since the investment characteristics of the Funds will correspond directly
to those of the respective Portfolio in which the Fund invests all of its
Assets, the following is a discussion of the various investments of and
techniques employed by each Portfolio. Shares of the Funds are sold by Edgewood
Services, Inc. (`Edgewood''), the Trust's Distributor, to clients and customers
(including affiliates and correspondents) of Bankers Trust Company ("Bankers
Trust"), the Portfolios' investment adviser (`Adviser''), and to clients and
customers of other organizations

The Trust's Prospectuses for each Fund are each dated January 31, 1997.
The Prospectuses provide the basic information investors should know before
investing and may be obtained without charge by calling the Trust at the
telephone number listed below or by contacting any Service Agent. This
Statement of Additional Information (`SAI''), which is not a Prospectus, is
intended to provide additional information regarding the activities and
operations of the Trust and should be read in conjunction with that Fund's
Prospectus. This SAI is not an offer of any Fund for which an investor has not
received a Prospectus. Capitalized terms not otherwise defined in this SAI have
the meanings accorded to them in the Trust's Prospectuses.

BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR

EDGEWOOD SERVICES, INC.
DISTRIBUTOR
CLEARING OPERATIONS PITTSBURGH, PENNSYLVANIA 15230-0897 (800) 730-
1313
P.O. BOX 897

TABLE OF CONTENTS

Investment Objectives, Policies and Restrictions 1
Performance Information 29
Valuation of Securities; Redemptions and Purchases in Kind 32
Management of the Trust and Portfolios 34
Organization of the Trust 43
Taxation 44
Financial Statements 46

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

The investment objective(s) of each Fund is described in that Fund's
Prospectus. There can, of course, be no assurance that any Fund will achieve
its investment objective(s).

INVESTMENT POLICIES

Each Fund seeks to achieve its investment objective(s) by investing all of
its Assets in the corresponding Portfolio. The Trust may withdraw a Fund's
investment from the corresponding Portfolio at any time if the Board of Trustees
of the Trust determines that it is in the best interests of the Fund to do so.

Since the investment characteristics of each Fund will correspond directly
to those of the corresponding Portfolio, the following is a discussion of the
various investments of and techniques employed by each Portfolio.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit
are receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the
bearer of the receipt on the date specified on the certificate. The certificate
usually can be traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial transactions.
Generally, an acceptance is a time draft drawn on a bank by an exporter or an
importer to obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by a bank that, in effect, unconditionally
guarantees to pay the face value of the instrument on its maturity date. The
acceptance may then be held by the accepting bank as an earning asset or it may
be sold in the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as 270 days, most
acceptances have maturities of six months or less.

COMMERCIAL PAPER. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to which
the lender may determine to invest varying amounts.

ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the
"1933 Act"), securities which are otherwise not readily marketable and
repurchase agreements having a remaining maturity of longer than seven days.
Securities which have not been registered under the 1933 Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.

The Securities and Exchange Commission the (the "SEC") has adopted
Rule 144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of the
1933 Act of resales of certain securities to qualified institutional buyers.
The Adviser anticipates that the market for certain restricted securities such
as institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.

The Adviser will monitor the liquidity of Rule 144A securities in each
Portfolio's holdings under the supervision of the Portfolio's Board of Trustees.
In reaching liquidity decisions, the Adviser will consider, among other things,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers and other potential purchasers or sellers of the
security; (3) dealer undertakings to make a market in the security and (4) the
nature of the security and of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.

GENERAL. The successful use of such instruments draws upon the Adviser's
skill and experience with respect to such instruments and usually depends on the
Adviser's ability to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, a
Portfolio may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options on
futures contracts and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.

FUTURES CONTRACTS. A Portfolio may enter into contracts for the purchase
or sale for future delivery of fixed-income securities, foreign currencies, or
contracts based on financial indices including any index of U.S. government
securities, foreign government securities or corporate debt securities. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"), and
must be executed through a futures commission merchant, or brokerage firm, which
is a member of the relevant contract market. Futures contracts trade on a
number of exchange markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing members
of the exchange. A Portfolio may enter into futures contracts which are based
on debt securities that are backed by the full faith and credit of the U.S.
Government, such as long-term U.S. Treasury Bonds, Treasury Notes, Government
National Mortgage Association (`GNMA'') modified pass-through mortgage-backed
securities and three-month U.S. Treasury Bills. A Portfolio may also enter into
futures contracts which are based on bonds issued by entities other than the
U.S. government.

At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It
is expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by
buying (or selling, as the case may be) on a commodities exchange an identical
futures contract calling for delivery in the same month. Such a transaction,
which is effected through a member of an exchange, cancels the obligation to
make or take delivery of the securities. Since all transactions in the futures
market are made, offset or fulfilled through a clearinghouse associated with the
exchange on which the contracts are traded, the Portfolio will incur brokerage
fees when it purchases or sells futures contracts.

The purpose of the acquisition or sale of a futures contract, in the case
of a Portfolio which holds or intends to acquire fixed-income securities, is to
attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Portfolio. If interest
rates did increase, the value of the debt security in the Portfolio would
decline, but the value of the futures contracts to the Portfolio would increase
at approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. The Portfolio
could accomplish similar results by selling debt securities and investing in
bonds with short maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the cash market, the use
of futures contracts as an investment technique allows the Portfolio to maintain
a defensive position without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of
futures contracts should be similar to those of debt securities, a Portfolio
could take advantage of the anticipated rise in the value of debt securities
without actually buying them until the market had stabilized. At that time, the
futures contracts could be liquidated and the Portfolio could then buy debt
securities on the cash market. To the extent a Portfolio enters into futures
contracts for this purpose, the assets in the segregated asset account
maintained to cover the Portfolio's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high quality liquid debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the initial and variation margin payments made by the Portfolio with respect to
such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.

In addition, futures contracts entail risks. Although the Adviser believes
that use of such contracts will benefit the Portfolios, if the Adviser's
investment judgment about the general direction of interest rates is incorrect,
a Portfolio's overall performance would be poorer than if it had not entered
into any such contract. For example, if a Portfolio has hedged against the
possibility of an increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a
Portfolio has insufficient cash, it may have to sell debt securities from its
portfolio to meet daily variation margin requirements. Such sales of bonds may
be, but will not necessarily be, at increased prices which reflect the rising
market. A Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of its futures
positions, the Portfolio's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.

The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Board of Trustees of each Portfolio has adopted a further restriction
that the Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all
the futures contracts of the Portfolio and premiums paid on outstanding options
on futures contracts owned by the Portfolio (other than those entered into for
bona fide hedging purposes) would exceed 5% of the market value of the total
assets of the Portfolio.

OPTIONS ON FOREIGN CURRENCIES. Each Portfolio (except for Intermediate Tax
Free Portfolio) may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, the Portfolio could sustain losses
on transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.

Each Portfolio (except for Intermediate Tax Free Portfolio) may write
options on foreign currencies for the same types of hedging purposes. For
example, where a Portfolio anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the options will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Portfolio also may be
required to forego all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.

Each Portfolio (except for Intermediate Tax Free Portfolio) intends to
write covered call options on foreign currencies. A call option written on a
foreign currency by a Portfolio is "covered" if the Portfolio owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by its Custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if the Portfolio has a call on the same foreign
currency and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Portfolio in cash, U.S. government
securities and other high quality liquid debt securities in a segregated account
with its custodian.

Each Portfolio (except for Intermediate Tax Free Portfolio) also intends to
write call options on foreign currencies that are not covered for cross-hedging
purposes. A call option on a foreign currency is for cross-hedging purposes if
it is not covered, but is designed to provide a hedge against a decline in the
U.S. dollar value of a security which the Portfolio owns or has the right to
acquire and which is denominated in the currency underlying the option due to an
adverse change in the exchange rate. In such circumstances, the Portfolio
collateralizes the option by maintaining in a segregated account with its
custodian, cash or U.S. government securities or other high quality liquid debt
securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked to market daily.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which may not
be present in the case of exchange-traded currency options. A Portfolio's
ability to terminate over-the-counter options will be more limited than with
exchange-traded options. It is also possible that broker-dealers participating
in over-the-counter options transactions will not fulfill their obligations.
Until such time as the staff of the SEC changes its position, each Portfolio
will treat purchased over-the-counter options and assets used to cover written
over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.

OPTIONS ON SECURITIES. Each Portfolio may write (sell) covered call and put
options to a limited extent on its portfolio securities ("covered options") in
an attempt to increase income. However, the Portfolio may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Portfolio.

When a Portfolio writes a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will
realize income in an amount equal to the premium received for writing the
option. If the option is exercised, a decision over which the Portfolio has no
control, the Portfolio must sell the underlying security to the option holder at
the exercise price. By writing a covered call option, the Portfolio forgoes, in
exchange for the premium less the commission ("net premium"), the opportunity to
profit during the option period from an increase in the market value of the
underlying security above the exercise price.

When a Portfolio writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By
writing a covered put option, the Portfolio, in exchange for the net premium
received, accepts the risk of a decline in the market value of the underlying
security below the exercise price. The Portfolio will only write put options
involving securities for which a determination is made at the time the option is
written that the Portfolio wishes to acquire the securities at the exercise
price.

A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing
purchase transaction." The Portfolio will realize a profit or loss for a
closing purchase transaction if the amount paid to purchase an option is less or
more, as the case may be, than the amount received from the sale thereof. To
close out a position as a purchaser of an option, the Portfolio, may make a
`closing sale transaction'' which involves liquidating the Portfolio's position
by selling the option previously purchased. Where the Portfolio cannot effect a
closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to hold
underlying securities until an option is exercised or expires.

When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The
amount of the deferred credit will be subsequently marked to market to reflect
the current market value of the option written. The current market value of a
traded option is the last sale price or, in the absence of a sale, the mean
between the closing bid and asked price. If an option expires on its stipulated
expiration date or if the Portfolio enters into a closing purchase transaction,
the Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated
on the books of the custodian for the Portfolio.

A Portfolio may purchase call and put options on any securities in which it
may invest. The Portfolio would normally purchase a call option in anticipation
of an increase in the market value of such securities. The purchase of a call
option would entitle the Portfolio, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.

A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's holdings, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's holdings. Put options also may be purchased by the Portfolio for
the purpose of affirmatively benefiting from a decline in the price of
securities which the Portfolio does not own. The Portfolio would ordinarily
recognize a gain if the value of the securities decreased below the exercise
price sufficiently to cover the premium and would recognize a loss if the value
of the securities remained at or above the exercise price. Gains and losses on
the purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.

Each Portfolio has adopted certain other nonfundamental policies concerning
option transactions which are discussed below. The Portfolio's activities in
options may also be restricted by the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for qualification as a regulated investment
company.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.

A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolios' Trustees.

OPTIONS ON SECURITIES INDICES. In addition to options on securities, each
Portfolio (except for Intermediate Tax Free Portfolio) may also purchase and
write (sell) call and put options on securities indices. Such options give the
holder the right to receive a cash settlement during the term of the option
based upon the difference between the exercise price and the value of the index.
Such options will be used for the purposes described above under "Options on
Securities."

The International Equity Portfolio and the Pacific Basin Equity Portfolio
may, to the extent allowed by Federal and state securities laws, invest in
securities indices instead of investing directly in individual foreign
securities.

Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indices is more likely to occur, although the
Portfolio generally will only purchase or write such an option if the Adviser
believes the option can be closed out.

Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included in the
index is interrupted. The Portfolio will not purchase such options unless the
Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.

Price movements in a Portfolio's holdings may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indices
cannot serve as a complete hedge. Because options on securities indices require
settlement in cash, the Adviser may be forced to liquidate portfolio securities
to meet settlement obligations.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Because each Portfolio
(except for Intermediate Tax Free Portfolio) may buy and sell securities
denominated in currencies other than the U.S. dollar and receives interest,
dividends and sale proceeds in currencies other than the U.S. dollar, a
Portfolio from time to time 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. A 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.

A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or 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.
Each Portfolio maintains with its custodian a segregated account of high
grade liquid assets in an amount at least equal to its obligations under
each forward foreign currency exchange contract. 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.
Each Portfolio (except for Intermediate Tax Free 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. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term
investment decisions, a Portfolio will not routinely enter into foreign
currency hedging transactions with respect to security transactions;
however, Bankers Trust believes that it is important to have the
flexibility to enter into foreign currency hedging transactions when it
determines that the transactions would be in the Portfolio's best interest.
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.
While these contracts are not presently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward contracts. In
such event the Portfolio's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted. Forward contracts
may reduce the potential gain from a positive change in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance for the Portfolio
than if it had not entered into such contracts. The use of foreign
currency forward contracts may not eliminate fluctuations in the underlying
U.S. dollar equivalent value of the prices of or rates of return on a
Portfolio's foreign currency denominated portfolio securities and the use
of such techniques will subject a Portfolio to certain risks.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Portfolio may not always be able to enter into
foreign currency forward contracts at attractive prices and this will limit
the Portfolio's ability to use such contract to hedge or cross-hedge its
assets. Also, with regard to a Portfolio's use of cross-hedges, there can
be no assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. dollar will continue.
Thus, at any time poor correlation may exist between movements in the
exchange rates of the foreign currencies underlying a Portfolio's cross-
hedges and the movements in the exchange rates of the foreign currencies in
which the Portfolio's assets that are the subject of such cross-hedges are
denominated.

SHORT-TERM INSTRUMENTS. When a Portfolio experiences large cash
inflows through the sale of securities and desirable equity securities,
that are consistent with the Portfolio's investment objective, which are
unavailable in sufficient quantities or at attractive prices, each
Portfolio may invest in short-term instruments for a limited time pending
availability of such portfolio securities. Short-term instruments consist
of foreign or domestic: (i) short-term obligations of sovereign
governments, their agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated AA or higher by
Standard & Poor's Rating Group (`S&P'') or Aa or higher by Moody's
Investors Services, Inc. (`Moody's'') or, if unrated, of comparable
quality in the opinion of Bankers Trust; (iii) commercial paper; (iv) bank
obligations, including negotiable certificates of deposit, time deposits
and banker's acceptances; and (v) repurchase agreements. At the time the
Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer of the issuer's parent must have outstanding debt
rated AA or higher by S&P or Aa or higher by Moody's or outstanding
commercial paper or bank obligations rated A-1 by S&P or Prime-1 by
Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S. dollars or in foreign currencies.
LENDING OF PORTFOLIO SECURITIES. Each Portfolio (except for the
Intermediate Tax Free Portfolio) has the authority to lend portfolio
securities to brokers, dealers and other financial organizations. The
Portfolios will not lend securities to Bankers Trust, Edgewood or their
affiliates. By lending its securities, a Portfolio can increase its income
by continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term securities or obtaining
yield in the form of interest paid by the borrower when U.S. government
obligations are used as collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the securities fail financially. Each Portfolio will adhere to the
following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100 percent cash collateral or equivalent securities
from the borrower; (ii) the borrower must increase this collateral whenever
the market value of the securities including accrued interest rises above
the level of the collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions on
the loaned securities, and any increase in market value; (v) the Portfolio
may pay only reasonable custodian fees in connection with the loan; and
(vi) voting rights on the loaned securities may pass to the borrower;
provided, however, that if a material event adversely affecting the
investment occurs, the Board of Trustees must terminate the loan and regain
the right to vote the securities.
LOWER-RATED DEBT SECURITIES ("JUNK BONDS"). The Global High Yield
Securities Portfolio and the Latin American Equity Portfolio may invest in
lower-rated debt securities. While the market for high yield corporate
debt securities has been in existence for many years and has weathered
previous economic downturns, the 1980's brought a dramatic increase in the
use of such securities to fund highly leveraged corporate acquisitions and
restructuring. Past experience may not provide an accurate indication of
future performance of the high yield bond market, especially during periods
of economic recession. In fact, from 1989 to 1991, the percentage of
lower-rated debt securities that defaulted rose significantly above prior
levels.

The market for lower-rated debt securities may be thinner and less
active than that for higher rated debt securities, which can adversely
affect the prices at which the former are sold. If market quotations are
not available, lower- rated debt securities will be valued in accordance
with procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing high
yield corporate debt securities than is the case for securities for which
more external sources for quotations and last sale information is
available. Adverse publicity and changing investor perception may affect
the ability of outside pricing services to value lower-rated debt
securities and the Global High Yield Securities Portfolio's ability to
dispose of these securities.
Since the risk of default is higher for lower-rated debt securities,
Bankers Trust's research and credit analysis are an especially important
part of managing securities of this type held by the Portfolio. In
considering investments for the Portfolio, Bankers Trust will attempt to
identify those issuers of high yielding debt securities whose financial
conditions are adequate to meet future obligations, have improved or are
expected to improve in the future. Bankers Trust's analysis focuses on
relative values based on such factors as interest on dividend coverage,
asset coverage, earnings prospects and the experience and managerial
strength of the issuer.

The Global High Yield Securities Portfolio may choose, at its expense
or in conjunction with others, to pursue litigation or otherwise exercise
its rights as a security holder to seek to protect the interest of
security holders if it determines this to be in the best interest of the
Global High Yield Securities Fund.

BRADY BONDS. The Global High Yield Securities Portfolio and the Latin
American Equity Portfolio may invest in "Brady bonds," which have been
issued by the governments of Argentina, Brazil, Costa Rica, Mexico,
Nigeria, Philippines, Uruguay and Venezuela. Most Brady bonds are
currently rated below BBB by S&P or Baa by Moody's.
The Brady Plan was conceived by the U.S. Treasury in the 1980's in an
attempt to produce a debt restructuring program which would enable a debt
country to (i) reduce the absolute level of debt of its creditor banks,
and (ii) reschedule its external debt repayments, based upon its ability to
service such debts by persuading its creditor banks to accept a debt write-
off by offering them a selection of options, each of which represented an
attractive substitute for the nonperforming debt. Although it was
envisaged that each debtor country would agree to a unique package of
options with its creditor banks, the plan was that these options would be
based upon the following:(i) a discount bond carrying a market rate of
interest (whether fixed or floating), with principal collateralized by the
debtor country with cash or securities in an amount equal to at least one
year of rolling interest; (ii) a par bond carrying a low rate of interest
(whether fixed or floating), collateralized in the same way as in (i)
above; and (iii) retention of existing debt (thereby avoiding a debt write-
off) coupled with an advance of new money or subscription of new bonds.

The Global High Yield Securities Portfolio and the Latin American
Equity Portfolio may invest in either collateralized or uncollateralized
Brady bonds. U.S. dollar-denominated, collateralized Brady bonds, which
may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds
having the same maturity as the bonds. Interest payments on such bonds
generally are collateralized by cash or securities in an amount that in the
case of fixed rate bonds, is equal to at least one year of rolling interest
payments or, in the case of floating rate bonds, initially is equal to at
least one year's rolling interest payments based on the applicable interest
rate at the time and is adjusted at regular intervals thereafter.

MUNICIPAL BONDS. Municipal bonds generally fund longer-term capital
needs than municipal notes and have maturities exceeding one year when
issued. The Intermediate Tax Free Portfolio may invest in municipal bonds.
Municipal bonds include:

GENERAL OBLIGATION BONDS. Issuers of general obligation bonds include
states, counties, cities, towns and regional districts. The proceeds of
these obligations are used to fund a wide range of public projects,
including construction or improvement of schools, highways and roads, and
water and sewer systems. The basic security behind general obligation
bonds is the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. The taxes that can be levied
for the payment of debt service may be limited or unlimited as to the rate
or amount of special assessments.

REVENUE BONDS. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities
or, in some cases, the proceeds of a special excise tax or other specific
revenue source. Revenue bonds are issued to finance a wide variety of
capital projects, including electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals. Although the principal security behind these
bonds may vary, many provide additional security in the form of a debt
service reserve fund that may be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a
wide range of security, including partially or fully insured mortgages,
rent subsidized and/or collateralized mortgages, certificates of deposit
and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve
fund.
PRIVATE ACTIVITY BONDS. Private activity bonds, which are considered
municipal obligations if the interest paid thereon is excluded from gross
income for Federal income tax purposes but is a specific tax preference
item for Federal individual and corporate alternative minimum tax purposes,
are issued by or on behalf of public authorities to raise money to finance
various privately-operated facilities such as manufacturing facilities,
certain hospital and university facilities and housing projects. These
bonds are also used to finance public facilities such as airports, mass
transit systems and ports. The payment of the principal and interest on
these bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and generally the pledge, if any, of real
and personal property so financed as security for payment.

MUNICIPAL NOTES. Municipal notes generally fund short-term capital
needs. The Intermediate Tax Free Portfolio may invest in municipal notes,
which include:

TAX ANTICIPATION NOTES. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.

REVENUE ANTICIPATION NOTES. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as Federal revenues
available under Federal revenue sharing programs.

BOND ANTICIPATION NOTES. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds provide funds for the repayment of these
notes.
MISCELLANEOUS, TEMPORARY AND ANTICIPATORY INSTRUMENTS. These
instruments may include notes issued to obtain interim financing pending
entering into alternate financial arrangements, such as receipt of
anticipated Federal, state or other grants or aid, passage of increased
legislative authority to issue longer-term instruments or obtaining other
refinancing.

CONSTRUCTION LOAN NOTES. Construction loan notes are sold to provide
construction financing. Permanent financing, the proceeds of which are
applied to the payment of construction loan notes, is sometimes provided by
a commitment of the Government National Mortgage Association (`GNMA'') to
purchase the loan, accompanied by a commitment by the Federal Housing
Administration to insure mortgage advances thereunder. In other instances,
permanent financing is provided by commitments of banks to purchase the
loan. TheIntermediate Tax Free Portfolio will only purchase construction
loan notes that are subject to permanent GNMA or bank purchase commitments.

TAX-EXEMPT COMMERCIAL PAPER. The Intermediate Tax Free Portfolio may
invest in tax-exempt commercial paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by agencies of state and local governments to finance seasonal
working capital needs or as short-term financing in anticipation of
longer-term financing.

STANDBY COMMITMENTS. The Intermediate Tax Free Portfolio may acquire
standby commitments or "puts" solely to facilitate portfolio liquidity; the
Portfolio intends to exercise its rights thereunder for trading purposes.
The maturity of a municipal obligation is not to be considered shortened by
any standby commitment to which the obligation is subject. Thus, standby
commitments do not affect the dollar-weighted average maturity of the
Portfolio.
When municipal obligations are subject to puts separate from the
underlying securities, no value is assigned to the put. Because of the
difficulty of evaluating the likelihood of exercise or the potential
benefit of a put, the Board of Trustees has determined that puts shall have
a fair market value of zero, regardless of whether any direct or indirect
consideration was paid.

Since the value of the put is partly dependent on the ability of the
put writer to meet its obligation to repurchase, the Portfolio's policy is
to enter into put transactions only with put writers who are approved by
Bankers Trust. It is the Portfolio's general policy to enter into put
transactions only with those put writers which are determined to present
minimal credit risks. In connection with this determination, the Board of
Trustees will review regularly Bankers Trust's list of approved put
writers, taking into consideration, among other things, the ratings, if
available, of their equity and debt securities, their reputation in the
municipal securities markets, their net worth, their efficiency in
consummating transactions and any collateral arrangements, such as letters
of credit securing the puts written by them. Commercial banks normally
will be members of the Federal Reserve System, and other dealers will be
members of the National Association of Securities Dealers, Inc. or members
of a national securities exchange. Other put writers will have outstanding
debt rated Aa or better by Moody's Investors Services, Inc. (`Moody's'')
or AA or better by Standard & Poor's Ratings Group (`S&P''), or will be of
comparable quality in Bankers Trust's opinion, or such put writers'
obligations will be collateralized and of comparable quality in Bankers
Trust's opinion. The Board of Trustees has directed Bankers Trust not to
enter into put transactions with any put writer that, in the judgment of
Bankers Trust using the above-described criteria, is or becomes a
recognizable credit risk. The Trust is unable to predict whether all or
any portion of any loss sustained could subsequently be recovered from a
put writer in the event that a put writer should default on its obligation
to repurchase an underlying security.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING EASTERN EUROPE.
The Global High Yield Securities Portfolio may invest in foreign securities
issued by Eastern European countries. Investments in companies domiciled
in Eastern European countries may be subject to potentially greater risks
than those of other foreign issuers. These risks include: (i) potentially
less social, political and economic stability; (ii) the small current size
of the markets for such securities and the low volume of trading, which
result in less liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Portfolio's investment
opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation;
(v) the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property;
(vi) the absence, until recently in certain Eastern European countries, of
a capital market structure or market-oriented economy; and (vii) the
possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in
such countries, or in the Commonwealth of Independent States (consisting of
the Republics of the former Union of Soviet Socialist Republics).
The economic situation remains difficult for Eastern European
countries in transition from central planning, following what has already
been a sizable decline in output. The contraction now appears to be
bottoming out in parts of Eastern Europe. Following three successive years
of output declines, there are preliminary indications of a turnaround in
the former Czech and Slovak Federal Republic, Hungary and Poland; growth in
private sector activity and strong exports now appear to have contained the
fall in output. A number of their governments, including those of Hungary
and Poland, are currently implementing or considering reforms directed at
political and economic liberalization, including efforts to foster multi-
party political systems, decentralize economic planning, and a move toward
free-market economies. But key aspects of the reform and stabilization
efforts have not yet been fully implemented, and there remain risks of
policy slippage. At present, no Eastern European country has a developed
stock market, but Poland, Hungary and the Czech Republic have small
securities markets in operation.

In many other countries of the region, output losses have been even
larger. These declines reflect the adjustment difficulties during the
early stages of the transition, high rates of inflation, the compression of
imports, disruption in trade among the countries of the former Soviet
Union, and uncertainties about the reform process itself. Large-scale
subsidies are delaying industrial restructuring and are exacerbating the
fiscal situation. A reversal of these adverse factors is not anticipated
in the near term, and output is expected to decline further in most of
these countries. In the Russian Federation and most other countries of the
former Soviet Union, economic conditions are of particular concern because
of economic instability due to political unrest and armed conflicts in many
regions. Further, no accounting standards exist in Eastern European
countries. Although certain Eastern European currencies may be convertible
into U.S. dollars, the conversion rates may be artificial to the actual
market values and may be adverse to each Fund's shareholders.
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING LATIN AMERICA.
Investing in securities of Latin American issuers may entail risks relating
to the potential political and economic instability of certain Latin
American countries and the risks of expropriation, nationalization,
confiscation or the imposition of restrictions on foreign investment and on
repatriation of capital invested. In the event of expropriation,
nationalization or other confiscation by any country, the Latin American
Equity Fund could lose its entire investment in any such country.

The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the U.S. Disclosure and regulatory standards are in
many respects less stringent than U.S. standards. Furthermore, there is a
lower level of monitoring and regulation of the markets and the activities
of investors in such markets.

The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to
volume of trading in the securities of U.S. issuers could cause prices to
be erratic for reasons apart from factors that affect the soundness and
competitiveness of the securities issuers. For example, limited market
size may cause prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether or not
based on in-depth fundamental analysis, may decrease the value and
liquidity of portfolio securities.

The economies of Latin American countries may be predominantly based
in only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt
burdens or inflation rates. Securities of issuers located in Latin America
may have limited marketability and may be subject to more abrupt or erratic
price movements.
Latin American Equity Portfolio invests in securities denominated in
currencies of Latin American countries. Accordingly, changes in the value
of these currencies against the U.S. dollar will result in corresponding
changes in the U.S. dollar value of the Portfolio's assets denominated in
those currencies.

Some Latin American countries also may have managed currencies, which
are not free floating against the U.S. dollar. In addition, there is risk
that certain Latin American countries may restrict the free conversion of
their currencies into other currencies. Further, certain Latin American
currencies may not be internationally traded. Certain of these currencies
have experienced a steep devaluation relative to the U.S. dollar. Any
devaluations in the currencies in which the Portfolio's securities are
denominated may have a detrimental impact on the Fund's net asset value.

The economies of individual Latin American countries may differ
favorably or unfavorably from the U.S. economy in such respects as the rate
of growth of gross domestic product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Certain Latin American countries have experienced high levels of inflation
which can have a debilitating effect on an economy. Furthermore, certain
Latin American countries may impose withholding taxes on dividends payable
to the Portfolio at a higher rate than those imposed by other foreign
countries. This may reduce the Fund's investment income available for
distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico
are among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared
moratoria on the payment of principal and/or interest on outstanding debt.
Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not
be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's
willingness or ability to repay principal and interest due in a timely
manner may be affected by, among other factors, its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental entities may also
be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearage on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure
to implement such reforms, achieve such levels of economic performance or
repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the governmental entity, which
may further impair such debtor's ability or willingness to service its
debts in a timely manner. Consequently, governmental entities may default
on their sovereign debt.

Holders of sovereign debt, including the Portfolio, may be requested
to participate in the rescheduling of such debt and to extend further loans
to governmental entities. There is no bankruptcy proceeding by which
defaulted sovereign debt may be collected in whole or in part.

Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock and
agriculture. The region has a large population (roughly 300 million)
representing a large domestic market. Economic growth was strong in the
1960's and 1970's, but slowed dramatically (and in some instances was
negative) in the 1980's as a result of poor economic policies, higher
international interest rates, and the denial of access to new foreign
capital. Although a number of Latin American countries are currently
experiencing lower rates of inflation and higher rates of real growth in
gross domestic product (`GDP'') than they have in the past, other Latin
American countries continue to experience significant problems, including
high inflation rates and high interest rates. Capital flight has proven a
persistent problem and external debt has been forcibly rescheduled.
Political turmoil, high inflation, capital repatriation restrictions and
nationalization have further exacerbated conditions.

Large budget deficits and a high level of state ownership in many
productive and service areas have given way to balanced budgets and
privatization in Mexico, Brazil, Chile and Argentina. Changes in political
leadership have encouraged the implementation of market oriented economic
policies such as balanced budgets. Privatization trade reform and monetary
reform have been among the steps taken to modernize the Latin American
economies and to regenerate growth in the region. However, governments of
many Latin American countries have exercised and continue to exercise
substantial influence over many aspects of the private sector through the
ownership or control of many companies, including some of the largest in
those countries. As a result, government actions in the future could have
a significant effect on economic conditions which may adversely affect
prices of certain portfolio securities. Expropriation, confiscatory
taxation, nationalization, political, economic or social instability or
other similar developments, such as military coups, have occurred in the
past and could also adversely affect the Portfolio's investments in this
region.
Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and
monetary reform are among the recent steps taken to renew economic growth.
External debt is being restructured and flight capital (domestic capital
that has left the home country) has begun to return. Inflation control
efforts have also been implemented. Free trade zones are being discussed
in various areas around the region, the most notable being a free trade
zone between Mexico and the U.S. Various trade agreements have also been
formed within the region such as the Andean Pact, Mercosur and North
American Free Trade Agreement (NAFTA). The largest of these is NAFTA,
which was implemented on January 1, 1994. Latin American equity markets
can be extremely volatile and in the past have shown little correlation
with the U.S. market. Currencies are typically weak, but most are now
relatively free floating, and it is not unusual for the currencies to
undergo wide fluctuations in value over short periods of time due to
changes in the market.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING THE PACIFIC
BASIN. Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States
and European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-
making; (ii) popular unrest associated with demands for improved political,
economic and social conditions; (iii) internal insurgencies; (iv) hostile
relations with neighboring countries; and (v) ethnic, religious and racial
disaffection.
The economies of most of the Asian countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners,
principally, the United States, Japan, China and the European Community.
The enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the
local economies and general declines in the international securities
markets could have a significant adverse effect upon the securities markets
of the Asian countries.

Thailand has been transformed into one of the fastest growing stock
markets in the world. On February 23, 1991, the military staged its 17th
coup since the overthrow of the absolute monarchy in 1932. The newly
appointed government quickly focused on the economy and enacted major tax
revisions, slashing personal income tax and reducing taxes on imports.
Most significantly, it pushed through a 7% value added tax. Released from
political consideration by the coup, the Bank of Thailand was finally able
to implement a monetary tightening. As a result, interest rates rose and
GDP declined to 7.7% from 10% the previous year. The government continues
to move ahead with new projects - especially telecommunications, roads and
port facilities - needed to refurbish the country's overtaxed
infrastructure. Nonetheless, political unrest coupled with the shooting of
anti-government demonstrators in May 1992 has caused many international
businesses to question Thailand's political stability.
Hong Kong's impending return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth which was vigorous
in the 1980's. However, authorities in Beijing have agreed to maintain a
capitalist system for 50 years that, along with Hong Kong's economic
growth, continued to further strong stock market returns. In preparation
for 1997, Hong Kong has to develop trade with China, where it is the
largest foreign investor, while also maintaining its long-standing export
relationship with the United States. Spending on infrastructure
improvements is a significant priority of the colonial government while the
private sector continues to diversify abroad based on its position as an
established international trade center in the Far East.

In terms of GDP, industrial standards and level of education, South
Korea is second only to Japan in Asia. It enjoys the benefits of a
diversified economy with well developed sectors in electronics, automotive,
textiles and shoe manufacturing, steel and shipbuilding among others. The
driving force behind the economy's dynamic growth has been the planned
development of an export-oriented economy in a vigorously entrepreneurial
society. Real GDP grew about 7.5% in 1991. Labor unrest was noticeably
calmer, unemployment averaged a low of 2.3%, and investment was strong.
Inflation rates, however, are beginning to challenge South Korea's strong
economic performance. In addition, the international situation between
South and North Korea continues to improve. Both Koreas joined the United
Nations separately in late 1991, creating another forum for negotiation and
joint cooperation.

Indonesia is a mixed economy with many socialist institutions and
central planning, but has recently placed emphasis on deregulation and
private enterprise. Like Thailand, Indonesia has extensive natural wealth,
yet with a large and rapidly increasingly population, it remains a poor
country. Agriculture, including forestry and fishing, is an important
sector, accounting for 21% of GDP and over 50% of the labor force. Once
the world's largest rice importer, Indonesia is now nearly self-sufficient.

The Malaysian economy continued to perform well, growing at an average
annual rate of 9% from 1987 through 1991. This placed Malaysia as one of
the fastest growing economies in the Asian-Pacific region. Malaysia has
become the world's third-largest producer of semiconductor devices (after
the U.S. and Japan) and the world's largest exporter of semiconductor
devices. More remarkable is the country's ability to achieve rapid
economic growth with relative price stability (2% inflation over the past
five years) as the government followed prudent fiscal/monetary policies.
Malaysia's high export dependence level leaves it vulnerable to a recession
in the OECD countries or a fall in world commodity prices.

Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived
from its entrepot history. During the 1970's and early 1980's, the economy
expanded rapidly, achieving an average annual growth rate of 9%. Per
capita GDP is among the highest in Asia. Singapore holds a position as a
major oil refining and services center.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING CHINA AND CHINA
REGION. China's economic reform plan was designed to bring in foreign
investment capital and technological skills. The result has been a move
towards a more mixed economy away from the previous centrally planned
economy. The process of devolving responsibility for all aspects of
enterprise to local management and authorities continues, even though the
system of socialism with Chinese characteristics involves considerable
influence by the central government on production and marketing.
In order to attract foreign investment, China has since 1978
designated certain areas of the country where overseas investors can
receive special investment incentives and tax concessions. There are five
Special Economic Zones (Shenzhen, Shantou and Zhuhai in Guangdong Province,
Xiamen in Fujian Province and Hainan Island, which itself is a province).
Fourteen coastal cities have been designated as `open cities'' and certain
Open Economic Zones have been established in coastal areas. Shanghai has
established the Pudong New Area. Twenty-seven High and New Technology
Industrial Development Zones have been approved where preferential
treatment is given to enterprises which are confirmed as technology
intensive.

China has had for many centuries a well deserved reputation for being
closed to foreigners, with trade with the outside world being carried on
under terms of extreme restriction and under central control. Such
conditions were maintained in the first thirty years of the Communist
regime which began in 1949; however, there have been several stages of
evolution, from the institution of an industrialization program in the
1950s to a modernization policy commencing in 1978 which combined economic
development with the beginnings of opening the country.
The securities markets in the China region are substantially smaller,
less liquid and more volatile than the major securities markets in the
United States. A high proportion of the shares of many Chinese issuers may
be held by a limited number of persons and financial institutions, which
may limit the number of shares available for investment by the Portfolio.
Similarly, volume and liquidity in the bond markets in China are less than
in the United States and, at times, price volatility can be greater than in
the United States. A limited number of issuers in Chinese securities
markets may represent a disproportionately large percentage of market
capitalization and trading value. The limited liquidity of securities
markets in China may also affect the Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so.
Accordingly, during periods of rising securities prices in the more
illiquid Chinese securities markets, the Portfolio's ability to participate
fully in such price increases may be limited by its investment policy of
investing not more than 15% of its net assets in illiquid securities.
Conversely, the Portfolio's inability to dispose fully and promptly of
positions in declining markets will cause the Portfolio's net asset value
to decline as the value of the unsold positions is marked to lower prices.
In addition, the Chinese securities markets are susceptible to being
influenced by large investors trading significant blocks of securities.

The Chinese, Hong Kong and Taiwan stock markets are undergoing a
period of growth and change which may result in trading volatility and
difficulties in the settlement and recording of transactions, and in
interpreting and applying the relevant law and regulations.

China governmental actions can have a significant effect on the
economic conditions in China, which could adversely affect the value and
liquidity of the Portfolio's investments. Although the Chinese government
has recently begun to institute economic reform policies, there can be no
assurances that it will continue to pursue such policies or, if it does,
that such policies will succeed.

The securities industry in China is not well developed. China has no
securities laws of nationwide applicability. The municipal securities
regulations adopted by Shanghai and Shenzhen municipalities are very new,
as are their respective securities exchanges and other self-regulatory
organizations. In addition, Chinese stockbrokers and other intermediaries
may not perform as well as their counterparts in the United States and
other more developed securities markets. The prices at which the Portfolio
may acquire investments may be affected by trading by persons with material
non-public information and by securities transactions by brokers in
anticipation of transactions by the Portfolio in particular securities.
China does not have a comprehensive system of laws, although
substantial changes have occurred in this regard in recent years. The
corporate form of organization has only recently been permitted in China
and national regulations governing corporations were introduced only in May
1992. Prior to the introduction of such regulations, Shanghai had adopted a
set of corporate regulations applicable to corporations located or listed
in Shanghai, and the relationship between the two sets of regulations is
not clear. Consequently, until a firmer legal basis is provided, even such
fundamental corporate law tenets as the limited liability status of Chinese
issuers and their authority to issue shares remain open to question. Laws
regarding fiduciary duties of officers and directors and the protection of
shareholders are not well developed. China's judiciary is relatively
inexperienced in enforcing the laws that exist, leading to a higher than
usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in China, it may be impossible to obtain swift and
equitable enforcement of such law, or to obtain enforcement of the judgment
by a court of another jurisdiction. The bankruptcy laws pertaining to state
enterprises have rarely been used and are untried in regard to an
enterprise with foreign shareholders, and there can be no assurance that
such shareholders, including the Portfolio, would be able to realize the
value of the assets of the enterprise or receive payment in convertible
currency. As the Chinese legal system develops, the promulgation of new
laws, changes to existing laws and the preemption of local laws by national
laws may adversely affect foreign investors, including the Portfolio. The
uncertainties faced by foreign investors in China are exacerbated by the
fact that many laws, regulations and decrees of China are not publicly
available, but merely circulated internally.

Exports continue to rise strongly, although China remains vulnerable
to United States economic conditions and possible trade sanctions, unless
it liberalizes current import restrictions and improves its human rights
record. However, imports are also expected to rise and may outstrip exports
in terms of growth rates.

There are currently two officially recognized securities exchanges in
China -- The Shanghai Securities Exchange which opened in December 1990 and
The Shenzhen Stock Exchange which opened in July 1991. Shares traded on
these Exchanges are two types -- `A'' shares which can be traded only by
Chinese investors and `B'' shares which can be traded only by individuals
and corporations not resident in China.

In Shanghai, all `B'' shares are denominated in Chinese renminbi
(`RMB''), but all transactions in ``B'' shares must be settled in U.S.
dollars, and all distributions made on `B'' shares are payable in U.S.
dollars, the exchange rate being the weighted average exchange rate for the
U.S. dollar as published by the Shanghai Foreign Exchange Adjustment
Centre.

In Shenzhen, the purchase and sale prices for `B'' shares are quoted
in Hong Kong dollars. Dividends and other lawful revenue derived from `B''
shares are calculated in RMB but payable in Hong Kong dollars, the rate of
exchange being the average rate published by Shenzhen Foreign Exchange
Adjustment Centre.

There are no foreign exchange restrictions on the repatriation of
gains made on or income derived from `B'' shares, subject to the payment
of taxes imposed by China thereon.

Company law relating to companies limited by shares and regulations
regarding the issuing of shares by equity joint ventures have not yet been
developed on a national basis. The Shenzhen municipality issued regulations
in 1992 relating to joint stock companies, and the Shanghai municipality
has a draft joint stock company law under review. Regulations governing the
trading of securities on both the Shenzhen and the Shanghai stock exchanges
have been issued by each municipality; there is no national securities
legislation as yet.

Economies of countries in the China region may differ favorably or
unfavorably from the U.S. economy in such respects as rate of growth of
gross domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. As an export-driven
economy, the economy of China is affected by developments in the economies
of its principal trading partners. Revocation by the United States of
China's `Most Favored Nation'' trading status, which the U.S. President
and Congress reconsider annually, would adversely affect the trade and
economic development of China and Hong Kong. Hong Kong and Taiwan have
limited natural resources, resulting in dependence on foreign sources for
certain raw materials and economic vulnerability to global fluctuations of
price and supply.

RATING SERVICES

The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial
criterion for selection of portfolio investments, Bankers Trust also makes
its own evaluation of these securities, subject to review by the Board of
Trustees. After purchase by a Portfolio, an obligation may cease to be
rated or its rating may be reduced below the minimum required for purchase
by the Portfolio. Neither event would require a Portfolio to eliminate the
obligation from its portfolio, but Bankers Trust will consider such an
event in its determination of whether a Portfolio should continue to hold
the obligation. A description of the ratings is included in the Funds'
Prospectus.

INVESTMENT RESTRICTIONS

The following investment restrictions are "fundamental policies" of
each Fund and each Portfolio and may not be changed with respect to the
Fund or the Portfolio without the approval of a "majority of the
outstanding voting securities" of the Fund or the Portfolio, as the case
may be. "Majority of the outstanding voting securities" under the
Investment Company Act of 1940, as amended (the "1940 Act"), and as used in
this SAI and the Prospectuses, means, with respect to the Fund (or the
Portfolio), the lesser of (i) 67% or more of the outstanding voting
securities of the Fund (or of the total beneficial interests of the
Portfolio) present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund (or of the total beneficial
interests of the Portfolio) are present or represented by proxy or (ii)
more than 50% of the outstanding voting securities of the Fund (or of the
total beneficial interests of the Portfolio). Whenever the Trust is
requested to vote on a fundamental policy of a Portfolio, the Trust will
hold a meeting of the corresponding Fund's shareholders and will cast its
vote as instructed by that 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 of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote.

As a matter of fundamental policy, no Portfolio (or Fund) may (except that
no investment restriction of a Fund shall prevent a Fund from investing all
of its Assets in an open-end investment company with substantially the same
investment objectives):
(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current
value of the Portfolio's (Fund's) net assets, it may borrow money
(but only as a temporary measure for extraordinary or emergency
purposes in the case of the Small Cap Portfolio (Fund), Capital
Appreciation Portfolio (Fund), International Equity Portfolio
(Fund), and Intermediate Tax Free Portfolio (Fund)), and enter into
reverse repurchase agreements or dollar roll transactions, and
except that it may pledge, mortgage or hypothecate not more than
1/3 of such assets to secure such borrowings (it is intended that
money would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial interests
(redemption of shares) while effecting an orderly liquidation of
portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction
or other similar situations) or reverse repurchase agreements,
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of this
restriction and except that assets may be pledged to secure letters
of credit solely for the purpose of participating in a captive
insurance company sponsored by the Investment Company Institute;
for additional related restrictions, see clause (i) under the
caption "Additional Restrictions" below (as an operating policy,
the Portfolios may not engage in dollar-roll transactions);

(2) underwrite securities issued by other persons except insofar as
the Portfolios (Trust or the Funds) may technically be deemed an
underwriter under the 1933 Act in selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of
the Portfolio's (Fund's) portfolio securities and provided that any
such loans not exceed 30% of the Portfolio's (Fund's) total assets
(taken at market value); (b) through the use of repurchase
agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types
distributed publicly or privately (under current regulations, the
Portfolio's (Fund's) fundamental policy with respect to 20% risk
weighing for financial institutions prevent the Portfolio (Fund)
from engaging in securities lending);

(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts (except futures and option
contracts) in the ordinary course of business (except that the
Portfolio (Trust) may hold and sell, for the Portfolio's (Fund's)
portfolio, real estate acquired as a result of the Portfolio's
(Fund's) ownership of securities);

(5) concentrate its investments in any particular industry (excluding
U.S. government securities), but if it is deemed appropriate for
the achievement of a Portfolio's (Fund's) investment objective(s),
up to 25% of its total assets may be invested in any one industry;
and
(6) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the
1940 Act or the rules and regulations promulgated thereunder,
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, are not considered to be the issuance of a senior security
for purposes of this restriction.

As an operating policy, except as otherwise noted, no Portfolio will
invest in another open-end registered investment company. This operating
policy does not apply to the Intermediate Tax Free Portfolio, Capital
Appreciation Portfolio, or International Equity Portfolio.

ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and
policies, each Portfolio (or the Trust, on behalf of each Fund) will not as
a matter of operating policy (except that no operating policy shall prevent
a Fund from investing all of its Assets in an open-end investment company
with substantially the same investment objectives):

(i) borrow money (including through reverse repurchase or
forward roll transactions) for any purpose in excess of 5% (10%
with respect to Intermediate Tax Free Portfolio (Fund)) of the
Portfolio's (Fund's) total assets (taken at cost), except that
the Portfolio (Fund) may borrow for temporary or emergency
purposes up to 1/3 of its total assets;

(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's (Fund's) total assets (taken at market
value), provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this restriction;

(iii) purchase any security or evidence of interest therein
on margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;

(iv) except for Intermediate Tax Free Portfolio (Fund), sell
securities it does not own (short sales) such that the dollar
amount of such short sales at any one time exceeds 25% of the net
equity of the Portfolio (Fund), and the value of securities of
any one issuer in which the Portfolio (Fund) is short exceeds the
lesser of 2.0% of the value of the Portfolio's (Fund's) net
assets or 2.0% of the securities of any class of any U.S. issuer
and, provided that short sales may be made only in those
securities which are fully listed on a national securities
exchange or a foreign exchange (This provision does not include
the sale of securities that the Portfolio (Fund)
contemporaneously owns or where the Portfolio has the right to
obtain securities equivalent in kind and amount to those sold,
i.e., short sales against the box.) (the Portfolios (Funds)
currently do not engage in short selling);
(v) with respect to Intermediate Tax Free Portfolio (Fund), (a)
sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided
that if such right is conditional the sale is made upon the same
conditions; and (b) make short sales of securities or maintain a
short position, unless at all times when a short position is open
it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue and equal in
amount to, the securities sold short, and unless not more than
10% of the Portfolio's (Fund's) net assets (taken at market
value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one
time (the Portfolio (Fund) has no current intention to engage in
short selling);

(vi) invest for the purpose of exercising control or management of
another company;
(vii) purchase securities issued by any investment company
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan
of merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Portfolio
(Fund) if such purchase at the time thereof would cause: (a) more
than 10% of the Portfolio's (Fund's) total assets (taken at the
greater of cost or market value) to be invested in the securities
of such issuers; (b) more than 5% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market value) to be
invested in any one investment company; or (c) more than 3% of
the outstanding voting securities of any such issuer to be held
for the Portfolio (Fund); provided further that, except in the
case of a merger or consolidation, the Portfolio (Fund) shall not
purchase any securities of any open-end investment company unless
(1) the Portfolio's investment adviser waives the investment
advisory fee with respect to assets invested in other open-end
investment companies and (2) the Portfolio incurs no sales charge
in connection with the investment;

(viii) except for Intermediate Tax Free Portfolio (Fund),
invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities
(excluding Rule 144A securities) that are restricted as to resale
under the 1933 Act;
(ix) except for Intermediate Tax Free Portfolio (Fund), invest
more than 15% of the Portfolio's (Fund's) total assets (taken at
the greater of cost or market value) in (a) securities (excluding
Rule 144A securities) that are restricted as to resale under the
1933 Act, and (b) securities that are issued by issuers which
(including predecessors) have been in operation less than three
years (other than U.S. government securities), provided, however,
that no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

(x) except for Intermediate Tax Free Portfolio (Fund), invest
more than 15% of the Portfolio's (Fund's) net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable (excluding Rule 144A
securities deemed by the Board of Trustees of the Portfolio
(Trust) to be liquid);
(xi) with respect to Intermediate Tax Free Portfolio (Fund),
invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities that
are illiquid or not readily marketable not including (a) Rule
144A securities that have been determined to be liquid by the
Board of Trustees; and (b) commercial paper that is sold under
section 4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one of
the two highest categories by at least two nationally recognized
statistical rating organizations and the Portfolio's (Fund's)
Board of Trustees have determined the commercial paper to be
liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating agency and the
Portfolio's (Fund's) Board of Trustees have determined that the
commercial paper is equivalent quality and is liquid;

(xii) with respect to Intermediate Tax Free Portfolio, (a)
invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities that
are restricted as to resale under the 1933 Act (other than Rule
144A securities deemed liquid by the Portfolio's (Fund's) Board
of Trustees), and (b) no more than 5% of the Portfolio's (Fund's)
total assets will be invested in securities issued by issuers
which (including predecessors) have been in operation less than
three years;
(xiii) except for Capital Appreciation Portfolio (Fund) and
International Equity Portfolio (Fund), with respect to 75% (50%
in the case of Global High Yield Securities Portfolio (Fund)) of
the Portfolio's (Fund's) total assets, purchase securities of any
issuer if such purchase at the time thereof would cause the
Portfolio (Fund) to hold more than 10% of any class of securities
of such issuer, for which purposes all indebtedness of an issuer
shall be deemed a single class and all preferred stock of an
issuer shall be deemed a single class, except that futures or
option contracts shall not be subject to this restriction;

(xiv) with respect to Capital Appreciation Portfolio (Fund)
and International Equity Portfolio (Fund), with respect to 75% of
its assets, invest more than 5% of its total assets in the
securities (excluding U.S. government securities) of any one
issuer;

(xv) except for Capital Appreciation Portfolio (Fund) and
International Equity Portfolio (Fund), with respect to 75% (50%
in the case of Global High Yield Securities Portfolio (Fund)) of
the Portfolio's (Fund's) total assets, invest more than 5% of its
total assets in the securities (excluding U.S. government
securities) of any one issuer and in the case of Global High
Yield Securities Portfolio (Fund) invest more than 25% of its
total assets in any one issuer;
(xvi) invest in securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer
or Trustee of the Portfolio (Trust), or is an officer or director
of the Adviser, if after the purchase of the securities of such
issuer for the Portfolio (Fund) one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or
both, all taken at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities, or
both, all taken at market value;

(xvii) invest in warrants (other than warrants acquired by the
Portfolio (Fund) as part of a unit or attached to securities at
the time of purchase) if, as a result, the investments (valued at
the lower of cost or market) would exceed 5% of the value of the
Portfolio's (Fund's) net assets or if, as a result, more than 2%
of the Portfolio's (Fund's) net assets (with the exception of the
Pacific Basin Equity Portfolio (Fund) which may invest up to 10%
of its net assets in warrants) would be invested in warrants not
listed on a recognized United States or foreign stock exchange
(New York or American Stock Exchange with respect to the
Intermediate Tax Free Portfolio (Fund)), to the extent permitted
by applicable state securities laws;
(xviii) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment policies of the Portfolio
(Fund) and the option is issued by the OCC, except for put and
call options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate value of
the obligations underlying the puts determined as of the date the
options are sold shall not exceed 5% (50% with respect to
Intermediate Tax Free Portfolio (Fund)) of the Portfolio's
(Fund's) net assets; (c) the securities subject to the exercise
of the call written by the Portfolio (Fund) must be owned by the
Portfolio (Fund) at the time the call is sold and must continue
to be owned by the Portfolio (Fund) until the call has been
exercised, has lapsed, or the Portfolio (Fund) has purchased a
closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's (Fund's) obligation to deliver
securities pursuant to the call it has sold; and (d) at the time
a put is written, the Portfolio (Fund) establishes a segregated
account with its custodian consisting of cash or short-term U.S.
government securities equal in value to the amount the Portfolio
(Fund) will be obligated to pay upon exercise of the put (this
account must be maintained until the put is exercised, has
expired, or the Portfolio (Fund) has purchased a closing put,
which is a put of the same series as the one previously written);
and
(xix) buy and sell puts and calls on securities, stock index
futures or options on stock index futures, or financial futures
or options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national securities or commodities exchange,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b) the
aggregate premiums paid on all such options which are held at any
time do not exceed 20% of the Portfolio's (Fund's) total net
assets; and (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5%
of the Portfolio's (Fund's) total assets.

There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in net
or total assets or in the change of securities rating of the investment, or
any other later change.

Each Fund will comply with the state securities laws and regulations
of all states in which it is registered. Each Portfolio will comply with
the permitted investments and investment limitations in the securities laws
and regulations of all states in which the corresponding Fund, or any other
registered investment company investing in the Portfolio, is registered.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for each
Portfolio, the selection of brokers, dealers and futures commission
merchants to effect transactions and the negotiation of brokerage
commissions, if any. Broker-dealers may receive brokerage commissions on
portfolio transactions, including options, futures and options on futures
transactions and the purchase and sale of underlying securities upon the
exercise of options. Orders may be directed to any broker-dealer or
futures commission merchant, including to the extent and in the manner
permitted by applicable law, Bankers Trust or its subsidiaries or
affiliates. Purchases and sales of certain portfolio securities on behalf
of a Portfolio are frequently placed by the Adviser with the issuer or a
primary or secondary market-maker for these securities on a net basis,
without any brokerage commission being paid by the Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers
serving as market-makers reflect the spread between the bid and asked
prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities. Purchases
of underwritten issues may be made which will include an underwriting fee
paid to the underwriter.

The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for
the purchase and sale of securities for a Portfolio taking into account
such factors as price, commission (negotiable in the case of national
securities exchange transactions), if any, size of order, difficulty of
execution and skill required of the executing broker-dealer through
familiarity with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Portfolio to reported commissions paid
by others. The Adviser reviews on a routine basis commission rates,
execution and settlement services performed, making internal and external
comparisons.
The Adviser is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio
transactions for a Portfolio with a broker to pay a brokerage commission
(to the extent applicable) in excess of that which another broker might
have charged for effecting the same transaction on account of the receipt
of research, market or statistical information. The term "research, market
or statistical information" includes advice as to the value of securities;
the advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts.

Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other
policies as the Trustees of the Portfolio may determine, the Adviser may
consider sales of shares of the Trust and of other investment company
clients of Bankers Trust as a factor in the selection of broker-dealers to
execute portfolio transactions. Bankers Trust will make such allocations
if commissions are comparable to those charged by nonaffiliated, qualified
broker-dealers for similar services.

Higher commissions may be paid to firms that provide research services
to the extent permitted by law. Bankers Trust may use this research
information in managing the Portfolio's assets, as well as the assets of
other clients.

Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or
dealers or groups thereof. In effecting transactions in over-the-counter
securities, orders are placed with the principal market-makers for the
security being traded unless, after exercising care, it appears that more
favorable results are available otherwise.

Although certain research, market and statistical information from
brokers and dealers can be useful to a Portfolio and to the Adviser, it is
the opinion of the management of the Portfolios that such information is
only supplementary to the Adviser's own research effort, since the
information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services
to clients other than the Portfolios, and not all such information is used
by the Adviser in connection with the Portfolios. Conversely, such
information provided to the Adviser by brokers and dealers through whom
other clients of the Adviser effect securities transactions may be useful
to the Adviser in providing services to the Portfolios.

In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the Adviser's other clients.
Investment decisions for a Portfolio and for the Adviser's other clients
are made with a view to achieving their respective investment objectives.
It may develop that a particular security is bought or sold for only one
client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the
same security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized
that in some cases this system could have a detrimental effect on the price
or volume of the security as far as a Portfolio is concerned. However, it
is believed that the ability of a Portfolio to participate in volume
transactions will produce better executions for the Portfolio.

For the period from January 1, 1996 to September 30, 1996, and the
fiscal years ended December 31, 1995 and 1994, Intermediate Tax Free
Portfolio paid no brokerage commissions.

Global High Yield Securities Portfolio paid no brokerage commissions
for the fiscal year ended September 30, 1996, $5,653 for the fiscal year
ended September 30, 1995 and paid no brokerage commissions for the period
from December 14, 1993 (commencement of operations) through September 30,
1994.

For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
Capital Appreciation Portfolio paid brokerage commissions in the amount of
$648,897, $247,868 and $162,941, respectively.

Small Cap Portfolio paid brokerage commissions in the amount of
$238,160 for the fiscal year ended September 30, 1996, $70,603 for the
fiscal year ended September 30, 1995 and $20,835 for the period from
October 21, 1993 (commencement of operations) through September 30, 1994.

For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
International Equity Portfolio paid brokerage commissions in the amount of
$603,995, $132,894 and $110,580, respectively.

Pacific Basin Equity Portfolio paid brokerage commissions in the
amount of $323,957, for the fiscal year ended September 30, 1996, $192,123
for the fiscal year ended September 30, 1995 and $139,363 for the period
from November 1, 1993 (commencement of operations) through September 30,
1994.
Latin American Equity Portfolio paid brokerage commissions in the
amount of $164,049 for the fiscal year ended September 30, 1996, $202,130
for the fiscal year ended September 30, 1995, and $188,008 for the period
from October 25, 1993 (commencement of operations) through September 30,
1994.

{PRIVATE }PERFORMANCE INFORMATION{TC "PERFORMANCE INFORMATION"}

STANDARD PERFORMANCE INFORMATION

From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or shareholder reports. These
performance figures are calculated in the following manner:

YIELD: Yields for a Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-
month period, net of expenses, by the average number of shares
entitled to receive distributions during the period, dividing this
figure by the Fund's net asset value per share at the end of the
period, and annualizing the result (assuming compounding of income) in
order to arrive at an annual percentage rate. Income is calculated
for purpose of yield quotations in accordance with standardized
methods applicable to all stock and bond mutual funds. Dividends from
equity investments are treated as if they were accrued on a daily
basis, solely for the purpose of yield calculations. In general,
interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds
trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.

Income calculated for the purposes of calculating a Fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a Fund
may differ from the rate of distributions of the Fund paid over the
same period or the rate of income reported in the Fund's financial
statements. For the 30-day period ended September 30, 1996, Global
High Yield Fund's yield was 7.30%.

TAX-EQUIVALENT YIELD: The Intermediate Tax Free Fund's tax-equivalent
yield is equal to the Fund's yield divided by (1-Tax Rate).

As of September 30, 1996, the Intermediate Tax Free Fund's tax
equivalent 30-day SEC yield was 5.81%, assuming a maximum Federal tax
rate of 31%. The Intermediate Tax Free Fund's 30-day SEC yield for
the period ended September 30, 1996 was 4.01%.

TOTAL RETURN: A Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures which
represent aggregate performance over a period or year-by-year
performance.

Global
High Capital
Intermediate Yield Appreciation Small Cap
Tax Free Securities Fund3 Fund4
Fund1 Fund2

{PRIVATE }
Total Return for
the One Year Ended 4.09% 23.31% 12.35% 26.41%
September 30, 1996
Cumulative Total
Return for the
Period From
Commencement of 23.39% 32.31% 89.09% 133.85%
Operations Through
September 30, 1996
Annualized Total
Return for the
Period From
Commencement of 5.14% 10.54% 19.58% 33.46%
Operations Through
September 30, 1996

1Fund commenced operations on July 20, 1992
2Fund commenced operations on December 14, 1993.
3Fund commenced operations on March 9, 1993.
4Fund commenced operations on October 21, 1993.

Latin
International Pacific Basin American Equity
Equity Fund1 Equity Fund2 Fund3
Total Return
for 1 Year ended
September 30, 1996 13.21% 7.86% 26.00%

Cumulative
Total Return
for the Period from
Commencement of
Operations through
September 30, 1996 83.28% 23.34% 8.91%

Average Annual
Total Return for
the Period from
Commencement of
Operations through
September 30, 1996 15.69% 7.17% 2.95%

1Fund commenced operations on August 4, 1992.
2Fund commenced operations on November 1, 1993August 4, 1992.
3Fund commenced operations on October 25, 1993.

PERFORMANCE RESULTS: Any total return quotation provided for a Fund
should not be considered as representative of the performance of the
Fund in the future since the net asset value and public offering price
of shares of the Fund will vary based not only on the type, quality
and maturities of the securities held in the corresponding Portfolio,
but also on changes in the current value of such securities and on
changes in the expenses of the Fund and the corresponding Portfolio.
These factors and possible differences in the methods used to
calculate total return should be considered when comparing the total
return of a Fund to total returns published for other investment
companies or other investment vehicles. Total return reflects the
performance of both principal and income.

COMPARISON OF FUND PERFORMANCE

Comparison of the quoted nonstandardized performance of various
investments is valid only if performance is calculated in the same manner.
Since there are different methods of calculating performance, investors
should consider the effect of the methods used to calculate performance
when comparing performance of a Fund with performance quoted with respect
to other investment companies or types of investments.

In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management
costs. Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning the Fund. Sources for a Fund's
performance information could include the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews
U.S. mutual funds investing internationally.

Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports
the performance rankings and ratings of a variety of mutual funds investing
abroad.

Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time
to time articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.

Forbes, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund
industry.

Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Investor's Daily, a daily newspaper that features financial, economic
and business news.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.

Morningstar Inc., a publisher of financial information and mutual fund
research.

New York Times, a nationally distributed newspaper which regularly
covers financial news.

Personal Investing News, a monthly news publication that often reports
on investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund
performance measures, yields, indices and portfolio holdings.

Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.

U.S. News and World Report, a national business weekly that
periodically reports mutual fund performance data.

ValueLine, a biweekly publication that reports on the largest 15,000
mutual funds.

Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.

Weisenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records, and price
ranges.

Working Women, a monthly publication that features a "Financial
Workshop" section reporting on the mutual fund/financial industry.

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities
for which price quotations are available, will normally be valued on the
basis of market valuations furnished by a pricing service. Such market
valuations may represent the last quoted price on the securities major
trading exchange or may be determined through use of matrix pricing. In
matrix pricing, pricing services may use various pricing models, involving
comparable securities, historic relative price movements, economic factors
and dealer quotations. Over-the-counter securities will normally be valued
at the bid price. Short-term debt obligations and money market securities
maturing in 60 days or less are valued at amortized cost, which
approximates market.

Securities for which market quotations are not readily available are
valued by Bankers Trust pursuant to procedures adopted by each Portfolio's
Board of Trustees. It is generally agreed that securities for which market
quotations are not readily available should not be valued at the same value
as that carried by an equivalent security which is readily marketable.
The problems inherent in making a good faith determination of value
are recognized in the codification effected by SEC Financial Reporting
Release No. 1 ("FRR 1" (formerly Accounting Series Release No. 113)) which
concludes that there is "no automatic formula" for calculating the value of
restricted securities. It recommends that the best method simply is to
consider all relevant factors before making any calculation. According to
FRR 1 such factors would include consideration of the:

type of security involved, financial statements, cost at date of
purchase, size of holding, discount from market value of
unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as to
any transactions or offers with respect to the security,
existence of merger proposals or tender offers affecting the
security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other
relevant matters.

To the extent that a Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
readily available, the Adviser of the Portfolio will value such securities
based upon all relevant factors as outlined in FRR 1.
The Trust, on behalf of each Fund, and each Portfolio reserve the
right, if conditions exist which make cash payments undesirable, to honor
any request for redemption or withdrawal by making payment in whole or in
part in readily marketable securities chosen by the Trust, or the
Portfolio, as the case may be, and valued as they are for purposes of
computing the Fund's or the Portfolio's net asset value, as the case may be
(a redemption in kind). If payment is made to a Fund shareholder in
securities, an investor, including the Fund, the shareholder may incur
transaction expenses in converting these securities into cash. The Trust,
on behalf of each Fund, and each Portfolio have elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which each Fund
and each Portfolio are obligated to redeem shares or beneficial interests,
as the case may be, with respect to any one investor during any 90-day
period, solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund or the Portfolio, as the case may be, at the beginning of
the period.

Each Portfolio has agreed to make a redemption in kind to the
corresponding Fund whenever the Fund wishes to make a redemption in kind
and therefore shareholders of the Fund that receive redemptions in kind
will receive portfolio securities of the corresponding Portfolio and in no
case will they receive a security issued by the Portfolio. Each Portfolio
has advised the Trust that the Portfolio will not redeem in kind except in
circumstances in which the Fund is permitted to redeem in kind or unless
requested by the Fund.
Each investor in a Portfolio, including the corresponding Fund, may
add to or reduce its investment in the Portfolio on each day the Portfolio
determines its net asset value. At the close of each such business day,
the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage effective for that day, which represents that investor's share
of the aggregate beneficial interests in the Portfolio. Any additions or
withdrawals which are to be effected as of the close of business on that
day will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of business on
such day plus or minus, as the case may be, the amount of net additions to
or withdrawals from the investor's investment in the Portfolio effected as
of the close of business on such day, and (ii) the denominator of which is
the aggregate net asset value of the Portfolio as of the close of business
on such day plus or minus, as the case may be, the amount of net additions
to or withdrawals from the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio
as the close of business on the following business day.
Each Fund (except for Intermediate Tax Free Fund) may, at its own
option, accept securities in payment for shares. The securities delivered
in payment for shares are valued by the method described under "Net Asset
Value" as of the day the Fund receives the securities. This may be a
taxable transaction to the shareholder. (Consult your tax adviser for
future tax guidance.) Securities may be accepted in payment for shares
only if they are, in the judgment of Bankers Trust, appropriate investments
for the Fund's corresponding Portfolio. In addition, securities accepted
in payment for shares must: (i) meet the investment objective and policies
of the acquiring Fund's corresponding Portfolio; (ii) be acquired by the
applicable Fund for investment and not for resale (other than for resale to
the Fund's corresponding Portfolio); (iii) be liquid securities which are
not restricted as to transfer either by law or liquidity of the market; and
(iv) if stock, have a value which is readily ascertainable as evidenced by
a listing on a stock exchange, over-the-counter market or by readily
available market quotations from a dealer in such securities. Each Fund
reserves the right to accept or reject at its own option any and all
securities offered in payment for its shares.

{PRIVATE }MANAGEMENT OF THE TRUST AND THE PORTFOLIOS{TC "MANAGEMENT OF THE
TRUST AND THE PORTFOLIOS"}

Each Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Funds
or Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios
and review the Funds' performance.

The Trustees and officers of the Trust and Portfolios, their birthdate
and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Unless otherwise
indicated, the address of each officer is Clearing Operations, P.O. Box
897, Pittsburgh, Pennsylvania 05230-0897.

TRUSTEES OF THE TRUST

S. LELAND DILL (birthdate: March 28, 1930 ) -- Trustee; Retired;
Director, Coutts Group; Coutts (U.S.A.) International; Coutts Trust
Holdings Ltd; Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General Partner of
Pemco (an investment company registered under the 1940 Act). His address
is 5070 North Ocean Drive, Singer Island, Florida 33404.

KELVIN J. LANCASTER (birthdate: December 10, 1924) -- Trustee;
Professor, Department of Economics, Columbia University. His address is
35 Claremont Avenue, New York, New York 10027.

PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) -- Trustee;
Principal, Philip Saunders Associates (Consulting); former Director of
Financial Industry Consulting, Wolf & Company; President, John Hancock Home
Mortgage Corporation; and Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc. His address is
445 Glen Road, Weston, Massachusetts 02193.

PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -- Trustee;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. ("SFG") (since December, 1988) and Signature (since April, 1989). His
address is 6 St. James Avenue, Boston, Massachusetts 02116.

TRUSTEES OF THE PORTFOLIOS

CHARLES P. BIGGAR (birthdate: October 14, 1930) -- Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.

S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired;
Director, Coutts Group; Coutts (U.S.A.) International; Coutts Trust
Holdings Ltd; Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General Partner of
Pemco (an investment company registered under the 1940 Act). His address
is 5070 North Ocean Drive, Singer Island, Florida 33404.

PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -- Trustee;
Chairman, Chief Executive Officer and President, SFG (since December, 1988)
and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.

* Indicates an `interested person'' (as defined in the 1940 Act) for
the Trust.

OFFICERS OF THE TRUST AND PORTFOLIOS

Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.

RONALD M. PETNUCH (birthdate: February 27, 1960) -- President and
Treasurer; Senior Vice President, Federated Services Company (`FSC'');
formerly, Director of Proprietary Client Services, Federated Administrative
Services (`FAS''), and Associate Corporate Counsel, Federated Investors
(`FI'').

CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) -- Vice President
and Assistant Treasurer; Vice President, FAS.

JAY S. NEUMAN (birthdate: April 22, 1950) -- Secretary; Corporate
Counsel, FI.

Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar
positions for other investment companies for which Signature or Edgewood or
an affiliate, respectively, serves as the principal underwriter.

* Indicates an `interested person'' (as defined in the 1940 Act) for
the Trust.
No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolios. No director, officer or
employee of Edgewood or any of its affiliates will receive any compensation
from the Trust or the Portfolios for serving as an officer or Trustee of
the Trust or a Portfolio.

Intermediate Tax Free Fund incurred Trustees fees equal to $2,002 for
the fiscal year ended September 30, 1996. For the same period,
Intermediate Tax Free Portfolio incurred Trustees fees equal to $1,866.

Global High Yield Securities Fund incurred Trustees fees equal to
$2,862 for the fiscal year ended September 30, 1996. For the same period,
Global High Yield Securities Portfolio incurred Trustees fees equal to
$2,638.

Capital Appreciation Fund incurred Trustees fees equal to $2,902 for
the fiscal year ended September 30, 1996. For the same period, Capital
Appreciation Portfolio incurred Trustees fees equal to $2,628.

Small Cap Fund incurred Trustees fees equal to $2,855 for the fiscal
year ended September 30, 1996. For the same period, Small Cap Portfolio
incurred Trustees fees equal to $2,718.

International Equity Fund incurred Trustees fees equal to $2,875 for
the fiscal year ended September 30, 1996 . For the same period,
International Equity Portfolio incurred Trustees fees equal to $3,004.

Pacific Basin Equity Fund incurred Trustees fees equal to $2,875 for
the fiscal year ended September 30, 1996. For the same period, Pacific
Basin Equity Portfolio incurred Trustees fees equal to $2,654.
Latin American Equity Fund incurred Trustees fees equal to $2,767 for
the fiscal year ended September 30, 1996. For the same period, Latin
American Equity Portfolio incurred Trustees fees equal to $2,904.

The following table reflects fees paid to the Trustees of the Trust
and Portfolio for the year ended September 30, 1996.

TRUSTEE COMPENSATION TABLE

AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION FROM FUND COMPLEX*
POSITION FROM TRUST PAID TO TRUSTEES

S. Leland Dill, $10,000 $23,000
Trustee of Trust
and Portfolios

Kelvin J. Lancaster, $13,000 $23,000
Trustee of Trust

Philip Saunders, Jr, $13,000 $23,000
Trustee of Trust
and Portfolios

Philip W. Coolidge, none none
Trustee of Trust
and Portfolios

Charles P. Biggar, none none
Trustee of Portfolios

* Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds, BT
Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management
Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free
Money Portfolio, International Equity Portfolio, Utility Portfolio, Short
Intermediate US Government Securities Portfolio, Intermediate Tax Free
Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio and
Capital Appreciation Portfolio.

Bankers Trust reimbursed the Funds and Portfolios for a portion of
their Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.

As of December 31, 1996, the Trustees and Officers of the Trust and
the Portfolios owned in the aggregate less than 1% of the shares of any
Fund or the Trust (all series taken together).

As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Intermediate Tax Free Fund: Donaldson
Lufkin Jenrette Securities Corporation, Inc., Jersey City, NJ, owned
approximately 136,317 (6.65%) shares; Batrus & Co., New York, NY, owned
approximately 179,533 (8.75%) shares; Infid & Co., New York, NY, owned
approximately 356,829 (17.04%) shares and Henry Shotmeyer, Sr., New York,
NY, owned approximately 551,074 (26.88%) shares.
As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Global High Yield Securities Fund:
Batrus & Co., New York, NY, owned approximately 111,827 (5.71%) shares and
Infid & Co., New York, NY, owned approximately 1,634,638 (83.49%) shares.

As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Capital Appreciation Fund: Batrus &
Co., New York, NY, owned approximately 1,363,613 (32.91%) shares and Infid
& Co., New York, NY, owned approximately 1,1719,184 (41.49%) shares.

As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Small Cap Fund: Big Woods Partners
II, Rochester, NY, owned approximately 528,788 (5.11%) shares; Charles
Schwab & Co., San Francisco, CA, owned approximately 676,448 (6.54%)
shares; Batrus & Co., New York, NY, owned approximately 1,780,137 (17.22%)
shares; Infid & Co., New York, NY, owned approximately 2,387,089 (23.09%)
shares and Bankers Trust Co.; Jersey City, NJ, acting as Trustee, owned
approximately 3,345,851 (32.36%) shares.

As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of International Equity Fund: Bankers
Trust Co., Jersey City, NJ, acting as Trustee, owned approximately
1,182,693 (9.90%) shares; Batrus & Co., New York, NY, owned approximately
1,754,393 (14.69%) shares; Charles Schwab & Co., San Francisco, CA, owned
approximately 1,967,593 (16.48%) shares and Infid & Co., New York, NY,
owned approximately 3,224,028 (27.00%) shares.

As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Pacific Basin Equity Fund: Batrus &
Co., New York, NY, owned approximately 571,948 (21.73%) shares and Infid &
Co., New York, NY, owned approximately 1,539,491 (58.50%) shares.
As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of Latin American Equity Fund: Batrus &
Co., New York, NY, owned approximately 154,978 (8.36%) shares; Charles
Schwab & Co., San Francisco, CA, owned approximately 464,092 (25.04%)
shares and Infid & Co., New York, NY, owned approximately 926,714 (50.00%)
shares.

INVESTMENT ADVISER

Under the terms of each Portfolio's investment advisory agreement with
Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the
Portfolio subject to the supervision and direction of the Board of Trustees
of the Portfolio. Bankers Trust will: (i) act in strict conformity with
each Portfolio's Declaration of Trust, the 1940 Act and the Investment
Advisers Act of 1940, as the same may from time to time be amended; (ii)
manage each Portfolio in accordance with the Portfolio's investment
objectives, restrictions and policies; (iii) make investment decisions for
each Portfolio; and (iv) place purchase and sale orders for securities and
other financial instruments on behalf of each Portfolio.
Bankers Trust bears all expenses in connection with the performance
of services under each Advisory Agreement. The Trust and each Portfolio
bears certain other expenses incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the
Trust or the Portfolio who are not officers, directors or employees of
Bankers Trust, Edgewood or any of their affiliates; SEC fees and state Blue
Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.

For the period from January 1, 1996 to September 30, 1996, and the
years ended December 31, 1995 and 1994, Bankers Trust earned $67,313,
$96,572, and $117,549, respectively, in compensation for investment
advisory services provided to Intermediate Tax Free Portfolio. During the
same periods, Bankers Trust reimbursed $23,842, $18,572, and $41,555,
respectively, to that Portfolio to cover expenses.

For the fiscal years ended September 30, 1996 and 1995, and the period
from December 14, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $156,634, $141,692, and $66,073, respectively,
in compensation for investment advisory services provided to Global High
Yield Securities Portfolio. During the same periods, Bankers Trust
reimbursed $86,070, $78,840, and $48,741, respectively, to that Portfolio
to cover expenses.
For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
Bankers Trust accrued $1,225,764, $482,453, and $329,399, respectively, in
compensation for investment advisory services provided to Capital
Appreciation Portfolio. During the same periods, Bankers Trust reimbursed
$319,524, $131,702, and $114,930, respectively, to that Portfolio to cover
expenses.

For the fiscal years ended September 30, 1996 and 1995, and the period
from October 21, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $1,293,449, $389,015, and $69,420,
respectively, in compensation for investment advisory services provided to
Small Cap Portfolio. During the same periods, Bankers Trust reimbursed
$331,176, $111,862, and $41,110, respectively, to that Portfolio to cover
expenses.

For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
Bankers Trust accrued $759,552, $322,696, and $322,489 respectively, in
compensation for investment advisory services provided to International
Equity Portfolio. During the same periods, Bankers Trust reimbursed
$229,297, $108,743, and $117,653 , respectively, to that Portfolio to cover
expenses.

For the fiscal years ended September 30, 1996 and 1995, and the period
from November 1, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $211,122, $173,591, and $116,020, respectively,
in compensation for investment advisory services provided to Pacific Basin
Equity Portfolio. During the same periods, Bankers Trust reimbursed
$30,450, $47,338, and $40,461, respectively, to that Portfolio to cover
expenses.
For the fiscal years ended September 30, 1996 and 1995, and the period
from October 25, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $151,004, $173,145, and $102,872, respectively,
in compensation for investment advisory services provided to Latin American
Equity Portfolio. During the same periods, Bankers Trust reimbursed
$46,928, $138,351, and $81,307, respectively, to that Portfolio to cover
expenses.

Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on
behalf of the Portfolios, including outstanding loans to such issuers which
could be repaid in whole or in part with the proceeds of securities so
purchased. Such affiliates deal, trade and invest for their own accounts
in such obligations and are among the leading dealers of various types of
such obligations. Bankers Trust has informed the Portfolios that, in
making its investment decisions, it does not obtain or use material inside
information in its possession or in the possession of any of its
affiliates. In making investment recommendations for the Portfolios,
Bankers Trust will not inquire or take into consideration whether an issuer
of securities proposed for purchase or sale by a Portfolio is a customer of
Bankers Trust, its parent or its subsidiaries or affiliates and, in dealing
with its customers, Bankers Trust, its parent, subsidiaries and affiliates
will not inquire or take into consideration whether securities of such
customers are held by any fund managed by Bankers Trust or any such
affiliate.

Each Fund's prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including
waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers
Trust shall stay in effect for at least 12 months.
SUB-INVESTMENT ADVISER

Bankers Trust has entered into a sub-investment advisory agreement
(the "Sub-Advisory Agreement") with BT Fund Managers International Limited
("BT Fund Managers International") a wholly owned subsidiary of Bankers
Trust Australia Limited ("BTAL") in Sydney. BTAL is a wholly owned
subsidiary of Bankers Trust New York Corporation. Under the Sub-Advisory
Agreement, Bankers Trust may receive investment advice and research
services with respect to companies based in the Pacific Basin and may grant
BT Fund Managers International investment management authority as well as
the authority to buy and sell securities if Bankers Trust believes it would
be beneficial to the Portfolio.

BTAL, which was granted a banking license in 1986, is the parent of
Bankers Trust Australia Group which has offices is Sydney, Melbourne,
Perth, Brisbane, Adelaide, London and Hong Kong. A representative office
of Bankers Trust Company was opened in Australia in 1966 and Australian
merchant banking operations commences in 1969. A related organization,
Bankers Trust New Zealand Limited, was established in 1986. Although BTAL
has not previously served as investment adviser for a registered investment
company, BTAL provides investment services for a range of clients.
ADMINISTRATOR

Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as
the Board of Trustees of the Trust and each Portfolio reasonably deem
necessary for the proper administration of the Trust or a Portfolio.
Bankers Trust will generally assist in all aspects of the Funds' and
Portfolios' operations; supply and maintain office facilities (which may be
in Bankers Trust's own offices), statistical and research data, data
processing services, clerical, accounting, bookkeeping and recordkeeping
services (including without limitation the maintenance of such books and
records as are required under the 1940 Act and the rules thereunder, except
as maintained by other agents), executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or
investors; prepare and file tax returns; supply financial information and
supporting data for reports to and filings with the SEC and various state
Blue Sky authorities; supply supporting documentation for meetings of the
Board of Trustees; provide monitoring reports and assistance regarding
compliance with Declarations of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange for
appropriate insurance coverage; calculate net asset values, net income and
realized capital gains or losses; and negotiate arrangements with, and
supervise and coordinate the activities of, agents and others to supply
services.

Pursuant to a sub-administration agreement (the "Sub-Administration
Agreement"), FSC performs such sub-administration duties for the Trust and
the Portfolios as from time to time may be agreed upon by Bankers Trust and
FSC. The Sub-Administration Agreement provides that FSC will receive such
compensation as from time to time may be agreed upon by FSC and Bankers
Trust. All such compensation will be paid by Bankers Trust.
For the period from January 1, 1996 to September 30, 1996, and the
years ended December 31, 1995 and 1994, Bankers Trust earned $67,185,
$96,355, and $117,245, respectively, in compensation for administrative and
other services provided to the Intermediate Tax Free Fund. During the same
periods, Bankers Trust reimbursed $40,323, $48,616, and $63,823,
respectively, to cover expenses. For the period from January 1, 1996 to
September 30, 1996, and the years ended December 31, 1995 and 1994, Bankers
Trust earned $8,414, $12,072, and $14,693, respectively, in compensation
for administrative and other services provided to Intermediate Tax Free
Portfolio.

For the fiscal years ended September 30, 1996 and 1995, and the period
from December 14, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $185,042, $167,703, and $78,503, respectively,
in compensation for administrative and other services provided to Global
High Yield Securities Fund. During the same periods, Bankers Trust
reimbursed $109,939, $74,013, and $40,342, respectively, to cover expenses.
For the same periods, Bankers Trust received $39,158, $35,342, and $16,518,
respectively, in compensation for administrative and other services
provided to Global High Yield Securities Portfolio.

For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
Bankers Trust accrued $405,364, $229,796, and $165,092, respectively, in
compensation for administrative and other services provided to the Capital
Appreciation Fund. During the same periods, Bankers Trust reimbursed
$57,379, $48,877, and $79,097, respectively, to cover expenses. For the
fiscal year ended September 30, 1996, the period from January 1, 1995 to
September 30, 1995, and the year ended December 31, 1994, Bankers Trust
received $188,579, $74,224, and $50,677, respectively, in compensation for
administrative and other services provided to Capital Appreciation
Portfolio.
For the fiscal years ended September 30, 1996 and 1995, and the period
from October 21, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $1,285,892, $388,661, and $69,395,
respectively, in compensation for administrative and other services
provided to Small Cap Fund. During the same periods, Bankers Trust
reimbursed $109,960, $92,321, and $51,004, respectively, to cover expenses.
For the same periods, Bankers Trust received $198,992, $59,848, and
$10,680, respectively, in compensation for administrative and other
services provided to Small Cap Portfolio.

For the fiscal year ended September 30, 1996, the period from January
1, 1995 to September 30, 1995, and the year ended December 31, 1994,
Bankers Trust accrued $982,662, $421,538, and $421,138, respectively, in
compensation for administrative and other services provided to the
International Equity Fund. During the same periods, Bankers Trust
reimbursed $74,494, $52,956, and $66,603, respectively, to cover expenses.
For the fiscal year ended September 30, 1996, the period from January 1,
1995 to September 30, 1995, and the year ended December 31, 1994, Bankers
Trust received $175,281, $74,468, and $74,420, respectively, in
compensation for administrative and other services provided to
International Equity Portfolio.

For the fiscal years ended September 30, 1996 and 1995, and the period
from November 1, 1993 (commencement of operations) through September 30,
1994, Bankers Trust accrued $210,057, $173,407, and $115,972, respectively,
in compensation for administrative and other services provided to Pacific
Basin Equity Fund. During the same periods, Bankers Trust reimbursed
$56,703, $72,263, and $51,932, respectively, to cover expenses. For the
same periods, Bankers Trust received $70,374, $57,864, and $38,673,
respectively, in compensation for administrative and other services
provided to Pacific Basin Equity Portfolio.
For the fiscal years ended September 30, 1996 and 1995, and the period
from October 25, 1993 (commencement of operations) through September 30,
1994, Banker Trust accrued $143,318, $162,746, and $97,763, respectively,
in compensation for administrative and other services provided to Latin
American Equity Fund. During the same periods, Bankers Trust reimbursed
$53,312, $63,765, and $49,325, respectively, to cover expenses. For the
same periods, Bankers Trust received $30,201, $34,629, and $20,574,
respectively, in compensation for administrative and other services
provided to Latin American Equity Portfolio.

Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant
to the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary
expenses) exceed the expense limitation of any state having jurisdiction
over a Fund, Bankers Trust will reimburse the Fund for the excess expense
to the extent required by state law. As of the date of this SAI, the most
restrictive annual expense limitation applicable to any Fund is 2.50% of
the Fund's first $30 million of average annual net assets, 2.00% of the
next $70 million of average annual net assets and 1.50% of the remaining
average annual net assets.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for each Portfolio pursuant to the
administration and services agreements. As Custodian, it holds the Funds'
and each Portfolio's assets. Bankers Trust also serves as transfer agent
of the Trust and of each Portfolio pursuant to the respective
administration and services agreement. Under its transfer agency agreement
with the Trust, Bankers Trust maintains the shareholder account records for
each Fund, handles certain communications between shareholders and the
Trust and causes to be distributed any dividends and distributions payable
by the Trust. Bankers Trust may be reimbursed by the Funds or the
Portfolios for its out-of-pocket expenses. Bankers Trust will comply with
the self-custodian provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser
to the Portfolios. The Trust has acknowledged that the term "BT" is used
by and is a property right of certain subsidiaries of Bankers Trust and
that those subsidiaries and/or Bankers Trust may at any time permit others
to use that term.

The Trust may be required, on 60 days' notice from Bankers Trust at
any time, to abandon use of the acronym "BT" as part of its name. If this
were to occur, the Trustees would select an appropriate new name for the
Trust, but there would be no other material effect on the Trust, its
shareholders or activities.

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolios contemplated by
the Advisory Agreements and other activities for the Funds and the
Portfolios described in the Prospectuses and this SAI without violation of
the Glass-Steagall Act or other applicable banking laws or regulations.
However, counsel has pointed out that future changes in either Federal or
state statutes and regulations concerning the permissible activities of
banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and
regulations, might prevent Bankers Trust from continuing to perform those
services for the Trust and the Portfolios. State laws on this issue may
differ from the interpretations of relevant Federal law and banks and
financial institutions may be required to register as dealers pursuant to
state securities law. If the circumstances described above should change,
the Boards of Trustees would review the relationships with Bankers Trust
and consider taking all actions necessary in the circumstances.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trust and each
Portfolio. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas
City, Missouri 64105 acts as Independent Accountants of the Trust and each
Portfolio.

ORGANIZATION OF THE TRUST

Shares of the Trust do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable but have no
preemptive, conversion or subscription rights. Shareholders generally vote
by Fund, except with respect to the election of Trustees and the
ratification of the selection of independent accountants.

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Declaration of Trust
provides for indemnification from the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of
the Trust. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations, a possibility that
the Trust believes is remote. Upon payment of any liability incurred by
the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in a manner so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the
Trust.

The Trust was organized under the name BT Tax-Free Investment Trust
and assumed its current name of BT Investment Funds on May 16, 1988.

Except as described below, whenever the Trust is requested to vote on
a fundamental policy of the Portfolio, the Trust will hold a meeting of the
Fund's shareholders and will cast its vote as instructed by 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 of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote.

Except as described below, whenever the Fund is requested to vote on
matters pertaining to the Portfolio, the Fund will hold a meeting of its
shareholders and will cast its votes proportionately as instructed by Fund
shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund would not request a vote of its shareholders with
respect to (a) any proposal relating to the Portfolio, which proposal, if
made with respect to the Fund, would not require the vote of the
shareholders of the Fund, or (b) any proposal with respect to the Portfolio
that is identical in all material respects to a proposal that has
previously been approved by shareholders of the Fund. Any proposal
submitted to holders in the Portfolio, and that is not required to be voted
on by shareholders of the Fund, would nonetheless be voted on by the
Trustees of the Trust.

TAXATION

TAXATION OF THE FUNDS

The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the Code.
As a regulated investment company, each Fund will not be subject to
U.S. Federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-
term capital losses), if any, that it distributes to shareholders. The
Funds intend to distribute to their shareholders, at least annually,
substantially all of their investment company taxable income and net
capital gains, and therefore do not anticipate incurring Federal income tax
liability.

Each Fund shareholder will also receive, if appropriate, various
written notices after the close of the Fund's prior taxable year as to the
Federal income status of his dividends and distributions which were
received from the Fund during the Fund's prior taxable year. Shareholders
should consult their tax advisers as to any state and local taxes that may
apply to these dividends and distributions. The dollar amount of dividends
excluded from Federal income taxation and the dollar amount subject to such
income taxation, if any, will vary for each shareholder depending upon the
size and duration of each shareholder's investment in the Fund. To the
extent that the Fund earns taxable net investment income, the Fund intends
to designate as taxable dividends the same percentage of each dividend as
its taxable net investment income bears to its total net investment income
earned. Therefore, the percentage of each dividend designated as taxable,
if any, may vary.

INTERMEDIATE TAX FREE PORTFOLIO

TAX-EXEMPT INTEREST. Investment in the Intermediate Tax Free Fund
would not be suitable for tax-exempt institutions, qualified retirement
plans, H.R. 10 plans and individual retirement accounts since such
investors would not gain any additional tax benefit from the receipt of
tax-exempt income.
Because the Intermediate Tax Free Fund will distribute exempt-interest
dividends, all or a portion of any interest on indebtedness incurred by a
shareholder to purchase or carry shares of the Fund will not be deductible
for Federal personal income tax purposes. In addition, the Code may
require a shareholder of the Fund, if he receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise
nontaxable social security and railroad retirement benefit payments.
Furthermore, that portion of any exempt-interest dividend paid by the Fund
which represents income from private activity bonds held by the Fund may
not retain its tax-exempt status in the hands of a shareholder who is a
"substantial user" of a facility financed by such bonds, or a "related
person" thereof. Moreover, as noted in the Prospectus of the Fund, (i)
some or all of the Fund's dividends and distributions may be specific
preference items, or a component of an adjustment item, for purposes of the
Federal individual and corporate alternative minimum taxes and (ii) the
receipt of the Fund's dividends and distributions may affect a corporate
shareholder's Federal "environmental" tax liability. In addition, the
receipt of Fund dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and a Subchapter S
corporate shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are
(i) "substantial users" with respect to a facility or "related" to such
users within the meaning of the Code and (ii) subject to a Federal
alternative minimum tax, the federal "environmental" tax, the Federal
"branch profits" tax or the Federal "excess net passive income" tax.

In the case of the Intermediate Tax Free Fund, these statements will
also designate the amount of exempt-interest dividends that is a specific
preference item for purposes of the Federal individual and corporate
alternative minimum taxes.

GLOBAL HIGH YIELD SECURITIES PORTFOLIO, PACIFIC BASIN EQUITY PORTFOLIO
AND LATIN AMERICAN EQUITY PORTFOLIO

FOREIGN SECURITIES. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to
determine the effective rate of foreign tax in advance since the amount of
the Portfolio's assets to be invested in various countries will vary.

If the Portfolio is liable for foreign taxes, and if more than 50% of
the value of the Portfolio's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, it may make an
election pursuant to which certain foreign taxes paid by it would be
treated as having been paid directly by shareholders of the entities, such
as the corresponding Fund, which have invested in the Portfolio. Pursuant
to such election, the amount of foreign taxes paid will be included in the
income of the corresponding Fund's shareholders, and such Fund shareholders
(except tax-exempt shareholders) may, subject to certain limitations, claim
either a credit or deduction for the taxes. Each such Fund shareholder
will be notified after the close of the Portfolio's taxable year whether
the foreign taxes paid will "pass through" for that year and, if so, such
notification will designate (a) the shareholder's portion of the foreign
taxes paid to each such country and (b) the portion which represents income
derived from sources within each such country.

The amount of foreign taxes for which a shareholder may claim a credit
in any year will generally be subject to a separate limitation for "passive
income," which includes, among other items of income, dividends, interest
and certain foreign currency gains. Because capital gains realized by the
Portfolio on the sale of foreign securities will be treated as U.S. source
income, the available credit of foreign taxes paid with respect to such
gains may be restricted by this limitation.

TAXATION OF THE PORTFOLIOS

The Portfolios are not subject to Federal income taxation. Instead,
the Fund and other investors investing in a Portfolio must take into
account, in computing their Federal income tax liability, their share of
the Portfolio's income, gains, losses, deductions, credits and tax
preference items, without regard to whether they have received any cash
distributions from the Portfolio.

Distributions received by a Fund (other than Intermediate Tax Free
Fund) from the corresponding Portfolio generally will not result in the
Fund recognizing any gain or loss for Federal income tax purposes, except
that: (1) gain will be recognized to the extent that any cash distributed
exceeds the Fund's basis in its interest in the Portfolio prior to the
distribution; (2) income or gain may be realized if the distribution is
made in liquidation of the Fund's entire interest in the Portfolio and
includes a disproportionate share of any unrealized receivables held by the
Portfolio; and (3) loss may be recognized if the distribution is made in
liquidation of the Fund's entire interest in the Portfolio and consists
solely of cash and/or unrealized receivables. A Fund's basis in its
interest in the corresponding Portfolio generally will equal the amount of
cash and the basis of any property which the Fund invests in the Portfolio,
increased by the Fund's share of income from the Portfolio, and decreased
by the amount of any cash distributions and the basis of any property
distributed from the Portfolio.
OTHER TAXATION

The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M
of the Code. The investment by each Fund in the corresponding Portfolio
does not cause the Fund to be liable for any income or franchise tax in the
State of New York.

Each Portfolio is organized as a New York trust. Each Portfolio is
not subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.

Fund shareholders may be subject to state and local taxes on their
Fund distributions. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund.

FINANCIAL STATEMENTS

The financial statements for each Fund or Portfolio for the period
ended September 30, 1996, are incorporated herein by reference to the
Annual Report to shareholders for each Fund dated September 30, 1996. A
copy of a Fund's Annual Report may be obtained without charge by contacting
the respective Fund.

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements 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. Neither the Prospectuses nor
this Statement of Additional Information constitutes an offer in any state
in which, or to any person to whom, such offer may not lawfully be made.

CUSIP # 055922801
CUSIP # 055922777
CUSIP # 055922819
CUSIP # 055922769
CUSIP#055922868
CUSIP # 055922736
CUSIP # 055922785
COMBINV400 (1/97)

PART C OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits:

(a) Financial Statements:
Incorporated by reference to the Annual Reports to
Shareholders dated September 30, 1996, pursuant to Rule
411 under the Securities Act of 1933. (File Nos. 33-07404
and 811-04760)

(b) Exhibits:

(1) (i) Conformed Copy of Declaration of Trust of the Trust; (9)
(ii) Supplement to Declaration of Trust; (9)
(iii) Second Supplement to Declaration of Trust; (9)
(2) Copy of By-Laws of the Trust; (9)
(3) Not applicable.
(4) Copy of Specimen stock certificates for shares of beneficial
interest of the Trust; (1)
(5) Not applicable.
(6) Conformed Copy of Distributor's Contract; +
(7) Not applicable.
(8) See Exhibit 9(b).
(9) (i) See Exhibit 9(b).
(ii) Administration and Services Agreement; (6)
(iii) Schedule of Fees under Administration and Services
Agreement; (7)
(10) Not applicable.
(11) Conformed copy of Consents of Independent Accountants; +
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Conformed Copy of Plan of Distribution; +
(16) Copy of Schedules for Computation of Performance Quotations;
(2)
(17) Copy of Financial Data Schedules; +
(18) Not applicable.
(19) Conformed Copy of Power of Attorney of Registrant, BT
Investment Portfolios, Capital Appreciation Portfolio,
International Equity Portfolio and Intermediate Tax Free
Portfolio. +

+ All exhibits have been filed electronically.
(1) Incorporated by reference to the Registrant's registration statement
on Form N-1A (``Registration Statement ') as filed with the Securities
and Exchange Commission (`Commission'') on October 24, 1986.
(2) Incorporated by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement as filed with the Commission on
February 13, 1992.
(6) Incorporated by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement as filed with the Commission on
April 30, 1993.
(7) Incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement as filed with the Commission on
November 8, 1993.
(9) Incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement as filed with the Commission on
July 31, 1995.

ITEM 25. Persons Controlled by or Under Common Control with Registrant:

Not applicable.

ITEM 26.Number of Holders of Securities:

Title of Class Number of Record Holders
(as of December 31, 1997)

Tax Free Money Fund 186
NY Tax Free Money Fund 211
Cash Management Fund 307
Treasury Money Fund 1866
100% Treasury Fund 0
Intermediate Tax Free Fund 80
Utility Fund 90
Small Cap Fund 517
Pacific Basin Equity Fund 191
European Equity Fund 0
BT Investment Lifecycle Short Range Fund 11
BT Investment Lifecycle Mid Range Fund 11
BT Investment Lifecycle Long Range Fund 13
Latin American Equity Fund 163
International Equity Fund 647
Global High Yield Securities Fund 86
Capital Appreciation Fund 333
International Bond Fund 0

ITEM 27. Indemnification; (10)

ITEM 28.Business and Other Connections of Investment Adviser:

Bankers Trust serves as investment adviser to the Trust. Bankers Trust, a
New York banking corporation, is a wholly owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of commercial
banking and trust activities and is a major wholesale supplier of financial
services to the international institutional market. To the knowledge of
the Trust, none of the directors or officers of Bankers Trust, except those
set forth below, is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of
a substantial nature, except that certain directors and officers also hold
various positions with and engage in business for Bankers Trust New York
Corporation. Set forth below are the names and principal businesses of the
directors and officers of Bankers Trust who are or during the past two
fiscal years have been engaged in any other business, profession, vocation
or employment of a substantial nature. These persons may be contacted c/o
Bankers Trust Company, 280 Park Avenue, New York, New York 10017.

George B. Beitzel, 29 King Street, Chappaqua, NY 10514-3432. Retired
Senior Vice President and Director of International Business Machines
Corporation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of Computer Task Group, FlightSafety International,
Inc., Phillips Gas Company, Phillips Petroleum Company, Caliber Systems,
Inc. (formerly, Roadway Services, Inc.), Rohm and Haas Company and TIG
Holdings, Chairman Emeritus of Amherst College, and Chairman of the
Colonial Williamsburg Foundation.
+ All exhibits have been filed electronically.
(10) Incorporated by reference to Post-Effective Amendment No. 38 to
Registrant's Registration Statement as filed with the Commission
on April 29, 1996.

William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Dallas, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Exxon Corporation, Halliburton Company and
Warner-Lambert Corporation, National Urban League, Inc. and the National
Retail Federation.

Jon M. Huntsman, Huntsman Corporation, 500 Huntsman Way, Salt Lake City, UT
84108. Chairman and Chief Executive Officer, Huntsman Corporation and other
affiliated companies. Director of Bankers Trust and Bankers Trust New York
Corporation. Chairman, Chief Executive Officer and Director of Sunstar
Corporation and JK Corp. Chairman and Director of Co-Ex Plastics Inc. and
Global Polymers Corporation. Chairman of Constar Corporation and Petrostar
Corporation. President of Autostar Corporation and Restar Corporation.
Director of Airstar Corporation, Consolidated Press International
(Australia), Razzleberry Foods Corporation and Thiokol Corporation.
General Partner of Huntsman Group Ltd., McLeod Creek Partnership and
Trustar Ltd. Chairman of Primary Children's Medical Center Foundation, an
overseer, The Wharton School, University of Pennsylvania, an advisor,
University of Utah, Eccles Business School, founder of Huntsman Cancer
Institute, University of Utah, chairman and director of the Huntsman Cancer
Foundation, and a trustee and president of the Jon and Karen Huntsman
Foundation.

Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Suite 400, Washington, DC 20036. Senior Partner,
Akin, Gump, Strauss, Hauer & Feld, LLP. Director of Bankers Trust and
Bankers Trust New York Corporation. Also a Director of American Express
Company, Corning Incorporated, Dow Jones, Inc., J.C. Penney Company, Inc.,
Revlon Group Incorporated, Ryder System, Inc., Sara Lee Corporation, Union
Carbide Corporation and Xerox Corporation, a trustee of Brookings
Institution, The Ford Foundation and Howard University, and governor of the
Joint Center for Political and Economic Studies.

Hamish Maxwell, Philip Morris Companies Inc., 100 Park Avenue, 10th Floor,
New York, NY 10017. Retired Chairman and Chief Executive Officer, Philip
Morris Companies Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of The New Corporation Limited and Sola
International Inc..

Donald F. McCullough, Collins & Aikman Corporation, 210 Madison Avenue, New
York, NY 10016. Chairman Emeritus, Collins & Aikman Corporation.
Director of Bankers Trust and Bankers Trust New York Corporation. Director
of Massachusetts Mutual Life Insurance Co. and Melville Corporation.

N.J. Nicholas Jr., 15 West 53rd Street, New York, NY 10019. Former
President, Co-Chief Executive Officer and Director of Time Warner Inc.
Director of Bankers Trust and Bankers Trust New York Corporation. Also a
Director of Boston Scientific Corporation and Xerox Corporation.

Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation.
Former Dean of The Wharton School, University of Pennsylvania and former
Chief Executive Officer of Touche Ross & Co. (now Deloitte and Touche).
Also Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home
Loan Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company,
Imasco Limited, The May Department Stores Company and Safeguard
Scientifics, Inc. Member, Radnor Venture Partners Advisory Board, advisory
board of the Controller General of the United States, and a Trustee, the
Universtiy of Pennsylvania.

Didier Pineau-Valencienne, Schneider S.A., 4 Rue de Longchamp, 75116 Paris,
France. Chairman and Chief Executive Officer, Schneider S.A. Director and
member of the European Advisory Board of Bankers Trust and Director of
Bankers Trust New York Corporation. Director of AXA (France) and Equitable
Life Assurance Society of America, Arbed (Luxembourg), Banque Paribas
(France), Ciments Francais (France), Cofibel (Belgique), Compagnie
Industrielle de Paris (France), SIAPAP, Schneider USA, Sema Group PLC
(Great Britain), Spie- Batignolles, Tractebel (Belgique) and Whirlpool.
Chairman and Chief Executive Officer of Societe Parisienne d'Entreprises et
de Participations.

Charles S. Sanford, Jr., Bankers Trust Company, 280 Park Avenue, New York,
NY 10017. Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Also a Director of Mobil Corporation and J.C. Penney
Company, Inc.

Eugene B. Shanks, Jr., Bankers Trust Company, 280 Park Avenue, New York, NY
10017. President of Bankers Trust and Bankers Trust New York Corporation.

Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue - 17W,
New York, NY 10017. Former Vice President, The Edna McConnell Clark
Foundation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director, Borden Inc., Continental Corp. and Melville
Corporation, Director and Vice Chair of Community Foundation for Palm Beach
and Martin Counties, and a Trustee Emerita of Cornell University.

George J. Vojta, Bankers Trust Company, 280 Park Avenue, New York, NY
10017. Vice Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Director of Northwest Airlines and Private Export
Funding UST Corp., the New York State Banking Board and St. Lukes-Roosevelt
Hospital Center, a partner of New York City Partnership and Chairman,
Wharton Financial Services Center.

ITEM 29.Principal Underwriters:

(a) Edgewood Services, Inc., ( ``Edgewood') the Distributor for shares
of the Registrant, also acts as principal underwriter for the following
open-end investment companies: FTI Funds, Excelsior Institutional Trust
(formerly, Master Funds, Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly,
UST Master Tax-Exempt Funds, Inc.), Excelsior Institutional Trust,
Marketvest Funds, Marketvest Funds, Inc., BT Advisor Funds, BT
Institutional Funds, and BT Pyramid Mutual Funds.

(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Douglas L. Hein Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

Newton Heston, III Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

S. Elliott Cohan Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779

ITEM 30. Location of Accounts and Records:

BT INVESTMENT FUNDS: Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

BANKERS TRUST COMPANY: 280 Park Avenue, New York, NY 10017

INVESTORS FIDUCIARY: 127 West 10th Street,
TRUST COMPANY Kansas City, MO 64105.

EDGEWOOD SERVICES, INC.: Clearing Operations, P.O. Box 897,
Pittsburgh, PA 15230-0897.
ITEM 31. Management Services:

Not applicable.

ITEM 32. Undertakings:

The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report, with respect to the respective series of the Trust, to
shareholders upon request and without charge.

The Registrant undertakes to comply with Section 16(c) of the
1940 Act as though such provisions of the Act were applicable to
the Registrant except that the request referred to in the third
full paragraph thereof may only be made by shareholders who hold
in the aggregate at least 10% of the outstanding shares of the
Registrant, regardless of the net asset value or values of shares
held by such requesting shareholders.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, the Registrant, BT
INVESTMENT FUNDS, certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pittsburgh and the
Commonwealth of Pennsylvania on the 28th day of Janaury, 1997.

BT INVESTMENT FUNDS
By: /s/Jay S. Neuman
Jay S. Neuman, Secretary
January 28, 1997

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following persons in the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Jay S. Neuman Attorney in Fact January 28, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below

/s/RONALD M. PETNUCH* President and Treasurer
(Chief Executive Officer,
Principal Financial and
Accounting Officer)

/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge

/s/S. LELAND DILL* Trustee
S. Leland Dill

/s/KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster

/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
*By Power of Attorney

SIGNATURES

BT INVESTMENT PORTFOLIOS have duly caused this Post-Effective
Amendment No. 39 to the Registration Statement on Form N-1A of BT
Investment Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 28th day of Janaury, 1997.

BT INVESTMENT PORTFOLIOS

By: /s/Jay S. Neuman
Jay S. Neuman, Secretary
January 28, 1997

This Post-Effective Amendment No. 39 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:

NAME TITLE DATE

By: /s/ Jay S. Neuman Attorney in Fact January 28, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below

/s/RONALD M. PETNUCH* President and Treasurer
(Chief Executive Officer,
Principal Financial and
Accounting Officer)

/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge

/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/S. LELAND DILL* Trustee
S. Leland Dill

/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.

*By Power of Attorney

SIGNATURES

CAPITAL APPRECIATION PORTFOLIO has duly caused this Post-Effective
Amendment No. 39 to the Registration Statement on Form N-1A of BT
Investment Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 28th day of Janaury, 1997.

CAPITAL APPRECIATION PORTFOLIO

By: /s/Jay S. Neuman
Jay S. Neuman, Secretary
January 28, 1997
This Post-Effective Amendment No. 39 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:

NAME TITLE DATE

By: /s/ Jay S. Neuman Attorney in Fact January 28, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below

/s/RONALD M. PETNUCH* President and Treasurer
(Chief Executive Officer,
Principal Financial and
Accounting Officer)

/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge

/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/s/S. LELAND DILL* Trustee
S. Leland Dill

/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.

*By Power of Attorney

SIGNATURES

INTERNATIONAL EQUITY PORTFOLIO has duly caused this Post-Effective
Amendment No. 39 to the Registration Statement on Form N-1A of BT
Investment Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 28th day of Janaury, 1997.

INTERNATIONAL EQUITY PORTFOLIO

By: /s/Jay S. Neuman
Jay S. Neuman, Secretary
January 28, 1997

This Post-Effective Amendment No. 39 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:

NAME TITLE DATE

By: /s/ Jay S. Neuman Attorney in Fact January 28, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below

/s/RONALD M. PETNUCH* President and Treasurer
(Chief Executive Officer,
Principal Financial and
Accounting Officer)

/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge

/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/s/S. LELAND DILL* Trustee
S. Leland Dill

/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.

*By Power of Attorney

SIGNATURES

INTERMEDIATE TAX FREE PORTFOLIO has duly caused this Post-Effective
Amendment No. 39 to the Registration Statement on Form N-1A of BT
Investment Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 28th day of Janaury, 1997.

INTERMEDIATE TAX FREE PORTFOLIO

By: /s/Jay S. Neuman
Jay S. Neuman, Secretary
January 28, 1997

This Post-Effective Amendment No. 39 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:

NAME TITLE DATE

By: /s/ Jay S. Neuman Attorney in Fact January 28, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below

/s/RONALD M. PETNUCH* President and Treasurer
(Chief Executive Officer,
Principal Financial and
Accounting Officer)

/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge

/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/s/S. LELAND DILL* Trustee
S. Leland Dill

/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.

* By Power of Attorney

Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

BT INVESTMENT FUNDS
DISTRIBUTOR'S CONTRACT

AGREEMENT made as of this 30th day of September, 1996, by and between
BT INVESTMENT FUNDS (the "Trust"), a Massachusetts business trust, and
Edgewood Services, Inc. ("EDGEWOOD"), a New York corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints EDGEWOOD as its principal underwriter, to
act as agent in selling and distributing shares of the Trust which may be
offered in one or more series (the "Funds") consisting of one or more
classes (the "Classes") of shares (the "Shares"), as described and set
forth on one or more exhibits to this Agreement, at the current offering
price thereof as described and set forth in the current Prospectuses of the
Trust. EDGEWOOD hereby accepts such appointment and agrees to provide such
other services for the Trust, if any, and accept such compensation from the
Trust, if any, as set forth in the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to do so.
In addition, the Trust and EDGEWOOD reserve the right to reject any
purchase order.
3. Neither EDGEWOOD nor any other person is authorized by the Trust to
give any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in
any supplemental information to said Prospectuses or SAIs approved by the
Trust. EDGEWOOD agrees that any other information or representations other
than those specified above which it or any dealer or other person who
purchases Shares through EDGEWOOD may make in connection with the offer or

sale of Shares, shall be made entirely without liability on the part of the
Trust. With respect to the duties and services provided for in this
Agreement, no person or dealer, other than EDGEWOOD, is authorized to act
as agent for the Trust for any purpose. EDGEWOOD agrees that in offering
or selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. EDGEWOOD will submit to the Trust
copies of all sales literature before using the same and will not use such
sales literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term of
this Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at least
annually by the Trustees of the Trust including a majority of the members
of the Board of Trustees of the Trust who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation of
any Distribution Plan relating to the Trust or in any related documents to
such Plan ("Disinterested Trustees") cast in person at a meeting called for
that purpose. If a Class is added after the first annual approval by the
Trustees as described above, this Agreement will be effective as to that
Class upon execution of the applicable exhibit and will continue in effect
until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
2

5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty
(60) days' written notice to any other party to this Agreement. This
Agreement may be terminated with regard to a particular Fund or Class by
EDGEWOOD on sixty (60) days' written notice to the Trust.
6. This Agreement may not be assigned by EDGEWOOD and shall
automatically terminate in the event of an assignment by EDGEWOOD as
defined in the Investment Company Act of 1940, as amended, provided,
however, that EDGEWOOD may employ such other person, persons, corporation
or corporations as it shall determine in order to assist it in carrying out
its duties under this Agreement.
7. EDGEWOOD shall not be liable to the Trust for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed by
this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved
by the Trustees of the Trust including a majority of the Disinterested
Trustees of the Trust cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the State of New York.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless EDGEWOOD and each person, if any, who
controls EDGEWOOD within the meaning of Section 15 of the Securities
Act of 1933 and Section 20 of the Securities Exchange Act of 1934, as
3

amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectuses or SAIs (as from time to time
amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Trust about EDGEWOOD by or on
behalf of EDGEWOOD expressly for use in the Registration Statement,
any Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against EDGEWOOD or any controlling
person thereof with respect to which indemnity may be sought against
the Trust pursuant to the foregoing paragraph, EDGEWOOD shall promptly
notify the Trust in writing of the institution of such action and the
Trust shall assume the defense of such action, including the
employment of counsel selected by the Trust and payment of expenses.
EDGEWOOD or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of EDGEWOOD or such
controlling person unless the employment of such counsel shall have
been authorized in writing by the Trust in connection with the defense
of such action or the Trust shall not have employed counsel to have
charge of the defense of such action, in any of which events such fees
4

and expenses shall be borne by the Trust. Anything in this paragraph
to the contrary notwithstanding, the Trust shall not be liable for any
settlement of any such claim of action effected without its written
consent. The Trust agrees promptly to notify EDGEWOOD of the
commencement of any litigation or proceedings against the Trust or any
of its officers or Trustees or controlling persons in connection with
the issue and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAIs.
(b) EDGEWOOD agrees to indemnify and hold harmless the Trust, each
of its Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust within
the meaning of Section 15 of the Securities Act of 1933, against any
and all loss, liability, claims, damage and expense whatsoever
(including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever)
arising out of or based upon any untrue statement or any alleged
untrue statement of material fact contained in the Registration
Statement, any Prospectuses or SAIs (as from time to time amended or
supplemented) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with respect to alleged
statements or alleged omissions or statements or omissions, if any,
made in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof in reliance upon, and in conformity
with, information furnished to the Trust about EDGEWOOD by or on
behalf of EDGEWOOD expressly for use in the Registration Statement or
5

any Prospectus, SAI, or any amendment or supplement thereof. In case
any action shall be brought against the Trust or any other person so
indemnified based on the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof, and with respect to which
indemnity may be sought against EDGEWOOD, EDGEWOOD shall have the
rights and duties given to the Trust, and the Trust and each other
person so indemnified shall have the rights and duties given to
EDGEWOOD by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the duties of such
person or by reason of the reckless disregard by such person of the
obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Trustees, officers, EDGEWOOD, and controlling persons of
the Trust by the Trust pursuant to this Agreement, the Trust is aware
of the position of the Securities and Exchange Commission as set forth
in the Investment Company Act Release No. IC-11330. Therefore, the
Trust undertakes that in addition to complying with the applicable
provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in
the absence of such a decision, a reasonable determination based upon
factual review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees, or (ii) by independent legal counsel
6

in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless disregard
of duties. The Trust further undertakes that advancement of expenses
incurred in the defense of a proceeding (upon undertaking for
repayment unless it is ultimately determined that indemnification is
appropriate) against an officer, Trustee, EDGEWOOD or controlling
person of the Trust will not be made absent the fulfillment of at
least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a
quorum of non-party Disinterested Trustees or independent legal
counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to
indemnification.
11. EDGEWOOD is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be
limited in any case to the Trust and its assets and EDGEWOOD shall not seek
satisfaction of any such obligation from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust, or any of them.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
13. EDGEWOOD shall be responsible for reviewing and making any filings
of advertisements and sales literature relating to the Funds that have been
furnished to EDGEWOOD.
14. EDGEWOOD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
7

other information not otherwise publicly available relative to the Trust
and its prior, present or potential shareholders and not to use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where EDGEWOOD may be exposed
to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
15. EDGEWOOD and the Trust each hereby represents and warrants to the
other that it has all the requisite authority to enter into, execute,
deliver and perform its obligations under this Agreement and that, with
respect to it, this Agreement is legal, valid and binding, and enforceable
in accordance with its terms.

* * * * *

EXHIBIT A
TO THE
DISTRIBUTOR'S CONTRACT

BT INVESTMENT FUNDS

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated as of September 30, 1996, between BT
Investment Funds and Edgewood Services, Inc. with respect to the Funds and
Classes of shares set forth in Schedule A to this Exhibit, attached hereto
(collectively, `Funds'').

1. The Trust hereby appoints EDGEWOOD to engage in activities
principally intended to result in the sale of shares of the Funds
("Shares"). Pursuant to this appointment, EDGEWOOD is authorized to select
a group of financial institutions ("Financial Institutions") to sell Shares
at the current offering price thereof as described and set forth in the
respective prospectuses of the Trust.

2. During the term of this Agreement, the Trust will pay EDGEWOOD for
services pursuant to this Agreement, a monthly fee computed at the annual
rate indicated on Schedule A on the average aggregate net asset value of
the Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate proration of
any fee payable on the basis of the number of days that the Agreement is in
effect during the month.

3. EDGEWOOD may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Fund's expenses
exceed such lower expense limitation as EDGEWOOD may, by notice to the
Trust, voluntarily declare to be effective.

4. EDGEWOOD will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
EDGEWOOD, in its sole discretion, may pay Financial Institutions a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by EDGEWOOD in its sole
discretion.

5. EDGEWOOD will prepare reports to the Board of Trustees of the Trust
on a quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.

In consideration of the mutual covenants set forth in the
Distributor's Contract dated as of September 30, 1996 between BT Investment
Funds and EDGEWOOD, BT Investment Funds executes and delivers this Exhibit
on behalf of the Funds, and with respect to the Classes set forth in
Schedule A to this Exhibit.

Witness the due execution hereof this 30th day of September, 1996.

ATTEST: BT INVESTMENT FUNDS

/s/ Jay S. Neuman By:/s/ Charles L. Davis, Jr.
[Secretary] [Vice President]
(SEAL)

ATTEST: EDGEWOOD SERVICES, INC.

/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
[Secretary] [Senior Vice President]
(SEAL)

SCHEDULE A
OF
EXHIBIT A
TO THE
DISTRIBUTOR'S CONTRACT

The provisions of the Distributor's Contract between BT Investment
Funds and Edgewood Services, Inc. shall be effective with respect to each
Fund and Class as of the date set forth below.
3

Name of Fund Effective Date Fee

Cash Management Fund September 30, 0.20%
1996
Treasury Money Fund September 30, 0.20%
1996
Tax Free Money Fund September 30, 0.20%
1996
NY Tax Free Money Fund September 30, 0.20%
1996
International Equity Fund September 30, 0.20%
1996
Utility Fund September 30, 0.20%
1996
Intermediate Tax Free Fund September 30, 0.20%
1996
100% Treasury Fund September 30, 0.20%
1996
Capital Appreciation Fund September 30, 0.20%
1996
BT Investment Lifecycle Long Range September 30, 0.20%
Fund 1996
BT Investment Lifecycle Mid Range September 30, 0.20%
Fund 1996
BT Investment Lifecycle Short Range September 30, 0.20%
Fund 1996
Liquid Assets Fund September 30, 0.20%
4

1996
Global High Yield Securities Fund September 30, 0.20%
1996
Latin American Equity Fund September 30, 0.20%
1996
Small Cap Fund September 30, 0.20%
1996
European Equity Fund September 30, 0.20%
1996
Pacific Basin Equity Fund September 30, 0.20%
1996
International Bond Fund September 30, 0.20%
1996

EXHIBIT B
TO THE
DISTRIBUTOR'S CONTRACT

BT INVESTMENT FUNDS

In consideration of the mutual covenants set forth in the
Distributor's Contract dated September 30, 1996 between BT INVESTMENT FUNDS
and EDGEWOOD, BT INVESTMENT FUNDS executes and delivers this Exhibit on
behalf of the Funds and Classes of shares first set forth in Schedule A to
this Exhibit, attached hereto.
Witness the due execution hereof this 30th day of September, 1996.

ATTEST: BT INVESTMENT FUNDS

/s/ Jay S. Neuman By:/s/ Charles L. Davis, Jr.
[Secretary] [Vice President]
(SEAL)

ATTEST: EDGEWOOD SERVICES, INC.

/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
[Secretary] [Senior Vice President]
(SEAL)

SCHEDULE A
OF

EXHIBIT B
TO THE
DISTRIBUTOR'S CONTRACT

The provisions of the Distributor's Contract between BT Investment
Funds and Edgewood Services, Inc. shall be effective with respect to each
Fund and Class as of the date set forth below.

Name of Fund Effective Date

Exhibit 15 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

BT INVESTMENT FUNDS
PLAN OF DISTRIBUTION

This Plan, when effective in accordance with its terms, shall be the
written plan of BT Investment Funds (the `Trust''), contemplated by Rule
12b-1 under the Investment Company Act of 1940, as amended (the `Act'').

W H E R E A S :

The Trust has been organized to operate as an open-end management
investment company and is registered as such under the Act;

The Trust intends to distribute the shares of its series (each, a
`Fund'') as listed on Schedule A hereto, and desires to adopt a
distribution plan pursuant to Rule 12b-1 under the Act with respect to such
Funds, and the Trustees of the Trust have determined, in the exercise of
their reasonable business judgment and in light of their fiduciary duty,
that there is a reasonable likelihood that adoption of this Plan will
benefit each Fund and its shareholders; and

The Trust desires to engage Edgewood Services, Inc. (`ESI'') to
provide (or cause to be provided) certain distribution services for each
Fund.

NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. The Trust may reimburse ESI, as the distributor, for expenses
incurred in connection with the distribution of the shares of the Funds at
an annual rate not exceeding the percentage of the average daily net assets
of the Fund as set forth on Schedule A hereto. Such expenses shall be
calculated and accrued daily and reimbursed monthly or at such other
intervals as the Board of Trustees shall determine.

2. ESI may seek reimbursement under paragraph 1 of this Plan for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Funds' shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of ESI 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 ESI or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature.

3. The Trust shall pay all costs and expenses in connection with
implementing and operating this Plan, subject to the limitation specified
in paragraph 1 hereof. The Trust shall pay all costs and expenses
associated with preparing the Fund's prospectuses and statements of
additional information and in connection with printing them for an
distributing them to existing shareholders and regulatory authorities,
which costs and expenses shall not be considered distribution expenses for
purposes of this Plan.

4. This Plan together with any related agreements shall not take
effect with respect to a Fund until it has been approved by a vote of at
2
least a majority (as defined in the Act) of the outstanding voting
securities of the Fund, if so required by Rule 12b-1 under the Act.

5. This Plan together with any related agreements shall become
effective with respect to a Fund upon approval by a majority vote of both
(i) the Board of Trustees and (ii) those Trustees who are not interested
persons of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
to it (the ``ualified Trustees''), cast in person at a meeting called for
the purpose of voting on this Plan and such related agreements.

6. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner
provided in paragraph 5 hereof.

7. In each year that the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to
the Board and the Board shall review, at least quarterly, written reports
complying with the requirements of Rule
12b-1 under the Act of the amounts expended under the Plan and purposes for
which such expenditures were made.

8. This Plan may be terminated at any time with respect to a Fund by
a majority vote of the Qualified Trustees or by vote of a majority of the
outstanding voting securities of the Fund.

9. This Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraph 1 hereof unless
such amendment is approved in the manner provided for initial approval in
paragraph 4 hereof and no material amendment to the Plan shall be made
3
unless approved in the manner provided for approval and annual renewal in
paragraph 5 hereof.

10. While this Plan shall be in effect, the selection and nomination
of Trustees who are not interested persons of the Trust (as defined in the
Act) shall be committed to the discretion of the Qualified Trustees then in
office.

11. ESI hereby acknowledges that (i) payments to be made by the Trust
to ESI pursuant to this Plan shall be for actual expenses of ESI as
contemplated hereunder, (ii) upon termination of this Plan with respect to
a Fund, the benefits inuring to ESI hereunder with respect to that Fund
shall immediately cease and (iii) to the extent expenses of ESI under this
Plan in any fiscal year of a Fund exceed amounts payable under this Plan
during such Fund's fiscal year, such expenses shall not be payable to ESI
in any succeeding fiscal year of the Fund.

12. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 7 hereof for a period
of not less than six years from the date of (a) this Plan or (b) the
agreements or such report, as the case may be, the first two years in an
easily accessible place.

Dated: May 16, 1988
as amended, April 1, 1990
Revised: September 30, 1996

SCHEDULE A

BT INVESTMENT FUNDS
SCHEDULE OF FEES UNDER THE PLAN OF DISTRIBUTION

Cash Management Fund 0.20%
Treasury Money Fund 0.20%
Tax Free Money Fund 0.20%
NY Tax Free Money Fund 0.20%
International Equity Fund 0.20%
Utility Fund 0.20%
Intermediate Tax Free Fund 0.20%
100% Treasury Fund 0.20%
Capital Appreciation Fund 0.20%
BT Investment Lifecycle Long Range Fund 0.20%
BT Investment Lifecycle Mid Range Fund 0.20%
BT Investment Lifecycle Short Range Fund 0.20%
Liquid Assets Fund 0.20%
Global High Yield Securities Fund 0.20%
Latin American Equity Fund 0.20%
Small Cap Fund 0.20%
European Equity Fund 0.20%
Pacific Basis Equity Fund 0.20%
International Bond Fund 0.20%

Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

The undersigned Trustees and officers, as indicated respectively
below, of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual
Funds, The Leadership Trust, and BT Advisor Funds (each, a `Trust'') and,
Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, International Equity Portfolio,
Utility Portfolio, Short/Intermediate U.S. Government Securities Portfolio,
Equity 500 Index Portfolio, Asset Management Portfolio, Capital
Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT Investment
Portfolios (each, a `Portfolio Trust'') each hereby constitutes and
appoints the Secretary and each Assistant Secretary of each Trust and each
Portfolio Trust and the Deputy General Counsel of Federated Investors, each
of them with full powers of substitution, as his true and lawful attorney-
in-fact and agent to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all
amendments thereto, and all other documents, filed by a Trust or a
Portfolio Trust with the Securities and Exchange Commission (the `SEC'')
under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable the Trust or Portfolio Trust to comply with such Acts, the rules,
regulations and requirements of the SEC, and the securities or Blue Sky
laws of any state or other jurisdiction, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the SEC
and such other jurisdictions, and the undersigned each hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any
one of such attorneys and agents has, and may exercise, all of the powers
hereby conferred. The undersigned each hereby revokes any Powers of
Attorney previously granted with respect to any Trust or Portfolio Trust
concerning the filings and actions described herein.

IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 30th day of September, 1996.

SIGNATURES TITLE

/s/Ronald M. Petnuch President and Treasurer (Chief Executive
Officer,
Ronald M. Petnuch Principal Financial and Accounting Officer)
of each Trust and Portfolio Trust

/s/Philip W. Coolidge Trustee of each Trust and
Philip W. Coolidge Portfolio Trust

SIGNATURES TITLE

/s/Charles P. Biggar Trustee of each Portfolio Trust
Charles P. Biggar

/s/S. Leland Dill Trustee of each Portfolio Trust
S. Leland Dill and BT Investment Funds

2
/s/Kelvin J. Lancaster Trustee of BT Investment Funds
Kelvin J. Lancaster

/s/Philip Saunders, Jr. Trustee of each Portfolio Trust
Philip Saunders, Jr. and BT Investment Funds