September 30, 1999
[GRAPHIC OMITTED] BT Mutual Funds
Intermediate
Tax Free Fund
Annual Report
TRUST: BT INVESTMENT FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
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Intermediate Tax Free Fund
Table of Contents
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Letter to Shareholders ........................... 3
Intermediate Tax Free Fund
Statement of Assets and Liabilities ............ 5
Statement of Operations ........................ 5
Statements of Changes in Net Assets ............ 6
Financial Highlights ........................... 6
Notes to Financial Statements .................. 7
Report of Independent Accountants .............. 8
Tax Information ................................ 8
Intermediate Tax Free Portfolio
Schedule of Portfolio Investments .............. 9
Statement of Assets and Liabilities ............11
Statement of Operations ........................11
Statements of Changes in Net Assets ............12
Financial Highlights ...........................12
Notes to Financial Statements ..................13
Report of Independent Accountants ..............14
Proxy Results .....................................15
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The Fund is not insured by the FDICand is not a deposit obligation of or
guaranteed by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
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2
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Intermediate Tax Free Fund
Letter to Shareholders
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We are pleased to present you with this annual report for the Intermediate Tax
Free Fund (the "Fund"), providing a review of the markets, the Portfolio, and
our outlook as well as a complete financial summary of the Fund's operations and
a listing of the Portfolio's holdings.
MARKET ACTIVITY
Interest rates rose dramatically over the annual period, as investors shifted
their attention from overseas crises to fundamentals of an ongoing strong U.S.
economy.
o In the fall of 1998, interest rates were artificially low, as turbulent Asian
and other world economies generated a flight to quality into U.S. Treasuries.
o The Federal Reserve Board officially lowered the fed funds rate by 0.25% each
on September 29, October 15, and November 17, 1998.
o The U.S. economy remained vibrant with GDP growth in excess of 2.5%-3%
throughout the twelve months, and, except for certain commodities such as oil
and gold, inflation overall remained benign. In fact, the core Consumer Price
Index increased only 1.9% on an annual basis through the end of August 1999,
the lowest twelve month rate of change in 33 years.
o Even with the strong economy/low inflation scenario, the Federal Reserve Board
chose to focus on strong retail sales and a robust labor market as potential
catalysts for future inflation and subsequently raised the fed funds rate by
0.25% on June 30th and again on August 24th.
Municipal bonds were less volatile than other fixed income sectors primarily
because they are less impacted by international turmoil.
o Municipal bond yields did not fall as much as Treasuries in the fourth
calendar quarter of 1998, nor did they rise as much as Treasuries in the first
three calendar quarters of 1999.
o Specifically, yields on intermediate Treasuries rose by approximately 1.50%
over the twelve months ended September 30, 1999. In contrast, intermediate tax
free bond yields moved within a narrower band, increasing by approximately
0.80% over the annual period.
o With limited overseas exposure and dramatically less supply than other fixed
income sectors, credit quality spreads of municipal bonds did not widen as
they did within the corporate and mortgage-backed sectors.
Rising interest rates meant lower municipal security supply, but a healthy
economy led to an improved credit quality picture and historically attractive
yield levels.
o For the first nine months of 1999, overall supply of municipal bonds was down
approximately 20% over the same nine month period one year ago. The volume of
refinancing of outstanding bonds was reduced notably, while issuance for new
capital projects was virtually flat.
o The ratio of credit quality upgrades to downgrades within the municipal bond
sector was approximately 7:1.
o Yields on intermediate tax free bonds at the end of the fiscal period were
approximately 82.3% of the yields of same-duration U.S. Treasuries. On a
taxable equivalent basis, this made municipal bond yields particularly
attractive for investment.
INVESTMENT REVIEW
The Fund slightly underperformed its category average and its benchmark for the
twelve months ended September 30, 1999. This can be attributed to two primary
factors. First--our more conservative credit posture. Such a posture means the
Fund does not benefit from narrow credit spreads, as seen in the municipal bond
market during this period. Still, it is important to reiterate that the Fund's
prospectus mandates higher credit quality standards than held by the benchmark,
and we continue to believe that this is the more prudent strategy over the long
term. Confirmation of this strategy came when the Fund's average credit quality
improved over the annual period, being upgraded from Aa2 on March 31, 1999 to
Aa1 as of September 30, 1999, as rated by Moody's.
The second factor impacting performance was yield curve positioning. Even within
the Fund's primarily neutral duration positioning, the portfolio was somewhat
overweighted in bonds with 10 to 15 year maturities. Yields at this portion of
the yield curve rose more than at the 5 to 10 year portion of the curve, as the
yield curve steepened on concerns, however unrealized, about rekindled
inflation.
Overall, the Fund's duration positioning had a positive impact on Fund
performance. For most of the fiscal year, we maintained a slightly short to
neutral Index duration. By doing so as interest rates moved up, we were able to
take advantage of the available higher rates. Then, in early September, we moved
to a shorter duration position in anticipation of further Federal Reserve Board
action. As the market reacted to ongoing economic strength and inflation
barometers heating up following the Fed's tightening in late August, this
shorter positioning strategy proved to be the right one. On September 30, the
Fund's duration stood at 4.8 years and its average maturity at 6.4 years.
<TABLE>
<CAPTION>
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Periods ended September 30, 1999 Cumulative Total Returns Average Annual Total Returns
- -------------------------------------------------------------------------------------------------------------------
Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
year years years inception year years years inception
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Intermediate Tax Free Fund/1
(inception 7/20/92) (1.21)% 14.31% 29.92% 41.05% (1.21)% 4.56% 5.37% 4.90%
- -------------------------------------------------------------------------------------------------------------------
Lehman 7 Year Government
Obligations Index/2 0.56% 17.38% 35.75% 48.97% 0.56% 5.49% 6.30% 5.72%
- -------------------------------------------------------------------------------------------------------------------
Lipper Intermediate
Municipal Debt Average/3 (0.76)% 14.18% 30.23% 42.72% (0.76)% 4.52% 5.42% 5.08%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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1/ Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. During the period the
Fund waived certain fees and expenses. Had these fees and expenses not been
waived, the Fund's return would have been lower.
2/ Indices are unmanaged, and investments cannot be made in an index. The index
represents government obligation securities with maturities of 7 to 8 years.
3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper, Inc. as falling into the respective
categories indicated. These figures do not reflect sales charges.
3
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Intermediate Tax Free Fund
Letter to Shareholders
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Diversification of Portfolio Investments
By Sector as of September 30, 1999
(percentages are based on market value)
Building 3% University 17%
Turnpike/Highway 12%
Property & Development 1%
Environment 7% Sales Tax 7%
[GRAPHIC OMITTED]
Refunding 3%
Transportation 11%
General
Obligations 27%
Miscellaneous 7%
Electric 2% Lease 3%
The Fund was able to find opportunities in both sector and specific issue
selection to take advantage of market aberrations. For example:
o We bought some Florida securities during the second half of the fiscal year,
taking advantage of supply/demand imbalances there.
o After benefiting from our overweighting in the high tax state of California
during the first half of the fiscal year, we reduced our holdings in this
state during the second half, as volume declined, quality spreads narrowed,
and yields became comparatively less attractive.
o We remained overweight in issues exempt from taxes in New York throughout the
annual period, though we did reduce our holdings a bit in the second half.
o Having sold some Connecticut and Massachusetts portfolio holdings in the first
half, more attractive yields among available supply led us to buy issues in
both of these states during the second half.
Reflecting our ongoing defensive posture in light of interest rates in general,
the Fund ended the annual period with almost 20% of its assets in cash, as
compared to approximately 9% at the end of September 1998 and 15% at the end of
March 1999.
MANAGER OUTLOOK
Looking ahead, we are cautious within our near-term outlook for the municipal
bond market and more positive within our longer-term outlook. The reason--we
anticipate that the Federal Reserve Board, having adopted a "tightening bias" on
October 5, will remain vigilant on the inflation front. We believe the Fed may
tighten monetary policy once more, probably in November 1999, and that interest
rates will likely drift higher before year end. For the near term, should
interest rates in fact move higher, we will extend the Fund's duration to lock
in yields. However, we believe that early in the year 2000, the rate of U.S.
economic growth may slow enough for interest rates to reverse course and begin
drifting downward.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek to produce a yield greater than a tax free
money market fund with lower risk to principal than a longer term or lower
credit quality tax free bond fund.
/s/ Gary Pollack
Gary Pollack
Portfolio Manager of the
Intermediate Tax Free Portfolio
September 30, 1999
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Performance Comparison
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Comparison of Change in Value
of a $10,000 Investment in the
Intermediate Tax Free Fund and
the Lehman 7-Year G.O. Bond
Index since July 31, 1992.
Total Return for the Year
Ended September 30, 1999
One Year Five Year Since 7/20/921
(1.21)% 5.37%/2 4.90%/2
1/ The Fund's inception date.
2/ Annualized.
Investment return and principal
value will fluctuate so that shares,
when redeemed, may be worth
more or less than their original cost.
[GRAPHIC OMITTED]
Intermediate Tax Free Fund - $14,105 Lehman 7-Year G.O. Bond Index - $14,897
Jul-92 10000 Jul-92 10000
Sep-92 9937 Sep-92 9972
Mar-93 10377 Mar-93 10463
Sep-93 10960 Sep-93 11076
Mar-94 10667 Mar-94 10741
Sep-94 10787 Sep-94 10973
Mar-95 11255 Mar-95 11452
Sep-95 11779 Sep-95 12147
Mar-96 12018 Mar-96 12419
Sep-96 12261 Sep-96 12691
Mar-97 12499 Mar-97 12997
Sep-97 13172 Sep-97 13715
Mar-98 13658 Mar-98 14176
Sep-98 14278 Sep-98 14816
Mar-99 14403 Mar-99 15024
Sep-99 14105 Sep-99 14897
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
4
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Intermediate Tax Free Fund
Statement of Assets and Liabilities September 30, 1999
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<TABLE>
<S> <C>
Assets
Investment in Intermediate Tax Free Portfolio, at Value ......................... $ 20,033,813
Prepaid Expenses and Other ...................................................... 18,203
Due from Bankers Trust .......................................................... 3,015
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Total Assets ....................................................................... 20,055,031
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Liabilities
Payable for Shares of Beneficial Interest Redeemed .............................. 8,000
Distributions Payable ........................................................... 66,710
Accrued Expenses and Other ...................................................... 20,735
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Total Liabilities .................................................................. 95,445
------------
Net Assets ......................................................................... $ 19,959,586
============
Composition of Net Assets
Paid-in Capital ................................................................. $ 19,825,247
Accumulated Net Realized Gain from Investment Transactions ...................... 40,180
Net Unrealized Appreciation on Investments ...................................... 94,159
------------
Net Assets ......................................................................... $ 19,959,586
============
Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding) ...................................... $ 10.40
============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) .................................................. 1,918,464
============
</TABLE>
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Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Income Allocated from Intermediate Tax Free Portfolio, net ...................... $ 908,809
------------
Expenses
Administration and Services Fees ................................................ 85,829
Professional Fees ............................................................... 29,608
Printing and Shareholder Reports ................................................ 23,888
Trustees Fees ................................................................... 6,089
Registration Fees ............................................................... 5,687
Miscellaneous ................................................................... 9,601
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Total Expenses .................................................................. 160,702
Less Fees Waived/Expenses Reimbursed by Bankers Trust ........................... (74,873)
------------
Net Expenses ................................................................. 85,829
------------
Net Investment Income .............................................................. 822,980
------------
Realized and Unrealized Gain (Loss) on Investment
Net Realized Gain from Investment Transactions .................................. 49,667
Net Change in Unrealized Appreciation/Depreciation on Investment ................ (1,154,450)
------------
Net Realized and Unrealized Loss on Investment ..................................... (1,104,783)
------------
Net Decrease in Net Assets from Operations ......................................... $ (281,803)
============
</TABLE>
See Notes to Financial Statements.
5
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Intermediate Tax Free Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
------------------ -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income .......................................... $ 822,980 $ 851,783
Net Realized Gain from Investment Transactions ................. 49,667 144,761
Net Change in Unrealized Appreciation/Depreciation on Investment (1,154,450) 630,290
------------ ------------
Net Increase (Decrease) in Net Assets from Operations ............. (281,803) 1,626,834
------------ ------------
Distributions to Shareholders
Net Investment Income .......................................... (822,980) (851,783)
Net Realized Gain from Investment Transactions ................. (153,783) (25,237)
------------ ------------
Total Distributions to Shareholders ............................... (976,763) (877,020)
------------ ------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares .................................. 5,657,450 10,929,947
Dividend Reinvestments ......................................... 390,166 452,871
Cost of Shares Redeemed ........................................ (8,901,450) (6,793,047)
------------ ------------
Net Increase (Decrease) from Capital Transactions in
Shares of Beneficial Interest ................................... (2,853,834) 4,589,771
------------ ------------
Total Increase (Decrease) in Net Assets ........................... (4,112,400) 5,339,585
------------ ------------
Net Assets
Beginning of year ................................................. 24,071,986 18,732,401
------------ ------------
End of year ....................................................... $ 19,959,586 $ 24,071,986
============ ============
</TABLE>
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Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the Intermediate Tax Free Fund.
<TABLE>
<CAPTION>
For the years ended For the period For the
September 30, January 1, 1996 to year ended
------------------------------ September 30, December 31,
1999 1998 1997 1996/2 1995
------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period .......... $11.02 $10.65 $10.34 $10.56 $ 9.72
------ ------ ------ ------ ------
Income fromInvestment Operations
Net Investment Income ...................... 0.41 0.42 0.44 0.33 0.47
Net Realized and Unrealized Gain (Loss)
on Investments ............................. (0.53) 0.38 0.31 (0.22) 0.84
------ ------ ------ ------ ------
Total from Investment Operations .............. (0.12) 0.80 0.75 0.11 1.31
------ ------ ------ ------ ------
Distributions to Shareholders
Net Investment Income ...................... (0.41) (0.42) (0.44) (0.33) (0.47)
Net Realized Gains ......................... (0.09) (0.01) -- -- --
------ ------ ------ ------ ------
Total Distributions ........................... (0.50) (0.43) (0.44) (0.33) (0.47)
------ ------ ------ ------ ------
Net Asset Value, End of Period ................ $10.40 $11.02 $10.65 $10.34 $10.56
====== ====== ====== ====== ======
Total Investment Return ....................... (1.21)% 7.71% 7.43% 4.09% 13.71%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ... $19,960 $24,072 $18,732 $22,008 $22,213
Ratios to Average Net Assets:
Net Investment Income ................... 3.83% 3.91% 4.23% 4.25%/1 4.58%
Expenses, Including Expenses of the
Intermediate Tax Free Portfolio ....... 0.85% 0.85% 0.85% 0.85%/1 0.85%
Decrease Reflected in Above Expense
Ratio Due to Fees Waived/Expenses
Reimbursed by Bankers Trust .......... 0.56% 0.37% 0.30% 0.38%/1 0.28%
</TABLE>
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1/ Annualized.
2/ The Board of Trustees approved the change of the fiscal year end from
December 31 to September 30.
See Notes to Financial Statements.
6
<PAGE>
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Intermediate Tax Free Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The Intermediate Tax Free Fund (the "Fund")
is one of the funds offered to investors by the Trust. The Fund began operations
on July 20, 1992. The Fund seeks to achieve its investment objective by
investing substantially all of its assets in the Intermediate Tax Free Portfolio
(the "Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The value of the investment in the Portfolio reflects
the Fund's proportionate Fund's interest in the net assets of the Portfolio. At
September 30, 1999, the Fund's investment was approximately 100% of the
Portfolio.
The financial statements of the Portfolio, including a list of assets held are
contained elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
B. Investment Valuation
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. Investment Income
The Fund earns income, net of expenses, on its investment in the Portfolio. All
of the net investment income and realized and unrealized gains and losses from
the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Distributions
It is the Fund's policy to declare dividends daily and distribute them monthly
to shareholders from net investment income. Dividends and distributions payable
to shareholders are recorded by the Fund on the ex-dividend date. Distributions
of net realized short-term and long-term capital gains, if any, earned by the
Fund will be made annually to the extent they exceed capital loss carryforwards.
E. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore no federal
income tax provision is required.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of
each fund. Expenses directly attributable to a fund are charged to that fund,
while expenses which are attributable to all of the Trust's funds are allocated
among them. Investment transactions are accounted for on the trade date basis.
Realized gains and losses are determined on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this agreement, Bankers Trust provides
administrative, custody, transfer agency and shareholder services to the Fund in
return for a fee computed daily and paid monthly at an annual rate of .40% of
the Fund's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to .40% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and .85% of the average daily net assets of the Fund, including expenses of the
Portfolio.
ICC Distributors, Inc. provides distribution services to the Fund.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Shares of Beneficial Interest
At September 30, 1999, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
For the For the
year ended year ended
September 30, 1999 September 30, 1998
------------------ ------------------
Shares Amount Shares Amount
-------- -------- -------- --------
Sold 521,268 $5,657,450 1,014,118 $10,929,947
Reinvested 36,150 390,166 41,978 452,871
Redeemed (823,289) (8,901,450) (630,927) (6,793,047)
-------- ---------- -------- -----------
Net Increase
(Decrease) (265,871) $(2,853,834) 425,169 $4,589,771
======== =========== ======= ==========
Note 4--Fund Merger
On September 8, 1999, the Board of Trustees voted to recommend the
reorganization of the Fund into the Morgan Grenfell Municipal Bond Fund. The
Board has determined that this proposal is in the best interests of
shareholders. The merger requires the approval of the Fund's shareholders.
7
<PAGE>
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Intermediate Tax Free Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of BT Investment Funds and
Shareholders of Intermediate Tax Free Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Intermediate Tax Free Fund (one of the funds comprising BT Investment Funds,
hereafter referred to as the "Fund") at September 30, 1999, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1999 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 16, 1999
- --------------------------------------------------------------------------------
Tax Information (Unaudited For the Year Ended September 30, 1999)
- --------------------------------------------------------------------------------
The Fund paid long term capital gains during the year ended September 30, 1999
in the amount of $63,998. All long term capital gain distributions are taxed at
the 20% capital gains rate. In addition, the fund's ordinary distributions were
100% tax exempt for federal income tax purposes.
8
<PAGE>
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Intermediate Tax Free Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Long-Term Municipal Bonds - 78.7%
Arizona - 2.3%
$ 440,000 Arizona State, Transportation Board Excise
Tax, 5.60%, 7/1/03 ............................... $ 457,820
-----------
Connecticut - 7.9%
500,000 Connecticut State, Resource Recovery,
5.00%, 1/1/07 .................................... 502,225
500,000 Connecticut State, Series A, 6.25%,
5/15/06 .......................................... 544,095
500,000 Connecticut State, Special Tax
Obligations, 5.90%, 9/1/05 ....................... 532,930
-----------
1,579,250
-----------
Delaware - 2.7%
520,000 Delaware Transportation Authority,
6.10%, 7/1/02 .................................... 544,112
-----------
Florida - 8.1%
575,000 Boca Plaza Association, Florida Revenue,
(LOC: Credit Suisse First Boston),
4.65%, 2/1/04 .................................... 568,595
50,000 Dade County, Florida, Aviation Authority,
5.40%, 10/1/07 ................................... 52,058
1,000,000 Jacksonville, Florida, Health Facility
Authority, 5.00%, 8/15/08 ........................ 1,000,300
-----------
1,620,953
-----------
Illinois - 7.2%
440,000 Chicago, Illinois, G.O., (FGIC Insured),
5.00%, 1/1/07 .................................... 442,759
1,000,000 Chicago, Illinois, Sales Tax Revenue,
5.00%, 1/1/09 .................................... 994,440
-----------
1,437,199
-----------
Indiana - 4.1%
300,000 Indiana University Revenue, 6.60%,
8/1/01 ........................................... 312,009
500,000 Purdue University of Indiana, University
Revenue, Series N, 5.50%,
7/1/12 ........................................... 508,445
-----------
820,454
-----------
Maine - 2.6%
500,000 Maine Municipal Bond Bank, Series B,
(MBIA Insured), 5.37% 11/1/05 .................... 519,405
-----------
Michigan - 3.7%
500,000 Michigan State, Building Authority,
(AMBAC Insured), 6.00%
10/1/02 .......................................... 523,920
200,000 Michigan State, Housing Development
Authority, 6.30% 12/1/03 ......................... 207,838
-----------
731,758
-----------
Massachusetts - 4.6%
1,000,000 Massachusetts State, Series B, 5.00%
5/1/17 ........................................... 919,200
-----------
Nebraska - 1.6%
300,000 Nebraska Public Power District Revenue,
5.70% 1/1/05 ..................................... 317,403
-----------
<PAGE>
Principal
Amount Description Value
------ ----------- -----
Nevada - 2.6%
$ 500,000 Clark County, Nevada Highway
Improvement Revenue, (AMBAC
Insured), 5.70% 7/1/03 ........................... $ 522,135
-----------
New York - 17.4%
700,000 New York City, New York, G.O.,
Series E, 6.00% 8/1/07 ........................... 750,260
500,000 New York State, Dormitory Authority
Revenue, Consolidated City
University System, (FGIC Insured),
5.75% 7/1/13 ..................................... 520,985
500,000 New York State, Dormitory Authority
Revenue, New York University,
(MBIA Insured), 6.00% 7/1/06 ..................... 536,745
300,000 New York State, Dormitory Authority
Revenue, State University
Educational Facility, (AMBAC
Insured), 5.00% 5/15/10 .......................... 292,623
500,000 New York State, Environment
Facilities Corporation, 5.75%
6/15/10 .......................................... 525,885
500,000 New York State, Local Government
Assistance Corporation, Series E,
5.25% 4/1/16 ..................................... 482,090
400,000 New York State, Thruway Authority
Revenue, Series E, 5.00% 1/1/16 .................. 370,348
-----------
3,478,936
-----------
North Carolina - 3.3%
650,000 North Carolina State, 5.10%
6/1/07 .......................................... 664,229
-----------
Tennessee - 2.2%
Shelby County, Tennessee, Public
Improvement, Series B,
10,000 5.25% 11/1/06 .................................... 10,307
405,000 5.50% 8/1/07 ..................................... 422,366
-----------
432,673
-----------
Texas - 5.3%
500,000 Texas State, Series A, 6.00%
10/1/06 .......................................... 537,635
500,000 University of Texas, Series A,
6.50% 8/15/01 .................................... 521,095
-----------
1,058,730
-----------
Virginia - 2.1%
400,000 Arlington County, Virginia, 5.50%
8/1/05 ........................................... 419,992
-----------
Wisconsin - 1.0%
200,000 Wisconsin State Transportation,
6.00% 7/1/00 ..................................... 203,348
-----------
Total Long-Term Municipal Bonds
(Cost $15,633,439) ............................................ 15,727,597
-----------
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Floating Rate Demand Notes - 16.0%
Florida - 4.0%
$ 800,000 Pinellas County, Florida, Health Facility
Authority Revenue, Pooled Hospital
Loan Program, (LOC: Chase
Manhattan Bank), 3.80% 12/1/15 ................... $ 800,000
-----------
Mississippi - 0.5%
100,000 Perry County, Mississippi, Leaf River
State Project, (LOC: Wachovia
Bank), 3.75% 3/1/02 .............................. 100,000
-----------
New York - 4.5%
200,000 New York City, New York, Sub Series A-4,
(LOC: Chase Manhattan Bank),
3.80% 8/1/21 ..................................... 200,000
100,000 New York City, New York, Sub Series
A-10, (LOC: Morgan Guaranty
Trust), 3.95% 8/1/16 ............................. 100,000
100,000 New York City, New York, Sub Series
A-10, (LOC: Morgan Guaranty
Trust), 3.95% 8/1/17 ............................. 100,000
100,000 New York, New York, G.O., Series B,
(FGIC Insured), 3.95% 10/1/20 .................... 100,000
400,000 New York State, Energy Research and
Development Authority, Pollution
Control Revenue, (LOC: Toronto
Dominion Bank), 4.20% 7/1/15 ..................... 400,000
-----------
900,000
Principal
Amount Description Value
------ ----------- -----
-----------
Wyoming - 7.0%
$ 300,000 Lincoln County, Wyoming, Pollution
Control Revenue, (Exxon Project-A),
3.75% 11/1/14 .................................... $ 300,000
800,000 Lincoln County, Wyoming, Pollution
Control Revenue, (Exxon Project-B),
3.75% 11/1/14 .................................... 800,000
300,000 Uinta County, Wyoming, Pollution
Control Revenue, (Chevron U.S.A.),
3.75% 12/1/22 .................................... 300,000
-----------
1,400,000
-----------
Total Floating Rate Demand Notes
(Cost $3,200,000) ............................................ 3,200,000
-----------
Total Investments (Cost $18,833,439)* ....... 94.7% 18,927,597
Other Assets in Excess of Liabilities ....... 5.3% 1,059,439
----- -----------
Net Assets .................................. 100.0% $19,987,036
===== ===========
The following abbreviations are used in portfolio descriptions:
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Corporation
G.O. -- General Obligation
LOC -- Line of Credit
MBIA -- Municipal Bond Investors Assurance
- -------------
*Tax Cost of Investments.
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Statement of Assets and Liabilities September 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at Value (Cost $18,833,439) .................. $18,927,597
Cash ..................................................... 16,720
Receivable for Securities Sold ........................... 880,257
Due From Bankers Trust ................................... 6,100
Interest Receivable ...................................... 237,326
-----------
Total Assets ................................................ 20,068,000
-----------
Liabilities
Accrued Expenses and Other ............................... 34,033
-----------
Total Liabilities ........................................... 34,033
-----------
Net Assets .................................................. $20,033,967
===========
Composition of Net Assets
Paid-in Capital .......................................... $19,939,809
Net Unrealized Appreciation on Investments ............... 94,158
-----------
Net Assets .................................................. $20,033,967
===========
- --------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Interest Income ................................................. $ 1,005,485
-----------
Expenses
Advisory Fees ................................................... 85,929
Professional Fees ............................................... 37,949
Administration and Services Fees ................................ 10,741
Trustees Fees ................................................... 4,997
Miscellaneous ................................................... 1,643
-----------
Total Expenses .................................................. 141,259
Less Fees Waived/Expenses Reimbursed by Bankers Trust ........... (44,590)
-----------
Net Expenses ................................................. 96,669
-----------
Net Investment Income .............................................. 908,816
-----------
Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain from Investment Transactions .................. 49,666
Net Change in Unrealized Appreciation/Depreciation on Investments (1,154,872)
-----------
Net Realized and Unrealized Loss on Investments .................... (1,105,206)
-----------
Net Decrease in Net Assets from Operations ......................... $ (196,390)
===========
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income ........................................... $ 908,816 $ 938,751
Net Realized Gain from Investment Transactions .................. 49,666 144,762
Net Change in Unrealized Appreciation/Depreciation on Investments (1,154,872) 630,294
------------ ------------
Net Increase (Decrease) in Net Assets from Operations .............. (196,390) 1,713,807
------------ ------------
Capital Transactions
Proceeds from Capital Invested .................................. 6,084,725 11,556,348
Value of Capital Withdrawn ...................................... (9,766,076) (7,741,467)
------------ ------------
Net Increase (Decrease) in Net Assets from Capital Transactions .... (3,681,351) 3,814,881
------------ ------------
Total Increase (Decrease) in Net Assets ............................ (3,877,741) 5,528,688
Net Assets
Beginning of year .................................................. 23,911,708 18,383,020
------------ ------------
End of year ........................................................ $ 20,033,967 $ 23,911,708
============ ============
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for the periods indicated for the Intermediate Tax Free Portfolio.
<TABLE>
<CAPTION>
For the years ended For the period For the
September 30, January 1, 1996 to year ended
--------------------------- September 30, December 31,
1999 1998 1997 1996/2 1995
---- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) .. $20,034 $23,912 $18,383 $22,019 $22,253
Ratios to Average Net Assets:
Net Investment Income .................. 4.22% 4.30% 4.62% 4.64%/1 4.97%
Expenses ............................... 0.45% 0.45% 0.45% 0.45%/1 0.45%
Decrease Reflected in Above Expense
Ratio Due to Fees Waived/Expenses
Reimbursed by Bankers Trust .......... 0.21% 0.16% 0.11% 0.14%1 0.08%
Portfolio Turnover Rate ................... 74% 64% 171% 130% 95%
</TABLE>
- -----------
1/ Annualized.
2/ The Board of Trustees approved the change of the fiscal year end from
December 31 to September 30.
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Intermediate Tax Free Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on December 11, 1991
as an unincorporated trust under the laws of New York and began operations on
July 20, 1992. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments are carried at fair market value as determined by an
independent pricing service at the end of each business day. Short-term debt
securities are valued at market value until such time as they reach a remaining
maturity of 60 days, whereupon they are valued at amortized cost using their
value on the 61st day. Securities for which quotations are not available are
stated at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees.
C. Security Transactions and Investment Income
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
discount on investments. Expenses are recorded as incurred. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the securities transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio at the time of such determination.
D. Federal Income Taxes
The portfolio is considered to be a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
E. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this agreement, Bankers Trust
provides administrative, custody, transfer agency and shareholder services to
the Portfolio in return for a fee computed daily and paid monthly at an annual
rate of .05% of the Portfolio's average daily net assets.
The Portfolio has entered into an agreement with Bankers Trust. Under this
Advisory Agreement, Bankers Trust manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies in return for a
fee computed daily and paid monthly at an annual rate of .40% of the Portfolio's
average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio to the extent necessary, to limit all expenses to .45%
of the average daily net assets of the Portfolio.
At September 30, 1999, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $100,000,000, which
expires April 29, 2000. A commitment fee of .10% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. On October 8, 1999, the revolving
credit facility was increased to $150,000,000. No amounts were drawn down or
outstanding under the credit facility for the year ended September 30, 1999.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended September 30, 1999 were
$13,481,504 and $18,211,982, respectively.
The aggregate gross unrealized appreciation for all investments was $306,314,
and the aggregate gross unrealized depreciation for all investments was
$212,156.
Note 4--Fund Merger
On September 8, 1999, the Board of Trustees voted to recommend the
reorganization of the Portfolio into the Morgan Grenfell Municipal Bond Fund.
The Board has determined that this proposal is in the best interests of
shareholders. The merger requires the approval of the Fund's shareholders.
13
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of
Intermediate Tax Free Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Intermediate Tax Free Portfolio
(hereafter referred to as the "Portfolio") at September 30, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 16, 1999
14
<PAGE>
- --------------------------------------------------------------------------------
Intermediate Tax Free Fund
Proxy Results (unaudited)
- --------------------------------------------------------------------------------
For the year ended September 30, 1999, the Bankers Trust Funds shareholders
voted on the following proposals at the annual meeting of shareholders on
October 8, 1999 or as adjourned. The description of each proposal and number of
shares voted are as follows:
1. To elect the Bankers Trust Funds Board of Trustees.
Shares Shares Voted
Voted Withheld
For Authority
-------- ---------
Messr Biggar 1,054,103 12,786
Messr Dill 1,054,103 12,786
Messr Hale 1,054,103 12,786
Messr Langton 1,054,103 12,786
Messr Saunders 1,054,103 12,786
Messr Van Benschoten 1,054,103 12,786
Dr. Gruber 1,054,103 12,786
Dr. Herring 1,054,103 12,786
2. To approve the New Investment Advisory Agreement with Bankers Trust Company.
For Against Abstain
--------- ------- -------
1,053,685 12,786 418
3. To approve the New Investment Advisory Agreement with Morgan Grenfell, Inc.
For Against Abstain
--------- ------- -------
1,053,685 12,786 418
4. To approve the New Investment Sub-advisory Agreement with Bankers Trust
Company.
For Against Abstain
--------- ------- -------
1,053,685 12,786 418
5. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants of the Fund and its corresponding Portfolio.
For Against Abstain
--------- ------- -------
1,066,889 -- --
15
<PAGE>
[Graphic Omitted]Bankers Trust
Architects of Value
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or
write to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Intermediate Tax Free Fund CUSIP #055922801
BT Investment Funds 467ANN (9/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
