[Deutsche Asset Management logo omitted]
Mutual Fund
Annual Report
September 30, 2000
Investment Class
Small Cap
Formerly BT Investment Small Cap Fund
A Member of the Deutsche Bank Group
[graphic omitted]
<PAGE>
Small Cap -- Investment Class
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TABLE OF CONTENTS
LETTER TO SHAREHOLDERS .................................. 3
SMALL CAP -- INVESTMENT CLASS
Statement of Assets and Liabilities .................. 7
Statement of Operations .............................. 8
Statements of Changes in Net Assets .................. 9
Financial Highlights ................................. 10
Notes to Financial Statements ........................ 11
Report of Independent Accountants .................... 13
Tax Information ...................................... 13
SMALL CAP PORTFOLIO
Schedule of Portfolio Investments .................... 14
Statement of Assets and Liabilities .................. 16
Statement of Operations .............................. 17
Statements of Changes in Net Assets .................. 18
Financial Highlights ................................. 19
Notes to Financial Statements ........................ 20
Report of Independent Accountants .................... 22
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The Fund is not insured by the FDIC and is not a deposit,
obligation of or guaranteed by Deutsche Bank. The Fund is
subject to investment risks, including possible loss of
principal amount invested.
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2
<PAGE>
Small Cap -- Investment Class
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LETTER TO SHAREHOLDERS
We are pleased to present you with this annual report for Small Cap --
Investment Class (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
SMALL CAPITALIZATION GROWTH STOCKS OUTPERFORMED THEIR LARGE CAP BRETHREN DURING
THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000. The Russell 2000 Growth Index
returned 29.66% and the Russell 2000 Index returned 23.39% for the annual period
as compared to the S&P 500 Index return of 13.28%. Throughout the annual period,
small cap growth companies exhibited strong earnings growth and attractive
relative valuations. Still, a theme of "volatility and reversal" dominated the
small cap equity market, as well as the broader equity markets.
OVERALL, THE FOURTH CALENDAR QUARTER OF 1999 EXPERIENCED SIGNIFICANT STRENGTH IN
THE EQUITY MARKETS, AS THE US ECONOMY REMAINED ROBUST WITH FEW SIGNS OF
INFLATION. There continued to be tight labor markets, but productivity stayed
strong. Economic momentum also continued to build around the world. However, the
equity market strength was relatively narrow and confined primarily to the
technology and telecommunications sectors across all capitalizations.
JANUARY 2000 BEGAN WITH WEAKNESS IN THE BROADER MARKETS, AS INVESTORS LOOKED
TOWARD A NUMBER OF POSSIBLE FEDERAL RESERVE BOARD INTEREST RATE INCREASES IN THE
FIRST HALF OF THE YEAR 2000 FOLLOWING A ROBUST FOURTH QUARTER AND HOLIDAY
SELLING SEASON. Following this short-lived early weakness, the small cap market
resumed its strength, narrowly confined to technology, telecommunications and
select biotechnology issues where revenue and earnings growth was expected to
continue despite rising interest rates. In February, there was a sell off of
such "Old Economy" sectors as manufacturing and other cyclical industries,
however the "New Economy" sectors -- technology, telecommunications and
biotechnology -- continued to do well, boosting the Russell 2000 Index overall.
The small cap market pulled back in March, ending the month down 6.6%, as the
mid and large cap markets reasserted themselves.
THE FIRST HALF OF THE SECOND CALENDAR QUARTER CONTINUED THE DOWNSLIDE OF THE
SMALL CAP INDEX THAT BEGAN MID-MARCH. The divergent sentiment toward "Old
Economy" vs. "New Economy" sectors continued. In addition, the near-certain
prospect of higher interest rates and the subsequent gradual slowdown in
economic growth, combined with a modest pickup in inflation, negatively affected
the broad US equity markets. For several reasons, the small cap market performed
well during the second half of the second quarter. Inflation fears subsided
somewhat. Optimism arose that the Federal Reserve Board could engineer a "soft
landing" for the US economy after a number of interest rate increases. And
finally, earnings growth estimates remained strong. The health care and energy
sectors led performance for the quarter, but negative returns in technology and
several other sectors pushed the Russell 2000 Index into negative territory for
the three-month period.
THE THIRD QUARTER OF 2000 PROVED TO BE DIFFICULT FOR STOCKS ACROSS ALL MARKET
CAPITALIZATIONS. Concerns about rising energy prices, a weak euro, a slowing US
economy and how these factors would affect company revenues and earnings caused
stocks to yo-yo. In the small cap market, the quarter began with a very brief
upswing in July, as inflationary fears subsided and the Federal Reserve Board
opted not to increase interest rates. However,
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TEN LARGEST STOCK HOLDINGS
(percentages are based on market value of total investments in the Portfolio)
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Province Healthcare Co. ....................... 4.21%
Documentum, Inc. .............................. 3.72
Infocus Corp. ................................. 3.50
Tech Data Corp. ............................... 3.29
Trigon Healthcare, Inc. ....................... 2.75
Avocent Corp. ................................. 2.65
Caremark Rx, Inc. ............................. 2.62
Resmed, Inc. .................................. 2.34
BJ Services Co. ............................... 2.17
ICN Pharmaceuticals, Inc. ..................... 2.16
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3
<PAGE>
Small Cap -- Investment Class
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
upward momentum reversed mid-July, as profit warnings started an overall
technology decline that carried over to the rest of the US equity markets.
August saw a turnaround, as the small cap market trended upward with less
intra-day volatility. Primarily driven by data showing the US economy coming
into better balance, with demand moderating and productivity rising, the Federal
Reserve Board once again refrained from raising interest rates. September
brought concerns about rising oil prices and revenue and earnings weakness. The
small cap market trended downward for the month with higher intra-day
volatility. Although negative returns from technology and producer durables
detracted, positive returns from health care, financial services and energy
contributed to the small cap market's outperformance of large caps for the
quarter.
INVESTMENT REVIEW
The Fund significantly outperformed its benchmarks for the twelve-month period,
particularly well worth noting given the extremely high volatility in the small
cap equity market during this annual period. Specific stock selection and sector
positioning bolstered Fund performance.
For example, among the Fund's best performers during the annual period were
Labranche & Co., Enzon Inc., Smith International Inc., Caremark Rx, Inc.,
Atlantic Coast Airlines, Trigon Healthcare Inc., and BJ Services Co. Given the
narrowness of small cap market outperformance overall, our management team's
stock-picking skills were critical to the Fund's success. So, too, was our
extensive research into sectors.
In the fourth quarter of 1999, the Fund was overweighted in two of the best
performing sectors, technology and health care. The energy sector was a top
performer in the first quarter of 2000, and the Fund's overweight position there
boosted Portfolio returns. Technology and health care continued to be winning
sectors during these months, and the Fund remained overweighted there as well.
While we remained overweighted in technology during the second half of the
fiscal year when this sector underperformed, we reduced the Fund's technology
holdings somewhat. We also increased the Fund's positions in the two best
performing sectors during these second six months, the energy and health care
sectors. Also having a positive impact on relative performance were
underweighted positions in the underperforming financials sector during the
first half of the year and in the producer durables and transportation sectors
during the second half.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURNS TOTAL RETURNS
Periods ended Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
September 30, 2000 year years years inception year years years inception
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap1
(inception 10/21/93) 41.59% 48.58% 121.43% 309.64% 41.59% 14.11% 17.23% 22.52%
---------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index2 23.39% 18.98% 79.28% 121.33%4 23.39% 5.96% 12.38% 12.17%4
---------------------------------------------------------------------------------------------------------------------------
Russell 2000
Growth Index2 29.66% 29.26% 79.55% 125.64%4 29.66% 8.93% 12.42% 12.49%4
---------------------------------------------------------------------------------------------------------------------------
Lipper Mid Cap
Growth Average3 63.86% 110.59% 183.90% 262.08%4 63.86% 26.97% 22.41% 19.82%4
---------------------------------------------------------------------------------------------------------------------------
<FN>
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1 PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. MARKET VOLATILITY CAN
SIGNIFICANTLY IMPACT SHORT TERM PERFORMANCE. RESULTS OF AN INVESTMENT MADE
TODAY MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL PERFORMANCE.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
These figures assume the reinvestment of dividend and capital gain
distributions. Performance would have been lower during the specified periods
if certain fees and expenses had not been waived by the Fund.
2 The Russell 2000 Index is an unmanaged capitalization weighted index that is
comprised of 2000 of the smallest stocks in the Russell 3000 Index. The
Russell 2000 Growth Index is comprised of securities in the Russell 2000
Index with a greater than average growth orientation. Index returns do not
reflect expenses, which have been deducted from the Fund's return.
3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Inc. as falling into the category
indicated. These figures do not reflect sales charges.
4 Benchmark returns are for the period beginning October 31, 1993.
</FN>
</TABLE>
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4
<PAGE>
Small Cap -- Investment Class
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LETTER TO SHAREHOLDERS
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PORTFOLIO DIVERSIFICATION
By Sector as of September 30, 2000
(percentages are based on market value of total investments in the Portfolio)
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Healthcare ................................... 26.90%
Technology ................................... 26.10
Credit Sensitive ............................. 14.10
Energy ....................................... 10.10
Consumer ..................................... 7.90
Transportation ............................... 4.00
Service Companies ............................ 2.80
Capital Goods ................................ 2.40
Process Industries ........................... 1.60
Cash Equivalents ............................. 4.10
MANAGER OUTLOOK
Our long-term outlook for the equity markets in general is favorable. Moderating
economic growth, contained inflationary pressures, high labor productivity, and
strong small cap profit estimates all contribute to our overall favorable
outlook for the small cap equity market in particular.
The small cap universe, representing well over 90% of all publicly traded
domestic companies, continues to provide an excellent source for corporate
America and others to recognize value in those companies with solid fundamentals
early in their growth cycle. We believe ongoing restructuring and consolidation
and increased merger and acquisition activity will continue to create
opportunities for small cap investors.
Still, there are several risks to the equity markets in general, including the
small cap market, over the rest of the year. These include:
o valuation risk, especially in NASDAQ stocks. The NASDAQ Composite has been
volatile, with seasonal tax loss selling adding to the market's volatility;
o uncertainty over oil prices, which may impact the US equity markets, and
higher overall energy costs, which may result in a deceleration of global
growth and may impact earnings of companies with foreign exposure; and
o the SEC's new Regulation Full Disclosure (Reg FD), which could mean lower
overall market multiples as a result of less predictability of company
earnings.
Earnings disappointments and valuations continue to present the primary
investment risk. However, we expect superior earnings growth to be the key
driver of smaller companies' potential outperformance ahead.
Given the recent high volatility in the stock market, it is important to keep in
mind that we remain disciplined in our process, and we continue to:
o focus on companies that we believe offer compelling valuations relative to
their growth rates
o focus on companies that historically have had strong, consistent earnings and
revenue growth o use extensive fundamental research to seek attractive
investment opportunities in unrecognized growth companies and sectors
o strictly adhere to our sell discipline seeking to help mitigate risk, and
o seek to use the volatility of the marketplace to our investors' advantage by
initiating or adding to positions on weakness.
It is important to remember that investors should take a long-term view when
investing in this segment of the market, as returns can be volatile in the short
term.
We will continue to monitor economic conditions and their effect on financial
markets as we seek long-term capital growth.
/S/SIGNATURES Doris R.Klug, Audrey M.T. Jones, and John P. Callaghan
Doris R. Klug, Audrey M.T. Jones, and John P. Callaghan
Portfolio Managers of the
SMALL CAP PORTFOLIO
September 30, 2000
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5
<PAGE>
Small Cap -- Investment Class
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PERFORMANCE COMPARISON
SMALL CAP -- INVESTMENT CLASS AND THE RUSSELL 2000 INDEX
GROWTH OF A $10,000 INVESTMENT (SINCE OCTOBER 21, 1993)1
[line graph omitted]
plot points as follows:
10/93 10130 10000
3/94 10510 9736
9/94 11600 10004
3/95 14290 10273
9/95 18500 12347
3/96 21323 13259
9/96 23385 13971
3/97 17744 13938
9/97 27571 18608
3/98 26987 19792
9/98 19745 15066
3/99 26616 16573
9/99 28931 17940
3/00 43639 22752
9/00 40964 22133
Average Annual Total Return for the Periods Ended September 30, 2000
One Year 41.59% Five Year 17.23% Since 10/21/931 22.52%
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1 The Fund's inception date.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE FUND'S RECENT
PERFORMANCE WAS ACHIEVED DURING FAVORABLE MARKET CONDITIONS THAT MAY NOT BE
SUSTAINED. Investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. These figures
assume the reinvestment of dividend and capital gain distributions. Performance
would have been lower during the specified period if certain fees and expenses
had not been waived by theFund. TheRussell 2000 Index is an unmanaged
capitalization weighted index that is comprised of 2000 of the smallest stocks
in the Russell 3000 Index.
Benchmark return is for the period beginning October 31, 1993.
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6
<PAGE>
Small Cap -- Investment Class
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STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
ASSETS
Investment in Small Cap Portfolio, at Value .................. $301,988,295
Receivable for Shares of Beneficial Interest Subscribed ...... 358,491
Prepaid Expenses and Other ................................... 16,891
------------
Total Assets .................................................... 302,363,677
------------
LIABILITIES
Payable for Shares of Beneficial Interest Redeemed ........... 9,721,907
Due to Bankers Trust ......................................... 143,104
Accrued Expenses and Other ................................... 28,931
------------
Total Liabilities ............................................... 9,893,942
------------
NET ASSETS ...................................................... $292,469,735
============
COMPOSITION OF NET ASSETS
Paid-in Capital .............................................. $217,527,783
Accumulated Net Realized Gain from Investment Transactions ... 16,732,219
Net Unrealized Appreciation on Investments ................... 58,209,733
------------
NET ASSETS ...................................................... $292,469,735
============
SHARES OUTSTANDING ($0.001 par value per share, unlimited number
of shares of beneficial interest authorized) ................. 10,852,469
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) ................... $ 26.95
============
See Notes to Financial Statements.
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7
<PAGE>
Small Cap -- Investment Class
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STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE YEAR ENDED
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income Allocated from Small Cap Portfolio, Net ............... $ 134,476
-----------
EXPENSES
Administration and Services Fees ............................. 1,774,770
Registration Fees ............................................ 47,471
Professional Fees ............................................ 23,769
Printing and Shareholder Reports ............................. 7,800
Trustees Fees ................................................ 3,871
Miscellaneous ................................................ 1,119
-----------
Total Expenses .................................................. 1,858,800
Less: Fee Waivers or Expense Reimbursements ..................... (84,030)
-----------
Net Expenses .................................................... 1,774,770
-----------
EXPENSES IN EXCESS OF INCOME .................................... (1,640,294)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain from Investment Transactions ............... 70,508,721
Net Change in Unrealized Appreciation/Depreciation
on Investments ............................................. 19,244,310
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................. 89,753,031
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $88,112,737
===========
See Notes to Financial Statements.
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8
<PAGE>
Small Cap -- Investment Class
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Expenses in Excess of Income ........................................ $ (1,640,294) $ (1,521,097)
Net Realized Gain from Investment Transactions ...................... 70,508,721 49,022,740
Net Change in Unrealized Appreciation/Depreciation
on Investments .................................................... 19,244,310 30,229,250
------------- -------------
Net Increase in Net Assets from Operations ............................. 88,112,737 77,730,893
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions ...................... (32,546,199) (593,090)
------------- -------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Sales of Shares ....................................... 622,544,178 162,501,561
Dividend Reinvestments .............................................. 22,159,906 422,175
Cost of Shares Redeemed ............................................. (624,073,187) (196,099,298)
------------- -------------
Net Increase (Decrease) from Capital Transactions in
Shares of Beneficial Interest ....................................... 20,630,897 (33,175,562)
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................... 76,197,435 43,962,241
NET ASSETS
Beginning of Year ................................................... 216,272,300 172,310,059
------------- -------------
End of Year ......................................................... $ 292,469,735 $ 216,272,300
============= =============
</TABLE>
See Notes to Financial Statements.
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9
<PAGE>
Small Cap -- Investment Class
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ................ $ 21.89 $ 14.96 $ 23.68 $ 21.66 $ 18.50
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Expenses in Excess of Income ................... (0.15) (0.15) (0.18) (0.14) (0.12)
Net Realized and Unrealized Gain (Loss)
on Investments .............................. 8.53 7.13 (6.24) 3.58 4.65
-------- -------- -------- -------- --------
Total from Investment Operations .................. 8.38 6.98 (6.42) 3.44 4.53
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment
Transactions ................................. (3.32) (0.05) (1.04) (1.42) (1.37)
In Excess of Net Realized Gains ................ -- -- (1.26) -- --
-------- -------- -------- -------- --------
Total Distributions ............................... (3.32) (0.05) (2.30) (1.42) (1.37)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ...................... $ 26.95 $ 21.89 $ 14.96 $ 23.68 $ 21.66
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN ........................... 41.59% 46.52% (28.38)% 17.90% 26.41%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted) ......... $292,470 $216,272 $172,310 $286,322 $242,236
Ratios to Average Net Assets:
Expenses in Excess of Income ................... (0.60)% (0.74)% (0.87)% (0.89)% (0.70)%
Expenses After Waivers,
Including Expenses of the
Small Cap Portfolio ....................... 1.25% 1.25% 1.25% 1.25% 1.25%
Expenses Before Waivers,
Including Expenses of the
Small Cap Portfolio ....................... 1.44% 1.46% 1.44% 1.28% 1.47%
</TABLE>
See Notes to Financial Statements.
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10
<PAGE>
Small Cap -- Investment Class
--------------------------------------------------------------------------------
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. Small Cap -- Investment Class (the "Fund") is
one of the funds offered to investors by the Trust. The Fund began operations
and offering shares of beneficial interest on October 21, 1993.
The Fund seeks to achieve its investment objective by investing substantially
all of its assets in the Small Cap Portfolio, a series of BT Investment
Portfolios (the "Portfolio"). The Portfolio is an open-end management investment
company registered under the Act. The value of the investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio.
At September 30, 2000, the Fund's investment was approximately 100% of the
Portfolio.
The financial statements of the Portfolio, including a list of assets held, are
contained elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
B. VALUATION OF SECURITIES
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements, which are included elsewhere in this
report.
C. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the securities transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
D. DISTRIBUTIONS
It is the Fund's policy to declare and distribute dividends quarterly to
shareholders from net investment income. Dividends and distributions payable to
shareholders are recorded by the Fund on the ex-dividend date. Distributions of
net realized short-term and long-term capital gains, if any, earned by the Fund
are made annually to the extent they exceed capital loss carryforwards.
E. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
The Fund may periodically make reclassifications among certain of its capital
accounts as a result of differences in the characterization and allocation of
certain income and capital gains distributions determined annually in accordance
with federal tax regulations which may differ from accounting principles
generally accepted in the United States.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, they are charged or credited to
paid-in-capital or accumulated net realized gain, as appropriate, in the period
that the differences arise. Accordingly, permanent differences as of September
30, 2000 have been primarily attributable to certain net operating losses and
the utilization of earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income tax
purposes, have been reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
FUND INCOME (LOSS) GAINS (LOSSES) CAPITAL
-------------- ---------------- -------------- ------------
Small Cap --
Investment Class $1,640,294 $(53,212,429) $51,572,135
F. OTHER
The Trust accounts separately for the assets, liabilities, and operations of
each of its funds. Expenses directly attributable to a fund are charged to that
fund, while expenses that are attributable to the Trust are allocated among the
funds in the Trust.
G. ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
--------------------------------------------------------------------------------
11
<PAGE>
Small Cap -- Investment Class
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"), an indirect wholly owned subsidiary of Deutsche
Bank AG. Under this agreement, Bankers Trust provides administrative, custody
and shareholder services to the Fund. The Trust has entered into an agreement
with Investment Company Capital Corp., an indirect wholly owned subsidiary of
Deutsche Bank AG, to provide transfer agency services to the Trust. These
services are provided in return for a fee computed daily and paid monthly at an
annual rate of .65% of the Fund's average daily net assets.
Bankers Trust has contractually agreed to waive its fees and reimburse expenses
of the Fund through January 31, 2001, to the extent necessary to limit all
expenses to .65% of the average daily net assets of the Fund, excluding expenses
of the Portfolio, and 1.25% of the average daily net assets of the Fund,
including expenses of the Portfolio.
ICC Distributors, Inc. provides distribution services to the Fund.
NOTE 3 -- SHARES OF BENEFICIAL INTEREST
At September 30, 2000 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, 2000 SEPTEMBER 30, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
Sold 24,179,824 $ 622,544,178 8,607,904 $ 162,501,561
Reinvested 994,610 22,159,906 24,817 422,175
Redeemed (24,203,140) (624,073,187) (10,266,076) (196,099,298)
----------- ------------- ----------- -------------
Net Increase
(Decrease) 971,294 $ 20,630,897 (1,633,355) $ (33,175,562)
=========== ============= =========== =============
NOTE 4 -- FUND NAME CHANGE
On January 31, 2000, the Fund changed its name from BT Investment Small Cap Fund
to Small Cap -- InvestmentClass.
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12
<PAGE>
Small Cap -- Investment Class
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of BT Investment Funds and Shareholders of Small Cap --
Investment Class:
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 Small Cap -- Investment Class (one of the funds comprising the BT Investment
Funds, hereafter referred to as the "Fund") at September 30, 2000, 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 accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 2000 by correspondence with the transfer agent, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 8, 2000
--------------------------------------------------------------------------------
TAX INFORMATION (Unaudited For the Year Ended September 30, 2000)
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund hereby designates the following earned amount as 20% rate capital gain
dividends for the fiscal year ended September 30, 2000, $24,660,532. The Fund's
distributions to shareholders included $2.36 per share from long term capital
gains, all of which is taxable at the 20% capital gains rate.
Of the ordinary income distributions made during the fiscal year ending
September 30, 2000, 5.44% qualifies for the dividends received deduction
available to corporate shareholders.
--------------------------------------------------------------------------------
13
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
INVESTMENTS IN UNAFFILIATED ISSUERS
COMMON STOCKS -- 92.7%
CAPITAL GOODS -- 2.3%
44,200 C&D Technologies, Inc. ............ $ 2,508,350
26,200 Dal-Tile International, Inc.1 ..... 327,500
55,000 Oshkosh Truck Corp.-- Class B ..... 2,131,250
35,000 Park Electrochemical Corp. ........ 1,946,875
-----------
6,913,975
-----------
CONSUMER -- 7.6%
80,700 Bally Total Fitness Holding Corp.1 2,017,500
46,700 BJ's Wholesale Club, Inc.1 ........ 1,593,637
70,400 Chico's FAS, Inc.1 ................ 2,393,600
89,900 Furniture Brands International, Inc.1 1,494,587
54,800 Gildan Activewear-- Class A1 ...... 1,828,950
65,400 Men's Wearhouse, Inc.1 ............ 1,851,637
108,400 Mohawk Industries, Inc.1 .......... 2,364,475
46,100 Performance Food Group Co.1 ....... 1,734,512
46,200 Salton, Inc.1 ..................... 1,492,838
35,700 Timberland Co.-- Class A1 ......... 1,463,700
41,400 Too, Inc.1 ........................ 983,250
66,200 Trex Co., Inc.1 ................... 2,006,687
42,400 WMS Industries, Inc.1 ............. 954,000
26,700 Zale Corp.1 ....................... 866,081
-----------
23,045,454
-----------
CREDIT SENSITIVE-- 13.6%
94,900 Annuity and Life Re ............... 2,289,463
69,200 Astoria Financial Corp. ........... 2,672,850
106,400 Banks United Corp.-- Class A ...... 5,393,150
20,900 BISYS Group, Inc.1 ................ 1,615,831
63,900 Bottomline Technologies, Inc.1 .... 2,384,269
98,318 D.R. Horton, Inc. ................. 1,689,841
100,800 Golden State Bancorp, Inc. ........ 2,381,400
116,000 Hibernia Corp. -- Class A ......... 1,421,000
130,200 Labranche & Co.1 .................. 4,345,425
80,366 Legg Mason, Inc. .................. 4,671,274
129,100 Lennar Corp. ...................... 3,832,656
84,900 LNR Property Corp. ................ 1,878,412
175,400 Philadelphia Suburban Co. ......... 4,067,088
273,700 Sovereign Bancorp, Inc. ........... 2,531,725
-----------
41,174,384
-----------
ENERGY -- 9.8%
103,800 BJ Services Co.1 .................. 6,344,775
65,900 Devon Energy Corp. ................ 3,963,885
362,400 Global Industries, Ltd.1 .......... 4,530,000
183,100 Marine Drilling Co., Inc.1 ........ 5,229,794
116,400 National-Oilwell, Inc.1 ........... 3,637,500
35,200 Smith International, Inc.1 ........ 2,871,000
103,700 Veritas DGC, Inc.1 ................ 3,000,819
-----------
29,577,773
-----------
HEALTH CARE -- 26.0%
90,800 Accredo Health, Inc.1 ............. 4,437,850
53,700 Alpharma, Inc. .................... 3,282,413
24,300 Aurora Bioscience1 ................ 1,652,400
104,000 Bindley Western Industries, Inc. .. 3,328,000
678,400 Caremark Rx, Inc.1 ................ 7,632,000
169,700 Cell Genesys, Inc.1 ............... 5,091,000
161,500 Coventry Health Care, Inc.1 ....... 2,442,688
60,000 Discovery Partners International.1 1,218,750
5,400 Eden Bioscience Corp.1 ............ 178,200
69,700 Enzon, Inc.1 ...................... 4,600,200
189,400 ICN Pharmaceuticals, Inc. ......... 6,297,550
77,700 Priority Healthcare Corp.-- Class B1 5,924,625
307,650 Province Healthcare Co.1 .......... 12,286,772
218,600 Resmed, Inc.1 ..................... 6,831,250
35,100 Sonosight, Inc.1 .................. 655,931
152,900 Trigon Healthcare, Inc.1 .......... 8,036,806
319,500 Xoma Ltd.1 ........................ 4,612,781
-----------
78,509,216
-----------
PROCESS INDUSTRIES-- 1.6%
56,500 Bowater, Inc. ..................... 2,623,719
56,500 Rayonier, Inc. .................... 2,030,469
-----------
4,654,188
-----------
SERVICE COMPANIES -- 2.7%
88,600 Alamosa PCS Holdings, Inc.1 ....... 1,434,212
48,500 GT Group Telecom1 ................. 639,594
213,600 Pac-West Telecomm, Inc.1 .......... 1,949,100
63,600 SBA Communications Corp.1 ......... 2,667,225
150,000 US Unwired-- Class A1 ............. 1,429,687
-----------
8,119,818
-----------
TECHNOLOGY -- 25.2%
67,400 Adtran, Inc.1 ..................... 2,867,659
77,500 ATMI, Inc.1 ....................... 1,811,562
140,000 Avocent Corp.1 .................... 7,717,500
46,800 Caliper Technologies1 ............. 2,711,475
139,100 Computer Network Technology Corp.1 4,781,563
53,300 Credence Systems Corp.1 ........... 1,599,000
187,050 Dendrite International1 ........... 5,015,278
133,600 Documentum, Inc.1 ................. 10,846,650
192,500 Infocus Corp.1 .................... 10,202,500
81,700 Intranet Solutions, Inc.1 ......... 4,085,000
136,800 Looksmart Ltd.1 ................... 1,530,450
153,500 Mentor Graphics Corp.1 ............ 3,616,844
51,500 PC-Tel, Inc.1 ..................... 1,197,375
40,300 Photon Dynamics, Inc.1 ............ 1,521,325
53,400 Symyx Technologies1 ............... 2,316,225
224,600 Tech Data Corp.1 .................. 9,601,650
27,300 TTM Technologies1 ................. 641,550
73,500 WJ Communications Inc.1 ........... 2,719,500
27,900 Zoran Corp.1 ...................... 1,360,125
-----------
76,143,231
-----------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
TRANSPORTATION -- 3.9%
121,200 Atlantic Coast Airlines, Inc.1 .... $ 3,901,125
83,300 Tidewater, Inc. ................... 3,790,150
177,800 US Freightways Corp. .............. 4,033,838
-----------
11,725,113
-----------
TOTAL COMMON STOCKS
(Cost $223,421,873) ...................... 279,863,152
-----------
TOTAL INVESTMENTS IN UNAFFILIATED ISSUERS
(Cost $223,421,873) ...................... 279,863,152
-----------
INVESTMENT IN AFFILIATED
INVESTMENT COMPANIES
SHORT-TERM INSTRUMENT -- 3.9%
11,891,566 Cash Management Institutional ... $ 11,891,566
-----------
TOTAL INVESTMENTS
(Cost $235,313,439) ............... 96.6% $291,754,718
OTHER ASSETS IN EXCESS OF LIABILITIES 3.4 10,233,614
----- ------------
NET ASSETS ...........................100.0% $301,988,332
===== ============
--------------------------------------------------------------------------------
1 Non-income producing security
See Notes to Financial Statements.
--------------------------------------------------------------------------------
15
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 2000
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in Unaffiliated Issuers, at Value (Cost of $223,421,873) .................. $279,863,152
Investments in Affiliated InvestmentCompanies, at Value (Cost of $11,891,566) ......... 11,891,566
Cash .................................................................................. 4,032
Dividends Receivable1 ................................................................. 28,048
Receivable for Securities Sold ........................................................ 4,773,659
Receivable for Shares of Beneficial Interest Subscribed ............................... 6,615,722
------------
Total Assets ............................................................................. 303,239,894
------------
LIABILITIES
Payable for Securities Purchased ...................................................... 1,086,609
Due to Bankers Trust .................................................................. 140,929
Accrued Expenses and Other 24,024
------------
Total Liabilities ........................................................................ 1,251,562
------------
NET ASSETS ............................................................................... $301,988,332
------------
COMPOSITION OF NET ASSETS
Paid-in Capital ....................................................................... $245,547,053
Net Unrealized Appreciation on Investments ............................................ 56,441,279
------------
Net Assets ............................................................................... $301,988,332
============
<FN>
--------------------------------------------------------------------------------
1 Includes $63,715 from the Portfolio's investment in Affiliated Investment
Companies.
</FN>
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE YEAR ENDED
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends .................................................... $ 1,764,216
-----------
Total Investment Income ......................................... 1,764,216
-----------
EXPENSES
Advisory Fees ................................................ 1,774,366
Administration and Services Fees ............................. 272,979
Professional Fees ............................................ 29,693
Trustees Fees ................................................ 3,734
Miscellaneous ................................................ 4,012
-----------
Total Expenses .................................................. 2,084,784
Less: Fee Waivers or Expense Reimbursements ..................... (455,044)
-----------
Net Expenses .................................................... 1,629,740
-----------
NET INVESTMENT INCOME ........................................... 134,476
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain from Investment Transactions ............... 70,508,730
Net Change in Unrealized Appreciation/Depreciation on Investments 19,244,312
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................. 89,753,042
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $89,887,518
===========
See Notes to Financial Statements.
--------------------------------------------------------------------------------
17
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment (Expenses in Excess of) Income ....................... $ 134,476 $ (188,887)
Net Realized Gain from Investment Transactions ...................... 70,508,730 49,022,746
Net Change in Unrealized Appreciation/Depreciation
on Investments .................................................... 19,244,312 30,229,254
------------- -------------
Net Increase in Net Assets from Operations ............................. 89,887,518 79,063,113
------------- -------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested ...................................... 645,704,347 160,986,273
Value of Capital Withdrawn .......................................... (648,908,543) (198,015,755)
------------- -------------
Net Decrease in Net Assets from Capital Transactions ................... (3,204,196) (37,029,482)
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................... 86,683,322 42,033,631
NET ASSETS
Beginning of Year ................................................... 215,305,010 173,271,379
------------- -------------
End of Year ......................................................... $ 301,988,332 $ 215,305,010
============= =============
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year
(000s omitted) ............................. $301,988 $215,305 $173,271 $285,878 $245,615
Ratios to Average Net Assets:
Net Investment (Expenses in
Excess of) Income ....................... 0.05% (0.09)% (0.22)% (0.24)% (0.05)%
Expenses After Waivers ..................... 0.60% 0.60% 0.60% 0.60% 0.60%
Expenses Before Waivers .................... 0.76% 0.75% 0.77% 0.77% 0.77%
Portfolio Turnover Rate ...................... 136% 159% 182% 188% 159%
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
19
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Investment Portfolios (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 August 6, 1993 as an
unincorporated Trust under the laws of New York and began operations on October
21, 1993. Small Cap Portfolio is a series of that Trust. The Declaration of
Trust permits the Board of Trustees (the "Trustees") to issue beneficial
interests in the Portfolio.
B. VALUATION OF SECURITIES
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on their closing price.
Short-term debt securities are valued at market value until such time as they
reach a remaining maturity of 60 days, whereupon they are valued at amortized
cost using their value on the 61st day. All other securities and other assets
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and accretion of discount on
investments. Expenses are recorded as incurred. Realized gains and losses from
securities transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the securities transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio at the time of such determination.
D. FEDERAL INCOME TAXES
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
E. ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
Actual results could differ from those estimates.
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"), an indirect wholly owned subsidiary of
Deutsche Bank AG. Under this agreement, Bankers Trust provides administrative
and custody services to the Portfolio. These services are provided in return for
a fee computed daily and paid monthly at an annual rate of .10% of the
Portfolio's average daily net assets.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this agreement, the Portfolio pays Bankers Trust a fee computed daily and paid
monthly at an annual rate of .65% of the Portfolio's average daily net assets.
Bankers Trust has contractually agreed to waive its fees and reimburse expenses
of the Portfolio through January 31, 2001, to the extent necessary to limit all
expenses to .60% of the average daily net assets of the Portfolio.
The Portfolio may invest in Cash Management Institutional ("Cash Management"),
an affiliated open-end management investment company managed by Bankers Trust.
Cash Management is offered as a cash management option to the Portfolio and
other accounts managed by Bankers Trust. Distributions from Cash Management to
the Portfolio for the year ended September 30, 2000 amounted to $1,236,365 and
are included in dividend income.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility in the amount of $200,000,000, which expires April 27, 2001. A
commitment fee on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned among all participants based on net
assets. No amounts were drawn down or outstanding for this fund under the credit
facility for the year ended September 30, 2000.
--------------------------------------------------------------------------------
20
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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, 2000 were
$344,619,682 and $338,893,588 , respectively.
For federal income tax purposes, the tax basis of investments held at September
30, 2000 was $235,572,270. The aggregate gross unrealized appreciation for all
investments was $71,899,698 and the aggregate gross unrealized depreciation for
all investments was $15,717,250.
--------------------------------------------------------------------------------
21
<PAGE>
Small Cap Portfolio
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Holders of Beneficial Interest of
Small Cap Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of portfolio 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 Small Cap Portfolio (hereafter
referred to as the "Portfolio") at September 30, 2000, 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 accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 8, 2000
--------------------------------------------------------------------------------
22
<PAGE>
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:
DEUTSCHE ASSET MANAGEMENT SERVICE CENTER
P.O. BOX 219210
KANSAS CITY, MO 64121-9210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc. and Deutsche Asset
Management Investment Services Limited.
Small Cap -- Investment Class CUSIP #055922769
1698ANN (9/00)
Distributed by:
ICC Distributors, Inc.
