As filed with the Commission on March 29, 2001
1933 Act File No. 333-96031
1940 Act File No. 811-4760

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. 2
Post-Effective Amendment No.

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

One South Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices)

(410) 895-3433
(Registrant's Telephone Number)

Daniel O. Hirsch, Esq. Copies to: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, Maryland 21202 787 Seventh Ave
(Name and Address of Agent New York, New York 10019
for Service)

Title of Securities Being Registered:
Shares of beneficial interest, par value $.001 per share

No filing fee is due because an indefinite number of shares were previously
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. This
Registration Statement relates to shares previously registered on Form N-1A
(File Nos. 33-07404, 811-4760).

Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.

It is proposed that this filing will become effective on April 27, 2001.

April 30, 2001

Smaller Companies Fund

Dear Shareholder,

I am writing to let you know that a meeting will be held May 24, 2001 for
shareholders to vote on an important proposal for each class of shares of
Smaller Companies Fund (`Smaller Companies'). As a shareholder in Smaller
Companies, you have the opportunity to voice your opinion on this matter.

The Proposal

We are asking shareholders of Smaller Companies to approve an agreement and
plan of reorganization between Smaller Companies and Small Cap Fund (`Small
Cap') to allow Smaller Companies to transfer all of its assets and liabilities
to Small Cap in exchange for shares of Small Cap.

Smaller Companies and Small Cap both have substantially similar investment
strategies. The same portfolio management team is currently managing both Funds
and the same sales force is now marketing both Funds. While it is not
advantageous to operate and market Smaller Companies separately from Small Cap
the reorganized fund may benefit from greater diversification and economies of
scale.

What this means for your investment
. You will receive shares of Small Cap in proportion to the value of your
shares in Smaller Companies.
. The transaction will be tax-free for shareholders and for both funds.
. Both funds have similar investment objectives and investment styles.
. Both funds employee the same portfolio management team.

It is important for you to vote

This package contains information about the proposal, along with a proxy
card for you to vote by mail, unless you are voting by telephone or through the
Internet. Please take a moment to read the enclosed materials and cast your vote
using the proxy card. Your prompt vote will help save money. If a majority of
shareholders have not voted prior to the meeting, we must try to obtain more
votes with additional mailings or phone solicitations. Both of these are costly
processes.

How to vote

Cast your vote by completing and signing the enclosed proxy card. Please
mail your completed and signed proxy as soon as possible, using the postage-paid
envelope provided. You may also vote by calling the toll-free telephone number
1-800-690-6903 or by logging on to the Internet at www.proxy.com.

Smaller Companies's Board of Trustees, whose primary role is to protect
your interests as a shareholder, has reviewed the proposal. In the Trustees'
opinion, the proposal is fair and reasonable. THE TRUSTEES RECOMMEND THAT YOU
VOTE FOR THE PROPOSAL.

PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES
YOU OWN.

Any questions?
Please call 1-800-730-1313 if you have any questions about the proposal or
voting procedures.

Sincerely,

/s/ Daniel O. Hirsch
Daniel O. Hirsch
Secretary

Smaller Companies Fund
(formerly Morgan Grenfell Smaller Companies Fund)
(a series of Morgan Grenfell Investment Trust)
One South Street
Baltimore, Maryland 21202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR MAY 24, 2001

This is the formal agenda for a Special Meeting (the `Meeting'), and any
adjournments thereof, of shareholders of your mutual fund. It tells you what
matters will be voted on and, in case you want to attend this Meeting in person,
the time and place of the Meeting.

To the shareholders of Smaller Companies Fund (`Smaller Companies'):

A Special Meeting of Smaller Companies shareholders will be held at One South
Street, Baltimore, MD 21202 on May 24, 2001 at 11a.m., Eastern Time, to
consider the following:

1. A proposal to approve an Agreement and Plan of Reorganization between
Smaller Companies and Small Cap Fund - Investment Class (a BT Investment
Fund) (`Small Cap'). Under this Agreement, Smaller Companies would transfer
all of its assets to Small Cap in exchange for shares of Small Cap. These
shares would be distributed proportionately to you and the other
shareholders of the Institutional and Investment shares of Smaller
Companies. Small Cap would also assume Smaller Companies' stated
liabilities. Your Board of Trustees recommends that you vote FOR this
proposal.

2. Any other business that may properly come before the Meeting.

Shareholders of record as of the close of business on April 19, 2001 are
entitled to vote at the Meeting and any related adjournments thereof.

Whether or not you expect to attend the Special Meeting, please complete and
return the enclosed proxy card. You may also vote your shares by calling the
toll-free number on your proxy card or by logging on to the Internet at
www.proxyvote.com. If shareholders do not return their proxies in sufficient
numbers, Smaller Companies will incur additional costs to solicit proxies.

By Order of the Board of Trustees,

/s/ Daniel O. Hirsch
Daniel O. Hirsch
Secretary

April 30, 2001

PROXY STATEMENT OF
SMALLER COMPANIES FUND
(formerly Morgan Grenfell Smaller Companies Fund)
(a series of Morgan Grenfell Investment Trust)

PROSPECTUS FOR
SMALL CAP FUND - INVESTMENT CLASS
(a series of BT Investment Funds)

This proxy statement and prospectus sets forth concisely the information you
should know before voting on the proposed reorganization of Smaller Companies
Fund, One South Street, Baltimore, Maryland 21202, 1-800-730-1313 ('Smaller
Companies') into Small Cap Fund - Institutional Class, One South Street,
Baltimore, MD 21202, 1-800-730-1313 ('Small Cap'). Please read it carefully and
retain it for future reference.

Both Small Cap and Smaller Companies (each a 'Fund' and together the 'Funds')
are open-end mutual funds investing in stocks and other equity securities of
small companies. Small Cap's investment objective is long term capital growth,
and Smaller Companies' investment objective is capital appreciation, with
current income as a secondary objective.

Small Cap is a 'feeder-fund' that invests all of its assets in a 'master
portfolio,' the Small Cap Portfolio. Small Cap and its master portfolio have the
same investment objective. All references to Small Cap apply to the Small Cap
Portfolio where appropriate.

On March 8, 2001, the Trustees of BT Investment Funds on behalf of the Small Cap
Fund approved a reorganization of the Small Cap Fund from a feeder fund in a
master-feeder structure to a stand alone, direct investment fund. It is
anticipated that the Small Cap Portfolio will effect a redemption-in-kind from
the master portfolio, and the Small Cap Fund will be reorganized as a stand
alone direct investment fund. If this reorganization of the Small Cap Fund
occurs before the combination of the Small Cap Fund and the Smaller Companies
Fund, the two stand alone direct investment funds will merge. If the combination
occurs prior to the reorganization of the Small Cap Fund, the Smaller Companies
Fund will merger into the Small Cap Fund, and the Small Cap Fund will transfer
the Smaller Companies Fund's assets to the Portfolio. In either case, the
combination of the Small Cap Fund and the Smaller Companies Fund will be a tax-
free transaction for shareholders of both Funds.

How the Reorganization Will Work

. Smaller Companies will transfer all of its assets to Small Cap. Small Cap
will assume Smaller Companies' stated liabilities.

. Small Cap will issue shares to Smaller Companies in an aggregate amount
equal to the value of the assets received by Small Cap, less the
liabilities assumed by Small Cap in the reorganization. These shares will
immediately be distributed by Smaller Companies to the shareholders in the
Institutional and the Investment class of Smaller Companies in proportion
to their holdings in the respective class of Smaller Companies on the
reorganization date.

. As described below, the reorganization will be tax-free for federal income
tax purposes.

. Smaller Companies will be liquidated and terminated, and you will be a
shareholder of Small Cap.

An investment in Small Cap is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.

================================================================================================================
Where to Get More Information
================================================================================================================

Prospectus of Small Cap dated January 29, 2001. In the same envelope as this proxy statement and
prospectus. Incorporated by reference into this
proxy statement and prospectus.
Small Cap's annual report to shareholders dated
September 30, 2000.
- ----------------------------------------------------------------------------------------------------------------

Prospectus of Smaller Companies dated On file with the Securities and Exchange Commission
February 28, 2001. ('SEC') and are available at no charge by calling
1-800-730-1313.
Incorporated by reference into this proxy statement
and prospectus.
Smaller Companies' annual and semi-annual reports to
shareholders.
A statement of additional information dated April 30,
2001. It contains additional information about both
Small Cap and Smaller Companies.
- ----------------------------------------------------------------------------------------------------------------
To ask questions about this proxy statement and Call our toll-free telephone number: 1-800-730-1313
prospectus. or write to us at Deutsche Asset Management, P.O.
Box 219165, Kansas City, MO 64121-9210.
- ----------------------------------------------------------------------------------------------------------------

The date of this proxy statement and prospectus is April 30, 2001.

TABLE OF CONTENTS

Page
----

INTRODUCTION 1

SUMMARY 1

THE REORGANIZATION 5

CAPITALIZATION 9

COMPARISON OF BUSINESS TRUSTS UNDER DELAWARE AND MASSACHUSETTS LAW 9

ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES 10

BOARDS' EVALUATION AND RECOMMENDATION 10

VOTING RIGHTS AND REQUIRED VOTE 11

INFORMATION CONCERNING THE MEETING 11

OWNERSHIP OF SHARES OF THE FUNDS 12

EXPERTS 13

AVAILABLE INFORMATION 13

Other Information

A. Agreement and Plan of Reorganization between Small Cap and Smaller
Companies (attached to this proxy statement and prospectus).

B. Annual report to shareholders dated September 30, 2000 of Small Cap.

C. Prospectus dated January 29, 2001 of Small Cap.

INTRODUCTION

This proxy statement and prospectus is being used by the Board of Trustees of
Smaller Companies to solicit proxies to be voted at a Meeting or any
adjournments thereof of shareholders of Smaller Companies. This Meeting will be
held at One South Street, Baltimore, MD 21202 on May 24, 2001 at 11:00 a.m.,
Eastern Time. The purpose of the Meeting is to consider a proposal to approve an
Agreement and Plan of Reorganization providing for the reorganization of Smaller
Companies into Small Cap. This proxy statement and prospectus and a proxy card
are being mailed to Smaller Companies' shareholders on or about April 30,
2001.

Who is Eligible to Vote?

Smaller Companies shareholders of record on April 19, 2001 are entitled to
attend and vote at the Meeting or any adjournments thereof. Each Institutional
and Investment share of the Smaller Companies outstanding on April 19, 2001 is
entitled to one vote. Shares represented by properly executed proxies, or shares
voted by telephone or on the Internet, unless revoked before or at the Meeting,
will be voted according to shareholders' instructions. If you sign a proxy card,
but do not fill in a vote, your shares will be voted to approve the Agreement.
If any other business comes before the Meeting, your shares will be voted at the
discretion of the persons named as proxies.

SUMMARY

The following is a summary. More complete information appears later in this
proxy statement and prospectus. You should read the entire proxy statement and
prospectus and the enclosed exhibits carefully because they contain details that
are not in the summary. The materials in the exhibits and the statements of
additional information dated January 29, 2001 and February 28, 2001,
respectively, for Small Cap and Smaller Companies are hereby incorporated by
reference into this proxy statement and prospectus.

Comparison of Smaller Companies to Small Cap

===================================================================================================================
Smaller Companies Small Cap
===================================================================================================================

General A diversified series of Morgan Grenfell A diversified series of BT Investment
Investment Trust (`MG Trust'). MG Trust Funds (`BT Trust'). BT Trust is an
is an open-end management investment open-end management investment company
company organized as a Delaware business organized as a Massachusetts business
trust. trust.
- -------------------------------------------------------------------------------------------------------------------
Investment Smaller Companies invests directly in Small Cap is a feeder fund in a
Structure securities, as described below. master-feeder structure, which means that
it invests all of its assets in a master
portfolio, the Small Cap Portfolio
(`Small Cap Portfolio'). Small Cap
Portfolio has the same investment
objective as Small Cap. All references
to Small Cap in this proxy statement
include Small Cap Portfolio where
appropriate.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of Institutional shares Investment shares
April 19, 2001 $______________ $__________ $_________________
- -------------------------------------------------------------------------------------------------------------------
Investment Deutsche Asset Management, Inc. is Smaller Bankers Trust Company (`Bankers Trust')
Advisers Companies' investment adviser. is the investment adviser of the Small
Cap Portfolio in which the Small Cap
invests. On March 8, 2001, the Trustees
approved a proposal to change the named
adviser from Bankers Trust to DeAM, Inc.
In the fall of 1999 shareholders approved
the new agreement with DeAM, Inc. on the
condition that it may be implemented
within two years of the date of the
shareholder meeting with subsequent
approval by a majority of the independent
trustees. Under the proposed new agreement
with DeAM, Inc. the service provided by
DeAM, Inc. would be the same as under the
current advisory agreement with Bankers
Trust. There will be no change in
portfolio managers, fund operations or
management oversight of the funds as a
result of the new agreement.
- -------------------------------------------------------------------------------------------------------------------
Control of investment Deutsche Asset Management, Inc. and Bankers Trust are indirect wholly-owned subsidiaries
advisers of Deutsche Bank AG, an international commercial and investment-banking group.
- -------------------------------------------------------------------------------------------------------------------
Portfolio managers Audrey Jones and Doris Klug are the portfolio managers for both Funds.
- -------------------------------------------------------------------------------------------------------------------

====================================================================================================================
Smaller Companies Small Cap
====================================================================================================================
Investment objectives and policies
- --------------------------------------------------------------------------------------------------------------------

Investment Capital appreciation, with current income Long-term capital growth.
Objectives as a secondary objective.
- --------------------------------------------------------------------------------------------------------------------
Principal Each Fund invests at least 65% of its total assets in the equity securities of US
Investments small capitalization companies. Each Fund defines the small capitalization equity
securities universe as the bottom 20% of the total domestic equity market
capitalization (at the time of investment), using a minimum market capitalization of
$10 million.
-----------------------------------------------------------------------------------------
Smaller Companies may invest up to 35% of Small Cap may also invest up to 25% of its
the Fund's total assets in investment assets in the stocks of non-US companies
grade fixed income securities, securities and up to 35% of its assets in large
of medium and large capitalization capitalization stocks. Under normal
companies, securities of foreign issuers conditions, these two tactics would not
and in cash. comprise major elements of its strategy.
- --------------------------------------------------------------------------------------------------------------------
Equity Securities Each Fund may invest in equity and equity-related securities, including common stock,
preferred stock, rights and warrants and convertible securities.
- --------------------------------------------------------------------------------------------------------------------
Principal strategies The same portfolio management team for both Funds generally use a `bottom-up'
approach to picking stocks. This approach focuses on individual stock selection
rather than industry selection. The team uses an active process, which combines
financial analysis with company visits to evaluate management and strategies.
-----------------------------------------------------------------------------------------
Each Fund looks for two financial attributes that set these companies apart:
. Evidence of above-average growth in revenues and earnings; and
. A balance sheet that can support this growth potential with sufficient working
capital and manageable levels of debt.
- --------------------------------------------------------------------------------------------------------------------
Illiquid securities Each Fund may invest up to 15% of its net assets in illiquid securities.
- --------------------------------------------------------------------------------------------------------------------
Investment Each Fund may invest in other investment companies to the extent permitted by the
Companies Investment Company Act of 1940.
- --------------------------------------------------------------------------------------------------------------------
Derivatives Each Fund may:
. Purchase and sell (write) put and call options on securities, securities indices
and currencies. These options may be traded on exchanges or over-the-counter.
. Enter into futures contracts on securities, securities indices and currencies, and
may purchase and write put and call options on these futures contracts.
. Enter into forward contracts on currencies.
- --------------------------------------------------------------------------------------------------------------------
Hedging Each Fund may purchase and write securities and index options for both hedging
purposes and non-hedging purposes, but may enter into other options, futures and
forward contracts only for hedging purposes.
- --------------------------------------------------------------------------------------------------------------------
Temporary defensive Smaller Companies may depart from its Small Cap may depart from its principal
positions principal investment strategies in order investment strategies in order to take a
to take a temporary defensive position by temporary defensive position by investing
investing up to 100% of its assets in up to 100% of its assets in common stocks
money market investments or other short of larger companies, in fixed income
term bonds that offer comparable safety. securities, or short-term money market
securities.
- --------------------------------------------------------------------------------------------------------------------
Principal investment risks
- --------------------------------------------------------------------------------------------------------------------
General You could lose money on your investment in either Fund. There is no guarantee that
either Fund will achieve its investment objective.
- --------------------------------------------------------------------------------------------------------------------
Market risk Although individual stocks can outperform the US stock market, deteriorating market
conditions might cause an overall weakness in the stock prices of the entire market,
including stocks held by the Funds.
- --------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------
Security selection risk A risk that pervades all investing is the risk that the securities in the Funds'
portfolio will decline in value.
- --------------------------------------------------------------------------------------------------------------------
Small company risk Both Funds' performance may be more volatile because they invest in small capitalization
stocks. Smaller companies may have limited product lines, markets and financial
resources. They may also have shorter operating histories and more volatile businesses.
In addition, it may be harder to sell these stocks, particularly in large blocks, which
can reduce their selling price.
- --------------------------------------------------------------------------------------------------------------------
Foreign investment risk To the extent either Fund holds shares of companies based outside the US it faces the
risks inherent in foreign investing. Adverse political, economic or social
developments as well as incomplete information due to different reporting standards
could undermine the value of the Fund's investments or prevent it from realizing the
full value of its investment. Also, a decline in foreign currency relative to the
value of the US dollar would depreciate the value of the investment itself.
- --------------------------------------------------------------------------------------------------------------------
Buying, exchanging and redeeming shares
- --------------------------------------------------------------------------------------------------------------------
Net asset value Each Fund calculates its net asset value per share (NAV) at the close of regular trading
on The New York Stock Exchange, Inc. (NYSE) every day the NYSE is open for business.
Each Fund's portfolio securities are valued either based on market quotations or, if
market quotations are unavailable, at fair value, which involves estimating a security's
value based on information other than market quotations.
- --------------------------------------------------------------------------------------------------------------------
Classes of shares Smaller Companies offers two classes of Small Cap has only one class of shares,
shares: Institutional shares and which is offered without a sales charge.
Investment shares. Both Institutional Therefore, the same class of Small Cap
and Investment shares are offered to the shares will be offered to Smaller
public without a sales charge. Companies Institutional and Investment
shareholders in this proxy statement and
prospectus.
- --------------------------------------------------------------------------------------------------------------------
Rule 12b-1 and service Institutional shares are not subject to Small Cap shares are not subject to any
fees any Rule 12b-1 or service fee. The Rule 12b-1 or service fee.
Investment shares are subject to a
shareholder service fee of 0.25% of
average net assets.
- --------------------------------------------------------------------------------------------------------------------
Buying and selling shares Institutional shares: Investors may Investors may purchase or redeem shares
purchase and redeem shares from either from authorized brokers or
authorized service agents, or directly directly from Small Cap.
from Smaller Companies.
Investment shares: Investors may purchase
shares only through their account
established with their service
organization.
- --------------------------------------------------------------------------------------------------------------------
Minimum investment Institutional shares -- Initial: $250,000; Initial: $2,000
amounts Subsequent: $25,000 Subsequent: $100
Investment shares -- Initial: $2,000
Subsequent: $100
- --------------------------------------------------------------------------------------------------------------------
Exchanging shares Shares of each Fund may be exchanged for shares of another Deutsche Asset Management
mutual fund up to four times a year (from the date of the first exchange).
- --------------------------------------------------------------------------------------------------------------------

Small Cap will waive the minimum investment amount for any Smaller Companies
account that, immediately after the reorganization, contains less than the
minimum investment amount required for Small Cap.

Annual Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of Small Cap or Institutional or Investment shares of Smaller Companies.
The table also shows pro forma expenses of shares of Small Cap following the
proposed reorganization.

Annual Fees and Expenses as a Percentage of Average Daily Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
The year ended September 30, 2000 for Small Cap Smaller Smaller
Companies Companies
Small Cap/2/ Small Cap/2/ Institutional Investment
The year ended October 31, 2000 for Smaller Companies (pro forma) Shares Shares
- -------------------------------------------------------------------------------------------------------------------------------

Management fees 0.65% 0.65% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) fees None None None None
- -------------------------------------------------------------------------------------------------------------------------------
Other expenses (including a shareholder servicing fee) 0.79% 0.79% 2.15% 2.40%/3/
- -------------------------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses/1/ 1.44% 1.44% 3.15% 3.40%
- -------------------------------------------------------------------------------------------------------------------------------
Less fee waivers or expense reimbursements/1/ (0.19)% (0.19)% (1.90)% (1.90)%
- -------------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.25% 1.25% 1.25% 1.50%
- -------------------------------------------------------------------------------------------------------------------------------

/1/ The investment adviser and administrator have contractually agreed for the
16 month period from Smaller Companies' fiscal year end of October 31, 2000, to
waive their fees or reimburse expenses so that total expenses will not exceed
1.25% for Institutional shares and 1.50% for Investment shares. The investment
adviser and administrator have contractually agreed for the 16 month period
from Small Cap's fiscal year-end of September 30, 2000, to waive their fees or
reimburse expenses so that Small Cap's total expenses will not exceed 1.25%.

/2/ Information on the annual operating expenses reflects the expenses of both
Small Cap and Small Cap Portfolio, the master portfolio into which Small Cap
invests all of its assets.

/3/ Under the Service Plan the Fund pays service fees at an aggregate annual
rate of up to 0.25% of the average daily net assets.
- ------------------------------------------------------------------------------

Expense Example

Hypothetically assume that each Fund's annual return is 5% and that the total
annual Fund operating expenses are exactly as described in the Fees and Expenses
table. For every $10,000 invested, an investor would have paid the following
expenses if an account were closed after the number of years indicated:

===============================================================================================================
Expense Example/3/ 1 Year 3 Years 5 Years 10 Years
===============================================================================================================

Small Cap $127 $437 $ 769 $1,708
- ---------------------------------------------------------------------------------------------------------------
Smaller
Companies -
Institutional Shares $127 $793 $1,484 $3,325
- ---------------------------------------------------------------------------------------------------------------
Smaller
Companies -
Investment Shares $153 $868 $1,606 $3,557

- ---------------------------------------------------------------------------------------------------------------
Small Cap $127 $437 $ 769 $1,708
pro forma
- ---------------------------------------------------------------------------------------------------------------

/3/ For the first 12 months, the expense example takes into account fee waivers
and reimbursements.

The purpose of the table is to assist shareholders in understanding the various
costs and expenses that a shareholder in the Funds will bear directly and
indirectly both for the current Funds and on a pro forma basis if the proposed
reorganization is approved. The example is included solely for illustrative
purposes and should not be considered a representation of future performance or
expenses. Actual expenses may be higher or lower.

THE REORGANIZATION

Terms of the Reorganization

The Board of each Fund has approved the Agreement and Plan of Reorganization
(the 'Agreement'), a copy of which is attached as Exhibit A. The Agreement
provides for reorganization on the following terms:

. The net asset value of both Funds will be computed as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
Time) on the reorganization date.

. The reorganization is scheduled to begin at 5:00 p.m., Eastern Time, on
May 31, 2001, but may occur on any later date before December 31, 2001.

. In the reorganization, Smaller Companies will transfer all of its assets to
Small Cap, and in exchange Small Cap will assume Smaller Companies' stated
liabilities and issue shares as described below. Small Cap will then
transfer those assets to Small Cap Portfolio in exchange for a pro rata
interest in Small Cap Portfolio.

. Small Cap will issue shares to Smaller Companies in an amount equal to the
value of the assets of Smaller Companies received by Small Cap, less the
liabilities of Smaller Companies assumed by Small Cap, in the transaction.
These shares will immediately be distributed by Smaller Companies to the
shareholders in each class of Smaller Companies in proportion to their
holdings in the respective class of Smaller Companies on the reorganization
date. As a result, Institutional and Investment shareholders of Smaller
Companies will become shareholders of Small Cap.

. In connection with the reorganization Smaller Companies will be terminated
and liquidated.

The following diagram shows how the reorganization will be carried out.

- --------------------------- ------------------------
Smaller Companies Small Cap Portfolio
transfers its assets and Small Cap transfers receives assets
stated liabilities to Smaller Companies' assets and (graphic of of Smaller
Small Cap (graphic of to Small Cap Portfolio right-facing arrows) Companies
right-facing arrows)
- --------------------------- ------------------------

Smaller Companies
Smaller Companies receives these shares Small Cap shares are
Institutional and (graphic of pro rata by class to its (graphic of issued
Investment shareholders left-facing arrows) Institutional and left-facing arrows)
receive Small Cap Investment
shares shareholders

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

Currently, Small Cap intends to retain most of the portfolio securities and
other assets acquired from Smaller Companies after the reorganization. The
portfolio managers may determine, however, to liquidate individual securities
from time to time in the ordinary course of business.

Tax Status of the Reorganization

The reorganization will be tax-free for federal income tax purposes and will not
take place unless Smaller Companies and Small Cap receive from Willkie Farr &
Gallagher, counsel to Small Cap, a satisfactory opinion substantially to the
effect that for federal income tax purposes:

. The acquisition all of Smaller Companies' assets by Small Cap solely in
exchange for shares of Small Cap and the assumption by Small Cap of Smaller
Companies' stated liabilities, followed by the distribution of such shares
to Smaller Companies' shareholders and the termination of Smaller
Companies, will be a 'reorganization' within the meaning of Section 368(a)
of the Internal Revenue Code of 1986 (the 'Code'), and each Fund will be 'a
party to a reorganization' within the meaning of Section 368(b) of the
Code;

. No gain or loss will be recognized by Smaller Companies upon (1) the
transfer of all of its assets and the assumption of its stated liabilities
by Small Cap as described above or (2) the distribution by Smaller
Companies of Small Cap shares to Smaller Companies' Institutional and
Investment shareholders;

. No gain or loss will be recognized by Small Cap upon the receipt of Smaller
Companies' assets solely in exchange for the issuance of Small Cap shares
to Smaller Companies and the assumption of certain of Smaller Companies'
stated liabilities by Small Cap;

. The basis of the assets of Smaller Companies acquired by Small Cap will be,
in each instance, the same as the basis of those assets in the hands of
Smaller Companies immediately prior to the transfer;

. The tax holding period of the assets of Smaller Companies in the hands of
Small Cap will, in each instance, include Smaller Companies' tax holding
period for those assets;

. The shareholders of Smaller Companies will not recognize gain or loss upon
the exchange of all their shares of Smaller Companies solely for Small Cap
shares as part of the reorganization;

. The basis of the Small Cap shares received by each Smaller Companies
Institutional or Investment shareholder in the reorganization will be the
same as the basis of the Institutional or Investment shares of Smaller
Companies surrendered in exchange therefor;

. The tax holding period of the Small Cap shares received by each Smaller
Companies shareholder will include the tax holding period of the
Institutional or Investment shares of Smaller Companies surrendered in
exchange provided that Smaller Companies shares were held as capital assets
on the date of the exchange;

. No gain or loss will be recognized by Small Cap upon its contribution of
the assets of Smaller Companies to Small Cap Portfolio solely in exchange
for an interest in Small Cap Portfolio;

. No gain or loss will be recognized by Small Cap Portfolio upon the
contribution by Small Cap of the assets of Smaller Companies to Small Cap
Portfolio solely in exchange for an interest in Small Cap Portfolio;

. The basis of Small Cap Portfolio with respect to the assets of Smaller
Companies contributed to Small Cap Portfolio by Small Cap will be, in each
instance, the same as the basis of those assets in the hands of Small Cap
immediately prior to such contribution;

. The tax holding period of Small Cap Portfolio with respect to the assets of
Smaller Companies contributed by Small Cap to Small Cap Portfolio will, in
each instance, include Smaller Companies and Small Cap's tax holding
periods for such assets;

. The basis of the interest in Small Cap Portfolio acquired by Small Cap as a
result of its contribution to Small Cap Portfolio of the assets of Smaller
Companies will be the same as Small Cap's basis in such assets; and

. The tax holding period of Small Cap with respect to its interest in Small
Cap Portfolio will include Smaller Companies' and Small Cap's tax holding
periods for the assets of Smaller Companies contributed to Small Cap
Portfolio by Small Cap.

If the reorganization is approved, Smaller Companies will distribute to its
shareholders Smaller Companies' net investment income and net realized capital
gains prior to the date of the reorganization. If this distribution were
determined as of ____________, the distribution would be approximately _______%
of the current net asset value. This is equivalent to $_______ per share,
consisting of investment income and short-term gains of $________ and long-term
gains of $________. The amount of the actual distribution per share may vary
significantly from this estimate depending primarily upon the extent of gains
actually realized when Smaller Companies' portfolio securities are sold, the
extent of losses or credits that offset those gains, and the number of Smaller
Companies shares outstanding. Stock markets can be volatile, and the amount of
the actual distribution per share is likely to fluctuate from the estimated
amount as the value of the Smaller Companies' holdings change.

As Small Cap shareholders, former Smaller Companies shareholders will become
liable for taxes payable on their proportionate share of any taxable income and
capital gains recognized by Small Cap. These may include not only taxable
income and gains recognized after the reorganization, but also taxable income
and capital gains recognized but not distributed prior to the reorganization and
taxable income and capital gains attributable to pre-reorganization periods but
not recognized until after the reorganization.

Reasons for the Proposed Reorganization

The Board of Trustees of Smaller Companies believes that the proposed
reorganization will be advantageous to the shareholders of Smaller Companies for
several reasons. The Board of Trustees considered the following matters, among
others, in approving the reorganization at a Meeting held on August 19, 1999 and
November 16, 2000.

Overlapping Investment Strategy and Market Niche. Smaller Companies and Small
Cap both have substantially similar investment strategies. The same portfolio
management team is currently managing both Funds and the same sales force is now
marketing both Funds. Because of the confusion that might be caused by offering
clients competing small cap funds, it is not advantageous to operate and market
Smaller Companies separately from Small Cap.

Master-Feeder Structure. If Small Cap continues to operate as a master-feeder,
the proposed reorganization would allow Smaller Companies to benefit from being
part of a master-feeder structure. As part of a master-feeder structure, the
feeder fund may benefit from economies of scale in portfolio management and
administration and the ability to participate in larger securities transactions.
Shareholders of both Funds may be better served by a combined fund offering
greater diversification at the portfolio level. To the extent that combining the
Funds' assets into a single fund creates a larger asset base, Small Cap may
achieve greater diversification after the reorganization than is currently
possible for either Fund. Greater diversification is expected to benefit the
shareholders of both Funds because it may reduce the negative effect that the
adverse performance of any one security may have on the performance of the
entire portfolio.

Investment Performance. Small Cap shares received in the reorganization will
provide Smaller Companies' shareholders with substantially the same investment
advantages as they currently have at a comparable level of risk. Smaller
Companies' Board of Trustees considered the performance history of each Fund,
which is shown in the table below. Specially, although the Acquiring Fund was
adversely affected by the timing and flow of funds into and out of the Acquiring
Fund during the most recent one-year period, the Boards of each Fund considered
the favorable longer-term performance of the Acquiring Fund. Since the same
portfolio management team is currently managing both Small Cap and Smaller
Companies, any gap in the performance of the two Funds is expected to narrow and
differ only based on fees. The Trustees further noted that due to the
overlapping investment strategy, market niche and the similar marketing channels
of these Funds, all shareholders may benefit by the possibility of reduced
expenses due to the combination of the Funds.

- -------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS/1/
- -------------------------------------------------------------------------------------------------------------
Smaller Companies Smaller Companies Small Cap
Investment shares Institutional Shares
(Inception 07/11/97) (Inception 06/30/95) (Inception 10/21/93)
- -------------------------------------------------------------------------------------------------------------

1 year ended 12/31/00 14.14% 14.39% 10.28%
- -------------------------------------------------------------------------------------------------------------
3 years ended 12/31/00 15.83% 16.10% 19.22%
- -------------------------------------------------------------------------------------------------------------
5 years ended 12/31/00 N/A 17.10% 15.44%
- -------------------------------------------------------------------------------------------------------------
Inception through 12/31/00 15.39% 18.10% 21.48%
- -------------------------------------------------------------------------------------------------------------
Total assets: as of 12/31/00 $ 469,036 $ 7,748,271 $ 306,852,100
- -------------------------------------------------------------------------------------------------------------

/1/ Past performance offers no indication of how the Fund will perform in the
future.

Possibility of Reduced Expenses. A combined Fund offers economies of scale that
may lead to better control over expenses than is currently possible,
particularly for Smaller Companies. Both Funds incur substantial costs for
accounting, legal, transfer agency services, insurance, and custodial and
administrative services. The Management fees and the Other expenses of Small Cap
shares are lower than those of Smaller Companies, on a gross basis. Taking into
account current fee waivers and expense reimbursements, the total of Small Cap's
Management fees and Other expenses is lower than the total of Smaller Companies'
Investment shares and equal to the total of Smaller Companies' Institutional
shares.

Benefits to Small Cap. The Board of Trustees of Small Cap considered that the
reorganization presents an excellent opportunity for Small Cap to acquire
investment assets without the obligation to pay commissions or other transaction
costs that are normally associated with the purchase of portfolio securities.
This opportunity provides an economic benefit to Small Cap and its shareholders.

Benefits to Advisers and Other Service Providers. The Boards of Trustees of both
Funds considered that the Funds' advisers, administrators and distributors might
also benefit from the reorganization. For example, the advisers and
administrators might function more efficiently and therefore realize cost
savings from a consolidated portfolio management effort and from the need to
prepare fewer prospectuses, reports and regulatory filings. The Trustees
believe, however, that these savings will not amount to a significant economic
benefit.

Additional Terms of Agreement and Plan of Reorganization

Tax-Free Aspect of the Reorganization. The Boards considered that the
reorganization is expected to be tax-free, permitting shareholders of the two
Funds to maintain their investments in a combined fund without recognition of
gain or loss for federal income tax purposes. The reorganization is intended to
qualify for federal income tax purposes as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the `Code'). As
a condition of closing, the Funds will receive an opinion of counsel, typical of
transactions of this type. The opinion will be to the effect that the transfer
of all of Smaller Companies' assets in exchange for shares of Small Cap and the
assumption by Small Cap of scheduled liabilities of Smaller Companies will
constitute a `reorganization' within the meaning of Section 368(a) of the Code
that Small Cap and Smaller Companies are each a `party to the reorganization'
within the meaning of Section 368(b) of the Code, and that no gain or loss will
be recognized by Smaller Companies or Small Cap or their respective shareholders
as a result of the transaction.

The Agreement and the transactions contemplated by it may be terminated and
abandoned by resolutions of either Board at any time prior to the Closing Date.
The Agreement may be terminated in the event that a material condition is not
fulfilled, a material covenant is not fulfilled or there is a material breach of
the Agreement. In the event of termination, there will be no liability for
damages on the part of either Fund or the Trustees or officers of either Fund.

Conditions to Closing the Reorganization. The obligation of the Funds to
consummate the reorganization is subject to the satisfaction of certain
conditions under the Agreement (see Agreement, paragraphs 6 and 7).

The obligation of Small Cap to consummate the reorganization is also subject to
the satisfaction of certain conditions under the Agreement, including that
Smaller Companies has distributed to its shareholders for its taxable year
ending on the closing date of the Reorganization: (1) all of its investment
company taxable income (prior to reduction by any dividends paid deduction); (2)
all of its net capital gain, after reduction by any capital loss carryforward;
and (3) all of the excess of (i) its interest income excludable from federal
gross income over (ii) the related deductions disallowed under the Code.

The obligations of both Funds are subject to, among other things, the approval
of the Agreement by the necessary vote of the outstanding shares of Smaller
Companies, in accordance with the provisions of Smaller Companies' declaration
of trust and by-laws. The obligation of the Funds to consummate the
reorganization is also subject to the receipt by the Funds and their Advisers of
an exemptive order from the SEC. There is no assurance that the order will be
granted. The Funds' obligations are also subject to several other conditions,
including the receipt of all consents, orders and permits necessary to
consummate the reorganization and the receipt of a favorable opinion of counsel
as to the federal income tax consequences of the reorganization.

Termination of Agreement. Smaller Companies or Small Cap may mutually agree to
terminate the Agreement (even if the shareholders of Smaller Companies have
already approved it) at any time before the reorganization date. Either Fund may
also terminate the Agreement if the other Fund has materially breached any
representation, warranty or agreement contained in the Agreement or if a
precedent condition to the obligation of the Fund terminating cannot or will not
be met.

Expenses of the Reorganization. Deutsche Asset Management, Inc. will be
responsible for certain expenses incurred, including expenses incurred in
connection with the Exemptive Application filed with the SEC. Small Cap will
bear its own expenses in connection with the reorganization. Smaller Companies
will bear its own expenses incurred in connection with the reorganization and
including, the fees and expenses incurred in connection with its liquidation and
termination. These liquidation and termination fees are expected to aggregate
approximately $5,000.00.

CAPITALIZATION

The following table sets forth the capitalization of each Fund as of December
31, 2000, and the pro forma combined capitalization of both Funds as if the
reorganization had occurred on that date. The table reflects pro forma exchange
ratios of approximately 0.604 Small Cap shares being issued for each share of
Smaller Companies Institutional shares and approximately 0.597 Small Cap shares
being issued for each share of Smaller Companies Investment shares. If the
reorganization is consummated, the actual exchange ratios on the reorganization
date may vary from the exchange ratios indicated due to changes in any of a
number of factors including:

. Changes in the market value of the portfolio securities of both Small Cap
and Smaller Companies between December 31, 2000 and the reorganization
date.

. Changes in the amount of undistributed net investment income and net
realized capital gains of Small Cap and Smaller Companies during that
period resulting from income and distributions.

. Changes in the accrued liabilities of Small Cap and Smaller Companies
during the same period.

- --------------------------------------------------------------------------------------------------------------------
Capitalization as Small Cap Small Cap Smaller Companies
of December 31, 2000 Pro Forma --------- -----------------
Combined/1/ Institutional Investment
------------- ----------

Net assets $315,069,405 $306,852,099 $7,748,271 $469,035
- ----------

Net asset value per share $ 25.00 $ 25.00 $ 15.10 $ 14.93
- -------------------------

Shares outstanding 12,603,697 12,274,973 513,183 31,425
- ------------------
- --------------------------------------------------------------------------------------------------------------------

/1/ If the reorganization had taken place on December 31, 2000, Institutional
Smaller Companies' shareholders would have received 309,963 shares of Small Cap
and Smaller Companies' Investment shareholders would have received 18,761 shares
of Small Cap.

It is impossible to predict how many shares of Small Cap will actually be
received and distributed by Smaller Companies on the reorganization date. The
table should not be relied upon to determine the amount of Small Cap shares that
will actually be received and distributed.

COMPARISON OF BUSINESS TRUSTS UNDER DELAWARE AND MASSACHUSETTS LAW

Small Cap is organized as a Massachusetts business trust. Smaller Companies is
organized as a Delaware business trust. The following is a comparison of the
laws of Massachusetts and Delaware applicable to business trusts.

Limitation of Shareholders' and Funds' Liability. Delaware law provides that
- ------------------------------------------------
the shareholders of a Delaware business trust (such as Smaller Companies) shall
not be subject to liability for the debts or obligations of the trust.
Massachusetts law provides that the shareholders of a Massachusetts business
trust (such as Small Cap) may, under certain circumstances, be liable for the
debts and obligations of that trust, although the risk of liability is remote
for shareholders of a Massachusetts business trust who do not participate in
the management of the trust. Delaware law provides that, to the extent that a
Delaware business trust issues multiple series of shares, each series shall not
be liable for the debts or obligations of any other series. In the case of
multiple series of a Massachusetts business trust, it is frequently assumed that
a series will only be liable for its own obligations, although there is no
direct statutory or judicial support for that position.

Limitation of Trustee Liability. Delaware law provides that, except to the
- -------------------------------
extent otherwise provided in a trust's declaration of trust or by-laws, Trustees
will not be personally liable to any person (other than the business trust or a
shareholder thereof) for any act, omission or obligation of the business trust
or any trustee thereof. Delaware law also provides that a trustee's actions
under a Delaware business trust's declaration of trust or by-laws will not
subject the trustee to liability to the business trust or its shareholders if
the Trustee takes such action in good faith reliance on the provisions of the
business trust's declaration of trust or by-laws. The declaration of trust of a
Massachusetts business trust may limit the liability of a trustee who is not
also an officer of the trust for breach of fiduciary duty except for, among
other things, any act or omission not in good faith which involves intentional
misconduct or a knowing violation of law or any transaction from which such
trustee derives an improper direct or indirect financial benefit.

Shareholder Voting. Delaware law provides that a Delaware business trust's
- ------------------
declaration of trust or by-laws may set forth provisions related to voting in
any manner. This provision appears to permit shareholder voting through
computer or electronic media. For an investment company with a significant
number of shareholders with access to computer or electronic networks, the use
of such voting methods could significantly reduce the costs of shareholder
voting.

Declarations of Trust. Although neither a Delaware business trust nor a
- ---------------------
Massachusetts business trust is required to hold annual shareholder meetings,
Delaware law affords to the trustees the ability to adapt the Delaware business
trust to future contingencies without the necessity of holding a special
shareholder meeting. The trustees of a Delaware business trust may have the
power to amend the business trust's governing instrument to create a class or
series of shares of beneficial interest that was not previously outstanding; to
dissolve the business trust; to incorporate the Delaware business trust; to
merge or consolidate with another entity; to sell, lease, exchange, transfer,
pledge or otherwise dispose of all or any part of the business trust's assets;
to cause any series to become a separate trust; and to change the Delaware
business trust's domicile -- all without shareholder vote. Any exercise of
authority by the trustees will be subject to applicable state and federal law.
The flexibility of Delaware business trusts should help to assure that a
Delaware business trust operates under the most advantageous form of
organization and is intended to reduce the expense and frequency of future
shareholder meetings for non-investment-related operational issues.

ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES

The following table shows where in each Fund's prospectus you can find
additional information about the business of the Fund.

- --------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectuses
- --------------------------------------------------------------------------------------------------------
Smaller Companies Small Cap
- --------------------------------------------------------------------------------------------------------

Risk/return summary Overview of Smaller Companies Overview of Small Cap
- --------------------------------------------------------------------------------------------------------
Investment objectives/goals Goal
- --------------------------------------------------------------------------------------------------------
Principal investment strategies Core Strategy, Investment Policies and Strategies
- --------------------------------------------------------------------------------------------------------
Principal risks of investing in Principal Risks of Investing in the Fund, Who Should Consider
the Funds: narrative disclosure Investing in the Fund
- --------------------------------------------------------------------------------------------------------
Principal risks of investing in
the Funds: risk/return bar Total Returns, After Fees and Expenses
chart and table
- --------------------------------------------------------------------------------------------------------
Fee table Annual Fund Operating Expenses
- --------------------------------------------------------------------------------------------------------
Body of prospectus A Detailed Look at Smaller Companies A Detailed Look at Small
Cap
- --------------------------------------------------------------------------------------------------------
Investment objectives,
principal investment Objective, Strategy, Principal Investments, Investment Process, Other
strategies and related risks Investments and Risks
- --------------------------------------------------------------------------------------------------------
Management: investment
adviser and portfolio manager Management of the Fund; Portfolio Managers
- --------------------------------------------------------------------------------------------------------
Shareholder information:
pricing of fund shares Calculating the Fund's Share Price
- --------------------------------------------------------------------------------------------------------
Shareholder information:
purchase of fund shares Buying and Selling Fund Shares:
redemption of fund shares
- --------------------------------------------------------------------------------------------------------
Investment Shares:
Service Plan, Buying and Selling Shares
Through your Service Organization
- --------------------------------------------------------------------------------------------------------
Shareholder information:
Dividends and distributions; Dividends and Distributions, Tax Considerations
tax consequences
- --------------------------------------------------------------------------------------------------------
Financial highlights information Financial Highlights
- --------------------------------------------------------------------------------------------------------

BOARDS' EVALUATION AND RECOMMENDATION

For the reasons described above, the Board of Trustees of Smaller Companies,
including the Trustees who are not `interested persons' of either Fund or any of
their advisers (`Independent Trustees'), unanimously approved the reorganization
at a Meeting held on August 19, 1999 and November 16, 2000. In particular, the
Board determined that the reorganization was in the best interests of Smaller
Companies and that the interests of Smaller Companies' shareholders would not be
diluted as a result of the reorganization. Similarly, the Board of Trustees of
Small Cap, including the Independent Trustees, unanimously approved the
reorganization at Meetings held on September 8, 1999 and September 13, 2000.
That Board also determined that the reorganization was in the best interests of
Small Cap and that the interests of Small Cap's shareholders would not be
diluted as a result of the reorganization.

===============================================================================
Therefore, after careful consideration, The Board of Trustees of Smaller
Companies, including the Independent Trustees, recommends that the shareholders
of Smaller Companies vote `FOR' the proposal to approve the Agreement and Plan
of Reorganization.
===============================================================================

VOTING RIGHTS AND REQUIRED VOTE

Each share of Smaller Companies outstanding on the Record Date is entitled to
one vote. Approval of the above proposal requires the affirmative vote of a
majority of the shares of Smaller Companies outstanding and entitled to vote.
For this purpose, a majority of the outstanding shares of Smaller Companies
means the vote of the lesser of:

(1) 67% or more of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares of Smaller Companies are present or
represented by proxy, or

(2) more than 50% of the outstanding shares of Smaller Companies.

Shares of Smaller Companies represented in person or by proxy, including shares
that abstain or do not vote on the proposal, will be counted for purposes of
determining whether there is a quorum at the Meeting or any adjournments
thereof. These include proxies submitted by a broker or nominee holding shares
in 'street name' who indicates on the proxy card that it does not have
discretionary authority to vote on the proposal. Because abstentions and broker
non-votes are treated as shares present but not voting, an abstention from
voting or a 'broker non-vote' has the same effect as a vote against the
proposal.

If the required approval of shareholders is not obtained, Smaller Companies will
continue to engage in business as a separate mutual Fund and the Board of
Trustees will consider what further action, if any, may be appropriate.

INFORMATION CONCERNING THE MEETING

Solicitation of Proxies

In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax, through the Internet or in person by the Trustees, officers
and employees of Smaller Companies or by personnel of Deutsche Asset Management,
Inc. or ICC Distributors, Inc., the distributor of Smaller Companies' shares.

Revoking Proxies

A Smaller Companies shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:

. By filing a written notice of revocation with Smaller Companies' transfer
agent, or

. By returning before the time of the Meeting a duly executed proxy with a
later date than the proxy being revoked, or

. If a shareholder has executed a proxy but is present at the Meeting and
wishes to vote in person, by notifying the secretary of Smaller Companies
at the Meeting at any time before the proxy is voted.

Simply attending the Meeting without voting, however, will not revoke a
previously executed and returned proxy. If you hold your shares in `streetname'
and have instructed a broker to vote your shares, you must follow the directions
received from your broker on revoking your proxy.

Outstanding Shares and Quorum

As of April 19, 2001, [___________] Institutional shares and [_____________]
Investment shares of Smaller Companies were outstanding. Only shareholders of
record on April 19, 2001 (the `Record Date') are entitled to notice of and to
vote at the Meeting. A majority of the outstanding shares of Smaller Companies
that are entitled to vote will be considered a quorum for the transaction of
business.

Other Business

Smaller Companies' Board of Trustees knows of no business to be presented for
consideration at the Meeting other than the proposal. If other business is
properly brought before the Meeting, proxies will be voted according to the best
judgment of the persons named as proxies.

Adjournments

If a quorum is not present in person or by proxy at the time any session of the
Meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the Meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of Smaller Companies' shares present
in person or by proxy at the session of the Meeting to be adjourned. If an
adjournment of the Meeting is proposed because there are not sufficient votes in
favor of the proposal, the persons named as proxies will vote those proxies
favoring the proposal in favor of adjournment, and will vote those proxies
against the reorganization against adjournment.

Telephone and Internet Voting

Smaller Companies may record votes over the telephone or through the Internet.
In doing so, it will use procedures designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that their instructions have
been properly recorded. Proxies voted over the telephone or through the
Internet may be revoked at any time before they are voted in the same manner
that proxies voted by mail may be revoked.

OWNERSHIP OF SHARES OF THE FUNDS

To the knowledge of the Funds, as of April 19, 2001, DeAM, Inc. owned XX.XX% of
the Fund. DeAM, Inc. is the majority shareholder of the Fund. DeAM, Inc. is an
indirect wholly-owned subsidiary of Deutsche Bank AG.

To the knowledge of the Funds, as of April 19, 2001, the following persons
owned, of record or beneficially, 5% or more of the outstanding shares of Small
Cap and Smaller Companies (before the reorganization) and would own (after the
reorganization), 5% or more of the outstanding shares of Small Cap.

==============================================================================================================================
Names and Addresses Smaller Smaller Small Cap Small Cap
of Owners of More Companies Companies Shares Shares
Than 5% of Shares Investment Institutional (before reorganization) (after reorganization
Class Class
==============================================================================================================================

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

/4/ As of April 19, 2001, the table reflects pro forma exchange ratios of
approximately [ ____ ]Small Cap shares being issued for each Institutional class
share of Smaller Companies and approximately[ ____] Small Cap shares being
issued for each Investment class share of Smaller Companies. If the
reorganization is consummated, the actual exchange ratios on the reorganization
date may vary from the exchange ratios as previously discussed.

As of April 19, 2001, the Trustees and officers of Smaller Companies and Small
Cap, each as a group, owned in the aggregate less than 1% of the outstanding
shares of their respective Funds.

EXPERTS

The financial statements and the financial highlights of Smaller Companies as of
October 31, 2000 and for the periods then ended and of Small Cap as of September
30, 2000 and for the periods then ended are incorporated by reference into this
proxy statement and prospectus. These financial statements and financial
highlights for each of Smaller Companies and Small Cap have been audited by
PricewaterhouseCoopers, LLP, independent accountants, as stated in the reports
appearing in the respective Annual Report to shareholders. These financial
statements and financial highlights are included in reliance upon the reports
given upon the authority of such firm as an expert in accounting and auditing.

AVAILABLE INFORMATION

Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, as amended, and
files reports, proxy statements and other information with the Securities and
Exchange Commission (the `SEC'). These reports, proxy statements and other
information filed by the Funds can be inspected and copied (at prescribed rates)
at the public reference facilities of the SEC at 450 Fifth Street, N.W.,
Washington, D.C., and at the following regional offices: Chicago (500 West
Madison Street, Suite 1400, Chicago, Illinois) and New York (7 World Trade
Center, Suite 1300, New York, New York). Copies of such material can also be
obtained by e-mail at publicinfo@sec.gov, or by writing the Public Reference
------------------
Branch, office of the Consumer Affairs and Information Services of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549-0102. For information on the
Public Reference Section, call the SEC at 1-202-942-8090. In addition, copies
of these documents may be viewed on-screen or downloaded from the EDGAR Database
on the SEC's Internet site at http://www.sec.gov.

EXHIBIT A

FORM OF AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ____th day of __________, 2000, among (i) BT Investment Funds (the "BT
Trust"), a business trust organized under the laws of the Commonwealth of
Massachusetts with its principal place of business at One South Street,
Baltimore, Maryland 21202, on behalf of Small Cap (the "Acquiring Fund"), a
series of the BT Trust, (ii) Morgan Grenfell Investment Trust (the "MG Trust"),
a business trust organized under the laws of the State of Delaware with its
principal place of business at One South Street, Baltimore, Maryland 21202, on
behalf of Smaller Companies (the "Acquired Fund"), a series of the MG Trust.

This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1) of the United States Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization")
will consist of (i) the transfer of all of the assets of each class of shares of
the Acquired Fund to the Acquiring Fund in exchange for (a) the issuance of
shares of the corresponding class of beneficial interest of the Acquiring Fund
(collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund Share")
to each class of shares of the Acquired Fund, and (b) the assumption by the
Acquiring Fund of certain scheduled liabilities of each class of shares of the
Acquired Fund, and (ii) the distribution by the Acquired Fund, on the Closing
Date herein referred to or as soon thereafter as conveniently practicable, of
the Acquiring Fund Shares to the shareholders of each class of shares of the
Acquired Fund in liquidation of each class of shares of the Acquired Fund and
the termination of each class of shares of the Acquired Fund, all upon the terms
and conditions hereinafter set forth in this Agreement.

WHEREAS, the Reorganization is intended to qualify as a reorganization
within the meaning of Section 368(a) of the Code;

WHEREAS, the MG Trust and the BT Trust are each registered open-end
management investment companies, and the Acquired Fund owns securities that
generally are assets of the character in which the Acquiring Fund is permitted
to invest;

WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest;

WHEREAS, the Board of Trustees of the BT Trust has determined that the
exchange of all of the assets of each class of the Acquired Fund for shares of
the Acquiring Fund and the assumption by the Acquiring Fund of certain scheduled
liabilities of the Acquired Fund is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction;

WHEREAS, the Board of Trustees of the MG Trust has determined that the
exchange of all of the assets of each class of the Acquired Fund for shares of
the Acquiring Fund and the assumption of certain scheduled liabilities of the
Acquired Fund is in the best interests of the Acquired Fund shareholders and
that the interests of the existing shareholders of the Acquired Fund would not
be diluted as a result of this transaction.

EXHIBIT A

1. TRANSFER OF ASSETS OF EACH CLASS OF SHARES OF THE ACQUIRED FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S
SCHEDULED LIABILITIES AND LIQUIDATION AND TERMINATION OF THE ACQUIRED FUND.

1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer all of its assets to the Acquiring Fund as set forth in paragraph
1.2 to the Acquiring Fund free and clear of all liens and encumbrances, and the
Acquiring Fund agrees in exchange therefor: (a) to issue and deliver to the
Acquired Fund the number of Acquiring Fund Shares, including fractional
Acquiring Fund Shares, determined by dividing the value of the Acquired Fund's
net assets for each class of shares of the Acquired Fund transferred to the
Acquiring Fund, computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of one Acquiring Fund Share, computed in
the manner as of the time and date set forth in paragraph 2.2; and (b) to assume
certain scheduled liabilities of such class of shares of the Acquired Fund, as
set forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").

1.2. (a) The assets of each class of shares of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all the property of such class,
including, without limitation, all good will, all interests in the name of the
Acquired Fund, all other intangible property and all books and records of the
Acquired Fund.

(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of these securities in the
ordinary course of its business (except to the extent sales may be limited by
representations made in connection with the issuance of the tax opinion
described in paragraph 7.6 hereof) but will not, without the prior approval of
the Acquiring Fund, acquire any additional securities other than securities of
the type in which the Acquiring Fund is permitted to invest.

1.3. The Acquired Fund will endeavor to discharge for each class of shares
all the Acquired Fund's known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume all liabilities, expenses, costs, charges
and reserves reflected on an unaudited Statement of Assets and Liabilities of
the Acquired Fund prepared by Deutsche Asset Management, Inc. ("DeAM, Inc."), as
administrator of the Acquired Fund, as of the Valuation Date, in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The Acquiring Fund shall assume only those liabilities of the
Acquired Fund reflected in that unaudited Statement of Assets and Liabilities
and shall not assume any other liabilities, whether absolute or contingent, not
reflected thereon.

1.4. On the Closing Date or as soon thereafter as is conveniently
practicable (the "Liquidation Date"), the Acquired Fund will (for each class of
its shares) liquidate and distribute pro rata by class to the Acquired Fund's
shareholders of record of such class determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares
it receives pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the class of shares of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the shareholders of the relevant class of the Acquired Fund and
representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All

EXHIBIT A

issued and outstanding shares of the relevant class of Acquired Fund will
simultaneously be cancelled on the books of the Acquired Fund, although share
certificates, if any, representing interests in the relevant class of shares of
the Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with paragraph 1.1. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.

1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in the
manner described in the Acquiring Fund's current prospectus and statement of
additional information.

1.6. Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.

1.7. Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing Date and
such later date on which the Acquired Fund is terminated.

1.8. The Acquired Fund shall, following the Closing Date and the making of
all distributions pursuant to paragraph 1.4, be terminated under the laws of the
State of Delaware and in accordance with its governing documents.

2. VALUATION

2.1. The value of the assets of each class of shares of the Acquired Fund
to be transferred, and liabilities of each class of shares of the Acquired Fund
to be assumed, hereunder shall be the value of such assets computed as of the
close of regular trading on The New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the then current prospectus
or statement of additional information of the Acquiring Fund.

2.2. The net asset value of the Acquiring Fund Shares shall be the value
computed as of the close of regular trading on the NYSE on the Valuation Date,
using the valuation procedures set forth in the then current prospectus or
statement of additional information of the Acquiring Fund.

2.3. All computations of value shall be made by Bankers Trust Company
("Bankers Trust") in accordance with its regular practice as pricing agent for
the Acquiring Fund.

3. CLOSING AND CLOSING DATE

3.1. The Closing Date shall be ______________, 2001, or such later date as
the parties may agree to in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 5:00
p.m. at the offices of Deutsche Asset Management, One South Street, Baltimore,
Maryland 21202, or at such other time and/or place as the parties may agree.

3.2. The custodian for the Acquired Fund (the "Custodian") shall deliver
at the Closing a certificate of an authorized officer stating that: (a) the
Acquired Fund's assets have been delivered in proper form to the Acquiring Fund
on the Closing Date and (b) all necessary transfer taxes

EXHIBIT A

including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities.

3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the BT Trust or the MG Trust
shall be closed to trading or trading thereon shall be restricted or (b) trading
or the reporting of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the parties hereto is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.

3.4. The Acquired Fund shall deliver to the Acquiring Fund at the Closing
a list of the names, addresses, taxpayer identification numbers and backup
withholding and nonresident alien withholding status of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding full and
fractional shares owned by each such shareholder immediately prior to the
Closing, certified on behalf of the Acquired Fund by the President or a Vice
President of the MG Trust. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired
Fund's account on the Closing Date to the Secretary of the MG Trust on behalf of
the Acquired Fund, or provide evidence satisfactory to the Acquired Fund that
such Acquiring Fund Shares have been credited to the Acquired Fund's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.

4. REPRESENTATIONS AND WARRANTIES

4.1. The MG Trust and the Acquired Fund represent and warrant to the BT
Trust and the Acquiring Fund as follows:

(a) The Acquired Fund is a series of the MG Trust, which is a business
trust, validly existing and in good standing under the laws of the State of
Delaware and has the power to own all of its properties and assets and, subject
to approval by the shareholders of the Acquired Fund, to perform its obligations
under this Agreement. The Acquired Fund is not required to qualify to do
business in any jurisdiction in which it is not so qualified or where failure to
qualify would subject it to any material liability or disability. The Acquired
Fund has all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;

(b) The MG Trust is a registered open-end investment management company,
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), is in full force and effect;

(c) The MG Trust is not, and the execution, delivery and performance of
this Agreement with respect to the Acquired Fund will not result, in a material
violation of its Declaration of Trust or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking with respect to the Acquired
Fund to which the BT Trust is a party or by which it is bound;

(d) The MG Trust has no material contracts or other commitments (other
than this Agreement) with respect to the Acquired Fund that will be terminated
with liability to the MG Trust or to the Acquired Fund prior to the Closing
Date;

EXHIBIT A

(e) No material litigation or administrative proceeding or investigation
of the same, before any court or governmental body, is presently pending or, to
the best of its knowledge, threatened against the MG Trust with respect to the
Acquired Fund or any of the Acquired Fund's properties or assets, except as
previously disclosed in writing to, and acknowledged in writing by, the
Acquiring Fund. The MG Trust and the Acquired Fund know of no facts which might
form the basis for the institution of such proceedings and neither the MG Trust
nor the Acquired Fund is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or the MG Trust's ability to
consummate the transactions herein contemplated;

(f) The Statement of Assets and Liabilities of the Acquired Fund as of
October 31, 2000, has been audited by Pricewaterhouse LLP, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (copies of which have been furnished to
each of the other parties hereto) fairly reflects the financial condition of the
Acquired Fund as of such date, and there are no known contingent liabilities of
the Acquired Fund as of such date not disclosed therein;

(g) Since October 31, 2000, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date that such indebtedness was incurred, except as otherwise disclosed to
and accepted by each of the other parties hereto. For the purposes of this
subparagraph (g), a decline in net asset value per share of the Acquired Fund
shall not constitute a material adverse change;

(h) At the Closing Date, all federal and other tax returns and reports of
the Acquired Fund required by law then to have been filed by such dates shall
have been timely filed, and all federal and other taxes (whether or not shown as
due on such returns) shall have been paid so far as due, or provision shall have
been made for the payment thereof and, to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no assessment has been
asserted with respect to such returns;

(i) For each taxable year of its operations, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has elected to be treated as such and will
qualify and be treated as such for its final taxable year ending on the Closing
Date;

(j) For each taxable year of its operations, the Acquired Fund has met
the requirements of Section 851(g) of the Code for qualification and treatment
as a separate corporation and will qualify and be treated as such for its final
taxable year ending on the Closing Date;

(k) All issued and outstanding shares of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of the transfer agent as provided in paragraph 3.4. The
Acquired Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any shares of the Acquired Fund, nor is there
outstanding any security convertible into any shares of the Acquired Fund;

(l) At the Closing Date, the MG Trust with respect to the Acquired Fund
will have good and marketable title to the assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.1

EXHIBIT A

and full right, power and authority to sell, assign, transfer and deliver such
assets hereunder and, upon delivery and payment for such assets, the Acquiring
Fund will acquire good and marketable title thereto, subject to no restrictions
on the full transfer thereof, including such restrictions as might arise under
the Securities Act of 1933, as amended (the "1933 Act"), other than as disclosed
in writing to, and accepted in writing by, the Acquiring Fund;

(m) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the MG Trust's Board of
Trustees on behalf of the Acquired Fund, and, subject to the approval of the
Acquired Fund shareholders, assuming due authorization, execution and delivery
by the BT Trust on behalf of the Acquiring Fund, this Agreement will constitute
a valid and binding obligation of the MG Trust with respect to the Acquired
Fund, enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;

(n) The information to be furnished by the MG Trust on behalf of the
Acquired Fund for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto;

(o) The information to be included in the registration statement on Form
N-14 of the Acquiring Fund (the "Registration Statement") (other than
information therein that relates to the Acquiring Fund and supplied in writing
by the Acquiring Fund for inclusion therein) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading;

(p) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the MG Trust on
behalf of the Acquired Fund of the transactions contemplated by this Agreement;

(q) All of the issued and outstanding shares of beneficial interest of the
Acquired Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws, except as may have been previously
disclosed in writing to and accepted by the Acquiring Fund; and

(r) The prospectus of the Acquired Fund dated February 28, 2000, and any
amendments or supplements thereto, previously furnished to the Acquiring Fund,
does not contain any untrue statements of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not materially misleading; and

(s) To the best of their knowledge, after consulting with their
independent auditors, neither the MG Trust nor the Acquired Fund has taken or
agreed to take any action that would prevent the Reorganization from
constituting a transaction qualifying as a reorganization under Section 368(a)
of the Code.

4.2. The BT Trust and the Acquiring Fund represent and warrant to MG Trust
and the Acquired Fund as follows:

EXHIBIT A

(a) The Acquiring Fund is a series of the BT Trust, which is a business
trust, validly existing and in good standing under the laws of The Commonwealth
of Massachusetts and has the power to own all of its properties and assets and
to perform its obligations under this Agreement. The Acquiring Fund is not
required to qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material liability
or disability. The Acquiring Fund has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry on its
business as now being conducted;

(b) The BT Trust is a registered open-end investment management company,
and its registration with the Commission as an investment company under the
Investment Company Act is in full force and effect;

(c) The current prospectus of and statement of additional information of
the BT Trust on behalf of the Acquiring Fund conform in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;

(d) The BT Trust has, and at the Closing Date will have, good and
marketable title to the Acquiring Fund's assets;

(e) The BT Trust is not, and the execution, delivery and performance of
this Agreement on behalf of the Acquiring Fund will not result, in a material
violation of its Declaration of Trust or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking with respect to the Acquiring
Fund to which the BT Trust is a party or by which it is bound;

(f) No material litigation or administrative proceeding or investigation
of the same, before any court or governmental body, is presently pending or, to
the best of its knowledge, threatened against the BT Trust with respect to the
Acquiring Fund or any of the Acquiring Fund's properties or assets, except as
previously disclosed in writing to, and acknowledged in writing by, the Acquired
Fund. The BT Trust and the Acquiring Fund know of no facts which might form the
basis for the institution of such proceedings and neither the BT Trust nor the
Acquiring Fund is a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects the Acquiring Fund's business or the BT Trust's ability on behalf of the
Acquiring Fund to consummate the transactions contemplated herein;

(g) The Statement of Assets and Liabilities of the Acquiring Fund as of
September 30, 2000, has been audited by Pricewaterhouse Coopers, LLP independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (copies of which have been furnished to
each of the other parties hereto) fairly reflects the financial condition of the
Acquiring Fund as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date not disclosed therein;

(h) Since September 30, 2000, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date that such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquired Fund. For the purposes of this subparagraph (h),
a decline in net asset value per share of the Acquiring Fund shall not
constitute a material adverse change;

EXHIBIT A

(i) At the Closing Date, all federal and other tax returns and reports of
the Acquiring Fund required by law then to have been filed by such dates shall
have been timely filed, and all federal and other taxes (whether or not shown as
due on said returns and reports) shall have been paid so far as due, or
provision shall have been made for the payment thereof and, to the best of the
Acquiring Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;

(j) For each taxable year of its operations, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has elected to be treated as such and will
qualify and be treated as such on the Closing Date;

(k) For each taxable year of its operations, the Acquiring Fund has met the
requirements of Section 851(g) of the Code for qualification and treatment as a
separate corporation and will qualify and be treated as such for its final
taxable year ending on the Closing Date;

(l) At the date hereof, all issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any shares of the Acquiring Fund, nor is there outstanding any security
convertible into shares of the Acquiring Fund;

(m) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action, if any, on the part of the BT Trust's Board
of Trustees on behalf of the Acquiring Fund, and, assuming due authorization,
execution and delivery by the MG Trust on behalf of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the BT Trust on
behalf of the Acquiring Fund, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;

(n) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund shareholders, pursuant to the terms
of this Agreement, will at the Closing Date have been duly authorized and, when
so issued and delivered, will be duly and validly issued Acquiring Fund Shares
and will be fully paid and non-assessable;

(o) The information to be furnished by BT Trust on behalf of the Acquiring
Fund, for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations applicable
thereto;

(p) The information contained in the Registration Statement (other than
information therein that relates to the Acquired Fund and supplied in writing by
the Acquired Fund for inclusion therein) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading;

(q) The BT Trust, on behalf of the Acquiring Fund, agrees to use all
reasonable efforts to obtain the approvals and authorizations required by the
1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as it
may deem appropriate in order to continue the Acquiring Fund's operations after
the Closing Date;

EXHIBIT A

(r) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the BT Trust on
behalf of the Acquiring Fund of the transactions contemplated by this Agreement;

5. COVENANTS OF EACH OF THE PARTIES

5.1. The MG Trust, on behalf of the Acquired Fund, will operate its
business in the ordinary course between the date hereof and the Closing Date. It
is understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions and any other dividends and
distributions necessary or advisable (except to the extent distributions that
are not customary may be limited by representations made in connection with the
issuance of the tax opinion described in paragraph 7.6 hereof), in each case
payable either in cash or in additional shares. Explicit covenant for Acquired
Fund to declare and pay all undistributed distributions/dividends for its
current fiscal year.

5.2. The BT Trust, on behalf of the Acquiring Fund, will operate its
business in the ordinary course between the date hereof and the Closing Date. It
is understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions and any other dividends and
distributions necessary or advisable, in each case payable either in cash or in
additional shares.

5.3. This Agreement will have been approved by the affirmative vote of the
holders of the majority of the outstanding shares of the Acquired Fund. The MG
Trust will take all action necessary to obtain approval of the transactions
contemplated herein.

5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.

5.5. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.

5.6. Subject to the provisions of this Agreement, the MG Trust, on behalf
of the Acquired Fund, and the BT Trust, on behalf of the Acquiring Fund, each
will take, or cause to be taken, all action, and do or cause to be done, all
things reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.

5.7. The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date the Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date, which statement shall be prepared in accordance with generally
accepted accounting principles consistently applied and shall be certified by
the MG Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but
in any case within 60 days after the Closing Date, the Acquired Fund shall
furnish to the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for
federal income tax purposes, and of any capital loss carryovers and other items
that will be carried over to the Acquiring Fund as a result of Section 381 of
the Code, and which statement will be certified by the Treasurer of the MG
Trust.

5.8. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Registration Statement, in
compliance with the 1933 Act, the

EXHIBIT A

Securities Exchange Act of 1934 (the "1934 Act"), and the 1940 Act in connection
with the Acquired Fund's shareholders approval of this Agreement and the
transactions contemplated herein.

5.9 The Acquired Fund and the Acquiring Fund shall each use its best
reasonable efforts to cause the Reorganization to be treated as a reorganization
within the meaning of Section 368(a) of the Code.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND AND THE ACQUIRING
FUND

The obligations of each Fund to consummate the transactions provided for
herein shall be subject, at their election, to the performance by each Fund of
all of the obligations to be performed by them hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:

6.1. All representations and warranties made in this Agreement by or on
behalf of the Funds shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;

6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities showing the federal
income tax basis and holding periods as of the Closing Date, certified by MG
Trust's Treasurer or Assistant Treasurer on behalf of the Acquired Fund;

6.3 MG Trust on behalf of the Acquired Fund and BT Trust on behalf of the
Acquiring Fund shall have delivered to the Acquiring Fund and the Acquired Fund,
respectively, on the Closing Date a certificate executed in its name by its
President or Vice President and Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and the Acquired Funds,
respectively, and dated as of the Closing Date, to the effect that the
representations and warranties made in this Agreement by or on behalf of the
Acquired Fund and the Acquiring Fund, respectively, are true and correct at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement.

7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE PARTIES

If any of the conditions set forth below do not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:

7.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the MG Trust's
Declaration of Trust and By-laws and certified copies of the votes evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, no party hereto may waive the conditions set
forth in this paragraph 7.1;

7.2. On the Closing Date, no action, suit or other proceeding shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit,

EXHIBIT A

or obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein;

7.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including "no-
action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by either party hereto to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
any party hereto, provided that any party may for itself waive any of such
conditions;

7.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;

7.5. The Acquired Fund shall have distributed to its shareholders all of
its investment company taxable income, as defined in Section 852(b)(2) of the
Code (prior to reduction by any dividends paid deduction), and all of its net
capital gain, as such term is used in Section 852(b)(3)(C) of the Code, after
reduction by any capital loss carryforward, and all of the excess of (1) its
interest income excludable from gross income under Section 103(a) of the Code
over (2) the deductions disallowed under Sections 265 and 171(a)(2) of the Code,
in each case for its taxable year ending on the Closing Date.

7.6. The parties shall have received a favorable written opinion of
Willkie Farr & Gallagher, addressed to the BT Trust and the MG Trust with
respect to the relevant Fund and satisfactory to Daniel O. Hirsch, as Secretary
of the Acquired Fund and the Acquiring Fund, substantially to the effect that
for federal income tax purposes:

(a) The acquisition by the Acquiring Fund of all of the assets of each
class of shares of the Acquired Fund solely in exchange for the issuance of
Acquiring Fund Shares to the Acquired Fund and the assumption of certain
scheduled Acquired Fund liabilities by the Acquiring Fund, followed by the
distribution by the Acquired Fund, in liquidation of the Acquired Fund, of
Acquiring Fund Shares to the Acquired Fund shareholders in exchange for their
Acquired Fund shares of beneficial interest and the termination of the Acquired
Fund, will constitute a reorganization within the meaning of Section 368(a) of
the Code, and the Acquired Fund and the Acquiring Fund will each be "a party to
a reorganization" within the meaning of Section 368(b) of the Code;

(b) No gain or loss will be recognized by the Acquired Fund upon (i) the
transfer of all of its assets to the Acquiring Fund solely in exchange for the
issuance of Acquiring Fund Shares to the Acquired Fund and the assumption of
certain scheduled Acquired Fund liabilities by the Acquiring Fund and (ii) the
distribution by the Acquired Fund of such Acquiring Fund Shares to the Acquired
Fund shareholders;

(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the issuance
of Acquiring Fund Shares to the Acquired Fund and the assumption of certain
scheduled Acquired Fund liabilities by the Acquiring Fund;

EXHIBIT A

(d) The basis of the assets of the Acquired Fund acquired by the Acquiring
Fund will be, in each instance, the same as the basis of those assets in the
hands of the Acquired Fund immediately prior to the transfer;

(e) The tax holding period of the assets of the Acquired Fund in the hands
of the Acquiring Fund will, in each instance, include Acquired Fund's tax
holding period for those assets;

(f) The Acquired Fund shareholders will not recognize gain or loss upon
the exchange of all of their shares of beneficial interest in the Acquired Fund
solely for Acquiring Fund Shares as part of the transaction;

(g) The basis of the Acquiring Fund Shares received by each Acquired Fund
shareholder in the transaction will be the same as the basis of the shares of
beneficial interest of the Acquired Fund surrendered in exchange therefor; and

(h) The tax holding period of the Acquiring Fund Shares received by each
Acquired Fund shareholder will include the tax holding period for the shares of
beneficial interest in the Acquired Fund surrendered in exchange therefor,
provided that such Acquired Fund shares were held as capital assets on the date
of the exchange.

(i) No gain or loss will be recognized by the Acquiring Fund upon its
contribution of the assets of the Acquired Fund to the Small Cap Portfolio
solely in exchange for an interest in the Small Cap Portfolio;

(j) No gain or loss will be recognized by the Small Cap Portfolio upon the
contribution by the Acquiring Fund of the assets of the Acquired Fund to
the Small Cap Portfolio solely in exchange for an interest in the Small Cap
Portfolio;

(k) The basis of the Small Cap Portfolio in the assets of the Acquired
Fund contributed to the Small Cap Portfolio by the Acquiring Fund will be, in
each instance, the same as the basis of those assets in the hands of the
Acquiring Fund immediately prior to such contribution;

(l) The tax holding period of the Small Cap Portfolio with respect to the
assets of the Acquired Fund contributed by the Acquiring Fund to the Small
Cap Portfolio will, in each instance, include the Acquired Fund's and the
Acquiring Fund's tax holding periods for such assets;

(m) The basis of the interest in the Small Cap Portfolio acquired by the
Acquiring Fund as a result of its contribution to the Small Cap Portfolio of the
assets of the Acquired Fund will be the same as the Acquiring Fund's basis in
such assets; and

(n) The tax holding period of the Acquiring Fund with respect to its
interest in the Small Cap Portfolio will include the Acquired Fund's and the
Acquiring Fund's tax holding periods for the assets of the Acquired Fund
contributed to the Small Cap Portfolio by the Acquiring Fund.

Notwithstanding anything herein to the contrary, no party hereto may waive
in any material respect the conditions set forth in this paragraph 7.6.

7.7 Each of the Acquiring Fund and the Acquired Fund agrees to make and
provide representations with respect to itself and its shareholders that are
reasonably necessary to enable Willkie Farr & Gallagher to deliver an opinion
substantially as set forth in paragraph 7.6.

EXHIBIT A

8. BROKERAGE FEES AND EXPENSES

8.1. Each party hereto represents and warrants to each other party hereto,
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.

8.2. Each party will bear its own expenses in connection with the
transaction, except that DeAM, Inc. will pay certain expenses incurred in
connection with the Reorganization.

8.3 Shareholders of each of Acquired Fund and Acquiring Fund will bear
their respective expenses, if any, in connection with the transaction.

9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

9.1. The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein or referred to in paragraphs 4.1, 4.2,
5.1 and 5.2 through 5.8 hereof and that this Agreement constitutes the entire
agreement between the parties.

9.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.

10. TERMINATION

10.1. This Agreement may be terminated at any time prior to the Closing
Date by: (a) the mutual agreement of the MG Trust on behalf of the Acquired
Fund and the BT Trust on behalf of the Acquiring Fund; (b) any party in the
event that the other party hereto shall materially breach any representation,
warranty or agreement contained herein to be performed at or prior to the
Closing Date; or (c) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.

10.2. In the event of any such termination, there shall be no liability
for damages on the part of any party hereto or their respective Trustees or
officers to any other party, but each shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement.

11. AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the MG
Trust on behalf of the Acquired Fund and the BT Trust on behalf of the Acquiring
Fund; provided, however, that following the meeting of the Acquired Fund
shareholders called by the MG Trust pursuant to paragraph 5.3 of this Agreement,
no such amendment may have the effect of changing the provisions for determining
the number of the Acquiring Fund Shares to be issued to the Acquired Fund
shareholders under this Agreement to the detriment of such shareholders without
their further approval.

12. NOTICES

Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail

EXHIBIT A

addressed to the MG Trust on behalf of the Acquired Fund and the BT Trust on
behalf of the Acquiring Fund at One South Street, Baltimore, MD 21202.

13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY

13.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.

13.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.

13.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.

13.5. It is expressly agreed that the obligations of the BT Trust and the
MG Trust shall not be binding upon any of their respective Trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
the trust property of the BT Trust or the MG Trust, as the case may be, as
provided in the trust instruments of the BT Trust and the MG Trust,
respectively. The execution and delivery of this Agreement have been authorized
by the Trustees of each of the BT Trust and the MG Trust, and this Agreement has
been executed by authorized officers of the BT Trust and the MG Trust on behalf
of the Acquired Fund and the Acquiring Fund, respectively, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officers shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the trust
property of the BT Trust and the MG Trust, as the case may be, as provided in
the Declaration of Trust of the BT Trust and the MG Trust, respectively.

EXHIBIT A

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and attested by its Secretary or
Assistant Secretary.

Attest: BT INVESTMENT FUNDS on behalf of

SMALL CAP

By: __________________________ By: ______________________________

Name: Daniel O. Hirsch

Title: Secretary Name: ______________________________

Title: ______________________________

Attest: MORGAN GRENFELL INVESTMENT TRUST

on behalf of SMALLER COMPANIES

By: __________________________ By: ________________________________

Name: Daniel O. Hirsch

Title: Secretary Name: _______________________________

Title: _____________________________

FORM OF PROXY CARD
MORGAN GRENFELL INVESTMENT TRUST
SMALLER COMPANIES FUND
One South Street, Baltimore, Maryland
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
11:00 A.M., Eastern Time, on Thursday, May 24, 2001

The undersigned hereby appoints [ ] and [ ] to each of them, with full
power of substitution as proxies of the undersigned to vote all shares of stock
that the undersigned is entitled in any capacity to vote at the above-stated
special meeting, and any and all adjournments or postponements thereof (the
"Special Meeting"), on the matters set forth on this Proxy Card, and, in their
discretion, upon all matters incident to the conduct of the Special Meeting and
upon such other matters as may properly be brought before the Special Meeting.
This proxy revokes all prior proxies given by the undersigned.

All properly executed proxies will be voted as directed. If no instructions are
indicated on a properly executed proxy, the proxy will be voted FOR approval of
Proposal I. All ABSTAIN votes will be counted only in determining the existence
of a quorum at the Special Meeting.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO THE
SMALLER COMPANIES FUND. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" PROPOSAL
I.

The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournment thereof.

Receipt of the notice and the Proxy Statement, dated April 30, 2001 (the "Proxy
Statement"), is hereby acknowledged.

To vote by Telephone

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-[ ]
3) Enter the 12-digit control number set forth on the Proxy card and follow the
instructions.

To vote by Internet

1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to the Website www.proxyvote.com
-----------------
3) Enter the 12-digit control number set forth on the Proxy card and follow the
instructions.

Please mark boxes in blue or black ink.

I. Approval of Agreement and Plan of Reorganization between the Institutional
and Investment shares of Smaller Companies Fund and Small Cap Fund,
pursuant to which: (a) the Smaller Companies Fund would transfer all of its
assets to Small Cap Fund in exchange for Small Cap Fund's assumption of
Smaller Companies Fund's liabilities and the issuance of shares of Small
Cap Fund to be distributed pro rata to Institutional and Investment shares
of Smaller Companies Fund, and (b) Smaller Companies Fund would be
terminated.

FOR AGAINST ABSTAIN

________________________________________________________________________________
PLEASE SIGN AND DATE BELOW AND MAIL THIS PROXY CARD PROMPLY USING THE ENCLOSED
ENVELOPE.

_____________________________________________
(Title or Authority)

_____________________________________________
(Signature)

Dated: [____________________________], 2001
(Joint owners should EACH sign. Please sign
EXACTLY as your name(s) appears on this card.
When signing as attorney, trustee, executor,
administrator, guardian or corporate officer,
please give your FULL title below.)

________________________________________________________________________________
YOUR VOTE IS IMPORTANT, PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

SMALL CAP FUND

STATEMENT OF ADDITIONAL INFORMATION

April 30, 2001

This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Small Cap Fund,
dated January 29, 2001. This statement of additional information should be read
in conjunction with the prospectus.

Additional copies of the prospectus may be obtained by writing to the Fund at
P.O. Box 219210, Kansas City, MO, 64121-9210 or by telephoning the Fund toll
free at 1-800-730-1313.

This statement of additional information is accompanied by and incorporated by
reference into the statement of additional information dated January 29, 2001 of
BT Investment Funds on behalf of the Small Cap Fund, and the statement of
additional information dated February 28, 2001, of Morgan Grenfell Investment
Trust on behalf of seven separate investment portfolios of the Trust, including
Smaller Companies Fund. Small Cap Fund and Smaller Companies Fund are referred
to collectively as the "Funds".

ADDITIONAL INFORMATION ABOUT

SMALL CAP FUND AND
SMALLER COMPANIES FUND

The following table shows where in each Fund's statement of additional
information (SAI) you can find additional information about each Fund.

- ---------------------------------------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- ---------------------------------------------------------------------------------------------------------------

MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 29, 2001
SAI dated February 28, 2001
- ---------------------------------------------------------------------------------------------------------------
Fund history GENERAL INFORMATION ORGANIZATION OF THE TRUST
ABOUT THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Description of each Fund and ADDITIONAL INFORMATION INVESTMENT OBJECTIVES,
its investments, strategies, ON FUND INVESTMENTS AND POLICIES AND RESTRICTIONS:
polices and risks STRATEGIES AND RELATED Investment Objectives
RISKS Investment Policies
Additional Risk Factors
INVESTMENT RESTRICTIONS Investment Restrictions
- ---------------------------------------------------------------------------------------------------------------
Management of the Funds, TRUSTEES AND OFFICERS MANAGEMENT OF THE TRUST
including the Board of Trustees, AND THE PORTFOLIOS:
Officers and Trustee compensation Trustees of the Trust and Portfolios
Officers of the Trust and Portfolios
Trustee Compensation Table
- ---------------------------------------------------------------------------------------------------------------
Control persons, principal TRUSTEES AND OFFICERS MANAGEMENT OF THE TRUST
holders of securities and AND THE PORTFOLIOS:
management ownership GENERAL INFORMATION Trustee Compensation Table
ABOUT THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Investment advisory and other INVESTMENT ADVISORY MANAGEMENT OF THE TRUST
services: investment adviser, AND OTHER SERVICES AND THE PORTFOLIOS:
distributor and other service Investment Adviser
providers SERVICE PLAN Administrator
Distributor
ADDITIONAL INFORMATION Service Agent
Custodian and Transfer Agent
Counsel and Independent
Accountants
- ---------------------------------------------------------------------------------------------------------------
Brokerage allocation and other PORTFOLIO TRANSACTIONS INVESTMENT OBJECTIVES,
practices POLICIES AND RESTRICTIONS:
Portfolio Transactions and
Brokerage Commissions
- ---------------------------------------------------------------------------------------------------------------
Shares of beneficial interest GENERAL INFORMATION ORGANIZATION OF THE TRUST
ABOUT THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Purchase, redemption and pricing PURCHASE AND REDEMPTION VALUATION OF SECURITIES;
of shares OF SHARES REDEMPTIONS AND PURCHASES IN-IN-KIND:
Purchase of Shares
Redemption of Shares
Redemptions and Purchases In-
Kind
Trading in Foreign Securities
- ---------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- ----------------------------------------------------------------------------------------------------------------

MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 29, 2001
SAI dated February 28, 2001
- ----------------------------------------------------------------------------------------------------------------
Taxation of the Funds TAXES TAXATION:
Dividends and Distributions
Taxation of the Fund
Taxation of the Portfolio
Foreign Securities
Other Taxation
- ----------------------------------------------------------------------------------------------------------------
Calculation of performance data PERFORMANCE INFORMATION PERFORMANCE INFORMATION:
Standard Performance Information
Comparison of Fund Performance
Economic and Market Information
- ----------------------------------------------------------------------------------------------------------------
Financial statements FINANCIAL STATEMENTS: FINANCIAL STATEMENTS:
This section incorporates by This section incorporates by
reference Morgan Grenfell reference Small Cap Fund's annual
Investment Trust's annual report report dated September 30, 2000.
dated October 31, 2000.
- ----------------------------------------------------------------------------------------------------------------

[Deutsche Asset Management logo]

Mutual Fund
Prospectus

January 29, 2001
Investment Class
Small Cap Fund

[Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.]

A Member of the
Deutsche Bank Group /

Overview
- --------------------------------------------------------------------------------

of Small Cap Fund ("Small Cap")

- --Investment Class

Goal: The Fund invests for long-term capital growth.

Core Strategy: The Fund invests primarily in stocks and other equity securities
of smaller US companies.

INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment goal as the Fund. The Fund, through the master portfolio, seeks to
achieve that goal by investing in stocks and other equity securities of
companies with small market capitalizations. In managing the Fund, we use a
"bottom-up' approach to picking securities. This approach focuses on individual
stock selection rather than industry selection. The Fund's portfolio management
team uses an active investment process to evaluate individual growth prospects.
- --------------------------------------------------------------------------------

Small Cap--Investment Class

Overview of Small Cap

Goal................................................................ 3
Core Strategy....................................................... 3
Investment Policies and Strategies.................................. 3
Principal Risks of Investing in the Fund............................ 4
Who Should Consider Investing in the Fund........................... 4
Total Returns, After Fees and Expenses.............................. 5
Annual Fund Operating Expenses...................................... 6

A Detailed Look at Small Cap

Objective........................................................... 7
Strategy............................................................ 7
Principal Investments............................................... 7
Investment Process.................................................. 7
Risks............................................................... 8
Management of the Fund.............................................. 8

Calculating the Fund's Share Price.................................. 10
Performance Information............................................. 10
Dividends and Distributions......................................... 10
Tax Considerations.................................................. 10
Buying and Selling Fund Shares ..................................... 10
Financial Highlights................................................ 14

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

Overview of Small Cap--Investment Class

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

. stocks that we have selected could perform poorly;

. small company stock returns could trail stock market returns generally
because of the liquidity risks specific to small company investing: greater
share-price volatility and fewer buyers for small company shares in periods
of economic or stock market stress. Such lack of liquidity may accelerate a
prevailing downward price trend and limit the Fund's ability to exit from an
unsuccessful investment;

. the stock market could decline or could underperform other investments;

. adverse political, economic or social developments could undermine the value
of the Fund's investments or prevent the Fund from realizing their value.
Foreign securities markets are often less liquid, more volatile and subject
to less government regulation than US securities markets. These risks are
higher for securities of issuers located in the emerging markets in which the
Fund invests; or

. the currency of a country in which the Fund invests may decrease in value
relative to the US dollar, which could affect the value of the investment to
US investors.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are seeking long-term capital
growth. There is, of course, no guarantee that the Fund will realize its goal.
Moreover, you should be willing to accept greater short-term fluctuation in the
value of your investment than you would typically experience investing in bond
or money market funds.

You should not consider investing in the Fund if you are pursuing a short-term
financial goal, if you seek regular income or if you cannot tolerate
fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in large company and medium-sized company stocks.
Diversifying your investments may improve your long-run investment return and
lower the volatility of your overall investment portfolio.

At meetings held on September 8, 1999 and September 13, 2000, the Board of
Trustees of the Small Cap recommended the reorganization of Smaller Companies
(formerly Morgan Grenfell Smaller Companies Fund) into Small Cap. The Board
determined that the proposal was in the best interest of shareholders because
both funds have the same investment management team and the reorganization is
expected to eliminate or reduce costs associated with maintaining multiple
funds with similar objectives and policies, including costs of separate
auditing, printing, and registering fees. The fund has filed an exemptive
application with the Securities and Exchange Commission (the "SEC') to permit
this proposed reorganization. Although we believe the SEC will grant this
request, there is no assurance that it will do so. The merger also requires the
approval of Smaller Companies' shareholders. A special meeting of shareholders
will be held for this purpose. In conclusion, if shareholders approve the
merger, shares of Smaller Companies will be converted to shares of Small Cap.

An investment in Small Cap--Investment Class is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
- --------------------------------------------------------------------------------

Overview of Small Cap--Investment Class

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for each
full calendar year since the Fund began selling shares on October 21, 1993 (its
inception date). The table compares the Fund's average annual return with the
Russell 2000 Index over the last one and five years, and since inception. The
Index is a passive measure of stock market returns. It does not factor in the
costs of buying, selling and holding stocks--costs that are reflected in the
Fund's results.
- --------------------------------------------------------------------------------
The Russell 2000 Index is an unmanaged domestic equity securities index
representing the performance of the 2,000 smallest companies of the Russell
3000 Index. The Russell 3000 Index measures the performance of the 3,000
largest US companies based on total market capitalization. The Russell 3000
represents approximately 98% of the investable US equity market. The Russell
2000 Index is a widely accepted benchmark of US small capitalization company
performance. It is a model, not an actual portfolio.

[GRAPH]

YEAR-BY-YEAR RETURNS
(each full calendar year since inception)

1994 19.31%
1995 58.57%
1996 6.90%
1997 13.16%
1998 6.15%
1999 44.75%
2000 10.28%

Since inception, the Fund's highest return in any calendar quarter was 30.11%
(third quarter 1997) and its lowest quarterly return was -24.39% (third quarter
1998). Past performance offers no indication of how the Fund will perform in the
future.

PERFORMANCE FOR PERIODS ENDED DECEMBER 31, 2000

Average Annual Returns
Since Inception
1 Year 5 Years (Oct. 21, 1993)/1/

Small Cap--
Investment Class 10.28% 15.44% 21.48%
-----------------------------------------------------------------------------------
Russell 2000
Index (3.02)% 10.31% 10.61%
-----------------------------------------------------------------------------------

/1/ The Russell 2000 Index is calculated from October 31, 1993.

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

Overview of Small Cap--Investment Class

ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table to the right describes the fees and expenses
you may pay if you buy and hold shares of the Fund.

Expense Example. This example illustrates the expenses you would have incurred
on a $10,000 investment in the Fund. It assumes that the Fund earned an annual
return of 5% over the periods shown, that the Fund's operating expenses
remained the same and you sold your shares at the end of the period.

You may use this hypothetical example to compare the Fund's expense history
with other funds. Your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
/1/Information on the annual operating expenses reflects the expenses of both
the Fund and the Small Cap Portfolio, the master portfolio into which the Fund
invests all of its assets. (A further discussion of the relationship between
the Fund and the master portfolio appears in the "Organizational Structure'
section of this prospectus).

/2/The investment adviser and administrator have agreed for the 16 months from
the Fund's fiscal year end of September 30, 2000, to waive their fees or
reimburse expenses so that total expenses will not exceed 1.25%.

/3/For the first 12 months, the expense example takes into account the fee
waivers and reimbursements.

ANNUAL FEES AND EXPENSES
Percent of Average
Daily Net Assets/1/

Management Fees 0.65%
-------------------------------------------------------------------------
Distribution and Service
(12b-1) Fees None
-------------------------------------------------------------------------
Other Expenses 0.79%
-------------------------------------------------------------------------
Total Fund Operating
Expenses 1.44%
-------------------------------------------------------------------------
Less: Fee Waivers or
Expense Reimbursements (0.19)%/2/
-------------------------------------------------------------------------
Net Expenses 1.25%
-------------------------------------------------------------------------

EXPENSE EXAMPLE/3/

1 Year 3 Years 5 Years 10 Years

$127 $437 $769 $1,708
-----------------------------------------------------------------------------

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

A detailed look
- --------------------------------------------------------------------------------
at Small Cap--Investment Class

OBJECTIVE

Small Cap--Investment Class seeks long-term capital growth.

The Fund invests for capital growth, not income; any dividend or interest
income is incidental to the pursuit of its goal. While we give priority to
capital growth, we cannot offer any assurance of achieving this goal. The
Fund's goal is not a fundamental policy. We must notify shareholders before we
change it, but we do not require their approval to do so.

STRATEGY

The Fund invests primarily in equity securities of US smaller capitalization
companies. We focus on individual security selection rather than industry
selection. In managing the Fund, we use a "bottom-up' approach in selecting
securities. The Fund's portfolio management team uses an active investment
process to evaluate company growth prospects and competitive strategies. Each
portfolio manager has specific sector responsibilities with investment
discretion over the securities within their sectors.

PRINCIPAL INVESTMENTS

Under normal circumstances, the Fund invests at least 65% of its total assets
in the equity securities of US smaller capitalization companies. The investment
adviser defines the small capitalization equity securities universe as the
bottom 20% of the total domestic equity market capitalization (at the time of
investment), using a minimum market capitalization of $10 million.

The Fund may also invest up to 25% of its assets in the stocks of non-US
companies and up to 35% of its assets in large capitalization stocks. Under
normal conditions, these two tactics would not comprise major elements of its
strategy.
- --------------------------------------------------------------------------------
"Market capitalization' or "Market cap' provides an estimate of a company's
value. It is calculated by multiplying the total number of a company's
outstanding shares by the share's current price.

INVESTMENT PROCESS

Company research lies at the heart of our investment process. We use a "bottom-
up' approach to picking securities. This approach focuses on individual stock
selection.

. The team focuses on stocks with superior growth prospects and above average
near-to-intermediate term performance potential.

. The team emphasizes individual selection of smaller stocks across all
economic sectors, early in their growth cycles and with the potential to be
the blue chips of the future.

. The team generally seeks companies with a leading or dominant position in
their niche markets, a high rate of return on invested capital and the
ability to finance a major part of future growth from internal sources.

. The team screens the bottom 20% of the total domestic equity market
capitalization utilizing specific criteria for each individual sector.

The team looks primarily for financial attributes that set these companies
apart:

. estimated above-average growth in revenues and earnings; and

. a balance sheet that can support this growth potential with sufficient
working capital and manageable levels of debt.

Historically, this Fund has had a high portfolio turnover rate.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
stock market events. We may invest up to 100% of the Fund's assets in the
common stock of larger companies, in fixed-income securities, or short-term
money market securities. To the extent we adopt such a position and over the
course of its duration, the Fund may not meet its goal of long-term capital
growth.
- --------------------------------------------------------------------------------

Portfolio Turnover. The portfolio turnover rate measures the frequency that the
master portfolio sells and replaces the securities it holds within a given
period. High turnover can increase the Fund's transaction costs, thereby
lowering its returns. It may also increase your tax liability.
- --------------------------------------------------------------------------------

A Detailed Look at Small Cap--Investment Class

RISKS

Below we set forth some of the prominent risks associated with investing in
small companies, as well as investing in general. Although we attempt to assess
the likelihood that these risks may actually occur and to limit them, we make
no guarantee that we will succeed.

Primary Risks

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities an investor has selected will not perform to expectations. To
minimize this risk, we monitor each of the stocks in the Fund for the following
signs of negative change:

. decelerating revenue or earnings growth;

. loss of market share;

. increasing levels of debt or decreasing levels of cash flow and working
capital; and

. a stock price that lags behind competitors'.

Small Company Risk. Small company stocks tend to experience steeper price
fluctuations--down as well as up--than the stocks of larger companies. A
shortage of reliable information--the same information gap that creates
opportunity--can also pose added risk. Industrywide reversals have had a
greater impact on small companies, since they lack a large company's financial
resources. Finally, small company stocks are typically less liquid than large
company stocks: when things are going poorly, it is harder to find a buyer for
a small company's shares.

Foreign Investment Risk. To the extent that the Fund holds the stocks of
companies based outside the United States, it faces the risks inherent in
foreign investing. Adverse political, economic or social developments could
undermine the value of the Fund's investments or prevent the Fund from
realizing their full value. Financial reporting standards for companies based
in foreign markets differ from those in the United States. Since the "numbers'
themselves sometimes mean different things, we devote much of our research
effort to understanding and assessing the impact of these differences upon a
company's financial condition. Finally, the currency of the country in which
the Fund has invested could decline relative to the value of the US dollar,
which would decrease the value of the investment to US investors.

Secondary Risks

Pricing Risk. When price quotations for securities are not readily available,
we determine their value by the method that most accurately reflects their
current worth in the judgment of the Board of Trustees. This procedure implies
an unavoidable risk, the risk that our prices are higher or lower than the
prices that the securities might actually command if we sold them. If we have
valued the securities too highly, you may end up paying too much for Fund
shares when you buy. If we underestimate their price, you may not receive the
full market value for your Fund shares when you sell.

MANAGEMENT OF THE FUND

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Funds Management, Bankers Trust
Company, DB Alex Brown LLC, Deutsche Asset Management, Inc., and Deutsche Asset
Management Investment Services Limited.

Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
of the Fund's activities on their behalf.

Investment Adviser. Under the supervision of the Board of Trustees, Bankers
Trust Company ("Bankers Trust'), with headquarters at 130 Liberty Street, New
York, NY 10006, acts as the Fund's investment adviser. Bankers Trust is an
indirect wholly-owned subsidiary of Deutsche Bank AG. As investment adviser,
Bankers Trust makes the Fund's investment decisions. It buys and sells
securities for the Fund and conducts the research that leads to the purchase
and sale decisions. The investment adviser received a fee of 0.65% of the
Fund's average daily net assets for its services in the last fiscal year. The
investment adviser reimbursed a portion of its fee during the period.

As of September 30, 2000, Bankers Trust had total assets under management of
approximately $190 billion. Bankers Trust is dedicated to servicing the needs
of corporations, governments, financial institutions, and private clients and
has invested retirement assets on behalf of the nation's largest corporations
and institutions for more than 50 years. The scope of the firm's capability is
broad: it is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets worldwide.

At a special meeting of shareholders held in 1999, shareholders of the Fund
approved a new investment advisory agreement with Deutsche Asset Management,
Inc. (formerly Morgan
- --------------------------------------------------------------------------------

A Detailed Look at Small Cap--Investment Class

Grenfell Inc.). The new investment advisory agreement may be implemented within
two years of the date of the special meeting upon approval of a majority of the
members of the Board of Trustees who are not "interested persons,' generally
referred to as independent trustees. Shareholders of the Fund also approved a
new sub-investment advisory agreement among the Trust, Deutsche Asset
Management, Inc. and Bankers Trust under which Bankers Trust may perform
certain of Deutsche Asset Management, Inc.'s responsibilities, at Deutsche
Asset Management, Inc.'s expense, upon approval of the independent trustees,
within two years of the date of the special meeting. Under the new investment
advisory agreement and new sub-advisory agreement, the compensation paid and
the services provided would be the same as those under the existing advisory
agreement with Bankers Trust.

Deutsche Asset Management, Inc. is located at 130 Liberty Street, New York, New
York 10006. The firm provides a full range of investment advisory services to
institutional clients. It serves as investment adviser to nine other investment
companies.

Portfolio Managers

The following portfolio managers are responsible for the day-to-day management
of the master portfolio's investments:

Audrey M. T. Jones, CFA

. Managing Director of the investment adviser and Lead Manager of the Fund.

. Joined Bankers Trust in 1986 and the Fund at its inception.

. Portfolio manager with a primary focus on the credit sensitive, communication
services, energy, process industries and transportation sectors.

. 29 years of investment industry experience.

. BBA from Pace University Lubin School of Business.

John P. Callaghan

. Managing Director of the investment adviser and Co-Manager of the Fund.

. Joined Bankers Trust in 1997.

. Portfolio manager with a primary focus on the technology, health care and
utility sectors.

. Previously at Odyssey Partners, a private investment partnership, from 1996
to 1997 and was a co-manager of the Small Capitalization Growth stock
Division at Weiss, Peck & Greer from 1993 to 1996.

. 18 years of investment industry experience.

. MBA from Harvard Business School.

Doris R. Klug, CFA

. Director of the investment adviser and Co-Manager of the Fund.

. Joined the Bankers Trust in 2000.

. Portfolio manager with primary focus on the consumer and capital goods
sector.

. Vice President of Mutual of America from 1993 to 2000.

. 19 years of investment industry experience.

. MBA from New York University's Stern School of Business.

Other Services. Bankers Trust provides the administrative services--such as
portfolio accounting, legal services and others--for the Fund. In addition,
Bankers Trust--or your service agent--performs the functions necessary to
establish and maintain your account. In addition to setting up the account and
processing your purchase and sale orders, these functions include:

. keeping accurate, up-to-date records for your individual Fund account;

. implementing any changes you wish to make in your account information;

. processing your request for cash dividends and distributions from the Fund;

. answering your questions on the Fund's investment performance or
administration;

. sending proxy reports and updated prospectus information to you; and

. collecting your executed proxies.

Service agents include brokers, financial advisors or any other bank, dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust. Service agents may charge additional fees to investors only for those
services not otherwise included in the Bankers Trust servicing agreement, such
as cash management, or special trust or retirement-investment reporting.

Organizational Structure. The Fund is a "feeder fund' that invests all of its
assets in a "master portfolio,' the Small Cap Portfolio. The Fund and its
master portfolio have the same investment objective. The master portfolio is
advised by Bankers Trust, an indirect wholly-owned subsidiary of Deutsche Bank
AG.

The master portfolio may accept investments from other feeder funds. The
feeders bear the master portfolio's expenses in proportion to their assets.
Each feeder can set its own
- --------------------------------------------------------------------------------

A Detailed Look at Small Cap--Investment Class

transaction minimums, fund-specific expenses, and other conditions. This
arrangement allows the Fund's Trustees to withdraw the Fund's assets from the
master portfolio if they believe doing so is in the shareholders' best
interests. If the Trustees withdraw the Fund's assets, they would then consider
whether the Fund should hire its own investment adviser, invest in a different
master portfolio, or take other action.

CALCULATING THE FUND'S SHARE PRICE

We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value' or "NAV') in accordance with the standard formula for valuing mutual
fund shares at the close of regular trading on the New York Stock Exchange
every day the Exchange is open for business.

The formula calls for deducting all of the Fund's liabilities from the total
value of its assets--the market value of the securities it holds, plus its cash
reserves--and dividing the result by the number of shares outstanding. (Note
that prices for securities that trade on foreign exchanges can change
significantly on days when the New York Stock Exchange is closed and you cannot
buy or sell Fund shares. Price changes in the securities the Fund owns may
ultimately affect the price of Fund shares the next time NAV is calculated.)

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotes for a particular security are not
readily available, we determine their value by the method that most accurately
reflects their current worth in the judgment of the Board of Trustees. You can
find the Fund's daily share price in the mutual fund listings of most major
newspapers.

PERFORMANCE INFORMATION

The Fund's performance can be used in advertisements that appear in various
publications. It may be compared to the performance of various indexes and
investments for which reliable performance data is available. The Fund's
performance may also be compared to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
- --------------------------------------------------------------------------------
The Exchange is open every week, Monday through Friday, except when the
following holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day
(the third Monday in January), Presidents' Day (the third Monday in February),
Good Friday, Memorial Day (the last Monday in May), Independence Day (July
4th), Labor Day (the first Monday in September), Thanksgiving Day (the fourth
Thursday in November) and Christmas Day.

DIVIDENDS AND DISTRIBUTIONS

Dividends and capital gains distributions, if any, are paid at least annually.
We automatically reinvest all dividends and any capital gains, unless you elect
to receive your distributions in cash.

TAX CONSIDERATIONS

The Fund does not ordinarily pay any US federal income tax. If you are a
taxable shareholder, you and other shareholders pay taxes on the income or
capital gains earned and distributed by the Fund. Your taxes will vary from
year to year, based on the amount of capital gains distributions and dividends
paid out by the Fund. You owe the taxes whether you receive cash or choose to
have distributions and dividends reinvested. Distributions and dividends
usually create the following tax liability:

TRANSACTION TAX STATUS

Income dividends Ordinary income
-----------------------------------------------------------------------------
Short-term capital gains Distributions Ordinary income
-----------------------------------------------------------------------------
Long-term capital gains Distributions Capital gains
-----------------------------------------------------------------------------

Every year your Fund will send you information on the distributions for the
previous year. In addition, if you sell your Fund shares you may have a capital
gain or loss.

TRANSACTION TAX STATUS

Your sale of shares owned Capital gains or losses
more than one year
-----------------------------------------------------------------------------
Your sale of shares owned for Gains treated as ordinary
one year or less income; losses subject to
special rules
-----------------------------------------------------------------------------

The tax considerations for tax deferred accounts, non-taxable entities, and
foreign investors may be different.

Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor before
investing.

BUYING AND SELLING FUND SHARES

How to contact Deutsche Asset Management Service Center:

By Phone: 1-800-730-1313
By Mail: Deutsche Asset Management
Service Center
P.O. Box 219210
Kansas City, MO 64121-9210

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

A Detailed Look at Small Cap--Investment Class

By Overnight Mail: Deutsche Asset Management
Service Center
210 West 10th Street, 8th
floor
Kansas City, MO 64105-1716

Our representatives are available to assist you personally Monday through
Friday, 9:00 a.m. to 7:00 p.m., Eastern time each day the New York Stock
Exchange is open for business. You can reach the Service Center's automated
assistance line 24 hours a day, 7 days a week.

Minimum Account Investments

Initial purchase: Minimum amount:
A standard account $2,500
A retirement account $ 500
An automatic investment plan
account $1,000
Subsequent purchase:
A standard account $ 250
A retirement account $ 100
An automatic investment plan
account $ 100
Account balance:
Non-retirement account $1,000
Retirement account None

Retirement account minimums only apply to retirement accounts opened directly
with the Fund's transfer agent. Retirement accounts opened through service
agents may have different investment minimums.
The Fund and its service providers reserve the right to, from time to time in
their discretion, waive or reduce the investment minimums. Shares of the Fund
may be purchased without regard to the investment minimums by employees of
Deutsche Bank AG, any of its affiliates or subsidiaries, their spouses and
minor children, and Directors or Trustees of any investment company advised or
administered by Deutsche Bank AG or any of its affiliates or subsidiaries,
their spouses and minor children.

How to Open Your Fund Account:

By Mail: Complete and sign the account
application that accompanies this
prospectus. (You may obtain
additional applications by calling
the Service Center.) Mail the
completed application along with a
check payable to Small Cap--
Investment Class--1698 to the
Deutsche Asset Management Service
Center. The addresses are shown
under "How to contact Deutsche
Asset Management Service Center.'
By Wire: Call the Service Center to set up
a wire account.

Please note that your account cannot become activated until we receive a
completed application via mail or fax.

If this is your first investment through a tax-sheltered retirement plan, such
as an IRA, you will need a special application form. This form is available
from your service agent, or by calling the Retirement Service Center at 1-800-
730-1313.

Two Ways to Buy and Sell Shares in Your Account:

MAIL:

Buying: Send your check, payable to "Small Cap--Investment Class--1698,' to the
Service Center. The addresses are shown under "How to contact Deutsche Asset
Management Service Center.' Be sure to include the fund number and your account
number (see your account statement) on your check. Please note that we cannot
accept cash, starter checks or third-party checks. If you are investing in more
than one fund, make your check payable to "Deutsche Asset Management Funds,'
and include your account number, the names and numbers of the funds you have
selected, and the dollar amount or percentage you would like invested in each
fund.

Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$1000 invested in your non-retirement account to keep it open. Unless
exchanging into another Deutsche Asset Management mutual fund, you must submit
a written authorization to sell shares in a retirement account.

WIRE:

Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your service agent must call the Service Center at 1-
800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a
trade confirmation number. Instruct your bank to send payment by wire using the
wire instructions noted below. All wires must be received by 4:00 p.m. Eastern
time the next business day.

Routing No: 021001033
Attn: Deutsche Asset Management/
Mutual Funds
DDA No: 00-226-296
FBO: (Account name)
(Account number)
Credit: Small Cap--Investment
Class--1698

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

A Detailed Look at Small Cap--Investment Class

Refer to your account statement for the account name and number.

Selling: You may sell shares by wire only if your account is authorized to do
so. For your protection, you may not change the destination bank account over
the phone. To sell by wire, contact your service agent or the Service Center
at 1-800-730-1313. Inform the Service Center representative of the amount of
your redemption and receive a trade confirmation number. The minimum
redemption by wire is $1,000. We must receive your order by 4:00 p.m. Eastern
time to wire your account the next business day.

Important Information about Buying and Selling Shares:

. You may buy and sell shares of a fund through authorized service agents as
well as directly from us. The same terms and conditions apply. Specifically,
once you place your order with a service agent, it is considered received by
the Service Center. It is then your service agent's responsibility to
transmit the order to the Service Center by the next business day. You
should contact your service agent if you have a dispute as to when your
order was placed with the fund. Your service agent may charge a fee for
buying and selling shares for you.

. You may place orders to buy and sell over the phone by calling your service
agent or the Service Center at 1-800-730-1313. If you pay for shares by
check and the check fails to clear, or if you order shares by phone and fail
to pay for them by 4:00 p.m. Eastern time the next business day, we have the
right to cancel your order, hold you liable or charge you or your account
for any losses or fees a fund or its agents have incurred. To sell shares,
you must state whether you would like to receive the proceeds by wire or
check.

. After we or your service agent receives your order, we buy or sell your
shares at the next price calculated on a day the New York Stock Exchange is
open for business.

. We accept payment for shares only in US dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. Please note that we
cannot accept cash, starter checks or third-party checks.

. The payment of redemption proceeds (including exchanges) for shares of a
fund recently purchased by check may be delayed for up to 15 calendar days
while we wait for your check to clear.

. We process all sales orders free of charge.

. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.

. You can exchange all or part of your shares for shares in another Deutsche
Asset Management mutual fund up to four times a year (from the date of the
first exchange). When you exchange shares, you are selling shares in one
fund to purchase shares in another. Before buying shares through an
exchange, you should obtain a copy of that fund's prospectus and read it
carefully. You may order exchanges over the phone only if your account is
authorized to do so.

Please note the following conditions:

. The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.

. You may make the exchange by phone, letter or wire, if your account has the
exchange by phone feature.

. If you are maintaining a taxable account, you may have to pay taxes on the
exchange.

. You will receive a written confirmation of each transaction from the Service
Center or your service agent.

. We reserve the right to close your account on 30 days' notice if it fails to
meet minimum balance requirements for any reason other than a change in
market value.

. If you sell shares by mail or wire, you may be required to obtain a
signature guarantee. Please contact your service agent or the Service Center
for more information.

. We remit proceeds from the sale of shares in US dollars (unless the
redemption is so large it is made "in kind').

. We do not issue share certificates.

. Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your service agent or the
Service Center for more information.

. We reserve the right to reject purchases of Fund shares, including
exchanges, for any reason.

. During periods of heavy market activity, you may have trouble reaching the
Service Center by telephone. If this occurs, you should make your request by
mail.

. Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to
the interests of the Fund's shareholders. In this connection, the Fund
specifically reserves the right to refuse (i) purchase or exchange requests
for any reason or (ii) multiple purchase or exchange requests, submitted by
a shareholder, group of shareholders, commonly controlled accounts or a
dealer, that are deemed by the Fund, in its sole discretion, to involve
excessive trading or to be part of a market timing strategy. For these
purposes, the Fund may consider, among other factors, an investor's trading
history in the Fund or an affiliated fund, the funds involved, the amount of
the investment and the background of the investors or dealers involved.

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

A Detailed Look at Small Cap--Investment Class

. We reserve the right to reject purchases of Fund shares (including exchanges)
or to suspend or postpone redemptions at times when both the New York Stock
Exchange and the Fund's custodian are closed

Special Shareholder Services

To help make investing with us as easy as possible, and to help you build your
investment, we offer the following special services. You can obtain further
information about these programs by calling the Service Center at 1-800-730-
1313.

. Regular Investments: You can make regular investments of $100 or more
automatically from your checking account bi-weekly, monthly, quarterly, or
semi-annually.

. Regular Withdrawals: You can arrange regular monthly, quarterly, semi-annual
and annual sales of shares in your account. The minimum transaction is $100,
and the account must have a balance of at least $10,000 to qualify.

. Account Statements and Fund Reports: We or your service agent will furnish
you with a written confirmation of every transaction that affects your
account balance. You will also receive periodic statements reflecting the
balances in your account. We will send you a report every six months on your
fund's overall performance, its current holdings and its investing
strategies.

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

A Detailed Look at Small Cap--Investment Class

The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP whose report, along with the Fund's
financial statements, is included in the Fund's annual report. The annual
report is available free of charge by calling the Service Center at 1-800-730-
1313.

FINANCIAL HIGHLIGHTS

For the Years Ended September 30,
2000 1999 1998 1997 1996

Per Share Operating
Performance:

Net Asset Value,
Beginning of Period $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 Investment 8.53 7.13 (6.24) 3.58 4.65
---------------------------------------------------------------------------------
Total Income (Loss) 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
Period $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
Period (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%
---------------------------------------------------------------------------------
Portfolio Turnover
Rate/1/ 136% 159% 182% 188% 159%
---------------------------------------------------------------------------------

/1/The portfolio turnover rate is the rate for the master portfolio into which
the Fund invests all of its assets.

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

This page intentionally left blank

Additional information about the Fund's investments and performance is
available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.

You can find more detailed information about the Fund in the current
Statement of Additional Information, dated January 29, 2001, which we have
filed electronically with the Securities and Exchange Commission (SEC) and
which is incorporated by reference. To receive your free copy of the
Statement of Additional Information, the annual or semi-annual report, or
if you have questions about investing in the Fund, 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

You can find reports and other information about each Fund on the EDGAR
Database on the SEC's website (http://www.sec.gov), or you can get copies of
this information, after payment of a duplicating fee, by electronic request at
publicinfo@sec.gov or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-0102. Information about each Fund, including its
Statement of Additional Information, can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. For information on the Public
Reference Room, call the SEC at 202-942-8090.

Small Cap--Investment Class CUSIP #055922769
BT Investment Funds 1698PRO (1/01)
811-4760
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

[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]

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
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

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
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,

- --------------------------------------------------------------------------------
TEN LARGEST STOCK HOLDINGS
(percentages are based on market value of total investments in the Portfolio)
- --------------------------------------------------------------------------------

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

- --------------------------------------------------------------------------------
3

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.

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

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

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
4

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS

- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION

By Sector as of September 30, 2000
(percentages are based on market value of total investments in the Portfolio)
- --------------------------------------------------------------------------------

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:

. valuation risk, especially in NASDAQ stocks. The NASDAQ Composite has been
volatile, with seasonal tax loss selling adding to the market's volatility;
. 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
. 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:

. focus on companies that we believe offer compelling valuations relative to
their growth rates
. 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
. strictly adhere to our sell discipline seeking to help mitigate risk, and
. 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

- --------------------------------------------------------------------------------
5

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
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%

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
6

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS

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

FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------

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
============= =============

See Notes to Financial Statements.
- --------------------------------------------------------------------------------

Small Cap -- Investment Class
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

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

FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------

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%

See Notes to Financial Statements.
- --------------------------------------------------------------------------------

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.

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

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.

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

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.

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

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

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

Small Cap Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES

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

SEPTEMBER 30, 2000
- ---------------------------------------------------------------------------------------------------------------------------

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>

See Notes to Financial Statements.

- --------------------------------------------------------------------------------
16

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

Small Cap Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS

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

FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------

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
============= =============

See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18

Small Cap Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

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

FOR THE YEARS ENDED SEPTEMBER 30,
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------

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%

See Notes to Financial Statements.
- --------------------------------------------------------------------------------

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.

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

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.

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

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

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

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.

PART C: OTHER INFORMATION

Item 15. Indemnification

The response to this Item 15 is incorporated by reference to Item 25 of Post-
Effective Amendment No. 38 to the Registrant's Registration Statement on Form N-
1A ("Registration Statement") as filed with the Securities and Exchange
Commission ("SEC") on April 29, 1996.

Item 16. Exhibits.

(1)(a) Declaration of Trust dated July 21, 1986 is incorporated by reference
to Post-Effective Amendment No. 34 to the Registration Statement as
filed with the SEC on July 31, 1995.

(b) Supplement to Declaration of Trust dated October 20, 1986 is
incorporated by reference to Post-Effective Amendment No. 34 to the
Registration Statement as filed with the SEC on July 31, 1995.

(c) Second supplement to Declaration of Trust dated dated May 16, 1988 is
incorporated by reference to Post-Effective Amendment No. 34 to the
Registration Statement as filed with the SEC on July 31, 1995.

(2) By-Laws are incorporated by reference to Post-Effective Amendment No.
34 to the Registration Statement as filed with the SEC on July 31,
1995.

(3) Not Applicable.

(4) Form of Agreement and Plan of Reorganization - filed herewith.

(5) Not Applicable.

(6)(a) Investment Advisory Agreement dated December 31, 1998 is incorporated
by Reference to Post-Effective Amendment No. 60 to the Registration
Statement as filed with the SEC on March 15, 1999.

(b) Investment Advisory Agreement dated June 4, 1999 as amended December
23, 1999 - filed herewith.

(7)(a) Distribution Agreement dated August 11, 1998 is incorporated by
reference to Post-Effective Amendment No.55 to the Registration
Statement as filed with the SEC on November 25, 1998.

(b) Appendix A dated December 9, 1998 to Distribution Agreement is
incorporated by reference to Post-Effective Amendment No.57 to
Registration Statement as filed with the SEC on February 8, 1999.

(c) Appendix A dated December 23, 1999 to Distribution Agreement is
incorporated by reference to Post-Effective Amendment No. 66 to the
Registration Statement as filed with the SEC on December 23, 1999.

(8) Not Applicable.

(9)(a) Custody Agreement dated July 1, 1996 is incorporated by reference to
Post-Effective Amendment No. 44 to the Registration Statement as filed
with the SEC on July 1, 1997.

(b) Amendment No. 2 to Exhibit A of the Custodian Agreement dated October
8, 1997 is incorporated by reference to Post-Effective Amendment No.
46 to the Registration Statement as filed with the SEC on January 28,
1998.

(c) Amendment No. 3 to Exhibit A of the Custodian Agreement dated June 10,
1998 is incorporated by reference to Post-Effective Amendment No. 57
to the Registration Statement as filed with the SEC on February 8,
1999.

(d) Amendment No. 4 to Exhibit A of the Custodian Agreement dated December
9, 1998 is incorporated by reference to Post-Effective Amendment No.
57 to the Registration Statement as filed with the SEC on February 8,
1999.

(e) Cash Services Addendum to Custodian Agreement dated December 18, 1997
is incorporated by reference to Post-Effective Amendment No. 50 to the
Registration Statement as filed with the SEC on June 30, 1998.

(f) Amendment No. 5 to Exhibit A of the Custodian Agreement dated December
23, 1999 is incorporated by reference to Post-Effective Amendment No.
66 to the Registration Statement as filed with the SEC on December 23,
1999.

(10) Rule 18f-3 Plan dated December 23, 1999 is incorporated by reference
to Post-Effective Amendment No. 67 to the Registration Statement as
filed with the SEC on January 31, 2000.

(11) Not Applicable

(12) Opinion of Legal Counsel concerning the tax matters and consequences
to shareholders discussed in the prospectus will be filed with
definitive form.

(13)(a) Administration and Services Agreement dated October 28, 1992 is
incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement as filed with the SEC on November 8, 1993.

(b) Exhibit D to the Administration and Services Agreement as of October
28, 1992, as revised December 9, 1998 is incorporated by reference to
Post-Effective Amendment No. 57 to Registrant's Registration Statement
as filed with the SEC on February 8, 1999.

(c) Agreement to Provide Shareholder Services for BT PreservationPlus
Income Fund as of June 10, 1998 is incorporated by reference to Post-
Effective Amendment No. 55 to Registrant's Registration Statement as
filed with the SEC on November 25, 1998.

(d) Shareholder Services Plan for BT PreservationPlus Income Fund as of
June 10, 1998 is incorporated by reference to Post-Effective Amendment
No. 55 to Registrant's Registration Statement as filed with the SEC on
November 25, 1998.

(e) Expense Limitation Agreement dated September 30, 1998 on behalf of
Intermediate Tax Free Fund, International Equity Fund, Capital
Appreciation Fund, Pacific Basin Equity Fund, Latin American Equity
Fund, Small Cap Fund, International Small Company Equity Fund and
Global Emerging Markets Equity Fund is incorporated by reference to
Post-Effective Amendment No. 56 to Registrant's Registration Statement
as filed with the SEC on January 28, 1999.

(f) Expense Limitation Agreement dated December 31, 1998 on behalf of Cash
Management Fund, Tax Free Money Fund, NY Tax Free Money Fund, Treasury
Money Fund and Quantitative Equity Fund is incorporated by reference
to Post-Effective Amendment No. 60 to Registrant's Registration
Statement as filed with the SEC on March 15, 1999.

(g) Expense Limitation Agreement dated March 31, 1999, on behalf of BT
Investment Lifecycle Long Range Fund, BT Investment Lifecycle Mid
Range Fund, and BT Investment Lifecycle Short Range Fund is
incorporated by reference to Post-Effective Amendment No. 63 to
Registrant's Registration Statement as filed with the SEC on July 29,
1999.

(h) Amended Expense Limitation Agreement dated December 31, 1998 on behalf
of Cash Management Fund, Tax Free Money Fund, NY Tax Free Money Fund,
Treasury Money Fund and Quantitative Equity Fund is incorporated by
reference to Post-Effective Amendment No. 66 to Registrant's
Registration Statement as filed with the SEC on December 23, 1999.

(i) Expense limitation dated September 30, 2000 on behalf of Preservation
Plus Income Fund, Mid Cap Fund and Small Cap Fund is incorporated by
reference to Post-Effective Amendment No. 78 to Registrant's
Registration Statement as filed with the SEC on January 29, 2001.

(j) Exhibit D to the Administration and Services Agreement as of October
28, 1992, as revised December 23, 1999 Fund is incorporated by
reference to Post-Effective Amendment No. 66 to Registrant's
Registration Statement as filed with the SEC on December 23, 1999.

(14) Consent of Independent Accountants is filed herewith.

(15) Not Applicable.

(16) Power of attorney dated December 23, 1999 is incorporated by reference
to Post-Effective Amendment No. 67 to Registrant's Registration
Statement as filed with the SEC on January 28, 2000.

Item 17. Undertakings.

. The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is part of
this registration statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of
1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
. The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, BT Investment Funds, on behalf of its series Small Cap Fund, has
duly caused this Registration Statement on Form N-14 to be signed on its behalf
by the undersigned, duly authorized, in the City of Baltimore and the State of
Maryland on this 29th day of March, 2001.

BT INVESTMENT FUNDS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
March 29, 2001

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.

Signatures Title Date
- ---------- ----- ----

By:/s/ DANIEL O. HIRSCH Secretary March 29, 2001
Daniel O. Hirsch Attorney in Fact
For the Persons Listed Below)

/s/ RICHARD T. HALE* President, Trustee and
Richard T. Hale Chief Executive Officer

/s/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)

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

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

/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber

/s/ RICHARD J. HERRING* Trustee
Richard J. Herring

/s/ BRUCE T. LANGTON* Trustee
Bruce T. Langton

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

/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten

*By Power of Attorney. Incorporated by reference to Post-Effective Amendment No.
67 of BT Investment Funds as filed with the SEC on January 28, 2000.

SIGNATURES

BT INVESTMENT PORTFOLIOS has duly caused this Registration Statement on Form N-
14 to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Baltimore and the State of Maryland on the 29th day of March 2000.

BT INVESTMENT PORTFOLIOS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
March 29, 2001

This Registration Statement on Form N-14 of BT Investment Funds has been signed
below by the following persons in the capacities indicated with respect to BT
INVESTMENT PORTFOLIOS.

NAME TITLE DATE

By:/s/ DANIEL O. HIRSCH Secretary March 29, 2001
Daniel O. Hirsch (Attorney in Fact
For the Persons Listed Below)

/s/ RICHARD T. HALE* President and
Richard T. Hale Chief Executive Officer

/s/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)

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

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

/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber

/s/ RICHARD J. HERRING* Trustee
Richard J. Herring

/s/ BRUCE T. LANGTON* Trustee
Bruce T. Langton

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

/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten

*By Power of Attorney. Incorporated by reference to Post-Effective Amendment No.
67 of BT Investment Funds as filed with the SEC on January 28, 2000.