NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BT Investment Funds (the "Trust") is registered under the Investment Company Act of 1940 (the "Act"), as
amended, as an open-end management investment company. The Trust was organized on July 21, 1986, as a
business trust under the laws of the Commonwealth of Massachusetts. The Small Cap Fund (the "Fund") is one
of the funds offered to investors by the Trust. The Fund commenced operations and began offering shares of
beneficial interest on October 21, 1993. The Fund invests substantially all of its assets in the Small Cap Portfolio
(the "Portfolio"). The Portfolio is an open-end management investment company registered under the Act. The
Fund seeks to achieve its investment objective by investing all of its investable assets in the Portfolio. The value of
such investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. At
March 31, 1996, the Fund's investment was approximately 99.7% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio Investments, are contained elsewhere
in this report.
B. 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 security transactions of the Portfolio are allocated pro rata
among the investors in the Portfolio at the time of such determination.
It is the Fund's policy to declare and distribute dividends quarterly to shareholders from net investment income.
Dividends payable to shareholders are recorded by the Fund on the ex-dividend date. Distributions of net
realized short-term and long-term capital gains, if any, earned by the Fund will be made annually to the extent
they are not offset by any capital loss carryforwards.
D. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue Code. Therefore, no f