N-30D 1 qef.txt QUANTITATIVE EQUITY ANNUAL REPORT DEUTSCHE ASSET MANAGEMENT [GRAPHIC OMITTED] Mutual Fund Annual Report December 31, 2001 QUANTITATIVE EQUITY FUND [GRAPHIC OMITTED] A Member of the DEUTSCHE BANK GROUP Quantitative Equity Fund -------------------------------------------------------------------------------- TABLE OF CONTENTS LETTER TO SHAREHOLDERS ............................. 3 PERFORMANCE COMPARISON ............................. 6 QUANTITATIVE EQUITY FUND Statement of Assets and Liabilities ............. 8 Statement of Operations ......................... 9 Statements of Changes in Net Assets ............. 10 Financial Highlights ............................ 11 Notes to Financial Statements ................... 13 Report of Independent Auditors .................. 15 Tax Information ................................. 15 QUANTITATIVE EQUITY PORTFOLIO Schedule of Portfolio Investments ............... 16 Statement of Assets and Liabilities ............. 20 Statement of Operations ......................... 21 Statements of Changes in Net Assets ............. 22 Financial Highlights ............................ 23 Notes to Financial Statements ................... 24 Report of Independent Auditors .................. 26 FUND TRUSTEES AND OFFICERS ......................... 27 ------------------------------------ The Fund is not insured by the FDIC and is not a deposit, obligation of or guaranteed by Deutsche Bank AG. The Fund is subject to investment risks, including possible loss of principal amount invested. ------------------------------------ -------------------------------------------------------------------------------- 2 Quantitative Equity Fund -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS We are pleased to present you with this annual report for Quantitative Equity Fund (the 'Fund'), providing a review of the markets, the Portfolio (theFund invests all of its assets in a master portfolio with the same goal as the Fund), and our outlook. Included are a complete financial summary of the Fund's operations and a listing of the Portfolio's holdings. MARKET ACTIVITY THE S&P 500 INDEX DECLINED 11.87% FOR THE YEAR ENDED DECEMBER 31, 2001, AS LOSSES IN THE FIRST AND THIRD QUARTERS OUTWEIGHED GAINS IN THE SECOND AND FOURTH. o Over the course of the year, the Federal Reserve Board made eleven interest rate cuts totaling 4.75%. This represents the most concentrated effort to rejuvenate the US economy in the central bank's history, though it was not sufficient to keep the economy from slipping into recession. o The equity market decline, which started in 2000 with the bursting of the Information Technology and Telecommunication sector bubble, expanded to all sectors of the US economy during the year 2001. o The Federal Reserve Board's interest rate cuts at first did little to help the equity markets, but began to have a positive effect in the second quarter. Equity markets stalled again in the third quarter and then plummeted in the wake of the September 11 attacks. o An equity market rally began late in September and ran through the fourth quarter, as investors' worst fears of a sharp economic decline did not appear to come to fruition. o For the year overall, large-cap stocks, as measured by the S&P 500 Index, underperformed mid-cap and small-cap stocks, as measured by the S&P MidCap 400 Index 1 and the Russell 2000 Index, 2 respectively. Within the large-cap sector, value-oriented stocks outperformed growth-oriented stocks by over 1%, as measured by the S&P 500 Barra Value Index 3 versus the S&P 500 Barra Growth Index. 4 SECTOR PERFORMANCE WITHIN THE S&P 500 INDEX WAS GENERALLY NEGATIVE ACROSS THE BOARD FOR THE YEAR. o The Utilities sector suffered the greatest decline for the year, though it had a relatively small weighting in the S&P 500 Index. Information Technology, which accounted for more than 17% of the S&P 500 Index, fell by more than 25%, despite a strong fourth-quarter rally. o Although Information Technology stocks declined on average, the best annual returns among the S&P 500 Index's largest positions came from stocks in that sector, including Microsoft and IBM. o S&P 500 Index additions and deletions were rather moderate with only 30 changes during the year, just more than half the record number of 58 additions and deletions to the Index posted in the year 2000. Of interest this year was the introduction of Real Estate Investment Trusts (REITs) to the Index. Enron Corporation was a notable deletion, having been dropped in early December after filing for bankruptcy and enduring a stock price decline of more than 97%. THE PACE OF MERGER AND ACQUISITION ACTIVITY SLOWED CONSIDERABLY IN 2001, AGAINST THE BACKDROP OF A SLOWING ECONOMY, FALLING STOCK PRICES, REGULATORY SCRUTINY AND OVERCAPACITY IN CERTAIN PREVIOUSLY DOMINANT SECTORS. o For the year 2001, the volume of announced US merger and acquisition activity declined to $819 billion, down from the previous year's volume of $1.74 trillion. The 2001 total was the lowest recorded since 1996. o The radio and television-broadcasting group comprised the leading sector for announced US transactions in 2001, accounting for nearly one-eighth of the total. This group traditionally has been an active area for merger activity. o The oil and gas sector ranked second in 2001, up from eighth place the previous year. o The slowing pace of merger and acquisition activity traces back to the US stock market peak in March 2000, though recent events, such as the terrorist attacks and slumping US economy, exacerbated the slowdown. -------------------------------------------------------------------------------- 1 S&P MidCap 400 Index is an unmanaged index that tracks the stock movement of 400 mid-sized US companies. 2 Russell 2000 Index is an unmanaged index that tracks the common stock price movement of the 2,000 smallest companies of the Russell 3000 Index, which measures the performance of the 3,000 largest US companies based on total market capitalization. 3 S&P 500 Barra Value Index is a capitalization-weighted index of all the stocks in the Standard & Poor's 500 that have low price-to-book ratios. 4 S&P 500 Barra Growth Index is a capitalization-weighted index of all the stocks in the Standard & Poor's 500 that have high price-to-book ratios. -------------------------------------------------------------------------------- 3 Quantitative Equity Fund -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS INVESTMENT REVIEW THE FUND SEEKS A TOTAL RETURN GREATER THAN THAT OF THE S&P 500 INDEX BY FOLLOWING A QUANTITATIVE STRATEGY THAT INTEGRATES AN EXPOSURE TO THE S&P 500 INDEX WITH INVESTMENTS IN THE STOCKS OF ACQUISITION TARGETS. 5 To pursue its goal of tracking the S&P 500 Index, the Fund invests in derivatives and common stocks of S&P 500 companies. To seek returns in excess of the S&P 500 Index, the Fund buys shares of companies that are acquisition targets based on specific events that trigger a merger arbitrage opportunity. The goal is to capture the difference between the target's post-bid share price and the target's expected fixed payout. These investments are made based on our own proprietary quantitative models. These shares are sold when the acquisition is consummated or the transaction is abandoned. DURING A CHALLENGING 12 MONTH PERIOD, THE FUND CLOSELY TRACKED THE PERFORMANCE OF THE S&P 500 INDEX. The Fund's performance was primarily fueled by the numerous deals closed. The following is a list of merger deals that the Fund invested in during the twelve months ended December 31, 2001, all of which were completed successfully. -------------------------------------------------------------------------------- CLOSED DEALS FROM JANUARY 1, 2001--DECEMBER 31, 2001 -------------------------------------------------------------------------------- ACNielsen by VNU NV Agribrands by Cargill Inc. Avis Group by Cendant Block Drug by GlaxoSmithKline Citadel Communications by Forstmann Little Efficient Networks by Siemens Harcourt General by Reed International Johns Manville by Berkshire Hathaway Keebler Foods by Kellogg Litton Industries by Northrop Grumman Minimed by Medtronics Objective Systems Integrator by Agilent Rollins Truck Leasing by Penske Truck Leasing Structural Dynamics Research by Electronic Data Systems Triton Energy by Amerada Hess --------------------------------------------------------------------------------
------------------------------------------------------------------------------------ CUMULATIVE AVERAGE ANNUAL TOTAL RETURNS TOTAL RETURNS Periods Ended 1 Year Since 1 Year Since December 31, 2001 Inception 2 Inception 2 ------------------------------------------------------------------------------------ Quantitative Equity Fund 1 Investment Class (12.10)% 3.90% (12.10)% 1.40% Institutional Class (11.99)% (15.95)% (11.99)% (8.31)% ------------------------------------------------------------------------------------ S&P 500 Index 3 (11.87)% (7.65)% (11.87)% (2.85)% ------------------------------------------------------------------------------------ Lipper Large Cap Core Funds Average 4 (13.77)% (7.74)% (13.77)% (3.01)% ------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 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. All performance assumes the reinvestment of dividend and capital gain distributions. Performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain of the Fund's fees and expenses had not been waived. 2 The Fund's inception dates are: Investment Class: March 31, 1999, Institutional Class: December 31, 1999. Benchmark returns are for comparative purposes relative to the Investment Class and are for the periods beginning March 31, 1999. 3 'S&P 500(R)' is a trademark of The McGraw Hill Companies, Inc. and has been licensed for use by the Fund's investment advisor. S&P 500 Index is an unmanaged index that measures the performance of 500 large US companies. Benchmark returns do not reflect expenses that have been deducted from the Fund's returns. 4 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. 5 The Fund may invest in derivatives that may be more volatile and less liquid than traditional securities and the Fund could suffer losses on its derivative positions. Mergers and acquisition transactions may be renegotiated, terminated or delayed and in the event that these transactions fail to close or close at a less than expected price per share, the Fund may realize losses or a lower return than expected. -------------------------------------------------------------------------------- 4 Quantitative Equity Fund -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS THE FUND MAINTAINED ITS STRICT CRITERIA IN ITS DISCIPLINED MERGER ARBITRAGE INVESTMENT APPROACH. For example, the Fund: o purchases only the stock of an announced target company, o invests in merger deals that are generally made with financing of at least 50% cash, and o usually invests in acquisition targets with a minimum market capitalization of $500 million, although shares of smaller companies may be purchased. MANAGER OUTLOOK We anticipate an economic recovery in 2002 that would suggest an improved picture for US equities. For the first time since 1999, US economic activity is expected to accelerate, which should bolster corporate revenues. Further, it appears the supply of labor should be less strained in the coming year. This, in turn, may reduce the pressure unit labor costs have exerted on profit margins in 2000 and 2001. In short, we believe the economy is probably near the bottom of the profit cycle. US equities have already begun to firm in anticipation of this improving economic picture, however, valuations are still high by historical standards, potentially limiting equity gains in 2002. For the near term, it appears the pace of merger activity is likely to remain at more restrained levels. Until a solid economic recovery takes hold, many would-be acquirers may stay on the sidelines. Nonetheless, we believe that the environment for selected, carefully researched mergers remains positive and that the Fund's opportunities to seek risk-adjusted returns greater than those of the S&P 500 Index should continue. We appreciate your ongoing support of Quantitative Equity Fund and look forward to serving your investment needs in the years ahead. /S/ SIGNATURES Manish Keshive and Eric Lobben Portfolio Managers of the QUANTITATIVE EQUITY PORTFOLIO December 31, 2001 -------------------------------------------------------------------------------- 5 Quantitative Equity Fund -------------------------------------------------------------------------------- PERFORMANCE COMPARISON 1 [GRAPHIC OMITTED] EDGAR REPRESENTAQTION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: Quantitative S&P 500 Lipper Large Cap Core Equity Fund - Investment Class Index 3 Funds Average 4 ------------------------------ ------- -------------------- 3/31/99 $10,000 $10,000 $10,000 4/30/99 10,710 10,387 10,357 5/31/99 10,640 10,142 10,128 6/30/99 11,390 10,705 10,677 7/31/99 11,050 10,371 10,369 8/31/99 10,930 10,320 10,251 9/30/99 10,680 10,037 9,988 10/31/99 11,500 10,673 10,583 11/30/99 11,700 10,891 10,828 12/31/99 12,399 11,531 11,505 1/31/00 11,745 10,952 10,992 2/29/00 11,581 10,745 10,965 3/31/00 12,768 11,796 11,913 4/30/00 12,440 11,441 11,548 5/31/00 12,236 11,206 11,278 6/30/00 12,430 11,483 11,593 7/31/00 12,174 11,304 11,422 8/31/00 13,259 12,006 12,177 9/30/00 12,532 11,372 11,557 10/31/00 12,471 11,324 11,467 11/30/00 11,468 10,432 10,570 12/31/00 11,821 10,480 10,712 1/31/01 12,261 10,851 10,944 2/28/01 11,133 9,862 10,006 3/31/01 10,445 9,237 9,354 4/30/01 11,187 9,955 10,059 5/31/01 11,294 10,022 10,113 6/30/01 10,993 9,778 9,817 7/31/01 10,929 9,682 9,676 8/31/01 10,252 9,075 9,113 9/30/01 9,424 8,342 8,355 10/31/01 9,596 8,502 8,540 11/30/01 10,327 9,153 9,138 12/31/01 10,390 9,235 922 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS Periods Ended 1 Year Since December 31, 2001 Inception 2 -------------------------------------------------------------------------------- Quantitative Equity Fund--Investment Class (12.10)% 1.40% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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. All performance assumes the reinvestment of dividend and capital gain distributions. Performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain of the Fund's fees and expenses had not been waived. 2 The Investment Class inception date is March 31, 1999. 3 S&P 500 Index is an unmanaged index that measures the performance of 500 large US companies. 4 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. -------------------------------------------------------------------------------- 6 Quantitative Equity Fund -------------------------------------------------------------------------------- PERFORMANCE COMPARISON 1 [GRAPHIC OMITTED] EDGAR REPRESENTAQTION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: Quantitative Equity Fund - S&P 500 Lipper Large Cap Institutional Class Index 3 Core Funds Average 4 -------------------------- ------- -------------------- 12/31/99 $250,000 $250,000 $250,000 1/31/00 236,800 237,450 238,935 2/29/00 233,300 232,962 238,029 3/31/00 257,225 255,746 258,639 4/30/00 250,825 248,048 250,749 5/31/00 246,700 242,963 245,010 6/30/00 250,625 248,964 251,779 7/31/00 245,675 245,080 248,046 8/31/00 267,525 260,300 264,344 9/30/00 252,900 246,556 251,019 10/31/00 251,650 245,520 249,131 11/30/00 231,425 226,173 229,649 12/31/00 238,750 227,250 232,679 1/31/01 247,425 235,300 237,688 2/28/01 224,675 213,850 217,382 3/31/01 210,800 200,300 203,248 4/30/01 225,750 215,875 218,533 5/31/01 228,125 217,300 219,642 6/30/01 222,075 212,025 212,600 7/31/01 220,775 209,925 210,200 8/31/01 207,125 196,800 198,050 9/30/01 190,425 180,875 182,200 10/31/01 193,900 184,350 186,250 11/30/01 208,850 198,475 199,300 12/31/01 201,125 200,250 201,125 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS Periods Ended 1 Year Since December 31, 2001 Inception 2 -------------------------------------------------------------------------------- Quantitative Equity Fund--Institutional Class (11.99)% (8.31)% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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. All performance assumes the reinvestment of dividend and capital gain distributions. Performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures for the classes differ because each class maintains a distinct expense structure. Performance would have been lower during the specified periods if certain of the Fund's fees and expenses had not been waived. 2 The Institutional Class inception date is December 31, 1999. 3 S&P 500 Index is an unmanaged index that measures the performance of 500 large US companies. 4 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. -------------------------------------------------------------------------------- 7 Quantitative Equity Fund -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------------------------------------------- DECEMBER 31, 2001 -------------------------------------------------------------------------------- ASSETS Investment in the Quantitative Equity Portfolio, at value ................................. $ 8,575,254 Receivable for capital shares sold ..................... 14,744 Prepaid expenses and other ............................. 7,531 ----------- Total assets .............................................. 8,597,529 ----------- LIABILITIES Accrued expenses and other ............................. 12,099 ----------- Total liabilities ......................................... 12,099 ----------- NET ASSETS ................................................ $ 8,585,430 =========== COMPOSITION OF NET ASSETS Paid-in capital ........................................ $10,159,274 Undistributed net investment income .................... 58,165 Accumulated net realized loss from investment and futures transactions ........................... (1,912,319) Net unrealized appreciation on investments and futures contracts .............................. 280,310 ----------- NET ASSETS ................................................ $ 8,585,430 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE Investment Class 1 ........................................ $ 9.52 =========== Institutional Class 2 ..................................... $ 9.58 =========== -------------------------------------------------------------------------------- 1 Net asset value, redemption price and offering price per share (based on net assets of $6,028,596 and 633,296 shares outstanding at December 31, 2001; $0.001 par value, unlimited number of shares authorized). 2 Net asset value, redemption price and offering price per share (based on net assets of $2,556,834 and 266,910 shares outstanding at December 31, 2001; $0.001 par value, unlimited number of shares authorized). See Notes to Financial Statements. -------------------------------------------------------------------------------- 8 Quantitative Equity Fund -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 2001 -------------------------------------------------------------------------------- INVESTMENT INCOME Income allocated from Quantitative Equity Portfolio: Dividend income .......................................... $ 78,573 Interest income .......................................... 141,490 ----------- Total income allocated from Quantitative Equity Portfolio ......................................... 220,063 Less allocated expenses .................................... (51,560) ----------- Net investment income allocated from Quantitative Equity Portfolio ............................ 168,503 ----------- EXPENSES Printing and shareholder reports ........................... 38,432 Registration fees .......................................... 38,041 Professional fees .......................................... 26,903 Administration and services fees: Investment Class ......................................... 19,959 Institutional Class ...................................... 3,034 Trustees fees .............................................. 8,570 Miscellaneous .............................................. 984 ----------- Total expenses ................................................ 135,923 Less: fee waivers and/or expense reimbursements ............... (112,936) ----------- Net expenses .................................................. 22,987 ----------- NET INVESTMENT INCOME ......................................... 145,516 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS Net realized loss from: Investment transactions .................................. (113,531) Futures transactions ..................................... (1,614,325) Net change in unrealized appreciation/depreciation on investments and futures contracts ..................... 500,194 ----------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FUTURES CONTRACTS ...................................... (1,227,662) ----------- NET DECREASE IN NET ASSETS FROM OPERATIONS .................... $(1,082,146) =========== See Notes to Financial Statements. -------------------------------------------------------------------------------- 9 Quantitative Equity Fund -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2001 2000 ----------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income .............................................. $ 145,516 $ 74,827 Net realized loss from investments and futures transactions ............................................. (1,727,856) (66,857) Net change in unrealized appreciation/depreciation on investments and futures contracts ................................ 500,194 (341,316) ----------- ---------- Net decrease in net assets from operations ............................ (1,082,146) (333,346) ----------- ---------- DISTRIBUTIONS TO SHAREHOLDERS Net investment income: Investment Class ................................................. (87,019) (35,310) Institutional Class .............................................. (32,652) (3,854) Net realized gain from investment transactions: Investment Class ................................................. -- (237,210) Institutional Class .............................................. -- (27,687) ----------- ---------- Total distributions ................................................... (119,671) (304,061) ----------- ---------- CAPITAL SHARE TRANSACTIONS Net increase resulting from Investment Class ....................... 1,466,885 2,885,951 Net increase resulting from Institutional Class .................... 2,112,820 645,560 ----------- ---------- Net increase in net assets from capital share transactions ............ 3,579,705 3,531,511 ----------- ---------- TOTAL INCREASE IN NET ASSETS .......................................... 2,377,888 2,894,104 NET ASSETS Beginning of year .................................................. 6,207,542 3,313,438 ----------- ---------- End of year (including undistributed net investment income of $58,165 and $32,320, respectively) ..................... $ 8,585,430 $6,207,542 =========== ==========
See Notes to Financial Statements. -------------------------------------------------------------------------------- 10 Quantitative Equity Fund -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------------------------------- INVESTMENT CLASS FOR THE PERIOD MARCH 31, 1999 2 FOR THE YEARS ENDED DECEMBER 31, THROUGH 2001 20001 DECEMBER 31, 1999 -------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE, BEGINNING OF PERIOD ................... $11.00 $12.12 $10.00 ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income ............................... 0.17 3 0.21 3 0.11 Net realized and unrealized gain (loss) on investments and futures contracts ................. (1.51) (0.77) 2.29 ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS ....................... (1.34) (0.56) 2.40 ------ ------ ------ DISTRIBUTIONS TO SHAREHOLDERS Net investment income ............................... (0.14) (0.07) (0.11) Net realized gains .................................. -- (0.49) (0.17) ------ ------ ------ TOTAL DISTRIBUTIONS .................................... (0.14) (0.56) (0.28) ------ ------ ------ NET ASSET VALUE, END OF PERIOD ......................... $ 9.52 $11.00 $12.12 ====== ====== ====== TOTAL INVESTMENT RETURN ................................ (12.10)% (4.67)% 23.99% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s omitted) ............ $6,029 $5,597 $3,303 Ratios to average net assets: Net investment income ............................. 1.66% 1.90% 2.39% 4 Expenses after waivers and/or reimbursements, including expenses of theQuantitative Equity Portfolio ............ 0.90% 0.90% 0.90% 4 Expenses before waivers and/or reimbursements, including expenses of the Quantitative Equity Portfolio ........... 2.47% 4.14% 11.84% 4 Portfolio turnover of the Quantitative Equity Fund ....................... --% --% 409%
-------------------------------------------------------------------------------- 1 The Fund's structure was changed from a stand-alone structure to a master-feeder structure on January 1, 2000. 2 Commencement of operations. 3 Net investment income per share was calculated using the average shares method. 4 Annualized. See Notes to Financial Statements. -------------------------------------------------------------------------------- 11 Quantitative Equity Fund -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- INSTITUTIONAL CLASS 1 FOR THE YEARS ENDED DECEMBER 31, 2001 2000 -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: NET ASSET VALUE, BEGINNING OF YEAR ................. $11.02 $12.12 ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income ........................... 0.17 2 0.34 2 Net realized and unrealized loss on investments and futures contracts ............. (1.50) (0.88) ------ ------ TOTAL FROM INVESTMENT OPERATIONS ................... (1.33) (0.54) ------ ------ DISTRIBUTIONS TO SHAREHOLDERS Net investment income ........................... (0.11) (0.07) Net realized gains .............................. -- (0.49) ------ ------ TOTAL DISTRIBUTIONS ................................ (0.11) (0.56) ------ ------ NET ASSET VALUE, END OF YEAR ....................... $ 9.58 $11.02 ====== ====== TOTAL INVESTMENT RETURN ............................ (11.99)% (4.50)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of year (000s omitted) .......... $2,557 $610 Ratios to average net assets: Net investment income ......................... 1.72% 2.83% Expenses after waivers and/or reimbursements, including expenses of the Quantitative Equity Portfolio ........................... 0.75% 0.75% Expenses before waivers and/or reimbursements, including expenses of the Quantitative Equity Portfolio ........................... 2.32% 3.98% -------------------------------------------------------------------------------- 1 The Institutional Class began operations on December 31, 1999. 2 Net investment income per share was calculated using the average shares method. See Notes to Financial Statements. -------------------------------------------------------------------------------- 12 Quantitative Equity Fund -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION BT Investment Funds (the 'Company') is registered under the Investment Company Act of 1940 (the 'Act'), as amended, as a non-diversified, open-end management investment company. The Company is organized as a business trust under the laws of the Commonwealth of Massachusetts. Quantitative Equity Fund (the 'Fund') is one of the funds the Company offers to investors. The Fund offers two classes of shares to investors: the Investment Class and the Institutional Class. All shares have equal rights with respect to voting except that shareholders vote separately on matters affecting their rights as holders of a particular fund or class. The investment objective of the Fund is to seek a total return greater than that of the S&P 500 Index. The Fund invests for long-term capital appreciation, not income; any dividend and interest income is secondary to the pursuit of its goal. There is no guarantee the Fund will realize its goal. The Fund seeks to achieve its investment objective by investing substantially all of its assets in the Quantitative Equity Portfolio (the 'Portfolio'), a series of BT Investment Portfolios, an open-end management investment company registered under the Act. The Portfolio's financial statements accompany this report. B. VALUATION OF SECURITIES The Fund determines the value of its investment in the Portfolio by multiplying its proportionate ownership of the Portfolio by the total value of the Portfolio's net assets. On December 31, 2001, the Fund owned approximately 100% of the Portfolio. The Portfolio's policies for determining the value of its net assets are discussed in the Portfolio's Financial Statements, which accompany this report. C. INVESTMENT INCOME The Fund receives a daily allocation of the Portfolio's net investment income and net realized and unrealized gains and losses in proportion to its investment in the Portfolio. Expenses, income, gains and losses are allocated among the classes based upon their relative net assets. Class specific expenses are charged directly to each class. D. DISTRIBUTIONS The Fund pays annual dividends from its net investment income and makes annual distributions of any net realized capital gains to the extent they exceed capital loss carryforwards. The Fund records dividends and distributions on its books on the ex-dividend date. E. FEDERAL INCOME TAXES It is the Fund's policy to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income taxes have been accrued. F. ESTIMATES In preparing its financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions. Actual results may be different. NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES Investment Company Capital Corp. ('ICCC'), an indirect, wholly-owned subsidiary of Deutsche Bank AG, is the Fund's Administrator. The Fund pays the Administrator an annual fee based on its average daily net assets which is calculated daily and paid monthly at the annual rate of 0.30% for the Investment Class and 0.15% for the Institutional Class. Prior to July 1, 2001, Bankers Trust served as the administrator to the Fund under the same fee structure. -------------------------------------------------------------------------------- 13 Quantitative Equity Fund -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS The Advisor and Administrator have contractually agreed to waive their fees and/or reimburse expenses of the Fund through April 30, 2003, to the extent necessary, to limit all expenses as follows: Investment Class to 0.90% of the average daily net assets of the Class, including expenses of the Portfolio; Institutional Class to 0.75% of the average daily net assets of the Class, including expenses of the Portfolio. Certain officers and directors of the Fund are also officers or directors of ICCC or affiliated with Deutsche Bank AG. These persons are not paid by the Fund for serving in these capacities. NOTE 3--CAPITAL SHARE TRANSACTIONS There were an unlimited number of capital shares authorized. Transactions in capital shares were as follows: Investment Class Shares ------------------------------------------------------------ For the For the Year Ended Year Ended December 31, 2001 December 31, 2000 ------------------------- -------------------------- Shares Amount Shares Amount -------- ----------- -------- ----------- Sold 364,270 $ 3,750,151 458,783 $ 5,553,565 Reinvested -- -- 20,575 230,449 Redeemed (239,643) (2,283,266) (243,164) (2,898,063) -------- ----------- -------- ----------- Net increase 124,627 $ 1,466,885 236,194 $ 2,885,951 ======== =========== ======== =========== Institutional Class Shares ------------------------------------------------------------ For the For the Year Ended Year Ended December 31, 2001 December 31, 2000 ------------------------- -------------------------- Shares Amount Shares Amount -------- ---------- -------- ----------- Sold 273,897 $2,736,059 233,763 $ 2,836,579 Reinvested -- -- 2,470 27,686 Redeemed (62,386) (623,239) (181,659) (2,218,705) -------- ---------- -------- ----------- Net increase 211,511 $2,112,820 54,574 $ 645,560 ======== ========== ======== =========== NOTE 4--FEDERAL INCOME TAXES At December 31, 2001, capital contributions, accumulated undistributed net investment income, and accumulated net realized gain/(loss) from investments have been adjusted for current period permanent book/tax differences. At December 31, 2001, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost for federal income tax purposes) was $249,163 and $34,475, respectively. The difference between book basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales. Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. Differences between distributable components on a tax basis and components of net assets are due to differing treatments of organizational cost. Distributions during the year ended December 31, 2001 were characterized as follows for tax purposes: 2001 2000 ---- ---- Ordinary income $119,671 $187,708 Long-term capital gains $ -- $116,353 At December 31, 2001, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income $ 78,415 Capital loss carryovers $(1,846,697) Unrealized appreciation/(depreciation) $ 214,688 At December 31, 2001, capital loss carryovers available as a reduction against future net realized capital gains consisted of $1,846,697, of which $42,799 expires in 2008 and $1,803,898 expires in 2009. -------------------------------------------------------------------------------- 14 Quantitative Equity Fund -------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Trustees BT Investment Funds--Quantitative Equity Fund We have audited the accompanying statement of assets and liabilities of Quantitative Equity Fund (the 'Fund') as of December 31, 2001, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Quantitative Equity Fund at December 31, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States. /S/ SIGNATURE Philadelphia, Pennsylvania January 25, 2002 -------------------------------------------------------------------------------- TAX INFORMATION (Unaudited) For the Year Ended December 31, 2001 We are providing this information as required by the Internal Revenue Code. The amounts may differ from those elsewhere in this report because of differences between tax and financial reporting requirements. Of the Fund's ordinary dividends made during the fiscal year ended December 31, 2001, 22.00%, qualified for the dividends received deduction available to corporate shareholders. Of the net investment income distributions made during the fiscal year ended December 31, 2001, 62.86% has been derived from investments in US Government and Agency Obligations. All or a portion of the distributions from this income may be exempt from taxation at the state level. Consult your tax advisor for state specific information. -------------------------------------------------------------------------------- 15 Quantitative Equity Portfolio -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2001 -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- INVESTMENTS IN UNAFFILIATED ISSUERS COMMON STOCKS--25.78% CONSUMER DISCRETIONARY--3.17% 1,047 AOL Time Warner, Inc.1 ...... $ 33,609 68 Bed, Bath & Beyond, Inc.1 ... 2,305 138 Carnival Corp. .............. 3,875 139 Clear Channel Communications1 7,076 223 Comcast Corp.1 .............. 8,028 106 Costco Wholesale Corp.1 ..... 4,704 132 Delphi Automotive Systems ... 1,803 78 Dollar General Corp. ........ 1,162 69 Eastman Kodak Co. ........... 2,031 432 Ford Motor Co. .............. 6,791 63 Gannett Co., Inc. ........... 4,235 203 Gap, Inc. (The) ............. 2,830 130 General Motors Corp. ........ 6,318 71 Harley-Davidson, Inc. ....... 3,856 87 Hilton Hotels Corp. ......... 950 551 Home Depot, Inc. ............ 28,106 89 Interpublic Group of Cos., Inc. 2,629 62 J.C. Penney Co., Inc. ....... 1,668 25 Jones Apparel Group, Inc.1 .. 829 116 Kmart Corp.1 ................ 633 79 Kohls Corp.1 ................ 5,565 101 Limited, Inc. ............... 1,487 182 Lowe's Companies ............ 8,447 58 Marriott International Inc.-- Class A .................... 2,358 102 Mattel, Inc. ................ 1,754 71 May Department Stores Co. ... 2,626 306 McDonald's Corp. ............ 8,100 63 Newell Rubbermaid, Inc. ..... 1,737 64 Nike, Inc.--Class B ......... 3,599 70 Office Depot, Inc.1 ......... 1,298 78 Sears, Roebuck and Co. ...... 3,716 108 Staples, Inc.1 .............. 2,020 90 Starbucks Corp.1 ............ 1,714 212 Target Corporation .......... 8,703 66 TJX Cos., Inc. .............. 2,631 71 Tribune Co. ................. 2,658 421 Viacom, Inc.1 ............... 18,587 1,057 Wal-Mart Stores, Inc. ....... 60,830 494 Walt Disney Co. ............. 10,236 ---------- 271,504 ---------- -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- CONSUMER STAPLES--2.28% 96 Albertson's, Inc. ........... $ 3,023 212 Anheuser-Busch Companies, Inc. 9,584 157 Archer-Daniels-Midland Co. .. 2,253 56 Avon Products ............... 2,604 96 Campbell Soup Co. ........... 2,867 56 Clorox Co. .................. 2,215 588 Coca-Cola Co. ............... 27,724 105 Coca-Cola Enterprises, Inc. . 1,989 133 Colgate-Palmolive Co. ....... 7,681 127 Conagra Foods, Inc. ......... 3,019 93 CVS Corp. ................... 2,753 67 General Mills, Inc. ......... 3,485 249 Gillette Co. ................ 8,316 82 HJ Heinz Co. ................ 3,372 96 Kellogg Co. ................. 2,890 126 Kimberly-Clark Corp. ........ 7,535 192 Kroger Co.1 ................. 4,007 418 PepsiCo, Inc. ............... 20,352 520 Philip Morris Companies, Inc. 23,842 306 Procter & Gamble Co. ........ 24,214 119 Safeway, Inc.1 .............. 4,968 186 Sara Lee Corp. .............. 4,135 159 SYSCO Corp. ................. 4,169 135 Unilever NV ................. 7,777 241 Walgreen Co. ................ 8,112 53 Wrigley (WM.), Jr. Co. ...... 2,723 ---------- 195,609 ---------- ENERGY--1.72% 59 Anadarko Petroleum Corp. .... 3,354 79 Baker Hughes, Inc. .......... 2,881 50 Burlington Resources, Inc. .. 1,877 252 ChevronTexaco Corp. ......... 22,582 148 Conoco Inc. ................. 4,189 1,631 Exxon Mobil Corp. ........... 64,098 101 Halliburton Co. ............. 1,323 73 Marathon Oil Corp. .......... 2,190 88 Occidental Petroleum Corp. .. 2,335 90 Phillips Petroleum Co. ...... 5,423 507 Royal Dutch Petroleum Co. ... 24,853 135 Schlumberger Ltd. N.V. ...... 7,418 75 Transocean Sedco Forex Inc. . 2,537 58 Unocal Corp. ................ 2,092 ---------- 147,152 ---------- See Notes to Financial Statements. -------------------------------------------------------------------------------- 16 Quantitative Equity Portfolio -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2001 -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- FINANCIALS--4.64% 124 AFLAC, Inc. ................. $ 3,045 171 Allstate Corp. .............. 5,763 313 American Express Co. ........ 11,171 619 American International Group, Inc. ............... 49,149 88 Amsouth Bancorp. ............ 1,663 62 AON Corp. ................... 2,202 379 Bank of America Corp. ....... 23,858 174 Bank of New York Co., Inc. .. 7,099 275 Bank One Corp. .............. 10,739 104 BB&T Corp. .................. 3,755 328 Charles Schwab Corp. ........ 5,074 51 Charter One Financial, Inc. . 1,385 1,188 Citigroup, Inc. ............. 59,970 80 Conseco, Inc.1 .............. 357 100 Equity Office Properties Trust 3,008 236 Fannie Mae .................. 18,762 136 Fifth Third Bancorp ......... 8,375 256 FleetBoston Financial Corp. . 9,344 63 Franklin Resources, Inc. .... 2,222 164 Freddie Mac ................. 10,726 56 Hartford Financial Services Group, Inc. ...... 3,519 110 Household International, Inc. 6,373 59 Huntington Bancshares, Inc. . 1,014 469 J.P. Morgan Chase & Co. ..... 17,048 73 John Hancock Financial Services 3,015 100 KeyCorp. .................... 2,434 58 Lehman Brothers Holdings, Inc. 3,874 65 Marsh and McLennan Cos., Inc. 6,984 201 MBNA Corp. .................. 7,075 113 Mellon Financial Corp. ...... 4,251 198 Merrill Lynch & Co., Inc. ... 10,320 177 MetLife, Inc. ............... 5,607 263 Morgan Stanley Dean Witter & Co. 14,712 142 National City Corp. ......... 4,152 53 Northern Trust Corp. ........ 3,192 68 PNC Financial Services Group 3,822 67 Providian Financial Corp.1 .. 238 54 Regions Financial Corp. ..... 1,622 80 SouthTrust Corp. ............ 1,974 51 St. Paul Cos., Inc. ......... 2,243 77 State Street Corp. .......... 4,023 52 Stilwell Financial, Inc. .... 1,415 69 SunTrust Banks, Inc. ........ 4,326 69 Synovus Financial Corp. ..... 1,729 450 U.S. Bancorp ................ 9,419 57 UnumProvident Corp. ......... 1,511 331 Wachovia Corp. .............. 10,380 207 Washington Mutual, Inc. ..... 6,769 406 Wells Fargo & Co. ........... 17,641 ---------- 398,349 ---------- -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- HEALTH CARE--3.81% 366 Abbott Laboratories ......... $ 20,404 311 American Home Products Corp. 19,083 247 Amgen, Inc.1 ................ 13,941 50 Applied Biosystems Group-- Applera Corp. 1,963 140 Baxter International, Inc. .. 7,508 61 Becton, Dickinson & Co. ..... 2,022 63 Biomet, Inc. ................ 1,947 95 Boston Scientific Corp.1 .... 2,291 459 Bristol-Myers Squibb Co. .... 23,409 105 Cardinal Health, Inc. ....... 6,789 266 Eli Lilly & Co. ............. 20,892 45 Genzyme Corp.--General Division1 ................. 2,694 73 Guidant Corp.1 .............. 3,635 127 HCA, Inc. ................... 4,895 92 HealthSouth Corp.1 .......... 1,363 126 Immunex Corp.1 .............. 3,491 716 Johnson & Johnson ........... 42,316 54 King Pharmaceuticals, Inc.1 . 2,275 67 McKesson, Inc. .............. 2,506 50 MedImmune, Inc.1 ............ 2,318 286 Medtronic, Inc. ............. 14,646 542 Merck & Co., Inc. ........... 31,870 1,492 Pfizer, Inc. ................ 59,456 307 Pharmacia Corp. ............. 13,094 346 Schering-Plough Corporation . 12,390 77 Tenet Healthcare Corporation1 4,521 75 UnitedHealth Group, Inc. .... 5,308 ---------- 327,027 ---------- INDUSTRIALS--2.71% 148 Automatic Data Processing, Inc. 8,717 206 Boeing Co. .................. 7,989 93 Burlington Northern Santa Fe Corp. ............. 2,653 81 Caterpillar, Inc. ........... 4,232 201 Cendant Corp.1 .............. 3,942 114 Concord EFS, Inc.1 .......... 3,737 50 CSX Corp. ................... 1,752 55 Deere & Co. ................. 2,401 101 Emerson Electric Co. ........ 5,767 73 FedEx Corp.1 ................ 3,787 93 First Data Corp. ............ 7,296 2,347 General Electric Co. ........ 94,068 191 Honeywell International, Inc. 6,460 72 Illinois Tool Works, Inc. ... 4,876 70 IMS Health, Inc. ............ 1,366 103 Lockheed Martin Corp. ....... 4,807 109 Masco Corp. ................. 2,671 See Notes to Financial Statements. -------------------------------------------------------------------------------- 17 Quantitative Equity Portfolio -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2001 -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- 94 Minnesota Mining & Manufacturing Co. .......... $ 11,112 91 Norfolk Southern Corp. ...... 1,668 88 Paychex, Inc. ............... 3,084 58 Pitney Bowes, Inc. .......... 2,181 84 Raytheon Co. ................ 2,727 180 Southwest Airlines Co. ...... 3,326 458 Tyco International Ltd. ..... 26,976 59 Union Pacific Corp. ......... 3,363 111 United Technologies Corp. ... 7,174 148 Waste Management, Inc. ...... 4,723 ---------- 232,855 ---------- INFORMATION TECHNOLOGY--4.74% 185 ADC Telecommunications, Inc.1 851 57 Adobe Systems, Inc. ......... 1,770 81 Advanced Micro Devices1 ..... 1,285 108 Agilent Technologies, Inc.1 . 3,079 91 Altera Corp.1 ............... 1,931 85 Analog Devices, Inc.1 ....... 3,773 82 Apple Computer, Inc.1 ....... 1,796 192 Applied Materials, Inc.1 .... 7,699 71 Applied Micro Circuits Corp.1 804 67 Avaya, Inc.1 ................ 814 58 BMC Software, Inc.1 ......... 949 61 Broadcom Corp.1 ............. 2,500 77 CIENA Corporation1 .......... 1,102 1,730 Cisco Systems, Inc.1 ........ 31,330 399 Compaq Computer Corp. ....... 3,894 136 Computer Associates International, Inc. ....... 4,691 87 Compuware Corp.1 ............ 1,026 58 Conexant Systems, Inc.1 ..... 833 220 Corning, Inc.1 .............. 1,962 615 Dell Computer Corp.1 ........ 16,716 111 Electronic Data Systems Corp. 7,609 522 EMC Corp.1 .................. 7,016 76 Gateway, Inc.1 .............. 611 459 Hewlett-Packard Co. ......... 9,428 1,589 Intel Corp. ................. 49,974 411 International Business Machines Corp. ............ 49,715 311 JDS Uniphase Corp.1 ......... 2,715 75 Linear Technology Corp. ..... 2,928 85 LSI Logic Corp.1 ............ 1,341 805 Lucent Technologies, Inc.1 .. 5,063 78 Maxim Integrated Products1 .. 4,096 141 Micron Technology, Inc.1 .... 4,371 1,272 Microsoft Corp.1 ............ 84,295 519 Motorola, Inc. .............. 7,795 77 Network Appliance, Inc.1 .... 1,684 753 Nortel Networks Corp.1 ...... 5,647 85 Novell, Inc.1 ............... 390 -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- 1,327 Oracle Corporation1 ......... $ 18,326 134 Palm, Inc.1 ................. 520 62 Parametric Technology Corp.1 484 69 PeopleSoft, Inc.1 ........... 2,774 179 Qualcomm, Inc.1 ............. 9,039 76 Sanmina-SCI Corp.1 .......... 1,512 107 Siebel Systems, Inc.1 ....... 2,994 154 Solectron Corp.1 ............ 1,737 770 Sun Microsystems, Inc.1 ..... 9,502 54 Symbol Technologies, Inc. ... 858 97 Tellabs, Inc.1 .............. 1,458 410 Texas Instruments, Inc. ..... 11,480 75 Unisys Corporation1 ......... 941 94 Veritas Software Corp.1 ..... 4,213 164 Xerox Corp.1 ................ 1,709 79 Xilinx, Inc.1 ............... 3,085 134 Yahoo!, Inc.1 ............... 2,377 ---------- 406,492 ---------- MATERIALS--0.51% 54 Air Products and Chemicals, Inc. 2,533 75 Alcan, Inc. ................. 2,695 204 Alcoa, Inc. ................. 7,252 126 Barrick Gold Corp. .......... 2,010 212 Dow Chemical Co. ............ 7,161 246 Du Pont (E.I.) de Nemours & Co. 10,458 53 Georgia-Pacific Corp. ....... 1,463 114 International Paper Co. ..... 4,600 77 Placer Dome, Inc. ........... 840 52 Rohm & Haas Co. ............. 1,801 51 Weyerhaeuser Co. ............ 2,758 ---------- 43,571 ---------- TELECOMMUNICATION SERVICES--1.56% 74 Alltel Corp. ................ 4,568 815 AT&T Corp. .................. 14,784 598 AT&T Wireless Services, Inc.1 8,593 443 BellSouth Corp. ............. 16,900 67 Citizen Communications Co.1 . 714 181 Nextel Communications, Inc.1 1,984 393 Qwest Communications International ............. 5,553 796 SBC Communications, Inc. .... 31,179 221 Sprint Corp.--PCS Group1 .... 5,395 209 Sprint Corp.--FON Group ..... 4,197 639 Verizon Communications, Inc. 30,327 682 WorldCom, Inc.--WorldCom Group1 9,603 ---------- 133,797 ---------- See Notes to Financial Statements. -------------------------------------------------------------------------------- 18 Quantitative Equity Portfolio -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2001 -------------------------------------------------------------------------------- SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- UTILITIES--0.64% 126 AES Corp.1 .................. $ 2,059 76 American Electric Power ..... 3,308 71 Calpine Corp.1 .............. 1,192 50 Consolidated Edison, Inc. ... 2,018 58 Dominion Resources, Inc. .... 3,486 182 Duke Energy Corp. ........... 7,145 77 Dynegy, Inc. ................ 1,963 77 Edison International1 ....... 1,163 120 El Paso Corp. ............... 5,353 52 Entergy Corp. ............... 2,034 76 Exelon Corp. ................ 3,639 53 FirstEnergy Corp. ........... 1,854 80 Mirant Corp.1 ............... 1,282 91 PG&E Corp.1 ................. 1,751 51 Progress Energy, Inc. ....... 2,297 70 Reliant Energy, Inc. ........ 1,856 162 Southern Co. ................ 4,107 61 TXU Corp. ................... 2,876 122 Williams Cos., Inc. ......... 3,113 81 Xcel Energy, Inc. ........... 2,247 ---------- 54,743 ---------- TOTAL COMMON STOCKS (Cost $1,927,825) ...................... 2,211,099 ---------- S&P TRUST SHARES--7.62% 2,850 iShares Trust S&P 500 ....... 327,465 2,850 S&P 500 Depository Receipt .. 325,869 ---------- TOTAL S&P TRUST SHARES (Cost $637,731) ........................ 653,334 --------- -------------------------------------------------------------------------------- PRINCIPAL AMOUNT/ SHARES DESCRIPTION VALUE -------------------------------------------------------------------------------- US TREASURY BILLS--60.25% US Treasury Bills: $ 525,000 2.15%, 1/17/02 2 ........... $ 524,493 4,650,000 1.98%, 1/31/02 ............. 4,642,327 ---------- TOTAL US TREASURY BILLS (Cost $5,166,820) ...................... 5,166,820 ---------- TOTAL INVESTMENTS IN UNAFFILIATED ISSUERS (Cost $7,732,376) ...................... 8,031,253 ---------- INVESTMENTS IN AFFILIATED INVESTMENT COMPANIES SHORT-TERM INSTRUMENTS--7.08% 607,016 Cash Management Fund Institutional ............. 607,016 ---------- TOTAL INVESTMENT IN AFFILIATED INVESTMENT COMPANIES (Cost $ 607,016) ....................... 607,016 ---------- TOTAL INVESTMENTS (Cost $8,339,392) 3 ........... 100.73% $8,638,269 LIABILITIES IN EXCESS OF OTHER ASSETS .................. (0.73) (62,930) ------ ---------- NET ASSETS ....................... 100.00% $8,575,339 ====== ========== -------------------------------------------------------------------------------- 1 Non-income producing security. 2 Held as collateral for futures contracts. 3 Aggregate cost for federal tax purposes is $8,423,581. See Notes to Financial Statements. -------------------------------------------------------------------------------- 19 Quantitative Equity Portfolio -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------------------------------------------- DECEMBER 31, 2001 -------------------------------------------------------------------------------- ASSETS Investment in unaffiliated issuers, at value (cost $7,732,376) ........................... $8,031,253 Investments in affiliated investment companies, at value (cost $607,016) .................. 607,016 ---------- Total investments, at value ............................... 8,638,269 Dividend and interest receivable ....................... 4,887 Receivable for shares of beneficial interest subscribed .................................. 17,501 Receivable for securities sold ......................... 49 Prepaid expenses and other ............................. 125 ---------- Total assets .............................................. 8,660,831 ---------- LIABILITIES Due to advisor ......................................... 4,971 Variation margin payable on futures contracts .......... 50,711 Accrued expenses and other ............................. 29,810 ---------- Total liabilities ......................................... 85,492 ---------- NET ASSETS ................................................ $8,575,339 ========== COMPOSITION OF NET ASSETS Paid-in capital ........................................ $8,295,029 Net unrealized appreciation on investments and futures contracts ..................... 280,310 ---------- NET ASSETS ................................................ $8,575,339 ========== See Notes to Financial Statements. -------------------------------------------------------------------------------- 20 Quantitative Equity Portfolio -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 2001 -------------------------------------------------------------------------------- INVESTMENT INCOME Dividends from unaffiliated issuers (net of foreign withholding tax of $19) ..................... $ 26,473 Dividends from affiliated investment companies ................ 52,100 Interest income ............................................... 141,490 ----------- Total investment income .......................................... 220,063 ----------- EXPENSES Advisory fees ................................................. 41,119 Professional fees ............................................. 18,428 Trustees fees ................................................. 10,045 Administration and services fees .............................. 4,302 Miscellaneous ................................................. 444 ----------- Total expenses ................................................... 74,338 Less: fee waivers and/or expense reimbursements .................. (22,778) ----------- Net expenses ..................................................... 51,560 ----------- NET INVESTMENT INCOME ............................................ 168,503 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS Net realized loss from: Investment transactions ..................................... (113,531) Futures transactions ........................................ (1,614,325) Net change in unrealized appreciation/depreciation on investments and futures contracts ........................ 500,194 ----------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FUTURES CONTRACTS ........................................ (1,227,662) ----------- NET DECREASE IN NET ASSETS FROM OPERATIONS ....................... $(1,059,159) =========== See Notes to Financial Statements. -------------------------------------------------------------------------------- 21 Quantitative Equity Portfolio -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2001 2000 1 -------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income ....................... $ 168,503 $ 83,926 Net realized loss from investments and futures transactions .................. (1,727,856) (66,857) Net change in unrealized appreciation/depreciation on investments and futures contracts ......... 500,194 (341,316) ----------- ---------- Net decrease in net assets from operations ..... (1,059,159) (324,247) ----------- ---------- CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Proceeds from capital invested .............. 6,513,596 7,071,555 Value of capital withdrawn .................. (3,023,062) (603,344) ----------- ---------- Net increase in net assets from capital transactions in shares of beneficial interest ..................... 3,490,534 6,468,211 ----------- ---------- TOTAL INCREASE IN NET ASSETS ................... 2,431,375 6,143,964 NET ASSETS Beginning of year ........................... 6,143,964 -- ----------- ---------- End of year ................................. $ 8,575,339 $6,143,964 =========== ========== -------------------------------------------------------------------------------- 1 Commencement of operations was January 1, 2000. See Notes to Financial Statements. -------------------------------------------------------------------------------- 22 Quantitative Equity Portfolio -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 2001 2000 -------------------------------------------------------------------------------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of year (000s omitted) ............ $8,575 $6,144 Ratios to average net assets: Net investment income ........................... 1.96% 2.42% Expenses after waivers and/or reimbursements .... 0.60% 0.60% Expenses before waivers and/or reimbursements ... 0.86% 1.65% Portfolio turnover rate ........................... 253% 451% See Notes to Financial Statements. -------------------------------------------------------------------------------- 23 Quantitative Equity Portfolio -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION The Quantitative Equity Portfolio (the 'Portfolio'), a series of BT Investment Portfolios, is registered under the Investment Company Act of 1940 (the 'Act'), as amended, as a non-diversified, open-end management investment company. BT Investment Portfolios is organized as a business trust under the laws of the state of New York. B. VALUATION OF SECURITIES The Portfolio values its investments at market value. When valuing listed equity securities, the Portfolio uses the last sale price prior to the calculation of the Portfolio's net asset value. When valuing equity securities that are not listed or that are listed but have not traded, the Portfolio uses the bid price in the over-the-counter market. When valuing short-term securities that mature within sixty days, the Portfolio uses amortized cost. When valuing securities for which market quotations are not readily available or for which the market quotations that are available are considered unreliable, the Portfolio determines a fair value in good faith under procedures established by and under the general supervision of the Board of Trustees. The Portfolio may use these procedures to establish the fair value of securities when, for example, a significant event occurs between the time the market closes and the time the Portfolio values its investments. After consideration of various factors, the Portfolio may value the securities at their last reported price or at fair value. On December 31, 2001, there were no fair valued securities. C. SECURITIES TRANSACTION AND INVESTMENT INCOME Securities transactions are recorded on trade date. Realized gains and losses are determined by comparing the proceeds of a sale or the cost of a purchase with a specific offsetting transaction. Dividend income, net of any foreign taxes withheld, is recorded on the ex-dividend date or, in the case of certain foreign securities, upon receipt of ex-dividend notification. Interest income, including amortization of premiums and accretion of discounts, is accrued daily. Estimated expenses are also accrued daily. The Portfolio makes a daily allocation of its net investment income and realized and unrealized gains and losses from securities and foreign currency transactions to its investors in proportion to their investment in the Portfolio. D. FEDERAL INCOME TAXES The Portfolio is considered a Partnership under the Internal Revenue Code. Therefore, no federal income tax provision is necessary. E. FUTURES CONTRACTS The Portfolio may buy or sell financial futures contracts on established futures exchanges. Under the terms of a financial futures contract, the Portfolio agrees to receive or deliver a specific amount of a financial instrument at a specific price on a specific date. The Portfolio's investments in financial futures contracts are designed to closely replicate the benchmark index used by the Portfolio. When the Portfolio enters into a futures contract, it is required to make a margin deposit equal to a percentage of the face value of the contract. While the contract is outstanding, the Portfolio may be required to make additional deposits or may have part of its deposit returned as a result of changes in the relationship between the face value of the contract and the value of the underlying security. The Portfolio records these payments as unrealized gains or losses. When entering into a closing transaction, the Portfolio realizes a gain or loss. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. -------------------------------------------------------------------------------- 24 Quantitative Equity Portfolio -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS F. ESTIMATES In preparing its financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions. Actual results may be different. NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES Deutsche Asset Management, Inc. (DeAM, Inc.), an indirect, wholly-owned subsidiary of Deutsche Bank AG, is the Portfolio's Advisor. The Portfolio pays the Advisor an annual fee based on its average daily net assets which is calculated daily and paid monthly at the annual rate of 0.50%. These fees are not charged on assets invested in affiliated money market funds. Prior to April 30, 2001, Bankers Trust Company served as the investment advisor to the Portfolio under the same fee structure. Investment Company Capital Corp. (ICCC), an indirect, wholly-owned subsidiary of Deutsche Bank AG, is the Portfolio's Administrator. The Portfolio pays the Administrator an annual fee based on its average daily net assets which is calculated daily and paid monthly at an annual rate of 0.05%. Prior to July 1, 2001, Bankers Trust Company served as the administrator to the Portfolio under the same fee structure. The Portfolio may invest in Cash Management Fund Institutional, an open-end management investment company managed by DeAM, Inc. For the year ended December 31, 2001, affiliates of Deutsche Bank AG received $234 in brokerage commissions from the Portfolio as a result of executing agency transactions in portfolio securities. Certain officers and directors of the Portfolio are also officers or directors of ICCC or affiliated with Deutsche Bank AG. These persons are not paid by the Portfolio for serving in these capacities. NOTE 3--LINE OF CREDIT AGREEMENT The Portfolio participates with other affiliated entities in an unsecured revolving credit facility with a syndicate of banks in the amount of $200,000,000, which expires April 26, 2002. A commitment fee is apportioned among participants based on their relative net assets. The Portfolio did not borrow during the period. NOTE 4--PURCHASE AND SALE OF INVESTMENT SECURITIES The aggregate cost of purchases and proceeds from sales of investments, other than US Government and short-term obligations, for the year ended December 31, 2001, were $8,576,506 and $9,271,470, respectively. At December 31, 2001, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost for federal income tax purposes) was $249,163 and $34,475, respectively. NOTE 5--FUTURES CONTRACTS The Portfolio had the following open contracts at December 31, 2001: Type of Market Unrealized Future Expiration Contracts Position Value Depreciation ------ ---------- --------- -------- ------ ------------ S&P 500 Index March Futures 2002 21 Long $5,803,460 $(18,567) The use of futures contracts involves elements of market risk and risks in excess of the amount recognized in the Statement of Assets and Liabilities. The 'market value' presented above represents the Portfolio's total exposure in such contracts whereas only the net unrealized appreciation (depreciation) is reflected in the Portfolio's net assets. Risks inherent in the use of futures contracts include 1) adverse changes in the value of such instruments, 2) an imperfect correlation between the price of the contracts and the underlying index and 3) the possibility of an illiquid secondary market. At December 31, 2001, the Portfolio pledged securities with a value of $524,493 to cover margin requirements on open futures contracts. -------------------------------------------------------------------------------- 25 Quantitative Equity Portfolio -------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Trustees BT Investment Portfolios--Quantitative Equity Portfolio We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of Quantitative Equity Portfolio (the 'Portfolio') as of December 31, 2001, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2001, by correspondence with the Portfolio's custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Quantitative Equity Portfolio at December 31, 2001, the results of its operations for the year then ended, and the changes in its net assets and its financial highlights for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States. /S/ SIGNATURE Philadelphia, Pennsylvania January 25, 2002 -------------------------------------------------------------------------------- 26 Quantitative Equity Fund -------------------------------------------------------------------------------- FUND TRUSTEES AND OFFICERS
----------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS NAME, BIRTH DATE AND IN THE FUND POSITION WITH THE TRUST AND BUSINESS EXPERIENCE AND COMPLEX OVERSEEN THE PORTFOLIO TRUST 1 DIRECTORSHIPS DURING THE PAST 5 YEARS BY TRUSTEE 2 ----------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES ----------------------------------------------------------------------------------------------------------------- Charles P. Biggar Retired (since 1987); formerly Vice President, 27 October 13, 1930 International Business Machines ('IBM') (1975 to Trustee BT Investment Portfolios 1978) and President, National Services and the Field since 1993; BT Investment Funds Engineering Divisions of IBM (1976 to 1987). since 1999; and International Equity Portfolio since 1991. ----------------------------------------------------------------------------------------------------------------- S. Leland Dill Trustee, Phoenix Zweig Series Trust (since September 27 March 28, 1930 1989); Trustee, Phoenix Euclid Market Neutral Fund Trustee BT Investment Portfolios (since May 1998); Retired (since 1986); formerly since 1993; BT Institutional Funds Partner, KPMG Peat Marwick (June 1956-June 1986); since 1986. Director, Vintners International Company Inc. (June 1989 to May 1992); Director, Coutts (USA) International (January 1992-March 2000); Director, Coutts Trust Holdings Ltd., Director, Coutts Group (March 1991 to March 1999); General Partner, Pemco (June 1979 to June 1986). ----------------------------------------------------------------------------------------------------------------- Martin J. Gruber Nomura Professor of Finance, Leonard N. Stern School 27 July 15, 1937 of Business, New York University (since 1964); Trustee BT Investment Portfolios Trustee, CREF (since 2000); Director, S.G. Cowen since 1999; BT Investment Funds Mutual Funds (since 1985); Director, Japan Equity since 1999. Fund, Inc. (since 1992); Director, Thai Capital Fund, Inc. (since 2000); Director, Singapore Fund, Inc. (since 2000). ----------------------------------------------------------------------------------------------------------------- Richard J. Herring Jacob Safra Professor of International Banking and 27 February 18, 1946 Professor, Finance Department, The Wharton School, Trustee BT Investment Portfolios University of Pennsylvania (since 1972); Director, since 1999; BT Investment Funds Lauder Institute of International Management Studies since 1999. (since 2000); Co-Director, Wharton Financial Institutions Center (since 2000). ----------------------------------------------------------------------------------------------------------------- Bruce E. Langton Formerly Assistant Treasurer of IBM Corporation 27 May 10, 1931 (until 1986); Trustee and Member, Investment Trustee BT Investment Portfolios Operations Committee, Allmerica Financial Mutual since 1999; BT Investment Funds Funds (1992 to 2001); Member, Investment Committee, since 1999. Unilever US Pension and Thrift Plans (1989 to 2001);3 Retired (since 1987); Director, TWA Pilots Directed Account Plan and 401(k) Plan (1988 to 2000). ----------------------------------------------------------------------------------------------------------------- Philip Saunders, Jr. Principal, Philip Saunders Associates (Economic and 27 October 11, 1935 Financial Consulting) (since 1998); former Director, Trustee BT Investment Portfolios Financial Industry Consulting, Wolf & Company (1987 since 1993; BT Investment Funds to 1988); President, John Hancock Home Mortgage since 1986. Corporation (1984 to 1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982 to 1986). ----------------------------------------------------------------------------------------------------------------- Harry Van Benschoten Retired (since 1987); Corporate Vice President, 27 February 18, 1928 Newmont Mining Corporation (prior to 1987); Director, Trustee BT Investment Portfolios Canada Life Insurance Corporation of New York (since since 1999; BT Investment Funds 1987). since 1999. -----------------------------------------------------------------------------------------------------------------
27 Quantitative Equity Fund -------------------------------------------------------------------------------- FUND TRUSTEES AND OFFICERS
----------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS NAME, BIRTH DATE AND IN THE FUND POSITION WITH THE TRUST AND BUSINESS EXPERIENCE AND COMPLEX OVERSEEN THE PORTFOLIO TRUST 1 DIRECTORSHIPS DURING THE PAST 5 YEARS BY TRUSTEE 2 ----------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES ----------------------------------------------------------------------------------------------------------------- Richard T. Hale 4 Managing Director, Deutsche Banc Alex. Brown Inc. 27 July 17, 1945 (formerly DB Alex. Brown LLC) (June 1999 to present); Trustee BT Investment Portfolios Deutsche Asset Management-Americas (June 1999 to since 1999; BT Investment Funds present); Director and President, Investment Company since 1999; President of each of Capital Corp. (registered investment advisor) (April the BT Trusts since 2000. 1996 to present). Director/Trustee and President, Deutsche Asset Management Mutual Funds (1989 to present); Director, Deutsche Global Funds, Ltd. (January 2000 to present); Director, CABEI Fund (June 2000 to present); Director, North American Income Fund (September 2000 to present); Vice President, Deutsche Asset Management, Inc. (September 2000 to present). Chartered Financial Analyst. Formerly, Director, ISI Family of Funds. -----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------- NAME, BIRTH DATE AND POSITION WITH EACH TRUST AND BUSINESS EXPERIENCE AND THE PORTFOLIO 1 DIRECTORSHIPS DURING THE PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------- OFFICERS ----------------------------------------------------------------------------------------------------------------- Daniel O. Hirsch Director, Deutsche Asset Management (1999 to March 27, 1954 present). Formerly, Principal, BT Alex. Brown Vice President/Secretary Incorporated, (Deutsche Banc Alex. Brown Inc.), (1998 to 1999); Assistant General Counsel, United States Securities and Exchange Commission, (1993 to 1998). ----------------------------------------------------------------------------------------------------------------- Charles A. Rizzo Director, Deutsche Asset Management (April 2000 to August 5, 1957 present); Certified Public Accountant; Certified Treasurer Management Accountant. Formerly, Vice President and Department Head, BT Alex. Brown Incorporated (Deutsche Banc Alex. Brown Inc.), 1998 to 1999; Senior Manager, Coopers & Lybrand L.L.P. (PricewaterhouseCoopers LLP), 1993 to 1998. ----------------------------------------------------------------------------------------------------------------- Amy Olmert Director, Deutsche Asset Management (formerly BT May 14, 1963 Alex. Brown Inc.) ;(January 1999 to present); Assistant Treasurer Certified Public Accountant (1989 to present). Formerly, Vice President, BT Alex. Brown Incorporated, (Deutsche Banc Alex. Brown Inc.), (1997 to 1999); Senior Manager (1992 to 1997), Coopers & Lybrand L.L.P. (PricewaterhouseCoopers LLP), (1988 to 1992). -----------------------------------------------------------------------------------------------------------------
1 Unless otherwise indicated, the address of each Director andO fficer is One South Street, Baltimore, MD 21202. 2 As of December 31, 2001 the total number of Funds and Portfolios (including the Master Portfolios) in the Fund Complex is 43. 3 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. 4 Mr. Hale is a trustee who is an 'Interested Person' within the meaning of Section 2(a)(19) of the 1940 Act. Mr. Hale holds various positions with Deutsche Bank AG and its advisor subsidiary Deutsche Asset Management, Inc. The Funds' Statement of Additional Information, includes additional information about the Fund's Trustees and Officers. To receive a free copy of the Statement of Additional Information, call toll-free: 1-800-730-1313. -------------------------------------------------------------------------------- 28 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] For information on how to invest, shareholder account information and current price and yield information, please contact your relationship manager or write to: DEUTSCHE ASSET MANAGEMENT SERVICE CENTER PO BOX 219210 KANSAS CITY, MO 64121-9210 or call toll-free: 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 in the US for the asset management activities of Deutsche Bank AG, Bankers Trust Company, Deutsche Banc Alex. Brown Inc., Deutsche Asset Management, Inc., and Deutsche Asset Management Investment Services Limited. Quantitative Equity Fund--Investment Class CUSIP #055922652 Quantitative Equity Fund--Institutional Class CUSIP #055922645 QEFANN (12/01) Printed 2/02 Distributed by: ICC Distributors, Inc.