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BT INVESTMENT FUNDS
PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.
A Statement of Additional Information with the same date has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference. You
may request a free copy of the Statement by calling the Fund's Service Agent at
1-800-730-1313.
UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 9.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY
BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Utility Fund
o Seeks a high level of current income derived primarily from equity securities
of public utility companies.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
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TABLE OF CONTENTS
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PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objectives and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 8
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17
Additional Information 22
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SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of Utility Fund (the "Fund") and the annual operating
expenses of the Fund and the expenses of the Utility Portfolio (the
"Portfolio"), as a percentage of average net assets of the Fund and (ii) an
example illustrating the dollar cost of such expenses on a $1,000 investment
in the Fund. THE TRUSTEES OF BT INVESTMENT FUNDS (THE "TRUST") BELIEVE THAT
THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS
THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE
TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE INVESTABLE ASSETS
("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE PORTFOLIO.
<TABLE>
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<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
............................................................................................................................
Investment advisory fee (after reimbursements or waivers) 0.44%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.81
............................................................................................................................
Total operating expenses (after reimbursements or waivers) 1.25%
............................................................................................................................
EXAMPLE 1 year 3 years 5 years 10 years
............................................................................................................................
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period $13 $40 $69 $151
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</TABLE>
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. Bankers Trust Company ("Bankers Trust") has voluntarily
agreed to waive a portion of its investment advisory fee. Without such waiver,
the Portfolio's investment advisory fee would be equal to 0.65%. The expense
table and the example reflect a voluntary undertaking by Bankers Trust or
Signature Broker-Dealer Services, Inc. ("Signature") to waive or reimburse
expenses such that the total operating expenses will not exceed 1.25% of the
Fund's average net assets annually. In the absence of this undertaking, for the
fiscal year ended December 31, 1995, the total operating expenses would have
been equal to approximately 1.90% of the Fund's average net assets annually. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each
example assumes a 5% annual return, actual performance will vary and may result
in a return greater or less than 5%.
The Fund is sold by Signature as the Trust's distributor (the "Distributor") to
customers of Bankers Trust or to customers of another bank or a dealer or other
institution that has a sub-shareholder servicing agreement with Bankers Trust
(along with Bankers Trust, a "Servicing Agent"). Some Service Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.
In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.
For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and Portfolio" herein.
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FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
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FOR THE PERIOD
AUGUST 3, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
------------------------------------ OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
..................................................................................................................................
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.10 $10.83 $10.10 $10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.40 0.48 0.39 0.15
Net Realized and Unrealized Gain (Loss) on Securities 2.28 (1.74) 0.73 0.10
..................................................................................................................................
Total from Investment Operations 2.68 (1.26) 1.12 0.25
..................................................................................................................................
Distributions from Net Investment Income (0.41) (0.47) (0.39) (0.15)
..................................................................................................................................
Net Asset Value, End of Period $11.37 $ 9.10 $10.83 $10.10
..................................................................................................................................
TOTAL INVESTMENT RETURN 30.12% (11.67%) 11.04% 6.09%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 3.79% 4.57% 3.95% 4.55%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Utility Portfolio 1.25% 1.25% 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.65% 0.48% 0.39% 0.96%*
Net Assets, End of Period (000's omitted) $10,225 $16,903 $37,558 $15,997
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<FN>
*Annualized
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is to seek a high level of current
income derived primarily from equity securities of public utility companies. The
Fund also seeks to achieve growth of income and capital appreciation, but only
when consistent with its primary investment objective. The Fund's yield is
expected to be higher than the equity market's average yield.
The Trust seeks to achieve the investment objectives of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objectives as the Fund. There can be no assurances that the investment objective
of either the Fund or the Portfolio will be achieved. The investment objective
of each of the Fund and the Portfolio is not a fundamental policy and may be
changed upon notice to but without the approval of the Fund's shareholders or
the Portfolio's investors, respectively. See "Special Information Concerning
Master-Feeder Fund Structure" on page 10 herein.
UTILITY PORTFOLIO
Under normal conditions at least 65% of the Portfolio's assets will be invested
in the equity securities of public utility companies. As used herein, "equity
securities" means common stock, preferred stock, trust or limited partnership
interests, warrants and rights, and securities convertible into common or
preferred stock. Public utility companies include companies that provide
electricity, natural gas, or water and other sanitary services to the public,
and telephone or telegraph companies and other companies providing public
communications services. Bankers Trust emphasizes quality in selecting
investments for the Portfolio and looks for well-established utility companies
with proven dividend records and sound financial structures. The Portfolio may
invest up to 15% of its assets in securities of foreign issuers. For additional
information on foreign investments and related hedging techniques, see "Risk
Factors; Matching the Fund to Your Investment Needs," "Additional Information"
and the Statement of Additional Information.
Equity Investments. The Portfolio invests primarily in common and preferred
stock and other securities with equity characteristics, such as trust or limited
partnership interests, rights and warrants. These investments may or may not pay
dividends and may or may not carry voting rights. The Portfolio may also invest
in convertible securities when, due to market conditions, it is more
advantageous to obtain a position in an attractive company by purchase of its
convertible securities than by purchase of its common stock. The convertible
securities in which the Portfolio invests may include any debt securities or
preferred stock which may be converted into common stock or which carries the
right to purchase common stock. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to exercise the
conversion privilege. Since the Portfolio invests in both common stock and
convertible securities, the risks of the general equity markets may be tempered
to a degree by the Portfolio's investments in convertible securities which are
often not as volatile as equity securities.
Short-Term Instruments. The Portfolio intends to stay invested in the securities
described above to the extent practical in light of its objective and long-term
investment perspective. However, the Portfolio's assets may be invested in
short-term instruments with remaining maturities of 397 days or less to meet
anticipated redemptions and expenses or for day-to-day operating purposes and
when, in Bankers Trust's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when the Portfolio experiences large cash inflows through the sale
of securities and desirable equity securities that are consistent with the
Portfolio's investment objective are unavailable in sufficient quantities or at
attractive prices, the Portfolio may hold short-term investments for a limited
time pending availability of such equity securities. Short-term instruments
consist of foreign and domestic: (i) short-term obligations of sovereign
governments, their agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated Aa or higher by
Moody's Investors Service, Inc. ("Moody's") or AA or higher by Standard & Poor's
Corporation ("S&P") or, if unrated, of comparable quality in the opinion of
Bankers Trust; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. At the time the Portfolio invests in commercial
paper, bank obligations or repurchase agreements, the issuer or the issuer's
parent must have outstanding debt rated Aa or higher by Moody's or AA or higher
by S&P or outstanding commercial paper or bank obligations rated Prime-1 by
Moody's or A-1 by S&P; or, if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S. dollars or in foreign currencies and will have been
determined to be of high quality by a nationally recognized statistical rating
organization, or if unrated, by Bankers Trust.
ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may also utilize the following investments and investment
techniques and practices: foreign investments, options on stocks, options on
stock indices, futures contracts on stock indices, options on futures contracts,
foreign currency exchange transactions, options on foreign currencies, Rule 144A
securities, when-issued and delayed delivery securities, securities lending and
repurchase agreements. See "Additional Information" for further information.
ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. Other than public utility companies, the
Portfolio will not invest more than 25% of its assets in the securities of
issuers in any one industry. These are fundamental investment policies of the
Portfolio which may not be changed without investor approval. No more than 15%
of the Portfolio's net assets may be invested in illiquid or not readily
marketable securities (including repurchase agreements and time deposits with
remaining maturities of more than seven calendar days). Additional investment
policies of the Portfolio are contained in the Statement of Additional
Information.
RISK FACTORS; MATCHING THE FUND
TO YOUR INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced investment plan; the Fund
seeks a high level of current income, with growth of income and capital
appreciation as a secondary objective. The Portfolio invests primarily in common
stock, preferred stock and securities convertible into common or preferred
stock. Changes in interest rates may also affect the value of the Portfolio's
investments, and rising interest rates can be expected to reduce the Fund's
share value. A description of a number of investments and investment techniques
available to the Portfolio, including foreign investments and the use of options
and futures, and certain risks associated with these investments and techniques
is included under "Additional Information." The Fund's share price, yield and
total return fluctuate and your investment may be worth more or less than your
original cost when you redeem your shares.
Because the Portfolio concentrates its investments in public utility companies,
its performance will depend in large part on conditions in the public utility
industries. Utility stocks have traditionally been popular among more
conservative stock market investors because they have generally paid above
average dividends. However, utility stocks can still be affected by the risks of
the stock market, as well as factors specific to public utility companies.
Governmental regulation of public utility companies can limit their ability to
expand their business or to pass cost increases on to customers. Companies
providing power or energy-related services may also be affected by fuel
shortages or cost increases, environmental protection or energy conservation
regulations, the special risks of constructing and operating nuclear power
facilities, as well as fluctuating demand for their services. Some public
utility companies are facing increased competition, which may reduce their
profits. All of these factors are subject to rapid change, which may affect
utility companies independently from the stock market as a whole.
RISK OF INVESTING IN FOREIGN SECURITIES
In seeking its investment objectives, the Portfolio may invest in securities of
foreign issuers. Foreign securities may involve a higher degree of risk and may
be less liquid or more volatile than domestic investments. Foreign securities
usually are denominated in foreign currencies, which means their value will be
affected by changes in the strength of foreign currencies relative to the U.S.
dollar as well as the other factors that affect security prices. Foreign
companies may not be subject to accounting standards or governmental supervision
comparable to U.S. companies, and there often is less publicly available
information about their operations. Generally, there is less governmental
regulation of foreign securities markets, and security trading practices abroad
may offer less protection to investors such as the Portfolio. The value of such
investments may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
Additional risks of foreign securities include settlement delays and costs,
difficulties in obtaining and enforcing judgments, and taxation of dividends at
the source of payment. The Portfolio will not invest more than 5% of the value
of its total assets in the securities of issuers based in developing countries,
including Eastern Europe.
PORTFOLIO TURNOVER
Bankers Trust intends to manage the Portfolio actively in pursuit of its
investment objectives. The Portfolio does not expect to trade in securities for
short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held. The Portfolio's portfolio turnover
rate for the years ended December 31, 1995, 1994 and 1993 and the period from
August 3, 1992 (commencement of operations) to December 31, 1992 was 53.71%,
11.43%, 0.0% and 0.0%, respectively. The increase in the Portfolio's turnover
rate from the year 1994 to 1995 was primarily due to the redemptions of Fund
shares in the 1995 period.
DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices or currency exchange
rates and for cash management purposes as a low cost method of gaining exposure
to a particular securities market without investing directly in those
securities. However, some derivatives are used for leverage, which tends to
magnify the effects of an instrument's price changes as market conditions
change. Leverage involves the use of a small amount of money to control a large
amount of financial assets and can, in some circumstances, lead to significant
losses. The Adviser will use derivatives only in circumstances where the Adviser
believes they offer the most economic means of improving the risk/reward profile
of the Portfolio. Derivatives will not be used to increase portfolio risk above
the level that could be achieved using only traditional investment securities or
to acquire exposure to changes in the value of assets or indices that by
themselves would not be purchased for the Portfolio. The use of derivatives for
non-hedging purposes may be considered speculative. A description of the
derivatives that the Portfolio may use and some of their associated risks is
found under "Additional Information."
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objectives by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust at (800) 730- 1313.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the Securities and Exchange Commission
("SEC"), whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as the votes of the Fund's
shareholders. Fund shareholders who do not vote will not affect the Trust's
votes at the Portfolio meeting. The percentage of the Trust's votes representing
the Fund's shareholders not voting will be voted by the Trustees or officers of
the Trust in the same proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
Portfolio. See "Investment Objectives and Policies" for a description of the
fundamental policies of the Portfolio that cannot be changed without approval by
the holders of "a majority of the outstanding voting securities" (as defined in
the 1940 Act) of the Portfolio.
For descriptions of the investment objectives, policies and restrictions of the
Portfolio, see "Investment Objectives and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio" herein
and in the Statement of Additional Information. For descriptions of the expenses
of the Portfolio, see "Management of the Trust and Portfolio" herein.
NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which the
New York Stock Exchange Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through Friday,
except (a) January 1st, Presidents' Day (the third Monday in February), Good
Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last Thursday in November) and
December 25th; and (b) the preceding Friday or the subsequent Monday when one of
the calendar determined holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of the Fund is calculated once on each Valuation
Day as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value of
its investment in the Portfolio and other assets), less all liabilities, by the
total number of its shares outstanding. The Portfolio's securities and other
assets are valued primarily on the basis of market quotations or, if quotations
are not readily available, by a method which the Portfolio's Board of Trustees
believes accurately reflects fair value.
Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is $0.005 ( 1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of the Fund may be reimbursed from its assets, as described
herein. Service Agents may impose initial and subsequent investment minimums
that differ from the amounts presented in the "Minimum Investments" table below.
Shares of the Fund may be purchased in only those states where they may be
lawfully sold.
Purchase orders for shares of the Fund that are received by a Service Agent and
transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier, should the NYSE close earlier) on any Valuation Day will be effective
at that day's Valuation Time. The Trust and Signature reserve the right to
reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to Bankers
Trust as the Trust's custodian (the "Custodian") purchase payments on behalf of
its customers by the following business day (trade date +1) after an order is
placed, and a shareholder must settle with the Service Agent his or her
entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. The Fund may offer shareholders a automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should contact
their Service Agent.
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MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
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REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of the Fund received
by the Service Agent and transmitted to the Transfer Agent prior to the
Valuation Time (currently 4:00 p.m., New York time or earlier, should the NYSE
close earlier) on each Valuation Day will be effective at that day's Valuation
Time and the redemption proceeds normally will be delivered to the shareholder's
account with the Service Agent on the next day, but in any event within seven
calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Service Agent must employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Service Agent does not do so, it may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum (as shown above), but not if an
account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the automatic
cash withdrawal plan, shareholders should contact their Service Agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. The Fund reserves the right to
terminate or modify the exchange privilege in the future. To make an exchange,
follow the procedures indicated in "Purchase of Shares" and "Redemption of
Shares." Before making an exchange, please note the following:
* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
* Complete and sign an application, taking care to register your new account in
the same name, address and taxpayer identification number as your existing
account(s).
* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-sheltered plans. These plans contain special tax
advantages and let you invest for retirement while sheltering your investment
income from current taxes. Minimums may differ from those listed elsewhere in
the Prospectus.
* Individual Retirement Accounts (IRAs): personal savings plans that offer
tax advantages for individuals to set aside money for retirement and allow
new contributions of $2,000 per tax year.
* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions are
available through a "Salary Deferral" SEP for businesses with fewer than 25
eligible employees.
* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.
* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.
* 401(k) Programs: defined contribution plans available to corporations allowing
tax-deductible employer contributions and permitting employees to contribute a
percentage of their wages on a tax-deferred basis.
* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.
* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
distributed on the first business day in April, July and October. In December,
another income dividend will be distributed, plus net capital gains, if any.
Unless a shareholder instructs the Trust to pay such dividends and distributions
in cash, they will be automatically reinvested in additional shares of the Fund.
Federal Taxes. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes.
Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid, whether
you take them in cash or reinvest them in additional shares. Distributions
declared to shareholders of record in November and December and paid in January
are taxable as if paid on December 31. The Fund will send each shareholder a tax
statement by January 31 showing the tax status of the distributions received in
the past year.
Capital Gains. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should keep your regular account statements
to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, the Fund's share value is reduced by the amount of the
distribution. If you buy shares just before the ex-date ("buying a dividend"),
you will pay the full price for the shares and then receive a portion of the
price back as a taxable distribution.
Other Tax Information. In addition to Federal taxes, you may be subject to state
or local taxes on your investment, depending on the laws in your area. You
should consult with your own tax adviser concerning the application of federal,
state and local taxes to your distributions from the Fund.
PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to the Standard & Poor's 500
Composite Stock Price Index, the Standard & Poor's Utility Index, the Lipper
Utility Average or other various unmanaged indices or results of other mutual
funds or investment or savings vehicles. The Fund's investment results as used
in such communications will be calculated on a yield or total return basis in
the manner set forth below. From time to time, fund rankings may be quoted from
various sources, such as Lipper Analytical Services, Inc., Value Line and
Morningstar, Inc.
The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends and capital gain distributions are reinvested. An annualized
total return will be higher than a period total return if the period is shorter
than one year, because of the compounding effect.
The Trust may provide annualized "yield" quotations for the Fund. The "yield" of
the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
advertisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and changes in the Fund's expenses. In addition, during certain periods for
which total return or yields may be provided, Bankers Trust, as Adviser, Service
Agent or Administrator, or Signature, as Distributor, may have voluntarily
agreed to waive portions of their fees on a month-to-month basis. Such waivers
will have the effect of increasing the Fund's net income (and therefore its
total return or yield) during the period such waivers are in effect.
Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by independent
accountants.
MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and Portfolio are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed by
Bankers Trust, the administrator of the Trust and Portfolio, neither the Trust
nor Portfolio require employees other than its executive officers. None of the
executive officers of the Trust or Portfolio devotes full time to the affairs of
the Trust or Portfolio.
The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as the
case may be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
Trustees of the Trust and the Portfolio. For more information with respect to
the Trustees of both the Trust and the Portfolio, see "Management of the Trust
and the Portfolios" in the Statement of Additional Information.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objectives of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust as investment adviser. Mr. James F. Giblin is responsible for the
day-to-day management of the Portfolio. Mr. Giblin joined Bankers Trust Global
Investment Management business in January, 1995 as head of the U.S. large
capitalization equities business. Mr. Giblin, a 23-year veteran of equity
management and analysis joins Bankers Trust from Putnam Investments, where he
was senior vice president and senior portfolio manager. He managed a portion of
The Putnam Growth and Income Fund and was co-manager of the Putnam Health
Sciences Trust. Prior to joining Putnam Investments in 1993, Mr. Giblin spent 14
years with CIGNA Investments, most recently as head of CIGNA Equity Advisors,
with $4-billion in actively managed U.S. equities. Previously, he was managing
director and portfolio manager responsible for CIGNA's insurance accounts and
mutual funds.
Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional markets. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed-income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers with approximately $200 billion in assets under
management globally.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objectives and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its worldwide
subsidiaries and affiliates to assist in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.65% (before
waiver) of the average daily net assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this Prospectus and the Statement of Additional Information without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the interpretations of
relevant Federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities law.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, computed daily and paid monthly, at the annual rate of
0.65% of the average daily net assets of the Fund.
Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio. The Administration and Services Agreement provides
for the Portfolio to pay Bankers Trust a fee, computed daily and paid monthly,
at the annual rate of 0.10% of the average daily net assets of the Portfolio.
Under each Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including Signature, at Bankers
Trust's expense. For more information, see the Statement of Additional
Information.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The principal business address of SFG and
Signature is 6 St. James Avenue, Boston, Massachusetts 02116.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.20% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Fund. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated that
some activities may be conducted on a Trust-wide basis, with the result that
those activities will not be identifiable to any particular series. In the
latter case, expenses will be allocated among the series of the Trust on the
basis of their relative net assets. It is not expected that any payments will be
made under the Plan in the foreseeable future.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker or
agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them directly.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio and
serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreements with the Trust and the Portfolio.
ORGANIZATION OF THE TRUST
The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio.
Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all of the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.
EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
Bankers Trust and Signature have agreed to reimburse the Fund to the extent
required by applicable state law for certain expenses that are described in the
Statement of Additional Information. The Portfolio bears its own expenses.
Operating expenses for the Portfolio generally consist of all costs not
specifically borne by Bankers Trust or Signature, including investment advisory
and administration and services fees, fees for necessary professional services,
amortization of organizational expenses, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.
ADDITIONAL INFORMATION
Rule 144A Securities. The Portfolio may purchase securities in the United States
that are not registered for sale under Federal securities laws but which can be
resold to institutions under the SEC's Rule 144A. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are treated as exempt from the Portfolio's 15% limit on illiquid
securities. Under the supervision of the Board of Trustees of the Portfolio,
Bankers Trust determines the liquidity of restricted securities and, through
reports from Bankers Trust, the Board will monitor trading activity in
restricted securities. Because Rule 144A is relatively new, it is not possible
to predict how these markets will develop. If institutional trading in
restricted securities were to decline, the liquidity of the Portfolio could be
adversely affected.
When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.
Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risks which, like those associated with other
extensions of credit, include delays in recovery and possible loss of rights in
the collateral should the borrower fail financially.
Foreign Investments. The Portfolio may invest in securities of foreign issuers
directly or in the form of American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depositary Receipts ("EDRs") or other
similar securities representing securities of foreign issuers. These securities
may not necessarily be denominated in the same currency as the securities they
represent. Designed for use in U.S. and European securities markets,
respectively, ADRs, GDRs and EDRs are alternatives to the purchase of the
underlying securities in their national markets and currencies. ADRs, GDRs and
EDRs are subject to the same risks as the foreign securities to which they
relate.
With respect to certain countries in which capital markets are either less
developed or not easily accessed, investments by the Portfolio may be made
through investment in other investment companies that in turn are authorized to
invest in the securities of such countries. Investment in other investment
companies is limited in amount by the 1940 Act, will involve the indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies and may result in a duplication of fees and expenses.
Options on Stocks. The Portfolio may write and purchase put and call options on
stocks. A call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying stock at the exercise price at any
time during the option period. Similarly, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
stock at the exercise price at any time during the option period. A covered call
option, which is a call option with respect to which the Portfolio owns the
underlying stock, sold by the Portfolio exposes the Portfolio during the term of
the option to possible loss of opportunity to realize appreciation in the market
price of the underlying stock or to possible continued holding of a stock which
might otherwise have been sold to protect against depreciation in the market
price of the stock. A covered put option sold by the Portfolio exposes the
Portfolio during the term of the option to a decline in price of the underlying
stock. A put option sold by the Portfolio is covered when, among other things,
cash or liquid securities are placed in a segregated account to fulfill the
obligations undertaken.
To close out a position when writing covered options, the Portfolio may make a
"closing purchase transaction," which involves purchasing an option on the same
stock with the same exercise price and expiration date as the option which it
has previously written on the stock. The Portfolio will realize a profit or loss
for a closing purchase transaction if the amount paid to purchase an option is
less or more, as the case may be, than the amount received from the sale
thereof. To close out a position as a purchaser of an option, the Portfolio may
make a "closing sale transaction," which involves liquidating the Portfolio's
position by selling the option previously purchased.
The Portfolio intends to treat over-the-counter options ("OTC Options")
purchased and the assets used to "cover" OTC Options written as not readily
marketable and therefore subject to the limitations described in "Investment
Restrictions" in the Statement of Additional Information.
Options on Stock Indices. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.
Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or the option may expire unexercised.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Portfolio will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of a particular stock. Accordingly,
successful use by the Portfolio of options on stock indices will be subject to
Bankers Trust's ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual stocks.
Futures Contracts on Stock Indices. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of securities ("Futures Contracts"). This investment
technique is designed only to hedge against anticipated future change in general
market prices which otherwise might either adversely affect the value of
securities held by the Portfolio or adversely affect the prices of securities
which are intended to be purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset an existing futures
position.
In general, each transaction in Futures Contracts involves the establishment of
a position which will move in a direction opposite to that of the investment
being hedged. If these hedging transactions are successful, the futures
positions taken for the Portfolio will rise in value by an amount which
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.
Although Futures Contracts would be entered into for hedging purposes only, such
transactions do involve certain risks. These risks could include a lack of
correlation between the Futures Contract and the equity market being hedged, a
potential lack of liquidity in the secondary market and incorrect assessments of
market trends which may result in poorer overall performance than if a Futures
Contract had not been entered into.
Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good-faith deposit against performance of obligations under
Futures Contracts written for the Portfolio. The Portfolio may not purchase or
sell a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts would exceed 5% of the market value of the
Portfolio's total assets.
Options on Futures Contracts. The Portfolio may invest in options on such
Futures Contracts for similar purposes.
Foreign Currency Exchange Transactions. Because the Portfolio may buy and sell
securities denominated in currencies other than the U.S. dollar and receives
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Portfolio from time to time may enter into foreign currency exchange
transactions to convert to and from different foreign currencies and to convert
foreign currencies to and from the U.S. dollar. The Portfolio either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market or uses forward contracts to purchase or
sell foreign currencies.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. The Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.
The Portfolio may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, the Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
Options on Foreign Currencies. The Portfolio may write covered put and call
options and purchase put and call options on foreign currencies for the purpose
of protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. The Portfolio
may use options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different, but related currency. As with other types of options, however, the
writing of an option on foreign currency will constitute only a partial hedge up
to the amount of the premium received, and the Portfolio could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may be used to
hedge against fluctuations in exchange rates although, in the event of exchange
rate movements adverse to the Portfolio's position, it may forfeit the entire
amount of the premium plus related transaction costs. In addition, the Portfolio
may purchase call options on currency when the Adviser anticipates that the
currency will appreciate in value.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time. If the Portfolio is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Portfolio will not be able to sell the underlying currency
or dispose of assets held in a segregated account until the options expire or
are exercised. Similarly, if the Portfolio is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying currency. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions.
As in the case of forward contracts, certain options on foreign currencies are
traded over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded currency options. The Portfolio's ability
to terminate over-the-counter options ("OTC Options") will be more limited than
with exchange-traded options. It is also possible that broker-dealers
participating in OTC Options transactions will not fulfill their obligations.
Until such time as the staff of the SEC changes its position, the Portfolio will
treat purchased OTC Options and assets used to cover written OTC Options as
illiquid securities. With respect to options written with primary dealers in
U.S. Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.
All options that the Portfolio writes will be covered under applicable
requirements of the SEC. The Portfolio will write and purchase options only to
the extent permitted by the policies of state securities authorities in states
where shares of the Fund are qualified for offer and sale.
There can be no assurance that the use of these portfolio strategies will be
successful.
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. In the event of the
bankruptcy of the other party to either a repurchase agreement or a securities
loan, the Portfolio could experience delays in recovering either its cash or the
securities it lent. To the extent that, in the meantime, the value of the
securities repurchased had decreased or the value of the securities lent had
increased, the Portfolio could experience a loss. In all cases, Bankers Trust
must find the creditworthiness of the other party to the transaction
satisfactory. A repurchase agreement is considered a collateralized loan under
the 1940 Act.
Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities and foreign
currency exchange transactions, are not used to achieve investment leverage, the
Portfolio will cover such transactions, as required under applicable
interpretations of the SEC, either by owning the underlying securities or by
establishing a segregated account with the Portfolio's Custodian containing high
grade liquid debt securities in an amount at all times equal to or exceeding the
Portfolio's commitment with respect to these instruments or contracts.
<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
...............
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
...............
<PAGE>
BT INVESTMENT FUNDS
PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.
A Statement of Additional Information with the same date has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference. You
may request a free copy of the Statement by calling the Fund's Service Agent at
1-800-730-1313.
UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVEST- ING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT
PERFORMANCE OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE
OF THE PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND
STRUCTURE" ON PAGE 11.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY
BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Intermediate
Tax Free Fund
o Seeks to produce a yield greater than a tax-free money market fund with lower
risk to principal than a longer-term or lower credit quality, tax free bond
fund.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 10
Net Asset Value 13
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 17
Performance Information and Reports 18
Management of the Trust and Portfolio 19
- ------------------------------------------------------------------------------
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of Intermediate Tax Free Fund (the "Fund") and the
annual operating expenses of the Fund and the expenses of the Intermediate Tax
Free Portfolio (the "Portfolio"), as a percentage of average net assets of the
Fund; and (ii) an example illustrating the dollar cost of such expenses on a
$1,000 investment in the Fund. THE TRUSTEES OF BT INVESTMENT FUNDS (THE
"TRUST") BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE
PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE
FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER
AND THE INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE
TYPE OF SECURITIES BEING HELD BY THE PORTFOLIO.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
.....................................................................................................................
Investment advisory fee (after reimbursement or waivers) 0.37%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.48%
.....................................................................................................................
Total operating expenses (after reimbursements or waivers) 0.85%
.....................................................................................................................
Example 1 year 3 years 5 years 10 years
.....................................................................................................................
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period $9 $27 $47 $105
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that Plan in
the foreseeable future. Bankers Trust Company ("Bankers Trust") has
voluntarily agreed to waive a portion of its investment advisory fee. Without
such waiver, the Portfolio's investment advisory fee would be equal to 0.40%.
The expense table and the example reflect a voluntary undertaking by Bankers
Trust or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses will not exceed
0.85% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1995, total operating
expenses would have been equal to approximately 1.13% of the Fund's average
net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Moreover, while the example assumes a 5% annual return, actual
performance will vary and may result in a return greater or less than 5%.
The Fund is sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Servicing Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for
their services. Each Service Agent has agreed to transmit to shareholders who
are its customers appropriate disclosures of any fees that it may charge them
directly.
In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.
For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.
<PAGE>
FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Fund for each period indicated and has been audited by Coopers & Lybrand
L.L.P., the Fund's independent accountants, whose report thereon appears in
the Fund's Annual Report which is incorporated by reference in the Fund's
Statement of Additional Information.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
JULY 20, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
---------------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
.................................................................................................................................
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.72 $10.54 $ 9.99 $10.00
.................................................................................................................................
Income from Investment Operations
Net Investment Income 0.47 0.42 0.41 0.16
Net Realized and Unrealized Gain (Loss) from
Securities transactions 0.84 (0.82) 0.57 (0.01)
.................................................................................................................................
Total from Investment Operations 1.31 (0.40) 0.98 0.15
.................................................................................................................................
Distributions from
Net Investment Income (0.47) (0.42) (0.41) (0.16)
Net Realized Gain from Securities Transactions -- -- (0.02) --
.................................................................................................................................
Total Distributions (0.47) (0.42) (0.43) (0.16)
.................................................................................................................................
Net Asset Value, End of Period $10.56 $ 9.72 $10.54 $ 9.99
.................................................................................................................................
TOTAL INVESTMENT RETURN 13.71% (3.81)% 9.94% 3.42%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 4.58% 4.20% 3.88% 3.72%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Intermediate Tax Free Portfolio 0.85% 0.85% 0.85% 0.85%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.28% 0.36% 0.35% 0.80%*
Net Assets, End of Period
(000's omitted) $22,213 $25,303 $31,709 $9,992
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
*Annualized
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income exempt from Federal income tax
consistent with moderate risk of capital. The Fund offers investors a
convenient means of participating in a managed, diversified pool of high-grade
intermediate-term municipal securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping, and maintaining detailed records. The Fund's yield normally is
expected to be higher than a tax-free money market fund but lower than a
longer-term or lower quality tax free bond fund.
The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Intermediate Tax Free Portfolio, which has
the same investment objective as the Fund. There can be no assurances that the
investment objective of either the Fund or the Portfolio will be achieved. The
investment objective of each of the Fund and the Portfolio is not a
fundamental policy and may be changed upon notice to but without the approval
of the Fund's shareholders or the Portfolio's investors, respectively. See
"Special Information Concerning Master-Feeder Fund Structure" on page 11
herein.
INTERMEDIATE TAX FREE PORTFOLIO
The Portfolio intends to manage its holdings actively. Portfolio transactions
are undertaken principally to accomplish the Portfolio's investment objective
in relation to expected movements in the general level of interest rates, but
the Portfolio may also engage in short-term trading consistent with its
objective.
The Portfolio seeks to maintain a current yield that is greater than that
generally obtainable from a portfolio of short-term tax-exempt obligations,
subject to applicable quality restrictions. The Portfolio seeks to increase
yields by adjusting the average maturity of its portfolio in light of
prevailing market conditions and credit considerations. The Portfolio will
normally consist of a portfolio of securities with a weighted average maturity
of three to ten years. The remaining maturity of securities generally will not
exceed 20 years at the time of investment. The Portfolio adjusts its holdings
of long-term and short-term debt securities to reflect its assessment of
prospective changes in interest rates, which may adversely affect current
income. The success of this strategy depends upon the ability of Bankers
Trust, as the investment adviser (the "Adviser"), to forecast changes in
interest rates.
The value of securities held by the Portfolio will generally fluctuate
inversely with changes in prevailing interest rates and will also be affected
by changes in the creditworthiness of issuers and other market factors. The
quality criteria applied in the selection of Portfolio securities are intended
to minimize adverse price changes due to credit considerations. The value of
municipal securities in the Portfolio can also be affected by market reaction
to legislative consideration of various tax reform proposals. Although the
value of the assets of the Portfolio and the net asset value of the Fund will
fluctuate, the Portfolio attempts to conserve the value of its assets to the
extent consistent with its objective. Subject to restrictions set forth under
"Options and Futures Contracts," the Portfolio may purchase or sell certain
financial instruments in order to attempt to moderate market risk and minimize
fluctuations in the value of its assets. For a discussion of these
transactions, see "Options and Futures Contracts."
Municipal Securities. The Portfolio may invest in notes and bonds issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies, authorities
and instrumentalities. These obligations may be general obligation instruments
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest, or they may be revenue instruments
payable from specific revenue sources, but not generally backed by the
issuer's taxing power. These include industrial development bonds where
payment is the responsibility of the private industrial user of the facility
financed by the instruments.
Short-Term Municipal Investments. For temporary defensive purposes or for
purposes of liquidity, the assets of the Portfolio may be invested in short-
term municipal obligations. These short-term obligations include municipal
notes of various types, including notes issued in anticipation of receipt of
taxes, the proceeds of the sale of bonds, other revenues or grant proceeds and
project notes, as well as municipal commercial paper and municipal demand
obligations such as variable rate demand notes and master demand obligations.
The interest rate on variable rate demand notes is adjustable at periodic
intervals as specified in the notes. Master demand obligations permit the
investment of fluctuating amounts at periodically adjusted interest rates.
Although master demand obligations are not marketable to third parties, the
Portfolio considers them to be liquid because they are payable on demand.
There is no specific percentage limitation on these investments. The credit
quality of variable rate demand notes and other municipal obligations is
frequently enhanced by various arrangements with domestic or foreign financial
institutions, such as letters of credit, guarantees and insurance, and these
arrangements are considered when investment quality is evaluated. These
obligations will be of comparable quality to municipal bonds and will be
purchased in anticipation of a declining market and rising interest rates,
pending purchase of longer term investments or to maintain liquidity to meet
redemptions.
Puts. The Portfolio may purchase municipal bonds or notes together with the
right to resell them at an agreed price or yield within a specified period
prior to maturity. This right to resell is known as a put. The aggregate price
paid for securities with puts may be higher than the price which otherwise
would be paid. Consistent with the investment objectives of the Portfolio and
subject to the supervision of the Trustees of the Portfolio, the purpose of
this practice is to permit the Portfolio to be fully invested in tax-exempt
securities while maintaining the necessary liquidity to purchase securities on
a when-issued basis, to meet unusually large redemptions, to purchase at a
later date securities other than those subject to the put and to facilitate
Bankers Trust's ability to manage the Portfolio actively. The principal risk
of puts is that the put writer may default on its obligation to repurchase.
Bankers Trust will monitor each writer's ability to meet its obligations under
puts.
The amortized cost method is used by the Portfolio to value municipal
securities with maturities of less than 60 days; when these securities are
subject to puts separate from the underlying securities, no value is assigned
to the puts. The cost of any such put is carried as an unrealized loss from
the time of purchase until it is exercised or expires.
Zero Coupon Municipal Securities. The Portfolio may invest in zero coupon
municipal securities which are debt securities issued or sold at a discount
from their face value which do not entitle the holder to any periodic payment
of interest prior to maturity or a specified redemption date (or cash payment
date). The amount of the discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, liquidity of the
security and perceived credit quality of the issuer. Zero coupon securities
also may take the form of debt securities that have been stripped of their
unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. The market prices of zero coupon securities generally are more
volatile than the market prices of interest-bearing securities and are likely
to respond to a greater degree to changes in interest rates than interest-
bearing securities having similar maturities and credit qualities.
Taxable Investments. The Portfolio attempts to invest 100% of its assets in
tax-exempt municipal securities; however the Portfolio is permitted to invest
up to 20% (or greater while maintaining a temporary defensive position) of the
value of its total assets in securities, the interest income on which is
subject to Federal income or alternative minimum tax. The Portfolio may make
taxable investments pending investment of proceeds of tax-exempt securities,
pending settlement of purchases of portfolio securities, to maintain liquidity
to meet redemptions or when it is advisable in Bankers Trust's opinion because
of adverse market conditions. The taxable investments permitted for the
Portfolio include obligations of the U.S. and its agencies and
instrumentalities, bank obligations, commercial paper and repurchase
agreements and other debt securities which meet the Portfolio's quality
requirements.
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. In the event of
the bankruptcy of the other party to a repurchase agreement, the Portfolio
could experience delays in recovering its cash. To the extent that, in the
meantime, the value of the securities repurchased had decreased the Portfolio
could experience a loss. In all cases, Bankers Trust must find the
creditworthiness of the other party to the transaction satisfactory. A
repurchase agreement is considered a collateralized loan under the 1940 Act.
Rule 144A Securities. The Portfolio may purchase securities in the United
States that are not registered for sale under Federal securities laws but
which can be resold to institutions under the Securities and Exchange
Commission's (the "SEC") Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the Portfolio's 15% limit on illiquid securities. Under
the supervision of the Board of Trustees of the Portfolio, Bankers Trust
determines the liquidity of restricted securities and, through reports from
Bankers Trust, the Board will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.
When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a
segregated account containing high grade liquid securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.
Options and Futures Contracts. The Portfolio may buy and sell options and
futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling
futures, buying puts, and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, including buying futures,
writing puts and buying calls, tend to increase market exposure. The Portfolio
may invest in options (including over-the-counter options) and futures
contracts based on any type of security or index related to its investments.
Options and futures can be volatile investments, and involve certain risks. If
Bankers Trust applies a hedge at an inappropriate time or judges interest
rates incorrectly, options and futures strategies may lower the Portfolio's
return. The costs of hedging are not reflected in the Portfolio's yield but
are reflected in the Portfolio's total return. The Portfolio could also
experience losses if its options and futures positions were poorly correlated
with its other investments, or if it could not close out its positions because
of an illiquid secondary market. Each option written by the Portfolio will be
covered under applicable requirements of the SEC.
Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities, are not used
to achieve investment leverage, the Portfolio will cover such transactions, as
required under applicable interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated account with the
Portfolio's custodian containing high grade liquid debt securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
Quality Information. The Portfolio will not purchase any municipal obligation
unless it is rated at least A, MIG-1 or Prime-1 by Moody's Investors Service,
Inc. or A, SP-1 or A-1 by Standard & Poor's Corporation or it is unrated and in
the Adviser's opinion it is of comparable quality. These standards must be
satisfied at the time an investment is made. If the quality of the investment
later declines, the Portfolio may continue to hold the investment.
ADDITIONAL INVESTMENT LIMITATIONS
Under normal circumstances, at least 80% of the Portfolio's assets will be
invested in tax-exempt municipal securities. As an operating policy, the
Portfolio will consider instruments subject to the Federal alternative minimum
tax as taxable securities for purposes of this 80% requirement. As a
diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. As an
operating policy, no more than 15% of the Portfolio's net assets may be
invested in illiquid or not readily marketable securities (including
repurchase agreements and time deposits with remaining maturities of more than
seven calendar days). Additional investment policies of the Portfolio are
contained in the Statement of Additional Information.
RISK FACTORS; MATCHING THE FUND
TO YOUR INVESTMENT NEEDS
The Fund is designed for conservative investors looking for a relatively
stable, high-grade investment free from Federal income tax. Because the
Portfolio invests in high-grade tax-exempt instruments with short to
intermediate maturities, its share price should be more stable than that of a
long-term bond fund, although it may be less stable than that of a short-term
bond fund. Generally, short to intermediate-term instruments are less
sensitive to interest rate fluctuations or changes in an issuer's credit
standing than longer-term bonds. At the same time, the Fund may not offer the
same yield or growth potential as a long-term bond fund. The Fund should
provide higher yields than fixed-price investments such as mutual funds that
maintain shorter average maturities, but will not provide the same stability
of principal. Bond funds generally offer greater price stability than stock
funds, although the potential rewards of bonds are not as great. By itself,
the Fund does not constitute a balanced investment plan; the Fund and the
Portfolio stress income and preservation of capital rather than capital
growth. The Fund's share prices, yield and total return fluctuate based on
many factors, and the value of Fund shares when redeemed may be more or less
than their original cost.
The value of Fund shares will tend to decrease when interest rates rise, and
increase when interest rates fall. The Fund's share price and yield also
depend on the quality of the Portfolio's investments.
PORTFOLIO TURNOVER
Bankers Trust may engage in short-term trading when it believes it is
consistent with the Portfolio's investment objective. Also, a security may be
sold and another of comparable quality simultaneously purchased to take
advantage of what Bankers Trust believes to be a temporary disparity in the
normal yield relationship between the two securities. The frequency of
portfolio transactions -- the Portfolio's turnover rate -- will vary from year
to year depending on market conditions. Bankers Trust intends to manage the
Portfolio actively in pursuit of its investment objective. Because a high
turnover rate increases transaction costs and may increase taxable capital
gains, Bankers Trust carefully weighs the anticipated benefits of short-term
investment against these consequences. The Portfolio's annual portfolio
turnover rate for the years ended December 31, 1995, 1994 and 1993 and the
period from July 20, 1992 (commencement of operations) to December 31, 1992
was 95%, 118%, 40% and 132%, respectively. The decrease in the Portfolio's
turnover rate from the year ended 1994 to 1995 was primarily due to the timing
of subscriptions and redemptions of Fund shares.
DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset or market
index. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices or currency exchange rates and for cash management purposes
as a low cost method of gaining exposure to a particular securities market
without investing directly in those securities. However, some derivatives are
used for leverage, which tends to magnify the effects of an instrument's price
changes as market conditions change. Leverage involves the use of a small
amount of money to control a large amount of financial assets and can, in some
circumstances, lead to significant losses. The Adviser will use derivatives
only in circumstances where the Adviser believes they offer the most economic
means of improving the risk/reward profile of the Portfolio. Derivatives will
not be used to increase portfolio risk above the level that could be achieved
using only traditional investment securities or to acquire exposure to changes
in the value of assets or indices that by themselves would not be purchased
for the Portfolio. The use of derivatives for non-hedging purposes may be
considered speculative. A description of the derivatives that the Portfolio
may use and some of their associated risks is found under "Options and Futures
Contracts."
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at (800) 730-1313.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the SEC, whenever the
Trust is requested to vote on matters pertaining to the Portfolio, the Trust
will hold a meeting of shareholders of the Fund and will cast all of its votes
in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Trust's votes at the
Portfolio meeting. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees or officers of the Trust
in the same proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Portfolio. See "Investment Objective and Policies" for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.
NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the New York Stock Exchange, Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through
Friday, except: (a) January 1st, Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar-determined holidays falls on a Saturday or
Sunday, respectively.
The net asset value per share of the Fund is calculated on each Valuation Day
as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value
of its investment in the Portfolio and other assets), less all liabilities, by
the total number of its shares outstanding. The Portfolio's securities and
other assets are valued primarily on the basis of market quotations or, if
quotations are not readily available, by a method which the Portfolio's Board
of Trustees believes accurately reflects fair value.
Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is $0.005 (1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Fund may be reimbursed from its assets, as
described herein. Service Agents may impose initial and subsequent investment
minimums that differ from the amounts presented in the "Minimum Investments"
table below. Shares of the Fund may be purchased in only those states where
they may be lawfully sold.
Purchase orders for shares of the Fund that are received by a Service Agent
and transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or in
the event that the NYSE closes early, at the time of such early closing) on
any Valuation Day will be effective at that day's Valuation Time. The Trust
and Signature reserve the right to reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to Bankers Trust as the Trust's custodian (the "Custodian") purchase payments
on behalf of its customers by the following business day (trade date 1) after
an order for shares is placed, and a shareholder must settle with the Service
Agent his or her entitlement to an effective purchase or redemption order as
of a particular time. Because Bankers Trust is the Custodian and Transfer
Agent of the Trust, funds may be transferred directly from or to a customer's
account with Bankers Trust to or from the Fund without incurring the
additional costs or delays associated with the wiring of federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. The Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should
contact their Service Agent.
- --------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
- --------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next
determined on each Valuation Day. Redemption requests should be transmitted by
customers in accordance with procedures established by the Transfer Agent and
the shareholder's Service Agent. Redemption requests for shares of the Fund
received by the Service Agent and transmitted to the Transfer Agent prior to
the Valuation Time on each Valuation Day will be effective at that day's
Valuation Time (currently 4:00 p.m., New York time or earlier, should the NYSE
close earlier) and the redemption proceeds normally will be delivered to the
shareholder's account with the Service Agent on the next day, but in any event
within seven calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may
disclaim liability for following instructions communicated by telephone that
the Service Agent reasonably believes to be genuine. The Service Agent must
provide the investor with an opportunity to choose whether or not to utilize
the telephone redemption or exchange privilege. The Service Agent must employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. If the Service Agent does not do so, it may be liable for any
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum (as shown above), but not if
an account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the
automatic cash withdrawal plan, shareholders should contact their Service
Agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares" in that fund's prospectus. Before making an exchange,
please note the following:
* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
* Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).
* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, nonprofit
organizations and other institutions. Contact your Service Agent or Bankers
Trust for further information. Bankers Trust can set up your new account in
the Fund under a number of several tax-sheltered plans. These plans contain
special tax advantages and let you invest for retirement while sheltering your
investment income from current taxes. Minimums may differ from those listed
elsewhere in the Prospectus.
* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.
* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.
* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.
* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.
* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.
* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.
* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Any net capital gains are distributed in
December. Unless a shareholder instructs the Trust to pay such dividends and
distributions in cash, they will be automatically reinvested in additional
shares of the Fund.
Federal Taxes. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes.
Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's capital gain distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. The Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received in the past year.
The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by having, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets are invested in tax-exempt
securities. An exempt-interest dividend is that part of dividend distributions
made by the Fund which consists of interest received by the Fund derived from
tax-exempt securities held by the Portfolio. Exempt-interest dividends
received from the Fund will be treated for Federal income tax purposes as tax-
exempt interest income. In view of the Portfolio's investment policies, it is
expected that substantially all the Fund's dividends will be exempt-interest
dividends, although the Fund may from time to time distribute net short-term
capital gains or other minor amounts of taxable income.
Interest on certain tax-exempt municipal obligations issued after August 7,
1986 is a preference item for purposes of the Federal alternative minimum tax
applicable to individuals and corporations. Under tax regulations to be
issued, the portion of an exempt-interest dividend of a regulated investment
company that is allocable to these obligations will be treated as a preference
item for purposes of the alternative minimum tax. The Portfolio has limited
its investment to those securities the interest on which will not be treated
as preference items for purposes of the alternative minimum tax in the opinion
of bond counsel for the issuer. The Portfolio currently has no intention of
investing in obligations subject to the alternative minimum tax under normal
market conditions.
Corporations should, however, be aware that interest on all municipal
securities will be included in calculating: (i) adjusted current earnings for
purposes of the alternative minimum tax applicable to them; (ii) the
additional tax imposed on certain corporations by the Superfund Revenue Act of
1986; and (iii) the foreign branch profits tax imposed on effectively
connected earnings and profits of United States branches of foreign
corporations. Furthermore, special tax provisions may apply to certain
financial institutions and property and casualty insurance companies, and they
should consult their tax advisors before purchasing shares of the Fund.
Certain provisions in the Tax Reform Act of 1986, as amended, relating to the
issuance of municipal obligations have reduced the volume of municipal
obligations qualifying for Federal tax exemption and may continue to do so.
Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry shares of these Funds is
not deductible. The U.S. Department of the Treasury has been given authority
to issue regulations which would disallow the interest deduction if incurred
to purchase or carry shares of the Fund owned by the taxpayer's spouse, minor
child or entity controlled by the taxpayer. Entities or persons who are
"substantial users" (or related persons) of facilities financed by tax-exempt
bonds should consult their tax advisors before purchasing shares of the Fund.
Capital Gains. You may realize a capital gain or loss when you redeem (sell)
or exchange shares. Because the tax treatment also depends on your purchase
price and your personal tax position, you should keep your regular account
statements to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from capital gains, the
Fund's share value is reduced by the amount of the distribution. If you buy
shares just before the ex-date ("buying a dividend"), you will pay the full
price for the shares and then receive a portion of the price back as a taxable
distribution.
Other Tax Information. You may be subject to state or local taxes on your
investment, depending on the laws in your area. You should consult with your
own tax adviser concerning the application of federal, state and local taxes
to your distributions from the Fund.
PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment
results and/or comparisons of its investment results to the Lipper
Intermediate Muni Debt Average, the Lehman 7-Year G.O. Index, the Micropal
Intermediate Tax Free Bond Index or other various unmanaged indices or results
of other mutual funds or investment or savings vehicles. The Fund's investment
results as used in such communications will be calculated on a yield or total
rate of return basis in the manner set forth below. From time to time, fund
rankings may be quoted from various sources, such as Lipper Analytical
Services, Inc., Value Line and Morningstar, Inc.
The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of
an investment in the Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributed during such period. Period total
return may be annualized. An annualized total return is a compounded total
return which assumes that the period total return is generated over a one-year
period, and that all dividends and capital gain distributions are reinvested.
An annualized total return will be higher than a period total return if the
period is shorter than one year, because of the compounding effect.
The Trust may provide annualized "yield" quotations for the Fund. The "yield"
of the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
advertisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.
The Trust may also provide "tax-equivalent yield" quotations for the Fund. The
Fund's tax-equivalent yield is similar to the yield for the same period,
except that the tax-equivalent yield takes into account, for a stated tax
rate, the benefits of tax-exempt dividends.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the
Portfolio and changes in the Fund's expenses. In addition, during certain
periods for which total return quotations or yields may be provided, Bankers
Trust, as Adviser, Service Agent or Administrator, or Signature, as
Distributor, may have voluntarily agreed to waive portions of their fees on a
month-to-month basis. Such waivers will have the effect of increasing the
Fund's net income (and therefore its total return or yield) during the period
such waivers are in effect.
Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including listings of investment securities
held by the Portfolio at those dates. Annual reports are audited by
independent accountants.
MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and the Portfolio are managed under the supervision
of their respective Boards of Trustees. By virtue of the responsibilities
assumed by Bankers Trust, as the administrator of the Trust and the Portfolio,
neither the Trust nor the Portfolio requires employees other than its
officers. None of the Trust's or the Portfolio's officers devotes full time to
the affairs of the Trust or the Portfolio.
The Trustees of the Trust who are not "interested persons," (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio. The Portfolio has retained the
services of Bankers Trust, as investment adviser. Mr. Gary Pollack is
responsible for the day-to-day management of the Portfolio. Mr. Pollack has
been employed by Bankers Trust since prior to 1989 and has managed the
Portfolio's assets since the Portfolio's commencement of operations.
Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking, and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers with approximately $200 billion in assets under management globally.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structure. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. Bankers Trust may utilize the expertise of
any of its worldwide subsidiaries and affiliates to assist in its role as
investment adviser. All orders for investment transactions on behalf of the
Portfolio are placed by Bankers Trust with broker-dealers and other financial
intermediaries that it selects, including those affiliated with Bankers Trust.
A Bankers Trust affiliate will be used in connection with a purchase or sale
of an investment for the Portfolio only if Bankers Trust believes that the
affiliate's charge for the transaction does not exceed usual and customary
levels. The Portfolio will not invest in obligations for which Bankers Trust
or any of its affiliates is the ultimate obligor or accepting bank. The
Portfolio may, however, invest in the obligations of correspondents or
customers of Bankers Trust.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.40% of the
average daily net assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Trust's Administration and Services Agreement provides that
Bankers Trust shall receive a fee, computed daily and paid monthly, at the
annual rate of 0.40% of the average daily net assets of the Fund.
Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the net asset value of the Portfolio and generally assists
the Board of Trustees of the Portfolio in all aspects of the administration
and operation of the Portfolio. The Administration and Services Agreement
provides for the Portfolio to pay Bankers Trust a fee, computed daily and paid
monthly, at the annual rate of 0.05% of the average daily net assets of the
Portfolio. Under each Administration and Services Agreement, Bankers Trust may
delegate one or more of its responsibilities to others, including Signature,
at Bankers Trust's expense. For more information, see the Statement of
Additional Information.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and
its affiliates currently provide administration and distribution services for
other registered investment companies. The principal business address of SFG
and Signature is 6 St. James Avenue, Boston, Massachusetts 02116.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.20% of the Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of Signature who, as their primary
activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of the Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Fund, subject to the
0.20% of net assets limitation. All costs and expenses associated with
preparing the prospectus and statement of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Fund. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated
that some activities may be conducted on a Trust-wide basis, with the result
that those activities will not be identifiable to any particular series. In
the latter case, expenses will be allocated among the series of the Trust on
the basis of their relative net assets. It is not expected that any payments
will be made under the Plan in the foreseeable future.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions,
arranging for bank wires, performing shareholder sub-accounting, answering
client inquiries regarding the Trust, assisting clients in changing dividend
options, account designations and addresses, providing periodic statements
showing the client's account balance, transmitting proxy statements, periodic
reports, updated Prospectuses and other communications to shareholders and,
with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares
through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that
it may charge them directly.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio
and serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.
ORGANIZATION OF THE TRUST
The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Fund was established and designated as a separate series of
the Trust on January 29, 1992. The Trust offers shares of beneficial interest
of separate series, par value $0.001 per share. The shares of the other series
of the Trust are offered through separate prospectuses. No series of shares
has any preference over any other series.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the
Fund. There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Any Trustee may be removed from office upon the vote of shareholders
holding at least two-thirds of the Trust's outstanding shares at a meeting
called for that purpose. The Trustees are required to call such a meeting upon
the written request of shareholders holding at least 10% of the Trust's
outstanding shares.
The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio.
Each series of the Trust will not be involved in any vote involving a
Portfolio in which it does not invest its Assets. Shareholders of all of the
series of the Trust will, however, vote together to elect Trustees of the
Trust and for certain other matters. Under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.
EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and service fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to
the extent required by applicable state law for certain expenses that are
described in the Statement of Additional Information. The Portfolio bears its
own expenses. Operating expenses for the Portfolio generally consist of all
costs not specifically borne by Bankers Trust or Signature, including
investment advisory and administration and service fees, fees for necessary
professional services, amortization of organizational expenses, the costs
associated with regulatory compliance and maintaining legal existence and
investor relations.
<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
....................
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
....................
<PAGE>
BT INVESTMENT FUNDS
PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.
A Statement of Additional Information (SAI) with the same date has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference. You may request a free copy of the Statement by calling the Fund's
Service Agent at 1-800-730-1313.
UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 11.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. THE FUND INTENDS TO MAINTAIN A CONSTANT $1.00 PER SHARE NET ASSET VALUE,
ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Liquid Assets Fund
o Seeks a high level of current income to the extent consistent with liquidity
and the preservation of capital.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective, Policies and Risks 6
Risk Factors: Matching the Fund to Your Investment Needs 11
Net Asset Value 12
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 16
Performance Information and Reports 17
Management of the Trust and Portfolio 18
- ------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of shares of Liquid Assets Fund (the "Fund"), and the annual
operating expenses of the Fund and the expenses of the Liquid Assets Portfolio
(the "Portfolio"), as a percentage of average net assets of the Fund and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund. THE TRUSTEES OF BT INVESTMENT FUNDS (THE "TRUST")
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO
WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD
INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE
INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF
SECURITIES BEING HELD BY THE PORTFOLIO.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee (after reimbursement or waivers) 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.30
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.45%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following expenses on a $1,000 investment, assuming:
(1) 5% annual return and (2) redemption at the end of each time period $5 $14 $25 $57
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. The expense table and the example reflect a voluntary
undertaking by Bankers Trust or Signature Broker-Dealer Services, Inc.
("Signature") to waive or reimburse expenses such that total operating expenses
will not exceed 0.45% of the Fund's average net assets annually. In the absence
of this undertaking, for the fiscal year ended December 31, 1995, the total
operating expenses would have been equal to approximately 1.30% of the Fund's
average net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.
The Fund is sold by Signature as the Trust's distributor (the "Distributor") to
customers of Bankers Trust or to customers of another bank or a dealer or other
institution that has a sub-shareholder servicing agreement with Bankers Trust
(along with Bankers Trust, a "Service Agent"). Some Service Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.
In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.
For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and BT Investment Portfolios" herein.
<PAGE>
FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and have been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
JUNE 7, 1993
(COMMENCEMENT
FOR THE YEAR ENDED FOR THE YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995++ DECEMBER 31, 1994 DECEMBER 31, 1993
...................................................................................................................
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00
------ ------ ------
Income from Investment Operations
Net Investment Income 0.04 0.04 0.02
Net Realized Gain (Loss) on Securities 0.00+ (0.00)+ 0.00+
...................................................................................................................
Total from Investment Operations 0.04 0.04 0.02
...................................................................................................................
Contribution of Capital -- 0.00+ --
...................................................................................................................
Distributions from Net Investment Income (0.04) (0.04) (0.02)
Distributions from Net Realized Gains
from Securities Transactions (0.00)+ -- --
...................................................................................................................
Total Distributions (0.04) (0.04) (0.02)
..............................................................................
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
...................................................................................................................
TOTAL INVESTMENT RETURN 4.05% 3.88% 2.82%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average
Net Assets 5.63%* 3.93% 2.78%*
Ratio of Expenses to Average Net Assets,
Including Expenses of the Liquid Assets
Portfolio 0.45%* 0.45% 0.45%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust 0.85%* 1.08% 0.99%*
Net Assets, End of Period
(000's omitted) $ 0 $13,352 $8,108
- -------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
+ Represents less than $0.01 per share ++The Fund ceased operations on September 14, 1995.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in high quality money market
instruments. The Fund offers investors a convenient means of diversifying their
holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality, short-term
instruments may result in a lower yield than instruments with a lower quality or
a longer term.
The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund. The Portfolio is a series of BT Investment Portfolios, an open-end
management investment company. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is a fundamental policy and may
not be changed without the approval of the Fund's shareholders or the
Portfolio's investors, respectively. See "Special Information Concerning
Master-Feeder Fund Structure" on page 11 herein.
LIQUID ASSETS PORTFOLIO
The Portfolio will attempt to achieve its investment objective by investing in
the following money market instruments:
Bank Obligations. The Portfolio may invest in fixed rate or variable rate
obligations of U.S. or foreign banks which have total assets at the time of
purchase in excess of $1 billion and are rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 or higher by Standard & Poor's Corporation
("S&P") or, if not rated, are believed by Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, to be of comparable
quality. Bank obligations in which the Portfolio invests include certificates of
deposit, bankers' acceptances, time deposits and other U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks. If
Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, deems the instruments to present minimal credit risk, the Portfolio
may invest in obligations of foreign banks or foreign branches of U.S. banks,
which include subsidiaries of U.S. banks located in the United Kingdom, Grand
Cayman Island, Nassau, Japan and Canada. Investments in these obligations may
entail risks that are different from those of investments in obligations of U.S.
domestic banks because of differences in political, regulatory and economic
systems and conditions. These risks include future political and economic
developments, currency blockage, the possible imposition of withholding taxes on
interest payments, differing reserve requirements, reporting and recordkeeping
requirements and accounting standards, possible seizure or nationalization of
foreign deposits, difficulty or inability of pursuing legal remedies and
obtaining judgments in foreign courts, possible establishment of exchange
controls or the adoption of other foreign governmental restrictions that might
affect adversely the payment of principal and interest on bank obligations.
Under normal market conditions, the Portfolio will invest more than 25% of its
assets in the foreign and domestic bank obligations described above. The
Portfolio's concentration of its investments in bank obligations will cause the
Portfolio to be subject to the risks peculiar to the domestic and foreign
banking industries to a greater extent than if its investments were not so
concentrated. A description of the ratings set forth above is provided in the
Appendix to the Statement of Additional Information.
Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S. or
foreign corporations. Commercial paper when purchased by the Portfolio must be
rated Prime-1 by Moody's or A-1 or higher by S&P or, if not rated, must be
believed by Bankers Trust, acting under the supervision of the Board of Trustees
of the Portfolio, to be of comparable quality. Any commercial paper issued by a
foreign corporation and purchased by the Portfolio must be U.S.
dollar-denominated and must not be subject to foreign withholding tax at the
time of purchase. Investing in foreign commercial paper generally involves risks
similar to those described above relating to obligations of foreign banks or
foreign branches of U.S. banks.
Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Portfolio and the issuer, they are not normally traded.
Although no active secondary market may exist for these notes, the Portfolio
will purchase only those notes under which it may demand and receive payment of
principal and accrued interest daily or may resell the note to a third party.
While the notes are not typically rated by credit rating agencies, issuers of
variable rate master demand notes must satisfy Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, that the same criteria as
set forth above for issuers of commercial paper are met. In the event an issuer
of a variable rate master demand note defaulted on its payment obligation, the
Portfolio might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.
Other Debt Obligations. The Portfolio may invest in deposits, bonds, notes and
debentures of issuers that at the time of purchase have outstanding short term
obligations meeting the above short term rating requirements, or if there are no
such short term ratings, are determined by Bankers Trust to be of comparable
quality and are rated in the top two highest long term rating categories by two
NRSROs (or one NRSRO if that NRSRO is the only such NRSRO which rates the
security).
The Portfolio may also invest in securities generally referred to as
asset-backed securities, which directly or indirectly represent a participation
interest in, or are secured by and payable from, a stream of payments generated
by particular assets such as motor vehicle or credit card receivables.
Asset-backed securities provide periodic payments that generally consist of both
interest and principal payments. Consequently, the life of an asset-backed
security varies with the prepayment and loss experience of the underlying
assets.
U.S. Government Obligations. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Treasury or by agencies or instrumentalities of the U.S.
Government ("U.S. Government Obligations"). Obligations of certain agencies and
instrumentalities of the U.S. Government, such as short-term obligations of the
Government National Mortgage Association, are supported by the "full faith and
credit" of the U.S. Government; others, such as those of the Export-Import Bank
of the U.S., are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law.
Repurchase Agreements. The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Board of Trustees of the Portfolio. Under the terms of a typical repurchase
agreement, the Portfolio would acquire an underlying debt obligation of a kind
in which the Portfolio could invest for a relatively short period (usually not
more than one week), subject to an obligation of the seller to repurchase, and
the Portfolio to resell, the obligation at an agreed price and time, thereby
determining the yield during the Portfolio's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Portfolio's holding period. The value of the underlying securities
will be at least equal at all times to the total amount of the repurchase
obligations, including interest. The Portfolio bears a risk of loss in the event
that the other party to a repurchase agreement defaults on its obligations and
the Portfolio is delayed in or prevented from exercising its rights to dispose
of the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period in which the Portfolio
seeks to assert these rights. Bankers Trust, acting under the supervision of the
Board of Trustees of the Portfolio, reviews the creditworthiness of those banks
and dealers with which the Portfolio enters into repurchase agreements and
monitors on an ongoing basis the value of the securities subject to repurchase
agreements to ensure that it is maintained at the required level.
Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities to brokers, dealers and other financial organizations.
These loans must be secured continuously by cash or equivalent collateral or by
a letter of credit at least equal to 100% of the current market value of the
securities loaned plus accrued income. By lending its securities, the Portfolio
can increase its income by continuing to receive income on the loaned securities
as well as by the opportunity to receive interest on the collateral. Any gain or
loss in the market price of the borrowed securities which occurs during the term
of the loan inures to the Portfolio and its investors. In lending securities to
brokers, dealers and other organizations, the Portfolio is subject to risk
which, like those associated with other extensions of credit, includes delays in
recovery and possible loss of rights in the collateral should the borrower fail
financially.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. In a reverse repurchase agreement the Portfolio agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed date and price. At the time the
Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government Obligations or other high
grade, liquid debt instruments having a value equal to the repurchase price,
including accrued interest. Reverse repurchase agreements involve the risk that
the market value of the securities sold by the Portfolio may decline below the
repurchase price of the securities. Reverse repurchase agreements are considered
to be borrowings by the Portfolio for purposes of the limitations described in
"Additional Investment Limitations" below and in the Trust's Statement of
Additional Information.
When-Issued and Delayed-Delivery Securities. To secure prices deemed
advantageous at a particular time, the Portfolio may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction. The Portfolio will enter into when-issued or
delayed-delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Portfolio
may include securities purchased on a "when, as and if issued" basis under which
the issuance of the securities depends on the occurrence of a subsequent event.
Securities purchased on a when-issued or delayed-delivery basis may expose the
Portfolio to risk because the securities may experience fluctuations in value
prior to their actual delivery. The Portfolio does not accrue income with
respect to a when-issued or delayed-delivery security prior to its stated
delivery date. Purchasing securities on a when-issued or delayed-delivery basis
can involve the additional risk that the yield available in the market when the
delivery takes place may be higher than that obtained in the transaction itself.
Upon purchasing a security on a when-issued or delayed-delivery basis, the
Portfolio will maintain a segregated account at the Portfolio's custodian
containing cash, U.S. Government Obligations or other high grade liquid debt
instruments in an amount at least equal to the when-issued or delayed-delivery
commitment.
Illiquid Securities. The Portfolio may not invest more than 10% of its net
assets in securities which are illiquid or otherwise not readily marketable. If
a security becomes illiquid after purchase by the Portfolio, the Portfolio will
normally sell the security unless to do so would not be in the best interests of
shareholders.
PORTFOLIO QUALITY AND MATURITY
The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two nationally recognized statistical rating
organizations ("NRSRO"): (or one such NRSRO if that NRSRO is the only such NRSRO
which rates the security), or if unrated, are believed by Bankers Trust, under
the supervision of the Portfolio's Board of Trustees, to be of comparable
quality. A description of such ratings is provided in the Appendix to the
Statement of Additional Information. Bankers Trust, acting under the supervision
of and procedures adopted by the Board of Trustees of the Portfolio, will also
determine that all securities purchased by the Portfolio present minimal credit
risks. Bankers Trust will cause the Portfolio to dispose of any security as soon
as practicable if the security is no longer of the requisite quality, unless
such action would not be in the best interest of the Portfolio.
ADDITIONAL INVESTMENT LIMITATIONS
The Fund's and the Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the Statement of
Additional Information, except as noted, are "fundamental policies," which means
that they may not be changed without the approval of the holders of the Fund's
and the Portfolio's outstanding voting securities. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its Assets in another open-end investment company with the same investment
objective, such as the Portfolio. The Portfolio may not invest more than 25% of
its total assets in the securities of issuers in any single industry, except
that, under normal market conditions, more than 25% of the total assets of the
Portfolio will be invested in foreign and domestic bank obligations. As an
operating policy, the Portfolio may not invest more than 5% of its total assets
in the obligations of any one issuer except for U.S. Government Obligations and
repurchase agreements, which may be purchased without limitation. The Portfolio
is also authorized to borrow, including entering into reverse repurchase
transactions, in an amount up to 5% of its total assets for temporary purposes,
but not for leverage, and to pledge its assets to the same extent in connection
with these borrowings. See the Statement of Additional Information for
additional information with respect to reverse repurchase transactions. At the
time of an investment, the Portfolio's aggregate holdings of repurchase
agreements having a remaining maturity of more than seven calendar days (or
which may not be terminated within seven calendar days upon notice by the
Portfolio), time deposits having a remaining maturity of more than seven
calendar days, illiquid securities, restricted securities and securities lacking
readily available market quotations will not exceed 10% of the Portfolio's net
assets. If changes in the liquidity of certain securities cause the Portfolio to
exceed such 10% limit, the Portfolio will take steps to bring the aggregate
amount of its illiquid securities back below 10% of its net assets as soon as
practicable, unless such action would not be in the best interest of the
Portfolio. The Fund's and the Portfolio's limitations or investments in a single
industry and on borrowing may not be changed without the approval of the
shareholders of the Fund or the investors of the Portfolio, as the case may be.
All other investment policies and limitations described in this prospectus may
be changed by a vote of the Trustees of the Trust or the Portfolio Trust, as
applicable. The Statement of Additional Information contains further information
on the Fund's and the Portfolio's investment restrictions.
RISK FACTORS; MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
The Fund is designed for conservative investors looking for high current income
approximating money market rates while remaining conveniently liquid with a
stable share price. The Portfolio follows practices which enable the Fund to
attempt to maintain a $1.00 share price: limiting average maturity of the
securities held by the Portfolio to 90 days or less; buying securities which
mature in 397 days or less; and buying only high quality securities with minimal
credit risks. Of course, the Fund cannot guarantee a $1.00 share price, but
these practices help to minimize any price fluctuations that might result from
rising or declining interest rates. While the Portfolio invests in high quality
money market securities, you should be aware that your investment is not without
risk. All money market instruments, including U.S. Government securities, can
change in value when interest rates or an issuer's creditworthiness changes.
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust at (800) 730- 1313.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the Securities and Exchange Commission,
whenever the Trust is requested to vote on matters pertaining to the Portfolio,
the Trust will hold a meeting of shareholders of the Fund and will cast all of
its votes in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Trust's votes at the Portfolio
meeting. The percentage of the Trust's votes representing Fund shareholders not
voting will be voted by the Trustees or officers of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objective, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and BT Investment
Portfolios" herein and "Management of the Trust and Portfolios" in the Statement
of Additional Information. For descriptions of the expenses of the Portfolio,
see "Management of the Trust and BT Investment Portfolios" herein.
NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which the
Fund is open (each such day being a "Valuation Day"). The Fund is currently open
on each day, Monday through Friday, except (a) January 1st, Martin Luther King,
Jr.'s Birthday (the third Monday in January), Presidents' Day (the third Monday
in February), Memorial Day (the last Monday in May), July 4th, Labor Day (the
first Monday in September), Columbus Day (the second Monday in October),
Veteran's Day (November 11th), Thanksgiving Day (the last Thursday in November)
and December 25th; and (b) the preceding Friday or the subsequent Monday when
one of the calendar determined holidays falls on a Saturday or Sunday,
respectively.
The net asset value per share of the Fund is calculated twice on each Valuation
Day as of 12:00 noon, New York time, and as of the close of regular trading on
the New York Stock Exchange Inc. (the "NYSE") (currently 4:00 p.m., New York
time or in the event that the NYSE closes early, at the time of such early
closing). The net asset value per share of the Fund is computed by dividing the
value of the Fund's assets (i.e., the value of its investment in the Portfolio
and other assets), less all liabilities, by the total number of its shares
outstanding. The Fund's net asset value will normally be $1.00.
The assets of the Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by the Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by the Portfolio will
not be reflected in the Fund's net asset value. The Board of Trustees of BT
Investment Portfolios will monitor the valuation of assets by this method and
will make such changes as it deems necessary to assure that the assets are
valued fairly and in good faith by the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of the Fund may be reimbursed from its assets, as described
herein. Service Agents may impose initial and subsequent investment minimums
that differ from the amounts presented in the "Minimum Investments" table below.
Shares of the Fund may be purchased in only those states where they may be
lawfully sold.
Purchase orders for shares of the Fund will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the purchase order is received by the Service Agent
and transmitted to the Transfer Agent prior to 12:00 noon (New York time) and if
payment in the form of federal funds is received on that day by Bankers Trust,
as the Trust's custodian (the "Custodian"), the shareholder will receive the
dividend declared on that day. If the purchase order is received by the Service
Agent and transmitted to the Transfer Agent after 12:00 noon (New York time) and
prior to the close of the NYSE (currently 4:00 p.m., New York time or in the
event that the NYSE closes early, at the time of such early closing), the
shareholder will receive the dividend declared on the following day even if the
Custodian receives federal funds on that day. Purchase orders received after
12:00 noon (New York time) may not be accepted if the Portfolio is unable to
invest the funds at an acceptable rate. The Trust and Signature reserve the
right to reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to the
Custodian purchase payments on behalf of its customers in a timely manner, and a
shareholder must settle with the Service Agent his or her entitlement to an
effective purchase or redemption order as of a particular time. Because Bankers
Trust is the Custodian and Transfer Agent of the Trust, funds may be transferred
directly from or to a customer's account with Bankers Trust to or from the Fund
without incurring the additional costs or delays associated with the wiring of
federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. The Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should contact
their Service Agent.
- --------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
- --------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of the Fund received
by the Service Agent and transmitted to the Transfer Agent prior to 12:00 noon
(New York time) on each Valuation Day will be redeemed at the net asset value
per share as of 12:00 noon (New York time) and the redemption proceeds normally
will be delivered to the shareholder's account with the Service Agent on that
day; no dividend will be paid on the day of redemption. Redemption requests
received by the Service Agent and transmitted to the Transfer Agent after 12:00
noon (New York time) on each Valuation Day and prior to the close of the NYSE
will be redeemed at the net asset value per share as of the close of the NYSE
and redemption proceeds normally will be delivered to the shareholder's account
with the Service Agent the following day; shares redeemed in this manner will
receive the dividend declared on the day of the redemption. Payments for
redemptions will in any event be made within seven calendar days following
receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Service Agent must employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Service Agent does not do so, it may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum (as shown above). See "Minimum
Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the automatic
cash withdrawal plan, shareholders should contact their Service Agent.
Checkwriting. Shareholders of the Fund may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends on
shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege may
be obtained from a Service Agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. The Fund reserves the right to
terminate or modify the exchange privilege in the future. To make an exchange,
follow the procedures indicated in "Purchase of Shares" and "Redemption of
Shares." Before making an exchange, please note the following:
* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
* Complete and sign an application, taking care to register your new account in
the same name, address, and taxpayer identification number as your existing
account(s).
* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-sheltered plans. These plans contain special tax
advantages and let you invest for retirement while sheltering your investment
income from current taxes. Minimums may differ from those listed elsewhere in
the Prospectus.
* Individual Retirement Accounts (IRAs): personal savings plans that offer
tax advantages for individuals to set aside money for retirement and allow
new contributions of $2,000 per tax year.
* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions are
available through a "Salary Deferral" SEP for businesses with fewer than 25
eligible employees.
* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.
* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.
* 401(k) Programs: defined contribution plans available to corporations allowing
tax-deductible employer contributions and permitting employees to contribute a
percentage of their wages on a tax-deferred basis.
* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.
* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
Fund and the other investors in the Portfolio at the time of such determination.
The Fund declares dividends from its net income (i.e., the Fund's pro rata share
of the net income of the Portfolio) on each Valuation Day and pays dividends for
the preceding month within the first five Valuation Days of each month. The Fund
reserves the right to include realized short-term gains, if any, in such daily
dividends. Distributions of the Fund's pro rata share of the Portfolio's net
realized long-term capital gains, if any, and any undistributed net realized
short-term capital gains are normally declared and paid annually at the end of
the fiscal year in which they were earned to the extent they are not offset by
any capital loss carryforwards. Since the Fund is subject to a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund expects to make such other distributions as are necessary to
avoid the application of this tax. Unless a shareholder instructs the Fund to
pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at net asset value in additional
shares of the Fund.
The Trust intends to qualify the Fund as a regulated investment company, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"). Provided
the Fund meets the requirements imposed by the Code, the Fund will not pay any
Federal income or excise taxes. The Portfolio will also not be required to pay
any Federal income or excise taxes. Dividends paid by the Fund from its taxable
net investment income and distributions by the Fund of its net realized
short-term capital gains are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares of the Fund. The Trust does
not expect that the Fund will realize long-term capital gains and thus does not
contemplate paying distributions taxable to shareholders as long-term capital
gains. The Fund's dividends and distributions will not qualify for the
dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.
PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield" and/or "effective
yield" for the Fund. All yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized;'" that is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment. The Trust may include this information in sales material and
advertisements for the Fund.
Yield is a function of the quality, composition and maturity of the securities
held by the Portfolio and operating expenses of the Fund and the Portfolio. In
particular, the Fund's yield will rise and fall with short-term interest rates,
which can change frequently and sharply. In periods of rising interest rates,
the yield of the Fund will tend to be somewhat lower than prevailing market
rates, and in periods of declining interest rates, the yield will tend to be
somewhat higher. In addition, when interest rates are rising, the inflow of net
new money to the Fund from the continuous sale of its shares will likely be
invested by the Portfolio in instruments producing higher yields than the
balance of the Portfolio's securities, thereby increasing the current yield of
the Fund. In periods of falling interest rates, the opposite can be expected to
occur. Accordingly, yields will fluctuate and do not necessarily indicate future
results. While yield information may be useful in reviewing the performance of
the Fund, it may not provide a basis for comparison with bank deposits, other
fixed rate investments, or other investment companies that may use a different
method of calculating yield. Any fees charged by Service Agents for processing
purchase and/or redemption transactions will effectively reduce the yield for
those shareholders.
From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Fund might be
compared with, for example, the IBC/Donoghue's Taxable Money Fund Average, which
is an average compiled by IBC/Donoghue's Money Fund Report, a widely recognized,
independent publication that monitors the performance of money market mutual
funds. Similarly, the yield of the Fund might be compared with rankings prepared
by Micropal Limited and/or Lipper Analytical Services, Inc., which are widely
recognized, independent services that monitor the investment performance of
mutual funds. The yield of the Fund might also be compared with the average
yield reported by the Bank Rate Monitor for money market deposit accounts
offered by the 50 leading banks and thrift institutions in the top five standard
metropolitan areas. Shareholders may make inquiries regarding the Fund,
including current yield quotations and performance information, by contacting
any Service Agent.
Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by independent
accountants.
MANAGEMENT OF THE TRUST AND
BT INVESTMENT PORTFOLIOS
BOARD OF TRUSTEES
The affairs of the Trust and BT Investment Portfolios are managed under the
supervision of their respective Board of Trustees. By virtue of the
responsibilities assumed by Bankers Trust, the administrator of the Trust and BT
Investment Portfolios, neither the Trust nor BT Investment Portfolios require
employees other than its executive officers. None of the executive officers of
the Trust or BT Investment Portfolios devotes full time to the affairs of the
Trust or BT Investment Portfolios.
The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as the
case may be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
Trustees of the Trust and the Portfolio. For more information with respect to
the Trustees of both the Trust and BT Investment Portfolios, see "Management of
the Trust and Portfolios" in the Statement of Additional Information.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. BT Investment Portfolios has retained the
services of Bankers Trust, as investment adviser.
Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly-owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional markets. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers, with approximately $200 billion in assets under
management globally. Of that total, approximately $45 billion are in cash assets
alone. This makes Bankers Trust one of the nation's leading managers of cash
funds.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of BT Investment Portfolios, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. All orders for investment transactions on
behalf of the Portfolio are placed by Bankers Trust with broker-dealers and
other financial intermediaries that it selects, including those affiliated with
Bankers Trust. A Bankers Trust affiliate will be used in connection with a
purchase or sale of an investment for the Portfolio only if Bankers Trust
believes that the affiliate's charge for the transaction does not exceed usual
and customary levels. The Portfolio will not invest in obligations for which
Bankers Trust or any of its affiliates is the ultimate obligor or accepting
bank. The Portfolio may, however, invest in the obligations of correspondents
and customers of Bankers Trust.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.15% (before
waiver) of the average daily net assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, computed daily and paid monthly, at the annual rate of
0.55% (before waiver) of the average daily net assets of the Fund.
Under an Administration and Services Agreement with BT Investment Portfolios,
Bankers Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of BT Investment Portfolios in all aspects of the
administration and operation of BT Investment Portfolios. The Administration and
Services Agreement provides for the Portfolio to pay Bankers Trust a fee,
computed daily and paid monthly, at the annual rate of 0.05% (before waiver) of
the average daily net assets of the Portfolio. Under each Administration and
Services Agreement, Bankers Trust may delegate one or more of its
responsibilities to others, including Signature, at Bankers Trust's expense. For
more information, see the Statement of Additional Information.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly-owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The principal business address of SFG and
Signature is 6 St. James Avenue, Boston, Massachusetts 02116.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.20% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Fund. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or other series of the Trust involved, although it is anticipated that some
activities may be conducted on a Trust-wide basis, with the result that those
activities will not be identifiable to any particular series. In the latter
case, expenses will be allocated among the series of the Trust on the basis of
their relative net assets. It is not expected that any payments will be made
under the Plan in the foreseeable future.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees.The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, performing
shareholder sub-accounting, answering client inquiries regarding the Trust,
investing client cash account balances automatically in Fund shares and
processing redemption transactions at the request of clients, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the Service Agent, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and, with
respect to meetings of shareholders, collecting, tabulating and forwarding to
the Trust executed proxies, arranging for bank wires and obtaining such other
information and performing such other services as the Administrator or the
Service Agent's clients may reasonably request and agree upon with the Service
Agent. Service Agents may separately charge their clients additional fees only
to cover provision of additional or more comprehensive services not already
provided under the Administration and Services Agreement with Bankers Trust, or
of the type or scope not generally offered by a mutual fund, such as cash
management services or enhanced retirement or trust reporting. In addition,
investors may be charged a transaction fee if they effect transactions in Fund
shares through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that it
may charge them directly.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and BT Investment
Portfolios and serves as the Transfer Agent for the Trust and BT Investment
Portfolios under the respective Administration and Services Agreement with the
Trust and BT Investment Portfolios.
ORGANIZATION OF THE TRUST
The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
Liquid Assets Portfolio is a series of BT Investment Portfolios, an open-end
management investment company. BT Investment Portfolios was organized as a trust
under the laws of the State of New York. BT Investment Portfolios' Declaration
of Trust provides that the Fund and other entities investing in the Portfolio
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio. The interest in BT Investment Portfolios are divided into separate
series, such as the Portfolio. No series of BT Investment Portfolios has any
preference over any other series.
Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.
The series of the BT Investment Portfolios will vote separately or together in
the same manner as the series of the Trust. Under certain circumstances, the
investors in one or more series of BT Investment Portfolios could control the
outcome of these votes.
EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, the costs of regulatory
compliance and costs associated with maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to the
extent required by applicable state law for certain expenses that are described
in the Statement of Additional Information. The Portfolio bears its own
expenses. Operating expenses for the Portfolio generally consist of all costs
not specifically borne by Bankers Trust or Signature, including investment
advisory and administration and services fees, fees for necessary professional
services, amortization of organizational expenses, the costs associated with
regulatory compliance and maintaining legal existence and investor relations.
<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
..................
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statement of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..................
<PAGE>
BT INVESTMENT FUNDS
PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Funds that you should
know and can refer to in deciding whether a Fund's goals match your own.
A Statement of Additional Information (SAI) with the same date has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference. You may request a free copy of the Statement by calling the Funds'
Service Agent at 1-800-730-1313.
UNLIKE OTHER MUTUAL FUNDS, EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE
BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF EACH FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
CORRESPONDING PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND
STRUCTURE" ON PAGE 22.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. EACH FUND INTENDS TO MAINTAIN A CONSTANT $1.00 PER SHARE NET ASSET
VALUE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Cash Management Fund
Treasury Money Fund
NY Tax Free Money Fund
Tax Free Money Fund
o A family of money market funds each of which provides high current income to
the extent consistent with liquidity and capital preservation.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of the Funds Expenses 3
Fund Financial Highlights 5
Investment Objectives and Policies 13
Risk Factors; Matching the Funds to Your Investment Needs 22
Net Asset Value 24
Purchase and Redemption of Shares 24
Dividends, Distributions and Taxes 28
Performance Information and Reports 29
Management of the Trust and Portfolios 30
- ------------------------------------------------------------------------------
<PAGE>
SUMMARY OF THE FUNDS EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of shares of Cash Management Fund, Treasury Money Fund, NY Tax Free
Money Fund and Tax Free Money Fund (each, a "Fund" and collectively, the
"Funds") and the aggregate annual operating expenses of each Fund and the
expenses of the corresponding Portfolio (as defined below), as a percentage of
average net assets of that Fund and (ii) an example illustrating the dollar
cost of such expenses on a $1,000 investment in each Fund. THE TRUSTEES OF BT
INVESTMENT FUNDS (THE "TRUST") BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES
OF EACH FUND AND CASH MANAGEMENT PORTFOLIO, TREASURY MONEY PORTFOLIO, NY TAX
FREE MONEY PORTFOLIO OR TAX FREE MONEY PORTFOLIO (EACH, A "PORTFOLIO" AND
COLLECTIVELY, THE "PORTFOLIOS") WILL BE LESS THAN OR APPROXIMATELY EQUAL TO
THE EXPENSES WHICH THAT FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF
AN INVESTMENT ADVISER AND THE INVESTABLE ASSETS ("ASSETS") OF THAT FUND WERE
INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE CORRESPONDING
PORTFOLIO.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of each Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.60
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.75%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period $8 $24 $42 $93
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of each of the Funds.
While reimbursment of distribution expenses in amounts up to 0.20% of average
net assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. The expense table and the example reflect voluntary
undertakings by Bankers Trust Company ("Bankers Trust") or Signature
Broker-Dealer Services, Inc. ("Signature") to waive or reimburse expenses such
that the total operating expenses of each Fund will not exceed 0.75% of each
Fund's average net assets annually. In the absence of these undertakings, for
the fiscal year ended December 31, 1995, the total operating expenses would be
equal to the following approximate percentages of the Funds' average daily net
assets: 0.76% for Cash Management Fund, 0.77% for Treasury Money Fund, 0.83% for
Tax Free Money Fund and 0.83% for New York Tax Free Money Fund. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each example
assumes a 5% annual return, actual performance will vary and may result in a
return greater or less than 5%.
The Funds are sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Funds and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.
In addition to the customers of Bankers Trust or other institutions described
above, the Funds are available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Funds on an omnibus basis.
For more information with respect to the expenses of the Funds and Portfolios
see "Management of the Trust and Portfolios" herein.
<PAGE>
FUND FINANCIAL HIGHLIGHTS
The following tables show selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data for
each Fund for the periods indicated and have been audited by Coopers & Lybrand
L.L.P., the Funds' independent accountants, whose reports thereon appear in the
Funds' Annual Reports which are incorporated by reference in the Funds'
Statement of Additional Information.
<TABLE>
<CAPTION>
CASH MANAGEMENT FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
.................................................................................................................................
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
.................................................................................................................................
Income from Investment Operations
Net Investment Income 0.05 0.04 0.03 0.03 0.06
Net Realized Gain (Loss) from
Securities Transactions 0.00+ (0.01) 0.00+ 0.001+ 0.00+
.................................................................................................................................
Total from Investment Operations 0.05 0.03 0.03 0.03 0.06
.................................................................................................................................
Contribution of Capital -- 0.01 -- -- --
.................................................................................................................................
Distributions From:
Net Investment Income (0.05) (0.04) (0.03) (0.03) (0.06)
Net Realized Gain from
Securities Transactions
-- -- (0.001)+ (0.00)+ (0.00)+
.................................................................................................................................
Total Distributions (0.05) (0.04) (0.03) (0.03) (0.06)
.................................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
.................................................................................................................................
TOTAL INVESTMENT RETURN 5.35% 3.67%++ 2.54% 3.05% 5.68%
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 5.22% 3.70% 2.51% 3.04% 5.53%
Ratio of Expenses to Average Net Assets, Including Expenses
of the Cash Management Portfolio 0.74% 0.73% 0.75% 0.75% 0.75%
Decrease Reflected in Above Expense Ratio Due to Absorption
of Expenses by Bankers Trust 0.02% 0.08% 0.05% 0.04% 0.03%
Net Assets, End of Period (000's omitted) $135,998 $159,172 $76,578 $99,649 $127,164
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
+ Less than $0.01 per share
++ Increased by 0.96% due to Contribution of Capital.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CASH MANAGEMENT FUND
- -----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
FOR THE YEAR ENDED OCTOBER 5, 1988
DECEMBER 31, (COMMENCEMENT OF
----------------------------- OPERATIONS) TO
1990 1989 DECEMBER 31, 1988
.......................................................................................................................
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
.......................................................................................................................
Income from Investment Operations
Net Investment Income 0.08 0.09 0.02
Net Realized Gain (Loss) from Securities
Transactions -- -- --
.......................................................................................................................
Total from Investment Operations 0.08 0.09 0.02
.......................................................................................................................
Contribution of Capital -- -- --
.......................................................................................................................
Distributions From:
Net Investment Income (0.08) (0.09) (0.02)
Net Realized Gain from
Securities Transactions -- -- --
.......................................................................................................................
Total Distributions (0.08) (0.09) (0.02)
.......................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00
.......................................................................................................................
TOTAL INVESTMENT RETURN 7.85% 8.85% 8.13%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 7.58% 8.49% 7.80%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Cash Management Portfolio 0.75% 0.75%\1/ 0.75%*\1/
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.03% 0.11%\1/ 0.36%*\1/
Net Assets, End of Period (000's omitted) $101,892 $90,947 $30,024
- -----------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
\1/For indicated periods, ratios did not include any Cash Management Portfolio expenses and any voluntary absorption of
the Portfolio's expenses by Bankers Trust, since the Fund did not begin investing its Assets in the Cash Management
Portfolio until July 23, 1990.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TREASURY MONEY FUND
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
................................................................................................................................
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
................................................................................................................................
Income from Investment Operations
Net Investment Income 0.05 0.03 0.02 0.03 0.05
Net Realized Gain (Loss) from
Securities Transactions 0.00+ (0.00)+ 0.00+ 0.00+ 0.00+
................................................................................................................................
Total from Investment Operations 0.05 0.03 0.02 0.03 0.05
................................................................................................................................
Distributions From:
Net Investment Income (0.05) (0.03) (0.02) (0.03) (0.05)
Net Realized Gain from
Securities Transactions (0.00)+ -- (0.00)+ (0.00)+ (0.00)+
................................................................................................................................
Total Distributions (0.05) (0.03) (0.02) (0.03) (0.05)
................................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
................................................................................................................................
TOTAL INVESTMENT RETURN 5.19% 3.40% 2.43% 3.10% 5.30%
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 5.06% 3.36% 2.39% 2.90% 5.11%
Ratio of Expenses to Average Net Assets,
Including Expenses of
the Treasury Money Portfolio 0.75% 0.75% 0.75% 0.75% 0.75%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.02% 0.02% 0.01% 0.05% 0.00%
Net Assets, End of Period
000's omitted) $615,084 $696,915 $643,145 $1,302,365 $539,260
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
+ Less than $0.01 per share
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TREASURY MONEY FUND
- --------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
FOR THE YEAR ENDED NOVEMBER 1, 1988
DECEMBER 31, (COMMENCEMENT OF
----------------------------- OPERATIONS) TO
1990 1989 DECEMBER 31, 1988
.........................................................................................................................
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
.........................................................................................................................
Income from Investment Operations
Net Investment Income 0.07 0.08 0.01
Net Realized Gain (Loss) from Securities
Transactions 0.00+ -- --
.........................................................................................................................
Total from Investment Operations 0.07 0.08 0.01
.........................................................................................................................
Distributions From:
Net Investment Income (0.07) (0.08) (0.01)
Net Realized Gain from Securities Transactions (0.00)+ -- --
.........................................................................................................................
Total Distributions (0.07) (0.08) (0.01)
.........................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00
.........................................................................................................................
TOTAL INVESTMENT RETURN 7.61% 8.55% 8.15%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 7.30% 8.06% 7.77%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Treasury Money Portfolio 0.75% 0.75%\1/ 0.75%*\1/
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.01% 0.12%\1/ 1.53%*\1/
Net Assets, End of Period (000's omitted) $473,913 $337,391 $5,566
- --------------------------------------------------------------------------------------------------------------------------
* Annualized
\1/For indicated periods, ratios did not include any Treasury Money Portfolio expenses and any voluntary absorption of the
Portfolio's expenses by Bankers Trust, since the Fund did not begin investing its Assets in the Treasury Money Portfolio
until July 23, 1990.
+ Less than $0.01 per share
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
...................................................................................................................................
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.03 0.02 0.02 0.03 0.04
Net Realized Gain (Loss) from Securities
Transactions (0.00)+ (0.00)+ 0.00+ (0.00)+ (0.00)+
...................................................................................................................................
Total from Investment Operations 0.03 0.02 0.02 0.03 0.04
...................................................................................................................................
Distributions From:
Net Investment Income (0.03) (0.02) (0.02) (0.03) (0.04)
Net Realized Gain from
Securities Transactions -- (0.00)+ -- -- --
...................................................................................................................................
Total Distributions (0.03) (0.02) (0.02) (0.03) (0.04)
...................................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
...................................................................................................................................
TOTAL INVESTMENT RETURN 3.34% 2.27% 1.97% 2.69% 4.29%
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net
Assets 3.28% 2.21% 1.95% 2.66% 4.20%
Ratio of Expenses to Average Net Assets,
Including Expenses of the Tax Free Money
Portfolio 0.75% 0.75% 0.75% 0.75% 0.75%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.07% 0.08% 0.05% 0.05% 0.03%
Net Assets, End of Period (000's omitted) $119,393 $110,043 $111,285 $151,473 $143,559
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
+ Less than $0.01 per share
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
FOR THE YEAR ENDED JUNE 10, 1987
DECEMBER 31, (COMMENCEMENT OF
---------------------------------------------- OPERATIONS) TO
1990 1989 1988 DECEMBER 31, 1987
...................................................................................................................................
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.05 0.06 0.05 0.03
Net Realized Gain (Loss) from
Securities Transactions -- -- -- --
...................................................................................................................................
Total from Investment Operations 0.05 0.06 0.05 0.03
...................................................................................................................................
Distributions From:
Net Investment Income (0.05) (0.06) (0.05) (0.03)
Net Realized Gain from Securities Transactions -- -- -- --
...................................................................................................................................
Total Distributions (0.05) (0.06) (0.05) (0.03)
...................................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00
...................................................................................................................................
TOTAL INVESTMENT RETURN 5.59% 5.98% 4.91% 4.60%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 5.45% 5.77% 4.89% 4.54%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Tax Free Money Portfolio 0.75%\1/ 0.75%\1/ 0.66%\1/ 0.50%*\1/
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.04%\1/ 0.17%\1/ 0.75%\1/ 1.50%*\1/
Net Assets, End of Period
(000's omitted) $142,199 $194,983 $40,194 $20,768
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
\1/For indicated periods, ratios did not include any Tax Free Money Portfolio expenses and any voluntary absorption of the
Portfolio's expenses by Banker Trust, since the Fund did not begin investing its Assets in the Tax Free Money Portfolio until
February 19, 1991.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NY TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991
...................................................................................................................................
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income 0.03 0.02 0.02 0.02 0.04
Net Realized Loss from Securities
Transactions (0.00)+ (0.00)+ (0.00)+ (0.00)+ (0.00)+
...................................................................................................................................
Total from Investment Operations 0.03 0.02 0.02 0.02 0.04
Distributions from Net Investment Income (0.03) (0.02) (0.02) (0.02) (0.04)
...................................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
...................................................................................................................................
TOTAL INVESTMENT RETURN 3.12% 2.11% 1.68% 2.38% 4.07%
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 3.07% 2.05% 1.66% 2.38% 4.00%
Ratio of Expenses to Average Net Assets,
Including Expenses of the NY Tax Free Money
Portfolio 0.75% 0.75% 0.75% 0.75% 0.75%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.07% 0.08% 0.06% 0.05% 0.03%
Net Assets, End of Period (000's omitted) $70,765 $79,101 $103,938 $101,196 $98,905
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
+ Less the $0.01 per share
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NY TAX FREE MONEY FUND
- -------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
FOR THE YEAR ENDED SEPTEMBER 27, 1988
DECEMBER 31, (COMMENCEMENT OF
------------------------------- OPERATIONS) TO
1990 1989 DECEMBER 31, 1988
.........................................................................................................................
<S> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income 0.05 0.05 0.01
Net Realized Loss from Securities Transactions
.........................................................................................................................
Total from Investment Operations
Distributions from Net Investment Income (0.05) (0.05) (0.01)
.........................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00
.........................................................................................................................
TOTAL INVESTMENT RETURN 5.17% 5.36% 4.73%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 5.06% 5.21% 4.70%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the NY Tax Free Money Portfolio 0.75%\1/ 0.66%\1/ 0.75%\1/
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.03%\1/ 0.30%\1/ 1.46%*\1/
Net Assets, End of Period (000's omitted) $70,122 $63,315 $7,553
- -------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
\1/For indicated periods, ratios did not include any NY Tax Free Money Portfolio expenses and any voluntary absorption of
the Portfolio's expenses by Bankers Trust, since the Fund did not begin investing its Assets in the NY Tax Free Money
Portfolio until February 19, 1991.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in high quality money market
instruments. The Funds offer investors a convenient means of diversifying their
holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality short-term
instruments may result in a lower yield than instruments with a lower quality or
longer term.
The Trust seeks to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio, each of which has the
same investment objective as the corresponding Fund. There can be no assurances
that the investment objective of either the Funds or the Portfolios will be
achieved. The investment objective of each Fund and each Portfolio is a
fundamental policy and may not be changed without the approval of the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" on page 22 herein.
CASH MANAGEMENT PORTFOLIO
The Cash Management Portfolio will attempt to achieve its investment objectives
by investing in the following money market instruments:
Bank Obligations. The Portfolio may invest in fixed rate or variable rate
obligations of U.S. or foreign banks which have total assets at the time of
purchase in excess of $1 billion and are rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 or higher by Standard & Poor's Corporation
("S&P") or, if not rated, are believed by Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, to be of comparable
quality. Bank obligations in which the Portfolio invests include certificates of
deposit, bankers' acceptances, time deposits and other U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks. If
Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, deems the instruments to present minimal credit risk, the Portfolio
may invest in obligations of foreign banks or foreign branches of U.S. banks,
which include subsidiaries of U.S. banks located in the United Kingdom, Grand
Cayman Island, Nassau, Japan and Canada. Investments in these obligations may
entail risks that are different from those of investments in obligations of U.S.
domestic banks because of differences in political, regulatory and economic
systems and conditions. These risks include future political and economic
developments, currency blockage, the possible imposition of withholding taxes on
interest payments, differing reserve requirements, reporting and record keeping
requirements and accounting standards, possible seizure or nationalization of
foreign deposits, difficulty or inability of pursuing legal remedies and
obtaining judgments in foreign courts, possible establishment of exchange
controls or the adoption of other foreign governmental restrictions that might
affect adversely the payment of principal and interest on bank obligations.
Under normal market conditions, the Portfolio will invest more than 25% of its
assets in the foreign and domestic bank obligations described above. The
Portfolio's concentration of its investments in bank obligations will cause the
Portfolio to be subject to the risks peculiar to the domestic and foreign
banking industries to a greater extent than if its investments were not so
concentrated. A description of the ratings set forth above is provided in the
Appendix to the Statement of Additional Information.
Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S. or
foreign corporations. Commercial paper when purchased by the Portfolio must be
rated Prime-1 by Moody's or A-1 or higher by S&P or, if not rated, must be
believed by Bankers Trust, acting under the supervision of the Board of Trustees
of the Portfolio, to be of comparable quality. Any commercial paper issued by a
foreign corporation and purchased by the Portfolio must be U.S.
dollar-denominated and must not be subject to foreign withholding tax at the
time of purchase. Investing in foreign commercial paper generally involves risks
similar to those described above relating to obligations of foreign banks or
foreign branches of U.S. banks.
Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Portfolio and the issuer, they are not normally traded.
Although no active secondary market may exist for these notes, the Portfolio
will purchase only those notes under which it may demand and receive payment of
principal and accrued interest daily or may resell the note to a third party.
While the notes are not typically rated by credit rating agencies, issuers of
variable rate master demand notes must satisfy Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, that the same criteria as
set forth above for issuers of commercial paper are met. In the event an issuer
of a variable rate master demand note defaulted on its payment obligation, the
Portfolio might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.
Other Corporate Debt Obligations. The Portfolio may invest in bonds, notes and
debentures issued by U.S. corporations that at the time of purchase have
outstanding commercial paper meeting the above rating requirements, or if such
commercial paper is unrated or if no such commercial paper is outstanding, are
rated at least AA by S&P or Aa by Moody's. Such obligations, at the time of
investment, must have or be deemed to have less than 397 days to maturity.
U.S. Government Obligations. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Treasury or by agencies or instrumentalities of the U.S.
Government ("U.S. Government Obligations"). Obligations of certain agencies and
instrumentalities of the U.S. Government, such as short-term obligations of the
Government National Mortgage Association, are supported by the "full faith and
credit" of the U.S. Government; others, such as those of the Export-Import Bank
of the U.S., are supported by the right of the issuer to borrow from the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law.
Repurchase Agreements. The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Board of Trustees of the Portfolio. Under the terms of a typical repurchase
agreement, the Portfolio would acquire an underlying debt obligation of a kind
in which the Portfolio could invest for a relatively short period (usually not
more than one week), subject to an obligation of the seller to repurchase, and
the Portfolio to resell, the obligation at an agreed price and time, thereby
determining the yield during the Portfolio's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Portfolio's holding period. The value of the underlying securities
will be at least equal at all times to the total amount of the repurchase
obligations, including interest. The Portfolio bears a risk of loss in the event
that the other party to a repurchase agreement defaults on its obligations and
the Portfolio is delayed in or prevented from exercising its rights to dispose
of the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period in which the Portfolio
seeks to assert these rights. Bankers Trust, acting under the supervision of the
Board of Trustees of the Portfolio, reviews the creditworthiness of those banks
and dealers with which the Portfolio enters into repurchase agreements and
monitors on an ongoing basis the value of the securities subject to repurchase
agreements to ensure that it is maintained at the required level.
Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially.
TREASURY MONEY PORTFOLIO
The Treasury Money Portfolio will attempt to achieve its investment objectives
by investing only in (a) direct obligations of the U.S. Treasury, including
Treasury Bills, Notes and Bonds, and (b) repurchase agreements with respect to
those obligations. Information about the repurchase agreements in which the
Portfolio may invest appears under the caption "Cash Management Portfolio --
Repurchase Agreements." While obligations of the U.S. Treasury are guaranteed by
the U.S. Government as to the timely payment of principal and interest, the
market value of such obligations is not guaranteed and may rise and fall in
response to changes in interest rates. The shares of the Treasury Money Fund and
the interests in the Treasury Money Portfolio are not guaranteed or insured by
the U.S. Government.
TAX FREE MONEY PORTFOLIO AND NY TAX FREE MONEY PORTFOLIO
Tax Free Money Portfolio. The Tax Free Money Portfolio will attempt to achieve
its investment objectives by investing, under normal market conditions, no less
than 80% of its net assets in obligations issued by states and their
authorities, agencies, instrumentalities and political subdivisions which are
exempt from Federal income taxes ("Municipal Obligations"). While the Portfolio
is authorized to invest up to 20% of its net assets in taxable securities, it is
anticipated that ordinarily the Portfolio's assets will be substantially fully
invested in Municipal Obligations. Although not a policy of the Portfolio, the
Portfolio generally intends to invest no more than 25% of its assets in
Municipal Obligations of issuers in any one state, territory or possession of
the United States.
NY Tax Free Money Portfolio. The NY Tax Free Money Portfolio will attempt to
achieve its investment objectives by investing, under normal market conditions,
no less than 80% of its net assets in Municipal Obligations and no less than 65%
of its net assets in Municipal Obligations of the State of New York and its
authorities, agencies, instrumentalities and political subdivisions, as well as
of certain other governmental issuers, such as Puerto Rico, which are exempt
from New York State and City income taxes ("New York Municipal Obligations").
While the Portfolio is authorized to invest up to 20% of its net assets in
taxable securities, it is anticipated that ordinarily the Portfolio's assets
will be substantially fully invested in New York Municipal Obligations.
Dividends paid by the Portfolio that are derived from interest attributable to
New York Municipal Obligations will be excluded from gross income for Federal
income tax purposes and exempt from New York State and New York City personal
income taxes. Dividends derived from interest on Municipal Obligations other
than New York Municipal Obligations will be exempt from Federal income tax, but
will be subject to New York State and New York City income taxes.
The Tax Free Money Portfolio and the NY Tax Free Money Portfolio may invest in
securities of other investment companies that invest in high quality, short-term
securities in which the Portfolio could itself invest and that determine their
net asset value per share based on the amortized cost method, provided that the
investments are within the limits prescribed by the 1940 Act. Under the 1940
Act, the Portfolio may not invest in securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization, if: (i) more than 10% of the market value of the Portfolio's
total assets would be invested in securities of other investment companies; (ii)
more than 5% of the market value of the Portfolio's total assets would be
invested in the securities of any one investment company; or (iii) the Portfolio
would own more than 3% of any other investment company's voting securities. The
Portfolio will not invest in any investment company which is, or the investment
adviser of which is, an "affiliated person" under the 1940 Act of the Portfolio
or the Trust.
The NY Tax Free Money Portfolio is classified as a non-diversified investment
company under the 1940 Act, which means that the Portfolio is not limited by the
1940 Act in the proportion of its assets that it may invest in obligations of a
single issuer. However, the Portfolio intends to conduct its operations so that
each of its investors may qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which
will relieve each investor of any liability for Federal income tax to the extent
its earnings are distributed to its shareholders. To permit such qualification,
among other requirements, the Portfolio will limit its investments so that, at
the close of each quarter of the taxable year: (i) not more than 25% of the
market value of the Portfolio's total assets will be invested in the securities
of a single issuer; and (ii) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Portfolio will not own
more than 10% of the outstanding voting securities of a single issuer. The
Portfolio's assumption of large positions in the obligations of a small number
of issuers may cause the Portfolio's yield to fluctuate to a greater extent than
that of a diversified company, such as the Tax Free Money Portfolio, as a result
of changes in the financial condition or in the market's assessment of the
issuers.
SPECIAL CONSIDERATIONS AFFECTING THE NY TAX FREE PORTFOLIO AND THE FUND
The Portfolio's ability to achieve its investment objective is dependent upon
the ability of the issuers of New York Municipal Obligations to meet their
continuing obligations for the payment of principal and interest. New York State
and New York City face long-term economic problems that could seriously affect
their ability and that of other issuers of New York Municipal Obligations to
meet their financial obligations.
Certain substantial issuers of New York Municipal Obligations (including issuers
whose obligations may be acquired by the Portfolio) have experienced serious
financial difficulties in recent years. These difficulties have at times
jeopardized the credit standing and impaired the borrowing abilities of all New
York issuers and have generally contributed to higher interest costs for their
borrowings and fewer markets for their outstanding debt obligations. In recent
years, several different issues of municipal securities of New York State and
its agencies and instrumentalities and of New York City have been downgraded by
S&P and Moody's. On the other hand, strong demand for New York Municipal
Obligations has at times had the effect of permitting New York Municipal
Obligations to be issued with yields relatively lower, and after issuance, to
trade in the market at prices relatively higher, than comparably rated municipal
obligations issued by other jurisdictions. A recurrence of the financial
difficulties previously experienced by certain issuers of New York Municipal
Obligations could result in defaults or declines in the market values of those
issuers' existing obligations and, possibly, in the obligations of other issuers
of New York Municipal Obligations. Although as of the date of this Prospectus,
no issuers of New York Municipal Obligations are in default with respect to the
payment of their municipal obligations, the occurrence of any such default could
affect adversely the market values and marketability of all New York Municipal
Obligations and, consequently, the net asset value of the Portfolio's
investments.
Other considerations affecting the Portfolio's investments in New York Municipal
Obligations are summarized in the Statement of Additional Information.
Municipal Obligations. The two principal classifications of Municipal
Obligations consist of "notes" and "bonds." Municipal Obligations are further
classified as "general obligation" and "revenue" issues and the securities held
by the Portfolios may include "moral obligation" issues, which are normally
issued by special purpose authorities. General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or in some cases, from
the proceeds of a special excise tax or other specific revenue source, such as
the user of the facility being financed. The Portfolios may invest in "private
activity" bonds, described below, which as a general rule will be revenue bonds
and, accordingly, are not payable from the unrestricted revenues of the issuer.
Among other instruments, the Portfolios may purchase tax-exempt commercial paper
and short-term municipal notes, such as tax anticipation notes, bond
anticipation notes, revenue anticipation notes, construction loan notes and
other forms of short-term loans. These notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements or other revenues. The Portfolios may also acquire participations in
privately negotiated loans to municipal borrowers. The types, forms and
offerings of Municipal Obligations are continually changing, and the Portfolios
could invest in instruments that may be developed and offered in the market
place in the future, provided they meet the Portfolios' investment quality and
Federal income tax criteria. These new instruments will be described in the
Funds' then current prospectus prior to an investment by a Portfolio. A more
detailed discussion of the categories of Municipal Obligations is contained in
the Statement of Additional Information.
Interest income on certain types of private activity bonds issued after August
7, 1986 to finance nongovernmental activities is a specific tax preference item
for purposes of the Federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders of the Funds may be subject to a Federal
alternative minimum tax to the extent the Portfolios' income is derived from
interest on these bonds. Accordingly, these private activity bonds are not
included in the term "Municipal Obligations" for purposes of determining
compliance with the 80% test described under "Additional Investment Limitations"
below. However, while up to 20% of the Portfolios' net assets may be invested in
these private activity bonds, it is anticipated that they will ordinarily not
constitute a significant portion of the securities held by each Portfolio.
Dividends paid by the Funds which are derived from interest income on Municipal
Obligations are a "current earnings" adjustment item for purposes of the Federal
corporate alternative minimum tax.
Certain Municipal Obligations bear interest at rates that are not fixed, but
that vary with changes in specified market rates or indices. Certain of these
obligations may carry a demand feature that permits the Portfolios to tender
them back to the issuer or remarketing agent at par value prior to maturity. The
Portfolios may invest in floating rate and variable rate obligations carrying
stated maturities in excess of one year at the date of purchase by the
Portfolios if the obligations carry demand features that comply with conditions
established by the Securities and Exchange Commission (the "SEC") or its staff.
Each Portfolio will limit, its purchases of floating rate and variable rate
Municipal Obligations to those meeting the quality standards set forth below.
Frequently these obligations are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying credit or
of the bank, as the case may be, must also be equivalent to the quality
standards set forth below, as determined by Bankers Trust under the supervision
of the Boards of Trustees of the Portfolios.
The Portfolios may invest in the following Municipal Obligations: (i) notes
rated MIG-1 or VMIG-1 by Moody's or SP-1 or higher by S&P (or an equivalent
rating by another nationally recognized statistical rating organization
("NRSRO")) or which are considered to be of comparable quality by Bankers Trust
pursuant to guidelines established and maintained in good faith by the Board of
Trustees of the respective Portfolio; or (ii) other Municipal Obligations issued
by issuers with municipal notes outstanding, comparable in priority and
security, meeting the rating criteria described herein or, if no such notes are
outstanding or if they are unrated, are rated at least AA by S&P or Aa by
Moody's. The NY Tax Free Money Portfolio may also invest in municipal notes
rated MIG-2 or VMIG-2 by Moody's or SP-2 by S&P when Bankers Trust deems it
advisable. A description of the ratings set forth above is provided in the
Appendix to the Statement of Additional Information.
The Portfolios may invest in Municipal Obligations the income on which may be
derived from economically related projects or projects of a similar type. To the
extent that a Portfolio's assets are concentrated in Municipal Obligations
payable from revenues on economically related projects and facilities, or issued
by issuers in particular states, the Portfolio will be subject to the particular
risks presented by those projects, facilities or states to a greater extent than
it would be if the Portfolio's assets were not so concentrated. In addition, the
Portfolios may invest in private activity bonds the interest on which is not
subject to an alternative minimum tax, as described above, and may invest
without limitation in Municipal Obligations backed by letters of credit or
guarantees issued by banks or other financial institutions.
Taxable Investments. When, in the opinion of Bankers Trust, adverse market
conditions exist for Municipal Obligations or New York Municipal Obligations and
a "defensive" investment posture is warranted, each Portfolio may temporarily
invest more than 20% of its total assets in "Taxable Investments," which are
money market instruments having maturity and quality characteristics comparable
to those discussed above for Municipal Obligations, but that produce interest
not exempt from Federal income taxation; and the NY Tax Free Money Portfolio may
temporarily invest more than 35% of its total assets in instruments that produce
income excluded from gross income for Federal income tax purposes but subject to
New York State and New York City personal income taxation. Periods when a
defensive posture is warranted include those periods when the NY Tax Free Money
Portfolio's monies available for investment exceed the New York Municipal
Obligations available for purchase that meet the Portfolio's rating, maturity
and other investment criteria. Each Portfolio may invest in Taxable Investments
pending the investment of proceeds from sales of shares or portfolio securities
into Municipal Obligations or in anticipation of redemptions. Each Portfolio
also has the right to hold cash reserves as it deems necessary for temporary
defensive purposes. While each Portfolio is authorized to invest up to 20% of
its net assets under normal market conditions in Taxable Investments, it is
anticipated that they will not ordinarily constitute a significant portion of
either Portfolio's investments.
Taxable Investments will be limited to: (i) U.S. Government securities; (ii)
commercial paper and certificates of deposit, bankers' acceptances and
short-term obligations of foreign and domestic banks with total assets of $1
billion or more, in each case rated Prime-1 by Moody's or A-1 or higher by S&P,
or, if not rated, believed to be of equivalent investment quality by Bankers
Trust acting under the supervision of the Board of Trustees; (iii) short-term
corporate debt obligations of issuers which have commercial paper outstanding
meeting the rating requirements described herein or, if such commercial paper is
unrated, or if no such commercial paper is outstanding, are rated at least Aa by
Moody's or AA by S&P; and (iv) repurchase agreements with an underlying security
that would otherwise qualify for investment by the Portfolio. Taxable
Investments are described in more detail under the caption "Cash Management
Portfolio."
ADDITIONAL INVESTMENT TECHNIQUES
The Cash Management Portfolio and the Treasury Money Portfolio may enter into
reverse repurchase agreements and lend securities held by it to brokers, dealers
and other financial organizations. Loans of securities by a Portfolio, if and
when made, may not exceed 20% of the Portfolio's total assets and will be
collateralized by cash, letters of credit or U.S. Government Obligations that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Tax Free Money Portfolio and the NY
Tax Free Money Portfolio may also enter into reverse repurchase agreements and
purchase participation interests and standby commitments. See "Investment
Objectives and Policies" in the Statement of Additional Information for a more
detailed description of reverse repurchase agreements, participation interests
and standby commitments.
PORTFOLIO QUALITY AND MATURITY
Each Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which each Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two NRSROs (or one such NRSRO if that NRSRO is the
only such NRSRO which rates the security), or if unrated, are believed by
Bankers Trust, under the supervision of the respective Portfolio's Board of
Trustees, to be of comparable quality. A description of such ratings is provided
in the Appendix to the Statement of Additional Information. Bankers Trust,
acting under the supervision of and procedures adopted by the Board of Trustees
of each Portfolio, will also determine that all securities purchased by a
Portfolio present minimal credit risks. Bankers Trust will cause a Portfolio to
dispose of any security as soon as practicable if the security is no longer of
the requisite quality, unless such action would not be in the best interest of
that Portfolio.
ADDITIONAL INVESTMENT LIMITATIONS
Each Fund's and Portfolio's investment objectives, together with the investment
restrictions described in this paragraph and the Statement of Additional
Information, except as noted, are "fundamental policies," which means that they
may not be changed without the approval of the holders of each Fund's and each
Portfolio's outstanding voting securities. The Funds have the same investment
restrictions as the Portfolios, except that each Fund may invest all of its
Assets in another open-end investment company with the same investment
objectives, such as the corresponding Portfolio. The Tax Free Money Portfolio
and the NY Tax Free Money Portfolio will invest at least 80% of their respective
net assets in tax-exempt Municipal Obligations under normal market conditions.
Each Portfolio may not invest more than 25% of its total assets in the
securities of issuers in any single industry, except that, under normal market
conditions, more than 25% of the total assets of the Cash Management Portfolio
will be invested in foreign and domestic bank obligations. As an operating
policy, the Cash Management Portfolio and the Treasury Money Portfolio may not
invest more than 5% of its total assets in the obligations of any one issuer
except for U.S. Government Obligations and repurchase agreements, which may be
purchased without limitation. The same is true with respect to 75% of the assets
of the Tax Free Money Portfolio. This restriction, however, shall not preclude
the purchase by the Tax Free Money Portfolio of issues backed by letters of
credit or guarantees of banks or other financial institutions, even though any
such bank or financial institution provides a letter of credit or guarantee with
respect to securities that in the aggregate represent more than 5%, but not more
than 10%, of the total assets of the Portfolio, and will consider the issuer of
the security (and not the letter of credit or guarantee) the principal obligor
of the obligation. Each Portfolio is also authorized to borrow, including
entering into reverse repurchase transactions, in an amount up to 5% of its
total assets for temporary purposes, but not for leverage, and to pledge its
assets to the same extent in connection with these borrowings. See the Statement
of Additional Information for additional information with respect to reverse
repurchase transactions. At the time of an investment, a Portfolio's aggregate
holdings of repurchase agreements having remaining maturities of more than seven
calendar days (or which may not be terminated within seven calendar days upon
notice by the Portfolio), time deposits having a remaining maturity of more than
seven calendar days, illiquid securities (including floating and variable rate
Municipal Obligations having a demand feature of more than seven calendar days),
restricted securities and securities lacking readily available market quotations
will not exceed 10% of the Portfolio's net assets. If changes in the liquidity
of certain securities cause a Portfolio to exceed such 10% limit, that Portfolio
will take steps to bring the aggregate amount of its illiquid securities back
below 10% of its net assets as soon as practicable, unless such action would not
be in the best interest of the Portfolio. The Statement of Additional
Information contains further information on the Funds' and the Portfolios'
investment restrictions.
RISK FACTORS; MATCHING THE FUNDS
TO YOUR INVESTMENT NEEDS
Each Fund is designed for conservative investors looking for high current income
approximating taxable or tax free, as the case may be, money market rates while
remaining conveniently liquid with a stable share price. Each Portfolio follows
practices which enable the corresponding Fund to attempt to maintain a $1.00
share price: limiting average maturity of the securities held by the Portfolio
to 90 days or less; buying securities which mature in 397 days or less; and
buying only high quality securities with minimal credit risks. Of course, the
Fund cannot guarantee a $1.00 share price, but these practices help to minimize
any price fluctuations that might result from rising or declining interest
rates. While each Portfolio invests in high quality money market securities, you
should be aware that your investment is not without risk. All money market
instruments, including U.S. Government securities, can change in value when
interest rates or an issuer's creditworthiness changes.
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE Unlike other
open-end management investment companies (mutual funds) which directly acquire
and manage their own portfolio securities, each Fund seeks to achieve its
investment objective by investing all of its Assets in a corresponding
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in a Portfolio's
securities is indirect. In addition to selling a beneficial interest to each
Fund, each Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in that Portfolio on the
same terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the
respective Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in each of the Funds should be aware that these
differences may result in differences in returns experienced by investors in the
different funds that invest in each of the Portfolios. Such differences in
returns are also present in other mutual fund structures. Information concerning
other holders of interests in any of the Portfolios is available from Bankers
Trust at (800) 730-1313.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the same Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the respective Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes at the Portfolio meeting. The percentage
of the Trust's votes representing a Fund's shareholders not voting will be voted
by the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.
Certain changes in a Portfolio's investment objectives, policies or restrictions
may require the respective Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of a
Fund. Notwithstanding the above, there are other means for meeting redemption
requests, such as borrowing.
Each Fund may withdraw its investment from a corresponding Portfolio at any
time, if the Board of Trustees of the Trust determines that it is in the best
interests of the shareholders of the Fund to do so. Upon any such withdrawal,
the Board of Trustees of the Trust would consider what action might be taken,
including the investment of all the Assets of the Fund in another pooled
investment entity having the same investment objective as the Fund or the
retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio.
Each Fund's investment objective is a fundamental policy and may not be changed
without the approval of the Fund's shareholders. If there is a change in the
Fund's investment objective, the Fund's shareholders should consider whether the
Fund remains an appropriate investment in light of their then-current needs. The
investment objective of each Portfolio is a fundamental policy. Shareholders of
the Fund will receive 30 days prior written notice with respect to any change in
the investment objective of the Fund or its corresponding Portfolio. See
"Investment Objectives and Policies" for a description of the fundamental
policies of each Portfolio that cannot be changed without approval by the
holders of "a majority of the outstanding voting securities" (as defined in the
1940 Act) of that Portfolio.
For descriptions of the investment objectives, policies and restrictions of the
Portfolios, see "Investment Objectives and Policies." For descriptions of the
management of the Portfolios, see "Management of the Trust and Portfolios"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolios, see "Management of the Trust and Portfolios" herein.
NET ASSET VALUE
The net asset value per share of each Fund is calculated on each day on which
the Fund is open (each such day being a "Valuation Day"). The Fund is currently
open on each day, Monday through Friday, except (a) January 1st, Martin Luther
King, Jr.'s Birthday (the third Monday in January), Presidents' Day (the third
Monday in February), Good Friday, Memorial Day (the last Monday in May), July
4th, Labor Day (the first Monday in September), Columbus Day (the second Monday
in October), Veteran's Day (November 11th), Thanksgiving Day (the last Thursday
in November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar-determined holidays falls on a Saturday or
Sunday, respectively.
The net asset value per share of each Fund is calculated twice on each Valuation
Day as of 12:00 noon, New York time, and as of the close of regular trading on
the New York Stock Exchange Inc. (the "NYSE"), which is currently 4:00 p.m., New
York time or in the event that the NYSE closes early, at the time of such early
closing. The net asset value per share of each Fund is computed by dividing the
value of the Fund's assets (i.e., the value of its investment in the
corresponding Portfolio and other assets), less all liabilities, by the total
number of its shares outstanding. Each Fund's net asset value will normally be
$1.00.
The assets of each Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by a Portfolio at its
cost at the time of its purchase and thereafter assuming a constant amortization
to maturity of any discount or premium. Accordingly, immaterial fluctuations in
the market value of the securities held by a Portfolio will not be reflected in
the corresponding Fund's net asset value. The Board of Trustees of each
Portfolio will monitor the valuation of assets by this method and will make such
changes as it deems necessary to assure that assets are valued fairly and in
good faith by that Portfolio.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of each Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of the Funds may be reimbursed from their respective assets,
as described herein. Service Agents may impose initial and subsequent investment
minimums that differ from the amounts presented in the "Minimum Investments"
table below. Shares of the Funds may be purchased in only those states where
they may be lawfully sold.
Purchase orders for shares of the Funds will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the Purchase order is received by the Service Agent
and transmitted to the Transfer Agent after 12:00 noon (New York time) and prior
to the close of the NYSE, the shareholder will receive the dividend declared on
the following day even if Bankers Trust, as the Trust's custodian (the
"Custodian"), receives federal funds on that day. The Trust and Signature
reserve the right to reject any purchase order.
Another mutual fund investing in a Portfolio may accept purchase orders up until
a time later than 12:00 noon, New York time. Such orders, when transmitted to
and executed by a Portfolio, may have an impact on the corresponding Fund's
performance.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to the
Custodian purchase payments on behalf of its customers in a timely manner, and a
shareholder must settle with the Service Agent his or her entitlement to an
effective purchase or redemption order as of a particular time. Because Bankers
Trust is the Custodian and Transfer Agent of the Trust, funds may be transferred
directly from or to a customer's account with Bankers Trust to or from a
particular Fund without incurring the additional costs or delays associated with
the wiring of federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. The Funds may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should contact
their Service Agent.
- --------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
- --------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of the Funds
received by the Service Agent and transmitted to the Transfer Agent prior to
12:00 noon (New York time) on each Valuation Day will be redeemed at the net
asset value per share as of 12:00 noon (New York time) and the redemption
proceeds normally will be delivered to the shareholder's account with the
Service Agent on that day; no dividend will be paid on the day of redemption.
Redemption requests received by the Service Agent and transmitted to the
Transfer Agent after 12:00 noon (New York time) on each Valuation Day and prior
to the close of the NYSE will be redeemed at the net asset value per share as of
the close of the NYSE and redemption proceeds normally will be delivered to the
shareholder's account with the Service Agent the following day; shares redeemed
in this manner will receive the dividend declared on the day of the redemption.
Payments for redemptions will in any event be made within seven calendar days
following receipt of the request.
Another mutual fund investing in a Portfolio may accept redemption orders up
until a time later than 12:00 noon, New York time. Such orders, when transmitted
to, and executed by, a Portfolio may have an impact on the corresponding Fund's
performance.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Service Agent must employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Service Agent does not do so, it may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with a
Fund having a balance below the minimum (as shown above). See "Minimum
Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. The Funds may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the automatic
cash withdrawal plan, shareholders should contact their Service Agent.
Checkwriting. Shareholders of the Funds may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends on
shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege may
be obtained from a Service Agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. To make an exchange, follow the
procedures indicated in "Purchase of Shares" and "Redemption of Shares." The
Funds reserve the right to terminate or modify the exchange privilege in the
future. Before making an exchange, please note the following:
* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
* Complete and sign an application, taking care to register your new account in
the same name, address and taxpayer identification number as your existing
account(s).
* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-sheltered plans. These plans contain special tax
advantages and let you invest for retirement while sheltering your investment
income from current taxes. Minimums may differ from those listed elsewhere in
the Prospectus.
* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.
* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions are
available through a "Salary Deferral" SEP for businesses with fewer than 25
eligible employees.
* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.
* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.
* 401(k) Programs: defined contribution plans available to corporations allowing
tax-deductible employer contributions and permitting employees to contribute a
percentage of their wages on a tax-deferred basis.
* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.
* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
corresponding Fund and the other investors in that Portfolio at the time of such
determination. Each Fund declares dividends from its net income (i.e., that
Fund's pro rata share of the net income of the corresponding Portfolio) on each
Valuation Day and pays dividends for the preceding month within the first five
Valuation Days of each month. Each Fund reserves the right to include realized
short-term gains, if any, in such daily dividends. Distributions of each Fund's
pro rata share of the corresponding Portfolio's net realized long-term capital
gains, if any, and any undistributed net realized short-term capital gains are
normally declared and paid annually at the end of the fiscal year in which they
were earned to the extent they are not offset by any capital loss carryforwards.
Since each Fund is subject to a 4% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gains, each Fund expects to
make such other distributions as are necessary to avoid the application of this
tax. Unless a shareholder instructs the Trust to pay dividends or capital gains
distributions in cash, dividends and distributions will automatically be
reinvested at net asset value in additional shares of the Fund that paid the
dividend or distribution.
The Trust intends to qualify each Fund as a regulated investment company, as
defined in the Code. Provided a Fund meets the requirements imposed by the Code,
that Fund will not pay any Federal income or excise taxes. Each Portfolio will
also not be required to pay any Federal income or excise taxes. Dividends paid
by a Fund from its taxable net investment income and distributions by a Fund of
its net realized short-term capital gains (whether from tax-exempt or taxable
obligations) are taxable to shareholders as ordinary income, whether received in
cash or reinvested in additional shares of that Fund. The Trust does not expect
that any Fund will realize long-term capital gains and thus does not contemplate
paying distributions taxable to shareholders as long-term capital gains.
Exempt-interest dividends may be excluded by shareholders of a Fund from their
gross income for Federal income tax purposes although (i) a portion of these
dividends will be a specific preference item for purposes of the Federal
individual and corporate alternative minimum taxes to the extent they are
derived from certain types of private activity bonds issued after August 7, 1986
and (ii) all exempt-interest dividends will be a component of the "current
earnings" adjustment item for purposes of the Federal corporate alternative
minimum tax. In addition, corporate shareholders may incur a greater Federal
"environmental" tax liability through receipt of Fund dividends and
distributions. Each Fund's dividends and distributions will not qualify for the
dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of a Fund's prior taxable
year as to the Federal income tax status of his or her dividends and
distributions which were received from that Fund during that year. Furthermore,
if appropriate, the statements from the Tax Free Money Fund will set forth the
dollar amount of the shareholder's exempt-interest dividends which is excluded
from Federal income taxation, and the statements from the NY Tax Free Money Fund
will set forth the dollar amount of the shareholder's exempt-interest dividends
which is excluded from Federal income and exempt from New York State and City
personal income taxes. These statements will also designate the amount of
exempt-interest dividends that is a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes. Shareholders should
consult their tax advisers to assess the consequences of investing in a Fund
under state and local laws and to determine whether dividends paid by a Fund
that represent interest derived from U.S. Government Obligations are exempt from
any applicable state or local income taxes.
PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield," "effective yield"
and/or "tax equivalent yield" for a Fund. All yield figures are based on
historical earnings and are not intended to indicate future performance. The
"current yield" of a Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized;'" that is, the amount of income generated by
the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the compounding effect of
this assumed reinvestment. The "tax equivalent yield" demonstrates the yield on
a taxable investment necessary to produce an after-tax yield equal to a Fund's
tax free yield. It is calculated by increasing the yield shown for the Fund to
the extent necessary to reflect the payment of specified tax rates. The Trust
may include this information in sales material and advertisements for a Fund.
Yield is a function of the quality, composition and maturity of the securities
held by the corresponding Portfolio and operating expenses of a Fund and the
corresponding Portfolio. In particular, a Fund's yield will rise and fall with
short-term interest rates, which can change frequently and sharply. In periods
of rising interest rates, the yield of a Fund will tend to be somewhat lower
than prevailing market rates, and in periods of declining interest rates, the
yield will tend to be somewhat higher. In addition, when interest rates are
rising, the inflow of net new money to a Fund from the continuous sale of its
shares will likely be invested by the corresponding Portfolio in instruments
producing higher yields than the balance of that Portfolio's securities, thereby
increasing the current yield of the Fund. In periods of falling interest rates,
the opposite can be expected to occur. Accordingly, yields will fluctuate and do
not necessarily indicate future results. While yield information may be useful
in reviewing the performance of a Fund, it may not provide a basis for
comparison with bank deposits, other fixed rate investments, or other investment
companies that may use a different method of calculating yield. Any fees charged
by Service Agents for processing purchase and/or redemption transactions will
effectively reduce the yield for those shareholders.
From time to time, advertisements or reports to shareholders may compare the
yield of a Fund to that of other mutual funds with similar investment objectives
or to that of a particular index. The yield of the Cash Management Fund might be
compared with, for example, the IBC/Donoghue's First Tier Taxable Money Fund
Average, that of the Treasury Money Fund might be compared with IBC/Donoghue's
Treasury and Repo Money Fund Average, and that of Tax Free Money Fund and the NY
Tax Free Money Fund might be compared with IBC/ Donoghue's State Specific Money
Fund Average and IBC/Donoghue's Tax Free Stockholder General Purpose Money Fund
Average, which are averages compiled by IBC/Donoghue's Money Fund Report, a
widely recognized, independent publication that monitors the performance of
money market mutual funds. Similarly, the yield of a Fund might be compared with
rankings prepared by Micropal Limited and/or Lipper Analytical Services, Inc.,
which are widely recognized, independent services that monitor the investment
performance of mutual funds. The yield of a Fund might also be compared with the
average yield reported by the Bank Rate Monitor for money market deposit
accounts offered by the 50 leading banks and thrift institutions in the top five
standard metropolitan areas. Shareholders may make inquiries regarding the
Funds, including current yield quotations and performance information, by
contacting any Service Agent.
Shareholders will receive financial reports semi-annually that include listings
of investment securities held by a Fund's corresponding Portfolio at those
dates. Annual reports are audited by independent accountants.
MANAGEMENT OF THE TRUST AND PORTFOLIOS
BOARD OF TRUSTEES
Affairs of the Trust and the Portfolios are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed by
Bankers Trust, the administrator of the Trust and each Portfolio, neither the
Trust nor any Portfolio require employees other than its executive officers.
None of the executive officers of the Trust or any Portfolio devotes full time
to the affairs of the Trust or Portfolio.
The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolios, as the
case may be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
trustees of the Trust and the Portfolios. For more information with respect to
the Trustees of both the Trust and the Portfolios, see "Management of the Trust
and Portfolios" in the Statement of Additional Information.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of each Fund by investing all the
Assets of the Fund in the corresponding Portfolio. Each Portfolio has retained
the services of Bankers Trust, as investment adviser.
Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly-owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional market. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers, with approximately $200 billion in assets under
management globally. Of that total, approximately $45 billion are in cash assets
alone. This makes Bankers Trust one of the nation's leading managers of cash
funds.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolios.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in accordance with that Portfolio's
investment objectives and stated investment policies, makes investment decisions
for each Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of each Portfolio and employs professional
investment managers and securities analysts who provide research services to
each Portfolio. All orders for investment transactions on behalf of any
Portfolio are placed by Bankers Trust with broker-dealers and other financial
intermediaries that it selects, including those affiliated with Bankers Trust. A
Bankers Trust affiliate will be used in connection with a purchase or sale of an
investment for a Portfolio only if Bankers Trust believes that the affiliate's
charge for the transaction does not exceed usual and customary levels. Each
Portfolio will not invest in obligations for which Bankers Trust or any of its
affiliates is the ultimate obligor or accepting bank. Each Portfolio may,
however, invest in the obligations of correspondents and customers of Bankers
Trust.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from each
Portfolio, computed daily and paid monthly, at the annual rate of 0.15% of the
average daily net assets of each Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, computed daily and paid monthly, at the annual rate of
0.55% of the average daily net assets of each Fund.
Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of that Portfolio and generally assists
the Board of Trustees of that Portfolio in all aspects of the administration and
operation of that Portfolio. Each Administration and Services Agreement provides
for the Portfolio to pay Bankers Trust a fee, computed daily and paid monthly,
at the annual rate of 0.05% of the average daily net assets of that Portfolio.
Under each Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including Signature, at Bankers
Trust's expense. For more information, see the Statement of Additional
Information.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly-owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The principal business address of SFG and
Signature is 6 St. James Avenue, Boston, Massachusetts 02116.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.20% of each Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to result
in the sale of the Funds' shares, including, but not limited to: compensation to
and expenses (including overhead and telephone expenses) of account executives
or other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of that Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Funds, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Funds. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund involved, although it is anticipated that some activities may be conducted
on a Trust-wide basis, with the result that those activities will not be
identifiable to any particular Fund. In the latter case, expenses will be
allocated among the Funds on the basis of their relative net assets. It is not
expected that any payments will be made under the Plan in the foreseeable
future.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, performing
shareholder sub-accounting, answering client inquiries regarding the Trust,
investing client cash account balances automatically in Fund shares and
processing redemption transactions at the request of clients, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the Service Agent, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and, with
respect to meetings of shareholders, collecting, tabulating and forwarding to
the Trust executed proxies, arranging for bank wires and obtaining such other
information and performing such other services as the Administrator or the
Service Agent's clients may reasonably request and agree upon with the Service
Agent. Service Agents may separately charge their clients additional fees only
to cover provision of additional or more comprehensive services not already
provided under the Administration and Services Agreement with Bankers Trust, or
of the type or scope not generally offered by a mutual fund, such as cash
management services or enhanced retirement or trust reporting. In addition,
investors may be charged a transaction fee if they effect transactions in Fund
shares through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that it
may charge to them directly.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and each Portfolio
and serves as the Transfer Agent for the Trust and each Portfolio under the
respective Administration and Services Agreement with the Trust and each
Portfolio.
ORGANIZATION OF THE TRUST
The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. Each Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
one Fund are not entitled to vote on a matter that does not affect that Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
Each Portfolio, in which all the Assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. Each
Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither a
Fund nor its shareholders will be adversely affected by reason of a Fund's
investing in the corresponding Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of a
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the Fund's shareholders.
Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.
EXPENSES OF THE TRUST
Each Fund bears its own expenses. Operating expenses for each Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, the costs of regulatory compliance and costs associated with
maintaining legal existence and shareholder relations. Bankers Trust and
Signature have agreed to reimburse a Fund to the extent required by applicable
state law for certain expenses that are described in the Statement of Additional
Information. Each Portfolio bears its own expenses. Operating expenses for each
Portfolio generally consist of all costs not specifically borne by Bankers Trust
or Signature, including investment advisory and administration and services
fees, fees for necessary professional services, amortization of organizational
expenses, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.
<PAGE>
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
..................
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..................
<PAGE>
BT INVESTMENT FUNDS
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PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.
A Statement of Additional Information with the same date has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference. You
may request a free copy of the Statement by calling the Fund's Service Agent at
1-800-730-1313.
UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 11.
SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.GOVERNMENT.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY
BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Short/Intermediate
U.S. Government
Securities Fund
o Seeks high current income through investment in short and intermediate term
U.S. Government securities, to the extent consistent with the preservation of
capital.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
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TABLE OF CONTENTS
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PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 9
Net Asset Value 12
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 16
Performance Information and Reports 17
Management of the Trust and Portfolio 18
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SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of the Short/Intermediate U.S. Government Securities
Fund (the "Fund") and the annual operating expenses of the Fund and the
expenses of the Short/Intermediate U.S. Government Securities Portfolio (the
"Portfolio"), as a percentage of average net assets of the Fund and (ii) an
example illustrating the dollar cost of such expenses on a $1,000 investment
in the Fund. THE TRUSTEES OF BT INVESTMENT FUNDS (THE "TRUST") BELIEVE THAT
THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS
THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE
TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE INVESTABLE ASSETS
("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE PORTFOLIO.
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ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee (after reimbursements or waivers) 0.25%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.60
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.85%
..............................................................................
Example 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following expenses
on a $1,000 investment, assuming:
(1) 5% annual return and (2)
redemption at the end of each time
period $9 $27 $47 $105
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The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. Bankers Trust Company ("Bankers Trust") has
voluntarily agreed to waive a portion of its investment advisory fee. Without
such waiver, the Portfolio's investment advisory fee would be equal to 0.25%.
The expense table and the example reflect a voluntary undertaking by Bankers
Trust or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses will not exceed
0.85% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1995, total operating
expenses would have been equal to approximately 1.13% of the Fund's average
net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Moreover, while each example assumes a 5% annual return, actual
performance will vary and may result in a return greater or less than 5%.
The Fund is sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for
their services. Each Service Agent has agreed to transmit to shareholders who
are its customers appropriate disclosures of any fees that it may charge them
directly.
In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.
For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.
FUND FINANCIAL HIGHLIGHTS
The following table shows the selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data for
the Fund for each period indicated and has been audited by Coopers & Lybrand
L.L.P., the Fund's independent accountants, whose report thereon appears in the
Fund's Annual Report which is incorporated by reference in the Fund's Statement
of Additional Information.
<TABLE>
<CAPTION>
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FOR THE PERIOD
AUGUST 24, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
------------------------------------------------ OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
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<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of
Period $ 9.61 $10.07 $ 9.92 $10.00
..................................................................................................................
Income from Investment Operations
Net Investment Income 0.55 0.42 0.39 0.13
Net Realized and Unrealized
Gain (Loss) on Securities 0.35 (0.46) 0.21 (0.08)
..................................................................................................................
Total from Investment
Operations 0.90 (0.04) 0.60 0.05
..................................................................................................................
Distributions from
Net Investment Income (0.55) (0.42) (0.39) (0.13)
Net Realized Gain from Security
Transactions -- -- (0.06) --
..................................................................................................................
Total Distributions (0.55) (0.42) (0.45) (0.13)
..................................................................................................................
Net Asset Value, End of Period $ 9.96 $ 9.61 $10.07 $ 9.92
..................................................................................................................
TOTAL INVESTMENT RETURN 9.54% (0.42%) 6.09% 1.48%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 5.54% 4.28% 3.68% 3.80%*
Ratio of Expenses to Average Net
Assets, Including Expenses of
the Short/Intermediate U.S.
Government Securities Portfolio 0.85% 0.85% 0.85% 0.85%*
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by Bankers Trust 0.28% 0.53% 0.57% 3.29%*
Net Assets, End of Period (000's
omitted) $23,168 $14,088 $14,143 $1,812
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</TABLE>
* Annualized
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income consistent with preservation of
capital. The Fund offers investors a convenient means of participating in a
managed, diversified pool of short-term and intermediate-term U.S. Government
securities while relieving those investors of the administrative burdens
typically associated with purchasing and holding these instruments, such as
coordinating maturities and reinvestments, providing for safekeeping and
maintaining detailed records. The Fund's yield normally is expected to be
higher than a money market fund but lower than a longer-term or lower quality
bond fund.
The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is not a fundamental policy
and may be changed upon notice to but without the approval of the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" on page 11 herein.
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
U.S. Government Securities. The Portfolio seeks to achieve its objective by
investing 100% of its assets in U.S. Government securities, including
repurchase agreements secured by U.S. Government securities.
In selecting securities for the Portfolio, Bankers Trust attempts to maintain
the Portfolio's overall sensitivity to interest rates in a range similar to
that of short-term to intermediate-term government bonds and notes with
weighted average maturities of two to five years. Because the Portfolio may
invest in mortgage securities whose prices are less sensitive to interest
rates than their relatively long maturities would suggest, the Portfolio's
dollar-weighted average maturity may be longer than five years from time to
time, but will not exceed seven years under normal conditions. The Portfolio
may hold individual securities with remaining maturities of more than seven
years as long as the Portfolio's dollar-weighted average maturity remains
within the above limit. The remaining maturities of individual securities,
excluding mortgage securities, will normally not exceed ten years.
"U.S. Government securities" as used herein means securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. U.S.
Government securities have varying degrees of government backing. They may be
backed by the credit of the government as a whole or only by the issuing
agency. Securities issued by certain agencies are supported only by the credit
of the agency that issued them, and not by the U.S. Government. Securities
issued by the Federal Home Loan Banks and the Federal National Mortgage
Association are supported by the agency's right to borrow money from the U.S.
Treasury under certain circumstances. There is no assurance that the U.S.
Government will support the obligations of its agencies or instrumentalities
if it is not required to do so by law. U.S. Treasury bonds, notes and bills,
and some agency securities, such as those issued by the Government National
Mortgage Association, are backed by the full faith and credit of the U.S.
Government as to payment of principal and interest and are the highest quality
government securities. The Fund itself, and its share price and yield, are not
guaranteed by the U.S. Government. For additional information on U.S.
Government securities, see below.
The Portfolio may invest a portion of its assets in short-term U.S. Government
securities with remaining maturities of one year or less and repurchase
agreements relating thereto. When Bankers Trust believes market conditions
warrant a temporary defensive position, the Portfolio may invest up to 100% of
its assets in these instruments.
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. The Portfolio
will only enter repurchase agreements with respect to obligations backed by
the full faith and credit of the U.S. Government. The Portfolio shall always
receive U.S. Government Securities as collateral with a market value equal to
102% of the purchase price plus accrued interest. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio could
experience delays in recovering its cash. To the extent that, in the meantime,
the value of the securities repurchased had decreased, the Portfolio could
experience a loss. In all cases, Bankers Trust must find the creditworthiness
of the other party to the transaction satisfactory. A repurchase agreement is
considered a collateralized loan under the 1940 Act.
When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a
segregated account containing high grade liquid securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.
Rule 144A Securities. The Portfolio may purchase securities in the United
States that are not registered for sale under Federal securities laws but
which can be resold to institutions under the Securities and Exchange
Commission's ("SEC") Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the Portfolio's 15% limit on illiquid securities. Under
the supervision of the Board of Trustees of the Portfolio, Bankers Trust
determines the liquidity of restricted securities and, through reports from
Bankers Trust, the Board will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.
Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risks which, like those associated with other
extensions of credit, includes delays in recovery and possible loss of rights
in the collateral should the borrower fail financially.
Mortgage-Backed Securities. The Portfolio may purchase mortgage-backed
securities issued by the U.S. Government and its agencies and
instrumentalities. Mortgage-backed securities include mortgage pass-through
securities, mortgage-backed bonds and mortgage pay-through securities. A
mortgage pass-through security is a pro rata interest in a pool of mortgages
where the cash flow generated from the mortgage collateral is passed through
to the security holder. Mortgage-backed bonds are general obligations of their
issuers, payable out of the issuers' general funds and additionally secured by
a first lien on a pool of mortgages. Mortgage pay-through securities exhibit
characteristics of both pass-throughs and mortgage-backed bonds. Mortgage-
backed securities also include other debt obligations secured by mortgages on
commercial real estate or residential properties. Other types of mortgage-
backed securities will likely be developed in the future, and the Portfolio
may invest in them if Bankers Trust determines they are consistent with the
Portfolio's investment objective and policies.
Collateralized Mortgage Obligations ("CMOs"). The Portfolio may purchase CMOs
issued by the U.S. Government and its agencies and instrumentalities. CMOs are
pay-through securities collateralized by mortgages or mortgage-backed
securities. CMOs are issued in classes and series that have different
maturities and often are retired in sequence.
Zero Coupon Bonds. These bonds can be issued directly by Federal agencies and
instrumentalities. Such issues of zero coupon bonds are originated in the form
of a zero coupon bond and are not created by stripping an outstanding bond.
Zero coupon bonds do not make regular interest payments. Instead they are sold
at a deep discount from their face value. Because a zero coupon bond does not
pay current income, its price can be very volatile when interest rates change.
In calculating its daily dividend, the Fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and its
face value.
Options and Futures Contracts. The Portfolio may buy and sell options and
futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling
futures, buying puts, and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, including buying futures,
writing puts and buying calls, tend to increase market exposure. The Portfolio
may invest in options (including over-the-counter options) and futures
contracts with respect to any type of security which the Portfolio could hold
directly or indexes composed only of such securities.
Options and futures can be volatile investments, and involve certain risks. If
Bankers Trust applies a hedge at an inappropriate time or judges interest
rates incorrectly, options and futures strategies may lower the Portfolio's
return. The costs of hedging are not reflected in the Portfolio's yield but
are reflected in the Portfolio's total return. The Portfolio could also
experience losses if its options and futures positions were poorly correlated
with its other investments, or if it could not close out its positions because
of an illiquid secondary market.
Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities, are not used
to achieve investment leverage, the Portfolio will cover such transactions, as
required under applicable interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated account with the
Portfolio's custodian containing high grade liquid debt securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may
be invested in illiquid or not readily marketable securities (including
repurchase agreements with remaining maturities of more than seven calender
days). Additional investment policies of the Portfolio are contained in the
Statement of Additional Information.
RISK FACTORS; MATCHING THE FUND TO YOUR INVESTMENT NEEDS
The Fund is designed for conservative bond investors looking for a relatively
stable, high quality investment. Because the Portfolio invests in high quality
instruments with short to intermediate maturities, its share price should be
more stable than that of a long-term bond fund, although it may be less stable
than that of a short-term bond fund. Generally, short to intermediate-term
instruments are less sensitive to interest rate fluctuations or changes in an
issuer's credit standing than longer-term bonds. At the same time, the Fund
may not offer the same yield or growth potential as a long-term bond fund. The
Fund should provide higher yields than mutual funds that maintain shorter
average maturities, but will not provide the same stability of principal. Bond
funds generally offer greater price stability than stock funds, although the
potential rewards of bonds are not as great. By itself, the Fund does not
constitute a balanced investment plan; the Fund and the Portfolio stress
income and preservation of capital rather than capital growth. The Fund's
share prices, yield and total return fluctuate based on many factors, and the
value of Fund shares when redeemed may be more or less than their original
cost.
The value of Fund shares will tend to decrease when interest rates rise, and
increase when interest rates fall. The Fund's share price and yield also
depend on the quality of the Portfolio's investments. While U.S. Government
securities generally are of high quality, government securities that are not
backed by the full faith and credit of the United States may be affected by
changes in the creditworthiness of the agency that issued them. Many
securities can provide higher yields than U.S. Government securities, although
they may not provide the same high quality.
Some types of U.S. Government securities carry certain risks. For example,
mortgage-backed securities are subject to certain prepayment risks, while zero
coupon bonds may require the Portfolio to accrue income for which it has
received no actual cash. For additional information about these types of U.S.
Government securities, see above and "Investment Objective and Policies."
PORTFOLIO TURNOVER
Bankers Trust may engage in short-term trading when it believes it is
consistent with the Portfolio's investment objective. Also, a security may be
sold and another of comparable quality simultaneously purchased to take
advantage of what Bankers Trust believes to be a temporary disparity in the
normal yield relationship between the two securities. The frequency of
portfolio transactions -- the Portfolio's turnover rate -- will vary from year
to year depending on market conditions. Because a high turnover rate increases
transaction costs and may increase taxable capital gains, Bankers Trust
carefully weighs the anticipated benefits of short-term investment against
these consequences. The Portfolio's turnover rate for the years ended December
31, 1995, 1994 and 1993 and for the period from August 24, 1992 (commencement
of operations) to December 31, 1992 was 246%, 202%, 267% and 75%,
respectively. The increase in the Portfolio's turnover rate from the year
ended 1994 to 1995 was primarily due to the timing of subscriptions and
redemptions of Fund shares.
DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may
be more volatile or less liquid than more traditional debt securities. There
are, in fact, many different types of derivatives and many different ways to
use them. There are a range of risks associated with those uses. Futures and
options are commonly used for traditional hedging purposes to attempt to
protect a fund from exposure to changing interest rates, securities prices or
currency exchange rates and for cash management purposes as a low cost method
of gaining exposure to a particular securities market without investing
directly in those securities. However, some derivatives are used for leverage,
which tends to magnify the effects of an instrument's price changes as market
conditions change. Leverage involves the use of a small amount of money to
control a large amount of financial assets and can, in some circumstances,
lead to significant losses. The Adviser will use derivatives only in
circumstances where the Adviser believes they offer the most economic means of
improving the risk/reward profile of the Portfolio. Derivatives will not be
used to increase portfolio risk above the level that could be achieved using
only traditional investment securities or to acquire exposure to changes in
the value of assets or indices that by themselves would not be purchased for
the Portfolio. The use of derivatives for non-hedging purposes may be
considered speculative. A description of the derivatives that the Portfolio
may use and some of their associated risks is found above and under
"Investment Objective and Policies."
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at
(800) 730-1313.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the SEC, whenever the
Trust is requested to vote on matters pertaining to the Portfolio, the Trust
will hold a meeting of shareholders of the Fund and will cast all of its votes
in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Trust's votes at the
Portfolio meeting. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees or officers of the Trust
in the same proportion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Portfolio. See "Investment Objective and Policies" for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.
NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the New York Stock Exchange Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through
Friday, except: (a) January 1st, Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar-determined holidays falls on a Saturday or
Sunday, respectively.
The net asset value per share of the Fund is calculated on each Valuation Day
as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value
of its investment in the Portfolio and other assets), less all liabilities, by
the total number of its shares outstanding. The Portfolio's securities and
other assets are valued primarily on the basis of market quotations or, if
quotations are not readily available, by a method which the Portfolio's Board
of Trustees believes accurately reflects fair value.
Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is $0.005 ( 1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Fund may be reimbursed from its assets, as
described herein. Service Agents may impose initial and subsequent investment
minimums that differ from the amounts presented in the "Minimum Investments"
table below. Shares of the Fund may be purchased in only those states where
they may be lawfully sold.
Purchase orders for shares of the Fund that are received by a Service Agent
and transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier, should the NYSE close earlier) on any Valuation Day will be effective
at that day's Valuation Time. The Trust and Signature reserve the right to
reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to Bankers Trust as the Trust's custodian (the "Custodian") purchase payments
on behalf of its customers by the following business day (trade date +1) after
an order for shares is placed, and a shareholder must settle with the Service
Agent his or her entitlement to an effective purchase or redemption order as
of a particular time. Because Bankers Trust is the Custodian and Transfer
Agent of the Trust, funds may be transferred directly from or to a customer's
account with Bankers Trust to or from the Fund without incurring the
additional costs or delays associated with the wiring of federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. The Fund may offer shareholders a automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should
contact their Service Agent.
- ------------------------------------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
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REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next
determined on each Valuation Day. Redemption requests should be transmitted by
customers in accordance with procedures established by the Transfer Agent and
the shareholder's Service Agent. Redemption requests for shares of the Fund
received by the Service Agent and transmitted to the Transfer Agent prior to
the Valuation Time (currently
4:00 p.m., New York time or earlier, should the NYSE close earlier) on each
Valuation Day will be effective at that day's Valuation Time and the
redemption proceeds normally will be delivered to the shareholder's account
with the Service Agent on the next day, but in any event within seven calendar
days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may
disclaim liability for following instructions communicated by telephone that
the Service Agent reasonably believes to be genuine. The Service Agent must
provide the investor with an opportunity to choose whether or not to utilize
the telephone redemption or exchange privilege. The Service Agent must employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. If the Service Agent does not do so, it may be liable for any
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum (as shown above) but not if
an account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the
automatic cash withdrawal plan, shareholders should contact their service
agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares" in that fund's prospectus. Before making an exchange,
please note the following:
* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
* Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).
* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, nonprofit
organizations and other institutions. Contact your Service Agent or Bankers
Trust for further information. Bankers Trust can set up your new account in
the Fund under a number of several tax-sheltered plans. These plans contain
special tax advantages and let you invest for retirement while sheltering your
investment income from current taxes. Minimums may differ from those listed
elsewhere in the Prospectus.
* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.
* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.
* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.
* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.
* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.
* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.
* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Any net capital gains are distributed in
December. Unless a shareholder instructs the Trust to pay such dividends and
distributions in cash, they will be automatically reinvested in additional
shares of the Fund.
Federal Taxes. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes.
Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. The Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received in the past year.
Capital Gains. You may realize a capital gain or loss when you redeem (sell)
or exchange shares. Because the tax treatment also depends on your purchase
price and your personal tax position, you should keep your regular account
statements to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, the Fund's share value is reduced by the amount of the
distribution. If you buy shares just before the ex-date ("buying a dividend"),
you will pay the full price for the shares and then receive a portion of the
price back as a taxable distribution.
Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your area.
You should consult with your own tax adviser concerning the application of
federal, state and local taxes to your distributions from the Fund.
PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment
results and/or comparisons of its investment results to various unmanaged
indices such as the Lehman Brothers 1-3 Year Government Index, the Lehman
Brothers Government Bond Index, the Lehman Brothers Intermediate Term Bond
Index, IBC/Donoghue's Money Fund Average, Lipper Short U.S. Government Average
or results of other mutual funds or investment or savings vehicles. In
addition, the Fund may compare various Portfolio characteristics such as
sector diversification, yield to maturity, duration, adjusted duration and
average maturity. The Fund's investment results as used in such communications
will be calculated on a yield or total return basis in the manner set forth
below. From time to time, fund rankings may be quoted from various sources,
such as Lipper Analytical Services, Inc., Value Line and Morningstar, Inc.
The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of
an investment in the Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributed during such period. Period total
return may be annualized. An annualized total return is a compounded total
return which assumes that the period total return is generated over a one-year
period, and that all dividends and capital gain distributions are reinvested.
An annualized total return will be higher than a period total return if the
period is shorter than one year because of the compounding effect.
The Trust may provide annualized "yield" quotations for the Fund. The "yield"
of the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
advertisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return quotations of the Fund will vary
depending upon interest rates, the current market value of the securities held
by the Portfolio and changes in the Fund's expenses. In addition, during
certain periods for which total return or yields may be provided, Bankers
Trust, as Adviser, Service Agent or Administrator, or Signature, as
Distributor, may have voluntarily agreed to waive portions of their fees on a
month-to-month basis. Such waivers will have the effect of increasing the
Fund's net income (and therefore its total return or yield) during the period
such waivers are in effect.
Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including listings of investment securities
held by the Portfolio at those dates. Annual reports are audited by
independent accountants.
MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and the Portfolio are managed under the supervision
of their respective Boards of Trustees. By virtue of the responsibilities
assumed by Bankers Trust, as the administrator of the Trust and the Portfolio,
neither the Trust nor the Portfolio requires employees other than its
officers. None of the Trust's or the Portfolio's officers devotes full time to
the affairs of the Trust or the Portfolio.
The Trustees of the Trust who are not "interested persons," (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio. The Portfolio has retained the
services of Bankers Trust, as investment adviser. Mr. Louis M. Hudson, Vice
President, is responsible for the day-to-day management of the Portfolio. Mr.
Hudson has been employed by Bankers Trust since 1961 and has managed the
Portfolio's assets since February, 1994.
Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers with approximately $200 billion in assets under management globally.
Of that total, approximately $64 billion are in actively managed fixed-income
funds. This makes Bankers Trust one of the nation's leading managers of fixed
income funds.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. All orders for investment transactions on
behalf of the Portfolio are placed by Bankers Trust with broker-dealers and
other financial intermediaries that it selects, including those affiliated
with Bankers Trust. A Bankers Trust affiliate will be used in connection with
a purchase or sale of an investment for the Portfolio only if Bankers Trust
believes that the affiliate's charge for the transaction does not exceed usual
and customary levels. The Portfolio will not invest in obligations for which
Bankers Trust or any of its affiliates is the ultimate obligor or accepting
bank. The Portfolio may, however, invest in the obligations of correspondents
or customers of Bankers Trust.
Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.25% of the
average daily net assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust to
pay Bankers Trust a fee, computed daily and paid monthly, at the annual rate
of 0.55% of the average daily net assets of the Fund.
Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The Administration and Services
Agreement provides for the Portfolio to pay Bankers Trust a fee, computed
daily and paid monthly, at the annual rate of 0.05% of the average daily net
assets of the Portfolio. Under each Administration and Services Agreement,
Bankers Trust may delegate one or more of its responsibilities to others,
including Signature, at Bankers Trust's expense. For more information, see the
Statement of Additional Information.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and
its affiliates currently provide administration and distribution services for
other registered investment companies. The principal business address of SFG
and Signature is 6 St. James Avenue, Boston, Massachusetts 02116.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.20% of the Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of Signature who, as their primary
activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of the Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Fund, subject to the
0.20% of net assets limitation. All costs and expenses associated with
preparing the prospectuses and statements of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Fund. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated
that some activities may be conducted on a Trust-wide basis, with the result
that those activities will not be identifiable to any particular series. In
the latter case, expenses will be allocated among the series of the Trust on
the basis of their relative net assets. It is not expected that any payments
will be made under the Plan in the foreseeable future.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions,
arranging for bank wires, performing shareholder sub-accounting, answering
client inquiries regarding the Trust, assisting clients in changing dividend
options, account designations and addresses, providing periodic statements
showing the client's account balance, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and,
with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares
through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that
it may charge them directly.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio
and serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.
ORGANIZATION OF THE TRUST
The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts. The Fund was established and designated as a separate series of
the Trust on January 29, 1992. The Trust offers shares of beneficial interest
of separate series, par value $0.001 per share. The shares of the other series
of the Trust are offered through separate prospectuses. No series of shares
has any preference over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust."
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the
Fund. There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Any Trustee may be removed from office upon the vote of shareholders
holding at least two-thirds of the Trust's outstanding shares at a meeting
called for that purpose. The Trustees are required to call such a meeting upon
the written request of shareholders holding at least 10% of the Trust's
outstanding shares.
The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio.
Each series of the Trust will not be involved in any vote involving a
Portfolio in which it does not invest its Assets. Shareholders of all of the
series of the Trust will, however, vote together to elect Trustees of the
Trust and for certain other matters. Under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.
EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to
the extent required by applicable state law for certain expenses that are
described in the Statement of Additional Information. The Portfolio bears its
own expenses. Operating expenses for the Portfolio generally consist of all
costs not specifically borne by Bankers Trust or Signature, including
investment advisory and administration and services fees, fees for necessary
professional services, amortization of organizational expenses, the costs
associated with regulatory compliance and maintaining legal existence and
investor relations.
<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
..............................................................................
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..............................................................................
