BT INVESTMENT FUNDS, 485BPOS, 1996-04-29

BT INVESTMENT FUNDS
485BPOS, 1996-04-29

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1996
File Nos. 33-7404 and 811-4760

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 38

AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 39

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

6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: 617-423-0800

Philip W. Coolidge Copies to: Burton M. Leibert, Esq.
Signature Broker-Dealer Services, Inc. Willkie Farr & Gallagher
6 St. James Avenue One Citicorp Center
Boston, Massachusetts 02116 153 East 53rd Street
(Name and Address of Agent for Service) New York, New York 10022

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b) [x] on April 29, 1996
pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to
paragraph (a)(i)

[ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to
paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

BT INVESTMENT PORTFOLIOS, GLOBAL HIGH YIELD SECURITIES PORTFOLIO, CAPITAL
APPRECIATION PORTFOLIO , SMALL CAP PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO,
PACIFIC BASIN EQUITY PORTFOLIO, LATIN AMERICAN EQUITY PORTFOLIO, LIMITED TERM
U.S. GOVERNMENT SECURITIES PORTFOLIO AND INTERMEDIATE TAX FREE PORTFOLIO HAVE
ALSO EXECUTED THIS AMENDMENT TO THE REGISTRATION STATEMENT.

<PAGE>

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
REGISTRANT FILED THE NOTICE REQUIRED BY RULE 24F-2 ON OR ABOUT NOVEMBER 30, 1995
FOR REGISTRANT'S FISCAL YEAR ENDED SEPTEMBER 30, 1995. REGISTRANT FILED THE
NOTICE REQUIRED BY RULE 24F-2 ON OR ABOUT FEBRUARY 28, 1996 FOR REGISTRANT'S
FISCAL YEAR ENDED DECEMBER 31, 1995. REGISTRANT WILL FILE THE NOTICE REQUIRED BY
RULE 24F-2 ON ABOUT MAY 31, 1996 FOR REGISTRANT'S FISCAL YEAR ENDED MARCH 31,
1996. BT0329I

BT0329I

BT INVESTMENT FUNDS

FORM N-1A
CROSS REFERENCE SHEET

Part A
ITEM NO. HEADINGS IN PROSPECTUS

1. Cover Page . . . . . . . . . . .Cover Page

2. Synopsis . . . . . . . . . . . .The Funds -- Expense Summary

3. Condensed Financial
Information . . . . . . . . . . Notapplicable

4. General Description of
Registrant . . . . . . . . . . .Cover Page; The Funds -- Who May Want to
Invest; The Funds in Detail --Risk
Factors and Certain Securities and
Investment Practices

5. Management of the Fund . . . . .The Funds -- Expense Summary; The Funds
in Detail -- Management of the
Trust and the Portfolios

6. Capital Stock and Other
Securities . . . . . . . . . . .Cover Page; The Funds in Detail --
Performance; Your Account -- Types of
Accounts, How to Buy Shares, How to Sell
Shares; Shareholder and Account
Policies -- Dividends, Capital Gains and
Taxes , Exchange Restrictions, Sales
Charge Reductions and Waivers, Additional
Information About the Trust and
Portfolios
7. Purchase of Securities Being
Offered . . . . . . . . . . . .Your Account -- How to Buy Shares;
Shareholder and Account
Policies --Valuation Details,
Exchange Restrictions, Sales Charge
Reductions and Waivers

8. Redemption or Repurchase . . . .Your Account -- How to Sell Shares;
Shareholder and Account Policies --
Valuation Details, Exchange Restrictions

9. Pending Legal Proceedings . . .Not applicable

Part B Headings in Statement of
ITEM NO. ADDITIONAL INFORMATION

10. Cover Page . . . . . . . .Cover Page

11. Table of Contents . . . .Contents

12. General Information and
History . . . . . . . . .Not applicable

13. Investment Objectives and
Policies . . . . . . . . .Investment Objective, Policies and Risks

14. Management of the Fund . .Management of the Trust and Portfolios

15. Control Persons and Principal
Holders of Securities . . See Prospectus -- "Organization of the Trust"

<PAGE>

16. Investment Advisory and Other
Services . . . . . .Management of the Trust and Portfolios

17. Brokerage Allocation and Other
Practices . . . . .Investment Objective, Policies and Risks

18. Capital Stock and Other
Securities . . . . . . . .Organization of the Trust; see Prospectus --
"Dividends, Distributions and Taxes" and
"Organization of the Trust"

19. Purchase, Redemption and Pricing
of Securities Being Offered . .Purchase and Redemption Information;
Net Asset Value

20. Tax Status . . . . . . . .Taxes; see Prospectus -- "Dividends,
Distributions and Taxes"

21. Underwriters . . . . . . .See Prospectus -- "Management of the
Trust and Portfolios"

22. Calculations of Yield Quotations
of Money Market Funds . .Performance Information

23. Financial Statements . . .Financial Statements

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<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.

Cash Management Fund
Treasury Money Fund
NY Tax Free Money Fund
Tax Free Money Fund

* 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 31
- ------------------------------------------------------------------------------
<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.

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+ 0.00+ 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 -- -- (0.00)+ (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
- -----------------------------------------------------------------------------------------------------------------------
<FN>
* 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
- -----------------------------------------------------------------------------------------------------------------------------------
+ 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
- ---------------------------------------------------------------------------------------------------------------------------
* 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.

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 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

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.

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.

Liquid Assets Fund

* 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 17
Performance Information and Reports 17
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 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>
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
.................................................................................................................................
<S> <C> <C> <C> <C>
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

<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)
..................................................................................................................
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.

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.

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.

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.

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).

* 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.

* 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.

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.

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, 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.

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.

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.

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.

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

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.

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.

Intermediate
Tax Free Fund

* 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 16
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>
- --------------------------------------------------------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
................................................................................................................................
<S> <C> <C> <C> <C>
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.

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.

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

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.

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.

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.

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

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.

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).

* 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.

* 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.

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

....................

....................
<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.

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.

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

<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 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
- ------------------------------------------------------------------------------

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.

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

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%.

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 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>
FOR THE PERIOD
AUGUST 24, 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 $ 9.61 $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
==================================================================================================================================
<FN>
* Annualized
</TABLE>

<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.

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.

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

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

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.

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.

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

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.

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.

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).

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.

* 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.

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.

"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.

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.

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.

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, 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.

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.

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.

..............................................................................
<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.

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.

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
<PAGE>

TABLE OF CONTENTS

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

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.

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

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.

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
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>
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
==================================================================================================================================
<FN>
*Annualized
</TABLE>

<PAGE>
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.

PURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

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.

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 (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.

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.

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).

TAX-SAVING RETIREMENT PLANS

* 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.

* 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.

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.

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.

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.

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, 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.

ADMINISTRATOR

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

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

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.

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.

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
LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
INTERMEDIATE TAX FREE FUND
GLOBAL HIGH YIELD SECURITIES FUND
CAPITAL APPRECIATION FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
PACIFIC BASIN EQUITY FUND
LATIN AMERICAN EQUITY FUND

PROSPECTUS: APRIL 29, 1996

BT Investment Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of sixteen funds. With the exception of
the Limited Term U.S. Government Securities Fund, each of the funds listed above
(each, a "Fund") is a separate series of BT Investment Funds. Limited Term U.S.
Government Securities Fund is a separate series of BT Pyramid Mutual Funds. (BT
Investment Funds and BT Pyramid Mutual Funds are each a "Trust.")

UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), EACH FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("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 19.

Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio.

Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.

To learn more about a Fund and its investments, investors can obtain a copy of
that Fund's Statement of Additional Information (an "SAI"), dated April 29,
1996, or January 29, 1996, which contains the corresponding Portfolio's most
recent financial report and portfolio listing. Each SAI has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. For a free copy of this document, call the Trusts' Service Agent at
1-(800)-730-1313.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, BANKERS
TRUST OR ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

The Global High Yield Securities Portfolio and Latin American Equity Portfolio
may invest in lower-quality debt securities, sometimes called "junk bonds." The
Global High Yield Securities Portfolio may invest in these types of securities
without limit. Investors should consider that these securities carry greater
risks, such as the risk of default, than other debt securities. Refer to "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
High Yield Securities (Junk Bonds)" on page 18 for further information.

The Latin American Equity Portfolio and Global High Yield Securities Portfolio
may borrow money for investment in securities. Such leverage will exaggerate any
increase or decrease the value of shares in the Funds. Borrowing also involves
costs to the Portfolio. See "Risk Factors and Certain Securities and Investment
Practices -- Leverage" on page 23 herein. Each of the corresponding Funds may be
considered a speculative investment and is designed for aggressive investors.

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.
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................

THE FUNDS ................................................................ 3

WHO MAY WANT TO INVEST
INVESTMENT PRINCIPLES AND RISKS
Each Fund's overall approach to investing.
EXPENSE SUMMARY
Each Fund's sales charges and annual operating expenses.

FINANCIAL HIGHLIGHTS ..................................................... 6

THE FUNDS IN DETAIL ...................................................... 11
INVESTMENT OBJECTIVES AND POLICIES
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
SECURITIES AND INVESTMENT PRACTICES
PERFORMANCE
How each Fund has done over time.
MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS
NET ASSET VALUE

PURCHASE AND REDEMPTION OF SHARES ........................................ 29
PURCHASE OF SHARES
REDEMPTION OF SHARES
EXCHANGE PRIVILEGE
TAX-SAVING RETIREMENT PLANS

SHAREHOLDER AND ACCOUNT POLICIES ......................................... 31
DIVIDENDS, CAPITAL GAINS AND TAXES
ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

APPENDIX ................................................................. 34
- -------------------------------------------------------------------------------

<PAGE>
THE FUNDS

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND'S investment objective is a high
level of current income consistent with preservation of capital. The Portfolio
invests 100% of its assets in short- and intermediate-term U.S. Government
securities, including repurchase agreements secured by U.S. Government
securities. See "Risk Factors and Certain Securities and Investment
Practices."

INTERMEDIATE TAX FREE FUND'S investment objective is a high level of current
income exempt from federal income tax consistent with moderate risk of capital.
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. See "Risk Factors and Certain
Securities and Investment Practices."

GLOBAL HIGH YIELD SECURITIES FUND'S investment objective is high current income
from investment in a non-diversified portfolio of high yield, non-investment
grade debt securities issued in many of the world's securities markets. Capital
appreciation will be considered when consistent with the primary investment
objective of high current income. See "Risk Factors and Certain Securities and
Investment Practices."

CAPITAL APPRECIATION FUND'S investment objective is long-term capital growth;
the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium sized
domestic corporations and, to a lesser extent, foreign corporations. See "Risk
Factors and Certain Securities and Investment Practices."

SMALL CAP FUND'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective. The Portfolio
seeks to provide long-term capital growth by investing primarily in equity
securities of smaller sized growth companies. See "Risk Factors and Certain
Securities and Investment Practices."

INTERNATIONAL EQUITY FUND'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio may
also invest in emerging market securities. See "Risk Factors and Certain
Securities and Investment Practices."

PACIFIC BASIN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. See "Risk Factors and Certain
Securities and Investment Practices."

LATIN AMERICAN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. See "Risk Factors and Certain Securities and Investment
Practices."

WHO MAY WANT TO INVEST

The Trusts seek to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio. The Portfolios are
Short-Intermediate U.S. Government Securities Portfolio, Intermediate Tax Free
Portfolio, Global High Yield Securities Portfolio, Capital Appreciation
Portfolio, Small Cap Portfolio, International Equity Portfolio, Pacific Basin
Equity Portfolio and Latin American Equity Portfolio, respectively.

The Capital Appreciation Fund, Small Cap Fund, International Equity Fund,
Pacific Basin Equity Fund, and Latin American Equity Fund are designed for
investors who are willing to accept short-term domestic and/or foreign stock
market fluctuations in pursuit of potentially high long-term returns. These
Funds invest for growth and do not pursue income.

In addition, the International Equity Fund, Global High Yield Securities Fund,
Latin American Equity Fund and Pacific Basin Equity Fund may also be appropriate
for investors who want to pursue their investment goals in markets outside of
the United States. By including international investments in your portfolio, you
can achieve an extra level of diversification and also participate in
opportunities around the world.

The Limited Term U.S. Government Securities Fund is designed for conservative
investors looking for a relatively stable, high quality investment. The
Intermediate Tax Free Fund is designed for conservative investors looking for a
relatively stable, high-grade investment free from federal income tax. Because
each Fund's corresponding Portfolio invests in high quality instruments or
high-grade tax-exempt instruments, respectively, 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.

Each Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund Shares, they may be worth more or less
than what they originally paid for them.

INVESTMENT PRINCIPLES AND RISKS

The value of each Portfolio's investments varies based on many factors. The
value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.

Stock values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment, especially for securities in emerging markets. Many
investments in emerging markets can be considered speculative, and therefore may
offer higher income (for debt funds) and total return potential, but
significantly greater risk.

Each of the Global High Yield Securities Fund and Portfolio is classified as a
"non-diversified" investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), and may invest a greater portion of its assets in a
single issuer than a diversified fund. As a result, this Portfolio may be more
susceptible to any single economic, political or regulatory occurrence than a
diversified fund. See "Risk Factors and Certain Securities and Investment
Practices -- Non-Diversified Fund" for more information. Each other Fund and
Portfolio is classified as "diversified."

Bankers Trust may use various investment techniques to hedge a Portfolio's
risks, but there is no guarantee that these strategies will work as intended.
When an investor sells their Fund shares ("Shares"), they may be worth more or
less than what they originally paid for them. See "Risk Factors and Certain
Securities and Investment Practices" for more information.

EXPENSE SUMMARY

ANNUAL OPERATING EXPENSES are paid out of the assets of each Portfolio and Fund.
Each Portfolio pays an investment advisory fee and an administrative services
fee to Bankers Trust. Each Fund incurs expenses such as maintaining shareholder
records and furnishing shareholder statements. Each Fund must provide financial
reports.

The following table provides: (i) for the last fiscal year of that Fund and the
corresponding Portfolio, the annual operating expenses of the Fund and expenses
of the corresponding Portfolio, in the aggregate, as a percentage of average
daily net assets of each Fund; and (ii) an example illustrating the dollar cost
of such expenses on a $1,000 investment in each Fund. THE TRUSTEES OF THE TRUST
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF EACH FUND AND THE CORRESPONDING
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 ASSETS OF EACH FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE CORRESPONDING PORTFOLIO.

<PAGE>
- ------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES (as a percentage of the average net assets of each
Fund)

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.25%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.35
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.60%
..............................................................................

INTERMEDIATE TAX FREE FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.37%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.48
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.85%
..............................................................................

GLOBAL HIGH YIELD SECURITIES FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.41%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.09
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.50%
..............................................................................

CAPITAL APPRECIATION FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.52%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.73
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.25%
..............................................................................

SMALL CAP FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.37%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.88
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.25%
..............................................................................

INTERNATIONAL EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.56%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.94
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.50%
..............................................................................

PACIFIC BASIN EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.74%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.01
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.75%
..............................................................................

LATIN AMERICAN EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.41%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.59
..............................................................................
Total operating expenses (after reimbursements or waivers) 2.00%
..............................................................................

EXPENSE TABLE EXAMPLE:
An investor would pay the following expenses assuming (1) 5% annual return and
(2) redemption at the end of each time period:

<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
........................................................................................................
<S> <C> <C> <C> <C>
Limited Term U.S. Government Securities Fund $ 6 $19 $ 33 $ 75
Intermediate Tax Free Fund $ 9 $27 $ 47 $105
Global High Yield Securities Fund $15 $47 $ 82 $179
Capital Appreciation Fund $13 $40 $ 69 $151
Small Cap Fund $13 $40 $ 69 $151
International Equity Fund $15 $47 $ 82 $179
Pacific Basin Equity Fund $18 $55 $ 95 $206
Latin American Equity Fund $20 $63 $108 $233
- --------------------------------------------------------------------------------------------------------
</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 a Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: Global High Yield Securities
Portfolio -- 0.80% Capital Appreciation Portfolio -- 0.65%; Small Cap Portfolio
- -- 0.65%; International Equity Portfolio -- 0.65%; Pacific Basin Equity
Portfolio -- 0.75%; Latin American Equity Portfolio -- 1.00%; Limited Term U.S.
Government Securities Portfolio -- 0.25%; and Intermediate Tax Free Portfolio --
0.40%. The expense table and the example reflect a voluntary undertaking by
Bankers Trust or Signature Broker-Dealer Services, Inc. ("SBDS"), as the
distributor (the "Distributor") of the Shares of each Fund, to waive or
reimburse expenses such that the total aggregate operating expenses of each Fund
and the corresponding Portfolio, for the fiscal year of that Fund and the
corresponding Portfolio (as a percentage of the Fund's average daily net assets)
will not exceed the following: Limited Term U.S. Government Securities Fund --
0.60%; Intermediate Tax Free Fund -- 0.85%, Global High Yield Securities Fund --
1.50%; Capital Appreciation Fund -- 1.25%; Small Cap Fund -- 1.25%;
International Equity Fund -- 1.50%; Pacific Basin Equity Fund -- 1.75% and Latin
American Equity Fund -- 2.00%. In the absence of this undertaking, "Total
Operating Expenses" would have been as follows: Limited Term U.S. Government
Securities Fund -- 0.84%; Intermediate Tax Free Fund -- 1.13%; Global High Yield
Securities Fund -- 2.61%; Capital Appreciation Fund -- 1.57%; Small Cap Fund --
1.59%; International Equity Fund -- 1.83%; Pacific Basin Equity Fund -- 2.27%;
and Latin American Equity Fund -- 3.17%. 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%.

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 1940 Act it is not expected that any payments will actually be
made under that plan in the foreseeable future.

For more information about each Fund's and each Portfolio's expenses see
"Management of the Trusts and the Portfolios" and "Valuation Details" herein.

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 each of the periods indicated and has been audited by Coopers &
Lybrand L.L.P., the Funds' independent accountants, whose report thereon appears
in each Fund's Annual Report which is incorporated by reference in that Fund's
SAI.

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 24, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
-------------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.61 $ 10.06 $ 9.93 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.57 0.44 0.41 0.14
Net Realized and Unrealized Gain (Loss) on Securities 0.35 (0.45) 0.20 (0.07)
..................................................................................................................................
Total from Investment Operations 0.92 (0.01) 0.61 0.07
..................................................................................................................................
Distributions from
Net Investment Income (0.57) (0.44) (0.41) (0.14)
Net Realized Gain from Security Transactions -- -- (0.07) --
..................................................................................................................................
Total Distributions (0.57) (0.44) (0.48) (0.14)
..................................................................................................................................
Net Asset Value, End of Period $ 9.96 $ 9.61 $ 10.06 $ 9.93
..................................................................................................................................
TOTAL INVESTMENT RETURN 9.81% (0.08%) 6.21% 2.02%*
RATIOS AND SUPPLMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 5.81% 4.69% 4.35% 4.08%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Short/Intermediate U.S. Government Securities Portfolio 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.24% 0.34% 1.43% 5.60%*
Net Assets, End of Period (000's omitted) $29,870 $31,302 $ 3,462 $ 3,188
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

INTERMEDIATE TAX FREE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
JULY 20, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
-------------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C>
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) on Securities 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 Security 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 SUPPLMENTAL 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
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL HIGH YIELD SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 14, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.29 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.77 0.31
Net Realized and Unrealized (Loss) on Securities and Foreign Currency (0.41) (0.02)
..................................................................................................................................
Total from Investment Operations 0.36 0.29
..................................................................................................................................
Dividends from Net Investment Income (0.87) --
..................................................................................................................................
Net Asset Value, End of Period $ 9.78 $ 10.29
..................................................................................................................................
TOTAL INVESTMENT RETURN 4.28% 3.66%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 8.68% 5.44%*
Ratio of Expenses to Average Net Assets, Including Expenses of the Global
High Yield Securities Portfolio 1.74% 1.75%*
Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses
by Bankers Trust 0.87% 1.08%*
Net Assets, End of Period (000's omitted) $22,913 $14,738
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 9, 1993
FOR THE PERIOD (COMMENCEMENT
JANUARY 1, 1995 TO FOR THE YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.10 $ 11.72 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment (Loss) (0.07) (0.04) (0.01)
Net Realized and Unrealized Gain on Securities 4.80 0.42 1.73
..................................................................................................................................
Total from Investment Operations 4.73 0.38 1.72
..................................................................................................................................
Net Asset Value, End of Period $ 16.83 $ 12.10 $ 11.72
..................................................................................................................................
TOTAL INVESTMENT RETURN 39.09% 3.24% 21.54%*
RATIOS AND SUPPLMENTAL DATA
Ratio of Net Investment (Loss) to Average Net Assets (0.65)%* (0.57)% (0.23)%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Capital Appreciation Portfolio 1.25%* 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.32%* 0.54% 0.74%*
Net Assets, End of Period (000's omitted) $57,380 $42,737 $17,573
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 21, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
..................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.60 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment (Loss) (0.04) (0.03)
Net Realized and Unrealized Gain on Securities 6.94 1.63
..................................................................................................................................
Total from Investment Operations 6.90 1.60
..................................................................................................................................
Net Asset Value, End of Period $ 18.50 $ 11.60
..................................................................................................................................
TOTAL INVESTMENT RETURN 59.48% 17.06%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment (Loss) to Average Net Assets (0.46%) (0.58%)*
Ratio of Expenses to Average Net Assets, Including Expenses of the Small Cap
Portfolio 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses by
Bankers Trust 0.34% 0.86%*
Net Assets, End of Period (000's omitted) $122,935 $21,332
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 4, 1992
FOR THE PERIOD DECEMBER 31, (COMMENCEMENT
JANUARY 1, 1995 TO ----------------- OF OPERATIONS) TO
SEPTEMBER 30, 1995 1994 1993 DECEMBER 31, 1992
...................................................................................................................................
Selected Per Share Data
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.37 $ 13.18 $ 9.75 $10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.14 0.10 0.05 0.03
Net Realized and Unrealized Gain (Loss) on Securities and
Foreign Currency 1.97 0.44 3.60 (0.28)
...................................................................................................................................
Total from Investment Operations 2.11 0.54 3.65 (0.25)
...................................................................................................................................
Distributions from
Net Investment Income (0.00)+ (0.09) (0.15) --
Net Realized Gain from Securities
Transactions (0.01) (0.26) (0.07) --
...................................................................................................................................
Total Distributions (0.01) (0.35) (0.22) --
...................................................................................................................................
Net Asset Value, End of Period $ 15.47 $ 13.37 $ 13.18 $ 9.75
...................................................................................................................................
TOTAL INVESTMENT RETURN 15.82% 4.12% 37.38% (6.01%)*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 1.55%* 0.84% 0.79% 0.97%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
International Equity Portfolio 1.50%* 1.50% 1.50% 1.50%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.33%* 0.37% 0.62% 1.36%*
Net Assets, End of Period (000's omitted) $82,807 $56,020 $33,869 $8,218
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
+Less Than $0.01 Per Share
</TABLE>

<PAGE>

PACIFIC BASIN EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 1, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
...................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.82 $ 10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income (Loss) 0.01 (0.04)
Net Realized and Unrealized Gain (Loss) on Securities and Foreign Currency (0.49) 1.86
...................................................................................................................................
Total from Investment Operations (0.48) 1.82
...................................................................................................................................
Distributions from Net Realized Gain from Securities Transactions (0.38) --
...................................................................................................................................
Net Asset Value, End of Period $ 10.96 $ 11.82
...................................................................................................................................
TOTAL INVESTMENT RETURN (3.87%) 20.11%*
RATIOS AND SUPPLEMENTAL DATA

Ratio of Net Investment Income (Loss) to Average Net Assets 0.12% (0.59%)*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Pacific Basin Equity Portfolio 1.75% 1.75%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.52% 0.60%*
Net Assets, End of Period (000's omitted) $24,504 $25,362
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

LATIN AMERICAN EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 25, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
...................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 14.59 $ 10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.03 0.00#
Net Realized and Unrealized Gain (Loss) on Securities and Foreign Currency (5.92) 4.59
...................................................................................................................................
Total from Investment Operations (5.89) 4.59
...................................................................................................................................
Distributions from Net Realized Gain from Securities Transactions (0.20) --
...................................................................................................................................
Net Asset Value, End of Period $ 8.50 $ 14.59
...................................................................................................................................
TOTAL INVESTMENT RETURN (40.68%) 50.01%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 0.29% 0.03%*
Ratio of Expenses to Average Net Assets, Including Expenses of
the Latin American Equity Portfolio 2.00% 2.00%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 1.17% 1.27%*
Net Assets, End of Period (000's omitted) $13,624 $27,489
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
#Less than $0.01 per share

</TABLE>
<PAGE>
THE FUNDS IN DETAIL

INVESTMENT OBJECTIVES AND POLICIES

The Trusts seek to achieve the investment objective of each Fund by investing
all of its Assets in the corresponding Portfolio, which has the same investment
objective as the Fund. Since the investment characteristics of each Fund will
correspond directly to those of the corresponding Portfolio, the following is a
discussion of the various investments of and techniques employed by each
Portfolio. Additional information about the investment policies of each
Portfolio appears in "Risk Factors and Certain Securities and Investment
Practices" in this Prospectus and in the Funds' SAI. There can be no assurance
that the investment objective of either a Fund or the corresponding Portfolio
will be achieved.

The SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO (LIMITED TERM U.S.
GOVERNMENT SECURITIES FUND), investment objective is a high level of current
income consistent with preservation of capital. The Portfolio invests 100%
of its assets in short- and intermediate-term U.S. Government securities,
including repurchase agreements secured by U.S. Government securities.

"U.S. Government securities" as used in this Prospectus 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 Mortgage
Corporation 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
"Risk Factors and Certain Securities and Investment Practices."

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: repurchase
agreements, when-issued and delayed delivery securities, Rule 144A securities,
securities lending, mortgage-backed securities, collateralized mortgage
obligations, zero coupon securities, and options and futures. See "Risk Factors
and Certain Securities and Investment Practices" in this Prospectus and in the
SAI for more information.

The INTERMEDIATE TAX FREE PORTFOLIO investment objective is a high level of
current income exempt from federal income tax consistent with moderate risk of
capital. 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 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.

Municipal Securities. The Intermediate Tax Free 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 Intermediate Tax Free 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. 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.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: puts, zero coupon
municipal securities, repurchase agreements, Rule 144A securities, when-issued
and delayed delivery securities, and options and futures contracts. See "Risk
Factors and Certain Securities and Investment Practices" in this Prospectus and
in the SAI for more information.

The GLOBAL HIGH YIELD SECURITIES PORTFOLIO'S investment objective is high
current income from investment in a non-diversified portfolio of high yield
non-investment grade debt securities issued in many of the world's securities
markets. Capital appreciation will be considered when consistent with the
primary investment objective of high current income. The Portfolio intends to
invest in Brady bonds and other sovereign debt and in high risk, lower quality
debt securities commonly referred to as "junk bonds" and regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation as well as in
the debt securities of issuers located in emerging markets, Brady bonds and
other sovereign debt.

Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in high yield, non-investment grade debt securities of both
governmental and corporate issuers in both the major industrialized markets and
the so-called "emerging markets." See "Risk Factors and Certain Securities and
Investment Practices -- Risks of Investing in Foreign Securities" and "-- Risk
of Investing in Emerging Markets."

Although Bankers Trust considers both industrialized and emerging countries
eligible for investment pursuant to the Portfolio's objective, the Portfolio
will not be invested in all such markets at all times. Furthermore, investing in
some emerging markets may be neither feasible nor desirable from time to time,
due to the lack of adequate custodial arrangements for the Portfolio's assets,
exchange controls and overly burdensome repatriation rules, the lack of
organized and liquid securities markets, and unacceptable political risks. Under
normal circumstances, the Portfolio will invest in at least three emerging
markets countries. See "Risk Factors and Certain Securities and Investment
Practices -- Risks of Investing in Foreign Securities" and " -- Risk of
Investing in Emerging Markets."

The Portfolio generally invests in securities which are rated BBB or lower by
Standard & Poor's Corporation ("S&P") or Baa or lower by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion
of Bankers Trust. Securities which are rated BBB by S&P or Baa by Moody's
possess some speculative characteristics. A description of the rating categories
is attached to this Prospectus. THERE IS NO LOWER LIMIT WITH RESPECT TO THE
RATING CATEGORIES FOR SECURITIES IN WHICH THE PORTFOLIO MAY INVEST. See "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing In
High Yield Securities (Junk Bonds)."

The Portfolio is not required to dispose of debt securities whose credit quality
declines at some point after the security is purchased; however, no more than
25% of the Portfolio's assets will be invested at any time in securities rated
less than CCC by S&P or Caa by Moody's or, if unrated, of comparable quality in
the opinion of Bankers Trust. S&P's lowest rating for bonds is CI, which is
reserved for income bonds on which no interest is being paid and D, which is
reserved for debt in default and in respect of which payment of interest or
repayment of principal is in arrears. Moody's lowest rating is C, which is
applied to bonds which have extremely poor prospects for ever attaining any real
investment standing. The Portfolio may, from time to time, purchase defaulted
debt securities if, in the opinion of Bankers Trust, the issuer may resume
interest payments in the near future. The Portfolio will not invest more than
10% of its total assets (at the time of purchase) in defaulted debt securities,
which may be illiquid. Other than as set forth above, there is no restriction on
the percentage of the Portfolio's assets which may be invested in bonds of a
particular rating.

The Portfolio invests in debt obligations allocated among diverse markets and
denominated in various currencies, including multi-currency units such as
European Currency Units ("ECUs"). The Portfolio may purchase securities that are
issued by the government or a company or financial institution of one country
but denominated in the currency (or multi-currency unit) of another country.

The Portfolio is classified as a "non-diversified" fund under the 1940 Act,
which means the Portfolio is not limited by the 1940 Act in the proportion of
its assets that may be invested in a single issuer. The Portfolio may,
therefore, invest in the securities of individual issuers to a greater degree
than a diversified fund and may be more susceptible to any single economic,
political or regulatory occurrence affecting those issuers. However, in order to
enable the Fund (and other registered investment companies which may in the
future invest all their assets in the Portfolio) to qualify as a regulated
investment company (a "RIC") the Portfolio must comply with the diversification
requirement of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for U.S. federal income tax purposes. See "Risk Factors and
certain Securities and Investment Practices -- Non-Diversified Fund" herein.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, floating rate bonds, zero coupon bonds, sovereign and supranational
debt obligations, Brady bonds, loan participations and assignments, convertible
bonds, preferred stock, foreign currency exchange transactions, options on
foreign currencies, options on foreign bond indices, futures contracts on
foreign bond indices, options on futures contracts, Rule 144A securities,
when-issued or delayed delivery securities, securities lending, repurchase
agreements and reverse repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.

The Portfolio may borrow money for investment purposes. See "Risk Factors and
Certain Securities and Investment Practices -- Leverage."

The CAPITAL APPRECIATION PORTFOLIO'S investment objective is long-term capital
growth; the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium-sized
domestic corporations and, to a lesser extent, foreign corporations.

Bankers Trust employs a flexible investment program in pursuit of the
Portfolio's investment objective. The Portfolio is not restricted to investments
in specific market sectors. The Portfolio may invest in any market sectors and
in companies of any size and may take advantage of any investment opportunity
with attractive long-term prospects. The Adviser takes advantage of its market
access and the research available to it to select investments in promising
growth companies that are involved in new technologies, new products, foreign
markets and special developments, such as research discoveries, acquisitions,
recapitalizations, liquidations or management changes, and companies whose stock
may be undervalued by the market. These situations are only illustrative of the
types of investment the Portfolio may make. The Portfolio is free to invest in
any common stock which in the Adviser's judgment provides above average
potential for long-term growth of capital and income.

The Portfolio will generally invest a majority of its assets in equity
securities of medium-sized companies (companies with a market capitalization of
between $500 million and $2 billion), but may invest in securities of companies
having various levels of market capitalization, including smaller companies
whose securities may be more volatile and less liquid than securities issued by
larger companies with higher levels of net worth. Investments will be in
companies in various industries. Industry and company fundamentals along with
key investment themes and various quantitative screens will be used in the
investment process. Criteria for selection of individual securities include the
issuer's competitive environment and position, prospects for growth, managerial
strength, earnings momentum and quality, underlying asset value, relative market
value and overall marketability. The Portfolio will follow a disciplined selling
process to lessen market risks.

The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments see "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities."

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
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 "Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.

The SMALL CAP PORTFOLIO'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective.

The Portfolio seeks to provide long term capital growth by investing primarily
in equity securities of smaller U.S. companies. The Portfolio's policy is to
invest in equity securities of smaller companies that Bankers Trust believes are
in an early stage or transitional point in their development and have
demonstrated or have the potential for above average capital growth. The Adviser
will select companies which have the potential to gain market share in their
industry, achieve and maintain high consistent profitability or produce
increases in earnings. The Adviser also seeks companies with strong company
management and superior fundamental strength.

The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. The Portfolio is free to invest in any common stock which
in the Adviser's judgement provides above average potential for long-term growth
of capital and income.

Under normal market conditions, the Portfolio will invest at least 65% of its
assets in smaller companies (with market capitalizations less than $750 million
at time of purchase) that offer strong potential for capital growth. Small
capitalization companies have the potential to show earnings growth over time
that is well above the growth rate of the overall economy. The Portfolio may
also invest in larger, more established companies that the Adviser believes may
offer the potential for strong capital growth due to their relative market
position, anticipated earnings growth, changes in management or other similar
opportunities. The Portfolio will follow a disciplined selling process to lessen
market risks.

For temporary defensive purposes, when in the opinion of the Adviser that market
conditions so warrant, the Portfolio may invest all or a portion of its Assets
in common stocks of larger, more established companies or in fixed-income
securities or short-term money market securities. To the extent the Portfolio is
engaged in temporary defensive investments, the Portfolio will not be pursuing
its investment objective.

Other Investments and Techniques. The Portfolio may also utilize the following
investments and investment techniques and practices: short-term investments,
options on stocks, options on stock indices, futures contracts on stock indices,
options on future contracts, foreign currency exchange transactions, options on
foreign currencies, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.

The INTERNATIONAL EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio also
invests in securities of issuers in emerging markets. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Risk of Investing in Emerging Markets." Under normal
circumstances, the Portfolio will invest at least 65% of the value of its total
assets in the equity securities of issuers based in at least three countries
other than the United States. The Portfolio's investments will generally be
diversified among several geographic regions and countries.

In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Portfolio. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Portfolio may invest in securities of companies
having various levels of net worth, including smaller companies whose securities
may be more volatile than securities offered by larger companies with higher
levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through use of options or futures based on an established local index or through
investment in other registered investment companies rather than investing
directly in individual securities. 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.

The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs"), options on stocks, options
on foreign stock indices, futures contracts on foreign stock indices, options on
futures contracts, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.

The PACIFIC BASIN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. Investment in such securities
involves certain considerations which are not normally involved in investment in
securities of U.S. issuers, and an investment in the Fund may be considered
speculative.

For purposes of this Prospectus, "issuers domiciled in, or doing business in,
the Pacific Basin region (other than Japan)" shall include securities of
issuers: (1) which are organized under the laws of Pacific Basin countries (see
below); (2) for which the principal securities trading market is in a Pacific
Basin country; or (3) which derive a significant proportion (at least 50
percent) of their revenues or profits from goods produced or sold, investments
made, or services performed in the countries of the Pacific Basin or which have
at least 50 percent of their assets situated in the countries of the Pacific
Basin. It is expected under normal conditions that at least 65% of the
Portfolio's assets will be invested in the equity securities of issuers located
in at least three countries in the Pacific Basin.

For the purpose of this Prospectus, the "Pacific Basin" includes, but is not
limited to, the following countries: Hong Kong, India, Indonesia, Malaysia, New
Zealand, Pakistan, the Philippines, the People's Republic of China ("China"),
Singapore, Sri Lanka, South Korea, Thailand, Taiwan and Vietnam. See "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities" and "-- Risks of Investing in Emerging Markets" in this
Prospectus and "Risk Factors and Certain Securities and Investment Practices --
Risks of Investing in China and China Region" in the SAI.

The Portfolio will be managed using a disciplined, value-oriented investment
philosophy that stresses the inherent value of, and the medium term outlook for,
the companies under examination. Experience has proven that often the real basis
of a business is quite different from that perceived by the market: a
misconception that usually results in its shares trading below its true business
or replacement value. The exploitation of this "perception/reality" gap is a
hallmark of the investment style that has been adopted for the Portfolio, and a
potential source of value for its investors.

"Value" investing means trying to find companies which are mispriced by the
market for reasons of neglect, fashion or misconception. These opportunities
arise out of legislative changes, industrial restructuring and technology
advancements, for example. As a result, Bankers Trust and the sub-investment
adviser attach great importance to analyzing trends and accessing possible
breaks with traditional price patterns. At the company level, the emphasis is
placed on assessing the inherent "business" value of the firm. While this often
varies from the stock market's valuation, the Adviser and the sub- investment
adviser believe a company's stock price tends to gravitate to their "business"
value over time.

The Portfolio's investments will generally be diversified among several
geographic regions and countries in the Pacific Basin. Criteria for determining
the appropriate distribution of investment among various countries and regions
include the prospects for relative growth among foreign countries, expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships and the range of alternative opportunities
available to international investors.

The Portfolio will not invest more than 20% of the value of its total assets in
issuers domiciled in China.

In countries and regions where capital markets are underdeveloped or not easily
accessed and information is difficult to obtain, the Portfolio may choose to
invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options on futures based on an established local index or
through investment in other registered investment companies. 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.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, ADRs, GDRs and EDRs, options on stocks, options on foreign stock
indices, futures contracts on foreign stock indices, options on futures
contracts, 144A securities, when-issued and delayed delivery securities,
securities lending and repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.

The LATIN AMERICAN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. Investment in such securities involves certain considerations
which are not normally involved in investment in securities of U.S. issuers, and
an investment in the Fund may be considered speculative. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Risk of Investing in Emerging Markets" herein and "Foreign
Securities: Special Consideration Concerning Latin America" in the SAI. It is
expected under normal conditions that at least 65% of the Portfolio's total
assets will be invested in the equity securities of Latin American issuers.

The Fund may borrow money for investment purposes. See "Risk Factors and
Certain Securities and Investment Practices -- Leverage."

For purposes of this Prospectus, "Latin America" is defined as Mexico, and all
countries in Central America and South America, including Argentina, Brazil,
Chile, Colombia, Peru and Venezuela.

As used in this Prospectus, "securities of Latin American issuers" is defined
as: (i) securities of companies the principal securities trading market for
which is in Latin America; (ii) securities, traded in any market, of companies
that derive 50% or more of their total revenue from either goods or services
produced in Latin America or sales made in Latin America; (iii) securities of
companies organized under the laws of, and with a principal office in, Latin
America; or (iv) securities issued or guaranteed by the government of a country
in Latin America, its agencies or instrumentalities, political subdivisions or
the central bank of such a country. Determinations as to eligibility will be
made by Bankers Trust, under the supervision of the Board of Trustees of BT
Investment Portfolios, based on publicly available information and inquiries
made to the issuers.

Bankers Trust intends to consider investment only in those countries in Latin
America in which it believes investing is feasible and does not involve undue
political risks. As of the date of this Prospectus, this list included
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Under normal
circumstances, the Portfolio's investments will be diversified among at least
three Latin American countries.

The Portfolio may invest in securities of companies having various levels of net
worth, including small companies whose securities may be more volatile than
securities offered by larger companies with higher levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options or futures based on an established local index or
through investment in other registered investment companies. 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.

Fixed Income Investments. For purposes of seeking capital appreciation, the
Portfolio may invest up to 35% of its total assets in debt securities of Latin
American issuers which are rated at least C by S&P or Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust. As an operating policy,
which may be changed by the Board of Trustees of BT Investment Portfolios, the
Portfolio will not invest more than 10% of its total assets in debt securities
rated BBB or lower by S&P or Baa or lower by Moody's. Securities which are rated
BBB by S&P or Baa by Moody's possess speculative characteristics. Bonds rated C
by S&P are of the lowest quality and may be used when the issuer has filed a
bankruptcy petition, but debt payments are still being paid. Moody's lowest
rating is C, which is applied to bonds which have extremely poor prospects of
ever attaining any real investment standing. See "Risk Factors and Certain
Securities and Investment Practices -- Risks of Investing in High Yield
Securities (Junk Bonds)." Certain debt securities can provide the potential for
capital appreciation based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest and ratings upgrades. Additionally, convertible bonds
offer the potential for capital appreciation through the conversion feature,
which enables the holder of the bond to benefit from increases in the market
price of the securities into which they are convertible.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: Brady bonds,
foreign currency exchange transactions, options on foreign currencies, ADRs,
GDRs and EDRs, options on stocks, options on foreign stock indices, futures
contracts on foreign stock indices, options on futures contracts, when-issued
and delayed delivery securities, Rule 144A securities, short-term investments,
repurchase agreements, reverse repurchase agreements and securities lending. See
"Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

The following pages contain more detailed information about types of instruments
in which a Portfolio may invest and strategies Bankers Trust may employ in
pursuit of a Portfolio's investment objective. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well.

Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Portfolio achieve its goal. Holdings and recent investment strategies are
described in the financial reports of a Fund and the corresponding Portfolio,
which are sent to Fund shareholders twice a year. For a free SAI or financial
report, call an Investment Professional.

RISKS OF INVESTING IN FOREIGN SECURITIES

Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of a Portfolio's foreign 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
foreign countries. In addition, changes in government administrations or
economic or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect the Portfolio's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, whether favorably
or unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by the Portfolio must be made in compliance with
U.S. and foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of a Portfolio as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, each Portfolio is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, a Portfolio's
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. The settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. Finally, there may be less
government supervision and regulation of securities exchanges, brokers and
issuers in foreign countries than in the United States.

RISK OF INVESTING IN EMERGING MARKETS

The world's industrialized markets generally include but are not limited to the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States; the world's emerging markets generally include but are not
limited to the following: Argentina, Bolivia, Brazil, Bulgaria, Chile, China,
Colombia, Costa Rica, the Czech Republic, Ecuador, Egypt, Greece, Hungary,
India, Indonesia, Israel, the Ivory Coast, Jordan, Malaysia, Mexico, Morocco,
Nicaragua, Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.

Investment in securities of issuers based in underdeveloped countries entails
all of the risks of investing in securities of foreign issuers outlined in this
section to a heightened degree. These heightened risks include: (i) greater
risks of expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (ii) the smaller size of the market for such
securities and a low or nonexistent volume of trading, resulting in lack of
liquidity and in price volatility; (iii) certain national policies which may
restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) in the case of Eastern Europe and in China and other Asian
countries, the absence of developed capital markets and legal structures
governing private or foreign investment and private property and the possibility
that recent favorable economic and political developments could be slowed or
reversed by unanticipated events.

So long as the Communist Party continues to exercise a significant or, in some
countries, dominant role in Eastern European countries or in China and other
Asian countries, investments in such countries will involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there may be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Portfolio could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund shareholders.

In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems could result
either in losses to the Portfolio due to subsequent declines in the value of the
security or, if the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser.

RISKS OF INVESTING IN HIGH YIELD SECURITIES (JUNK BONDS)
Lower-rated securities, including securities rated from BB to D by S&P or Ba to
C by Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust, will usually offer higher yields than higher-rated securities. However,
there is more risk associated with these investments. This is because of the
reduced creditworthiness and increased risk of default that these securities
carry. Lower-rated securities generally tend to reflect short-term corporate and
market developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Lower rated
securities also involve greater sensitivity to significant increases in interest
rates. Short-term corporate and market developments affecting the prices and
liquidity of lower-rated securities could include adverse news impacting major
issues or underwriters or dealers in lower-rated or unrated securities. In
addition, since there are fewer investors in lower-rated securities, it may be
harder to sell securities at an optimum time.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than originally expected at the time such bonds were
purchased. In the event of a restructuring, the Portfolio may bear additional
legal or administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds.

The risk of loss due to default by the issuer is significantly greater for the
holders of high yield securities because such securities are generally unsecured
and are often subordinated to other obligations of the issuer. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress and
may not have sufficient revenues to meet their interest payment obligations. An
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, its inability to meet specific projected
business forecasts, or the unavailability of additional financing.

Factors adversely affecting the market value of high yield and other Portfolio
securities will adversely affect the corresponding Fund's net asset value. In
addition, a Portfolio may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings.

RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS
The Small Cap Portfolio and Capital Appreciation Portfolio invest primarily in
smaller-sized and medium-sized, respectively, growth-oriented common stocks of
domestic corporations and, to a limited extent, foreign corporations.
Historically, medium- and small-capitalization stocks have been more volatile in
price that the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small- size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium- and small-size company stocks may fluctuate independently of
larger company stocks. Medium- and small-size company stocks may decline in
price as large company stocks rise, or rise in prices as large company stocks
decline.

NON-DIVERSIFIED FUND

The Global High Yield Securities Portfolio and Fund are each classified as a
"non-diversified" investment company so that with respect to 50% of the
Portfolio's assets, it will be able to invest more than 5% of its assets in
obligations of one or more issuers, while being limited with respect to the
other half of its assets to investments not exceeding 5% of the Portfolio's
total assets. (A "diversified" investment company would be required under the
1940 Act, to maintain at least 75% of its assets in cash (including foreign
currency), cash items, U.S. Government securities, and other securities limited
per issuer to not more than 5% of the investment company's total assets.) In
order to enable the Fund to qualify as a regulated investment company under the
Code, the Portfolio, among other things, may not invest more than 25% of its
assets in obligations of any one issuer (other than U.S. Government securities).
As a "non-diversified" investment company, the Portfolio may invest a greater
proportion of its assets in the securities of a smaller number of issuers and
therefore may be subject to greater market and credit risk than a more broadly
diversified fund.

The Portfolio will not have more than 25% of the current value of its total
assets invested in any single industry, provided that this restriction shall not
apply to debt securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.

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 the
corresponding 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 corresponding Fund, each Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will invest in a
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, the other investors investing in a 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 a 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, as the Administrator, 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 Portfolio. For example, if a large fund
withdraws from a 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, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
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 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.

A 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 herein with respect to the corresponding Portfolio.

Each 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 a 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 also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of a Fund or the
corresponding Portfolio. See "Risk Factors and Certain Securities and Investment
Practices" in the SAI for a description of the fundamental policies of each
Portfolio that cannot be changed without approval by "the vote 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 each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trusts and the Portfolios, see "Management
of the Trusts and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds -- Expense Summary" herein and
"Management of the Trust and the Portfolios" herein and in the SAI.

SECURITIES AND INVESTMENT PRACTICES

EQUITY SECURITIES. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants to subscribe to or purchase such securities, sponsored or unsponsored
ADRs, EDRs and GDRs, and convertible securities, consisting of debt securities
or preferred stock that may be converted into common stock or that carry the
right to purchase common stock. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these factors.

DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. Debt securities, loans, and other direct debt
have varying degrees of quality and varying levels of sensitivity to changes in
interest rates. Longer-term bonds are generally more sensitive to interest rate
changes than short-term bonds.

Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.

CONVERTIBLE SECURITIES. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed income stream -- generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security -- a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.

In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security) or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

PREFERRED STOCK. Preferred stock has a preference in liquidation (and, generally
dividends) over common stock but is subordinated in liquidation to debt. As a
general rule the market value of preferred stocks with fixed dividend rates and
no conversion rights varies inversely with interest rates and perceived credit
risk, with the price determined by the dividend rate. Some preferred stocks are
convertible into other securities, for example common stock, at a fixed price
and ratio or upon the occurrence of certain events. The market price of
convertible preferred stocks generally reflects an element of conversion value.
Because many preferred stocks lack a fixed maturity date, these securities
generally fluctuate substantially in value when interest rates change; such
fluctuations often exceed those of long-term bonds of the same issuer. Some
preferred stocks pay an adjustable dividend that may be based on an index,
formula, auction procedure or other dividend rate reset mechanism. In the
absence of credit deterioration, adjustable rate preferred stocks tend to have
more stable market values than fixed rate preferred stocks.

All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for a Portfolio. Bankers Trust expects,
however, that generally the preferred stocks in which a Portfolio invests will
be rated at least CCC by S&P or Caa by Moody's or, if unrated, of comparable
quality in the opinion of Bankers Trust. Preferred stocks rated CCC by S&P are
regarded as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations and represent the highest degree of speculation
among securities rated between BB and CCC; preferred stocks rated Caa by Moody's
are likely to be in arrears on dividend payments. Moody's rating with respect to
preferred stocks does not purport to indicate the future status of payments of
dividends.

WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant tends to
be more volatile than its underlying securities and ceases to have value if it
is not exercised prior to its expiration date. In addition, changes in the value
of a warrant do not necessarily correspond to changes in the value of its
underlying securities.

U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by other agencies or instrumentalities
are supported only by the credit of the entity that issued them.

MORTGAGE-BACKED SECURITIES. The Short/Intermediate Term U.S. Government
Securities 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 Short/Intermediate Term U.S.
Government Securities 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.

ADRS, GDRS AND EDRS are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
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. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities."

PUTS. The Intermediate Tax Free 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.

ZERO COUPON SECURITIES are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile, and certain zero coupon
securities move in the same direction as interest rates.

ZERO COUPON MUNICIPAL SECURITIES. The Intermediate Tax Free 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.

FLOATING RATE BONDS may have interest rates that move in tandem with a
benchmark, helping to stabilize their prices.

SOVEREIGN AND SUPRANATIONAL DEBT OBLIGATIONS. Debt instruments issued or
guaranteed by foreign governments, agencies, and supranational organizations
("sovereign debt obligations"), especially sovereign debt obligations of
developing countries, may involve a high degree of risk, and may be in default
or present the risk of default. The issuer of the obligation or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors.

BRADY BONDS. "Brady bonds" are bonds issued as a result of a restructuring of a
country's debt obligations to commercial banks under the "Brady plan." Brady
bonds have been issued by the governments of Argentina, Costa Rica, Mexico,
Nigeria, Uruguay and Venezuela, Brazil and the Philippines, as well as other
emerging market countries. Most Brady bonds are currently rated below BBB by S&P
or Baa by Moody's. While Bankers Trust is not aware of the occurrence of any
payment defaults on Brady bonds, investors should recognize that these debt
securities have been issued only recently and, accordingly, do not have a long
payment history. Brady bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the secondary market for Latin American debt.

RULE 144A SECURITIES are 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 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. No more than 10% of the Portfolio's
assets may be invested in securities restricted as to transfer or re-sale,
including Rule 144A securities.

WHEN ISSUED AND DELAYED DELIVERY SECURITIES. Each 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.

REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party in
return for cash. This could increase the risk of fluctuation in the fund's yield
or in the market value of its assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Portfolio's borrowing
restrictions. See "Risk Factors and Certain Securities and Investment Practices
- -- Leverage" and in the SAI.

INVESTMENT COMPANIES. 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 registered 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.

SHORT-TERM INVESTMENTS. Each 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, a Portfolio's assets may be invested
in high quality short-term investments with remaining maturities of 397 days or
less to meet anticipated redemptions and expenses 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 respective markets.

SECURITIES LENDING. Each Portfolio (other than the Intermediate Tax Free
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 financial organizations, a 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.

LEVERAGE. The Global High Yield Securities Portfolio and Latin American Equity
Portfolio may each borrow up to one-third of the value of its total assets, from
banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Portfolio is required
to maintain continuous asset coverage of 300% with respect to such borrowings
and to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidations of a Portfolio's holdings may be
disadvantageous from an investment standpoint.

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Portfolio's securities and the corresponding
Fund's net asset value and money borrowed by a Portfolio will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.

LOAN PARTICIPATIONS AND ASSIGNMENTS. The Global High Yield Securities Portfolio
may invest in fixed and floating rate loans ("loans") arranged through private
negotiations between a borrower and one or more institutions ("lenders"). The
majority of the Portfolio's investments in loans in emerging markets is expected
to be in the form of participations in loans ("participations") and assignments
of portions of loans from third parties ("assignments"). The Portfolio may also
invest in loans, participations or assignments of loans to borrowers located in
the industrialized world. Participations typically will result in the
Portfolio's having a contractual relationship only with the lender, not the
borrower. The Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing participations, the Portfolio generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan ("loan agreement"), nor any rights of
set-off against the borrower, and the Portfolio may not directly benefit from
any collateral supporting the loan in which it has purchased the participation.
As a result, the Portfolio will assume the credit risk of both the borrower and
the lender that is selling the participation. In the event of the insolvency of
the lender selling the participation, the Portfolio may be treated as a general
creditor of the lender and may not benefit from any set-off between the lender
and the borrower. The Portfolio will acquire participations only if the lender
interpositioned between the Portfolio and the borrower is determined by Bankers
Trust to be creditworthy. When the Portfolio purchases assignments from lenders,
the Portfolio will acquire direct rights against the borrower on the loan;
however, since assignments are arranged through private negotiations between the
potential assignees and assignors, the rights and obligations acquired by the
Portfolio as the purchaser of an assignment may differ from, and be more limited
than, those held by the assigning lender.

The Portfolio may have difficulty disposing of assignments and participations.
The liquidity of such securities is limited and the Portfolio anticipates that
such securities could only be sold to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Portfolio's ability to dispose of
particular assignments or participations when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for assignments and participations also may make it more
difficult in valuing the Portfolio and, therefore, calculating the net asset
value per share of the Fund. All assignments and participations shall be
considered to be illiquid securities by the Portfolio. The investment by the
Portfolio in illiquid securities, including assignments and participations, is
limited to a total of 15% of net assets.

DERIVATIVES

Each 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 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. Bankers Trust will
use derivatives only in circumstances where they offer the most efficient means
of improving the risk/reward profile of a Portfolio. The use of derivatives for
non-hedging purposes may be considered speculative.

Foreign Currency Exchange Transactions. Each Portfolio (other than the Short/
Intermediate U.S. Government Securities Portfolio and the Intermediate Tax Free
Portfolio) 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. A 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 a Portfolio to
purchase or to 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. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

A 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. 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. Each Portfolio (other than the Short/
Intermediate U.S. Government Securities Portfolio and the Intermediate Tax Free
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 U.S. dollar value of portfolio securities and against increases in the U.S.
dollar cost of securities to be acquired. A 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 a Portfolio's position, it may forfeit the entire amount of the
premium plus related transaction costs. In addition, a Portfolio may purchase
call options on a currency when the investment 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 a 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 it closes out the
options or the options expire or are exercised. Similarly, if the Portfolio is
unable to close out options it has purchased, it would have to exercise the
options in order to realize any profit and will incur transaction costs. The
Portfolio pays brokerage commissions or spreads in connection with its options
transactions.

Options on Stocks. Each Portfolio (except the Global High Yield Securities
Portfolio, the Short/Intermediate U.S. Government Securities Portfolio and the
Intermediate Tax Free Portfolio) may write and purchase 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 with respect to which a 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 a Portfolio exposes the Portfolio during the term of
the option to a decline in price of the underlying stock.

Options on Securities Indices. Each Portfolio may purchase and write put and
call options on stock or bond indices listed on domestic and foreign stock
exchanges, in lieu of direct investment in the underlying securities or for
hedging purposes. A stock or bond index fluctuates with changes in the market
values of the securities included in the index.

Options on securities indices are generally similar to options on stocks except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond index gives the holders 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 the exercise,
multiplied by (b) a fixed "index multiplier."

Successful use by a Portfolio of options on security indices will be subject to
Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.

Futures Contracts on Securities Indices. Each 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 domestic or foreign securities ("Futures
Contracts"). This investment technique may be used as a low-cost method of
gaining exposure to a particular securities market without investing directly in
those securities or to hedge against anticipated future changes 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.

When used for hedging purposes, 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 position 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 is 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.

The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of market.

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 a Portfolio. A Portfolio may not purchase or sell
a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts, other than Futures Contracts used for hedging
purposes, would exceed 5% of the market value of the Portfolio's total assets.

Options on Futures Contracts. Each Portfolio may invest in options on futures
contracts for similar purposes.

There can be no assurance that the use of these portfolio strategies will be
successful.

Asset Coverage. To assure that a 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, a Portfolio
will cover such transactions, as required under applicable interpretations, of
the SEC, either by owning the underlying securities, entering into an
off-setting transaction, 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.

PORTFOLIO TURNOVER

The portfolio turnover rate for each Portfolio for the periods indicated were as
follows: Short/Intermediate Term U.S. Government Securities Portfolio -- 246%,
202%, 267% and 75% for the fiscal years ended December 31, 1995, 1994 and 1993
and for the period from August 24, 1992 (commencement of operations) to December
31, 1992, respectively; Intermediate Tax Free Portfolio -- 95%, 118%, 40% and
132% for the fiscal years ended December 31, 1995, 1994, 1993 and for the period
from July 20, 1992 (commencement of operations) to December 31, 1992,
respectively; Global High Yield Securities Portfolio -- 169% and 347% for the
fiscal year ended September 30, 1995 and for the period from December 14, 1993
(commencement of operations) to September 30, 1994, respectively; Capital
Appreciation Portfolio -- 125%, 157% and 137% for the period from January 1,
1995 to September 30, 1995, the fiscal year ended December 31, 1994 and the
period from March 9, 1993 (commencement of operations) to December 31, 1993,
respectively; Small Cap Portfolio -- 161% and 154% for the fiscal year ended
September 30, 1995 and for the period from October 21, 1993 (commencement of
operations) to September 30, 1994, respectively; International Equity Portfolio
- -- 21%, 15%, 17% and 7% for the period from January 1, 1995 to September 30,
1995, the fiscal years ended December 31, 1994, 1993 and the period from August
4, 1992 (commencement of operations) to December 31, 1992, respectively; Pacific
Basin Equity Portfolio -- 104% and 40% for the fiscal year ended September 30,
1995 and for the period from November 1, 1993 (commencement of operations) to
September 30, 1994, respectively; Latin American Equity Portfolio -- 161% and
124% for the fiscal year ended September 30, 1995 and for the period from
October 25, 1993 (commencement of operations) to September 30, 1994,
respectively. These rates will vary from year to year. High turnover rates
increase transaction costs and may increase investable capital gains. Bankers
Trust considers these effects when evaluating the anticipated benefits of
short-term investing.

PERFORMANCE

Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports, which are
sent to all Fund shareholders.

For current Fund performance or a free copy of the Funds' financial report,
please contact a Service Agent.

Mutual fund performance is commonly measured as total return and/or yield. Each
Fund's performance is affected by the expenses of that Fund. The exclusion of
any applicable sales charge from a performance calculation produces a higher
return.

EXPLANATION OF TERMS

TOTAL RETURN is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.

YIELD refers to the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders. This difference may be significant for a
Fund investing in a Portfolio whose investments are denominated in foreign
currencies.

Performance information may include comparisons of a Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the
corresponding Portfolio and changes in the expenses of the Fund or Portfolio. In
addition, during certain periods for which total return may be provided, Bankers
Trust or SBDS may have voluntarily agreed to waive portions of their fees, or
reimburse certain operating expenses of a Fund or Portfolio, on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its yield and total return) during the period such waivers are in
effect.

TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

BOARD OF TRUSTEES
Each Trust and each Portfolio is governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or the Portfolio, as the case may be, have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that some of the same individuals are Trustees of a Trust and the
Portfolios, up to and including creating separate boards of trustees. See
"Management of the Trusts and the Portfolios" in the SAI for more information
with respect to the Trustees and officers of each Trust and each Portfolio.

INVESTMENT ADVISER
Neither Trust has retained the services of an investment adviser since each
Trust seeks to achieve the investment objective of each of its Funds by
investing all the Assets of the Fund in the corresponding Portfolio. Each
Portfolio has retained the services of Bankers Trust as investment adviser (the
"Adviser").

BANKERS TRUST COMPANY AND ITS AFFILIATES
Bankers Trust Company, 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.

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 each Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each 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 world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of a 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.

The Investment Advisory Agreement provides for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the average daily net assets of the Portfolio for its
then-current fiscal year: Short/Intermediate U.S. Government Securities
Portfolio, 0.25%; Intermediate Tax Free Portfolio, 0.40%; Global High Yield
Securities Portfolio, 0.80%; Capital Appreciation Portfolio, 0.65%; Small Cap
Portfolio, 0.65%; International Equity Portfolio, 0.65%; Pacific Basin Equity
Portfolio, 0.75%; and Latin American Equity Portfolio, 1.00%. With respect to
Global High Yield Securities Portfolio, Pacific Basin Equity Portfolio, and
Latin American Equity Portfolio, the investment advisory fee is higher than that
of most funds, but not necessarily higher than that of a typical international
fund, due to the greater complexity, expense and commitment of resources
involved in international investing.

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 SAI 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.

SUB-INVESTMENT ADVISER -- PACIFIC BASIN EQUITY PORTFOLIO
Bankers Trust has entered into a sub-investment advisory agreement (the "Sub-
Advisory Agreement") with BT Fund Managers International Limited ("BT Fund
Managers International"), a wholly owned registered investment advisory
subsidiary of Bankers Trust Australia Limited ("BTAL"). BTAL is a wholly owned
subsidiary of Bankers Trust New York Corporation. Under the Sub-Advisory
Agreement, Bankers Trust may receive investment advice and research services
with respect to companies based in the Pacific Basin and may grant BT Fund
Managers International investment management authority as well as the authority
to buy and sell securities if Bankers Trust believes it would be beneficial to
the Pacific Basin Equity Portfolio. Under the Sub-Advisory Agreement, BT Fund
Managers International receives a fee from Bankers Trust for providing
investment advice and research services, accrued daily and paid monthly, at the
annual rate of 0.60% of the average daily assets of the Portfolio.

PORTFOLIO MANAGERS

Louis M. Hudson, Vice President, is responsible for the day to day management
of the Short/Intermediate Term U.S. Government Securities Portfolio. Mr.
Hudson has been employed by Bankers Trust since 1961 and has managed the
Portfolio's assets since February, 1994.

Gary Pollack is responsible for the day-to-day management of the Intermediate
Tax Free 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.

David A. Reiss, Vice President of Bankers Trust and Stephen C. Freidheim,
Managing Director of Bankers Trust are responsible for the day-to-day
management of the Global High Yield Securities Portfolio. Mr. Reiss has been
employed by Bankers Trust since March, 1994 and has managed the Portfolio's
assets since March, 1994. From September, 1989 to March, 1994, Mr. Reiss was a
Portfolio Manager at Kidder Peabody Asset Management. Prior to September,
1989, he was an associate in Mortgage Research at Goldman, Sachs & Co. Mr.
Freidheim has been employed by Bankers Trust since August, 1993 and has
managed the Portfolio's assets since December, 1993. From July, 1990 to July,
1993 he was a Senior Vice President and Director of Research and Trading at
Nomura Securities International. Mr. Freidheim was also on the Board of
Directors of Nomura Corporate Research and Asset Management. Prior to July,
1990, he was Director of Research at Kidder, Peabody High Yield Asset
Management.

Mary Lisanti, Managing Director of Bankers Trust, is responsible for the
day-to-day management of the Capital Appreciation Portfolio and Small Cap
Portfolio. Ms. Lisanti has been employed by Bankers Trust since February, 1993
and has managed each Portfolio's assets since each Portfolio commenced
operations. Prior to 1993, she was a Vice President and Portfolio Manager with
Lieber & Company/The Evergreen Funds (since 1990).

Michael Levy has been the primary portfolio manager for the International Equity
Portfolio since August 1995. He also heads the international active equity team,
which is responsible for the day to day management of the Portfolio. Mr. Levy
has been the head of this team since joining Bankers Trust in March, 1993, and
is a Managing Director and International Equity Strategist of Bankers Trust. The
international active equity team has provided input into the management of the
Portfolio since the Portfolio's commencement of operations. Prior to joining
Bankers Trust, Mr. Levy was an investment banker and an equity analyst with
Oppenheimer & Company. He has twenty-four years of business experience, of which
fourteen years have been in the investment industry.

Robert Reiner has been the co-manager of the International Equity Portfolio
since joining Bankers Trust in 1994. Mr. Reiner is responsible for managing
global portfolios and developing analytical and investment tools for the group's
global equity team. As a member of the international active equity team, he
focuses on Japanese and European markets. Prior to joining Bankers Trust, he was
an equity analyst and also provided macroeconomic coverage for Scudder, Stevens
and Clark. He previously served as Senior Analyst at Sanford C. Bernstein & Co.
and was instrumental in the development of Bernstein's International Value Fund.
For more than nine years, Mr. Reiner was employed by S&P in its ratings group.
His tenure included managing the day to day operations of S&P's Tokyo office for
three years.

Paul Durham, Vice President of BTAL, is responsible for the day-to-day
management of the Pacific Basin Equity Portfolio. Mr. Durham has been employed
by Bankers Trust since January, 1988 and has managed the Portfolio's assets
since November, 1993.

Maria-Elena Carrion (CFA), Vice President of Bankers Trust, is primarily
responsible for the day-to-day management of the Latin American Equity
Portfolio. Ms. Carrion has been employed by Bankers Trust since April, 1993 and
has managed the Portfolio's assets since the Portfolio commenced operations.
Prior to April, 1993, Ms. Carrion was employed by Latin American Securities
(London) (from June, 1991 to April, 1993). Prior to June, 1991, Ms. Carrion was
employed by US Trust Company (from September, 1986 to June, 1991).

Bankers Trust investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.

ADMINISTRATOR

Under its Administration and Services Agreement with each 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
Funds. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, accrued daily and paid monthly equal on an annual basis to
the following percentages of the average daily net assets of the Fund for its
then-current fiscal year: Limited Term U.S. Government Securities Fund, 0.30%;
Intermediate Tax Free Portfolio, 0.40%; Global High Yield Securities Fund,
0.95%; Capital Appreciation Fund, 0.65%; Small Cap Fund, 0.65%; International
Equity Fund, 0.85%; Pacific Basin Equity Fund, 0.75%; and Latin American Equity
Fund, 0.95%.

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay Bankers Trust a fee, accrued daily and paid monthly,
equal on an annual basis to the following percentages of the Portfolio's average
daily net assets for its then-current fiscal year: Short/ Intermediate U.S.
Government Securities Portfolio, 0.05%; and Intermediate Tax Free Portfolio,
0.05%; Global High Yield Securities Portfolio, 0.20%; Capital Appreciation
Portfolio, 0.10%; Small Cap Portfolio, 0.10%; International Equity Portfolio,
0.15%; Pacific Basin Equity Portfolio, 0.25%; and Latin American Equity
Portfolio, 0.20%. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
SBDS, at Bankers Trust's expense.

DISTRIBUTOR

Under its Distribution Agreement with each Trust, SBDS, as Distributor, serves
as the Trust's principal underwriter on a best efforts basis. In addition, SBDS
provides the Trust with office facilities. SBDS 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 SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.

DISTRIBUTION AND SERVICE PLAN

Pursuant to the terms of each 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 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 SAI 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 SBDS under the Plan in any fiscal year of the Trust exceed amounts
payable under the Plan during that year, those expenses may be reimbursed in a
succeeding fiscal year; however, no carrying charge or interest will be added to
the amount of the expense. Expenses incurred in connection with distribution
activities will be identified to each 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.

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 each
Trust and receives no additional compensation from the Funds 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. 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 Trusts and each Portfolio
and serves as the transfer agent (the "Transfer Agent") for the Trust and each
Portfolio under the Administration and Services Agreement with the Trust and
each Portfolio.

NET ASSET VALUE

The net asset value per share of each 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 each 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.

PURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

Each 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 each 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 each Fund may be purchased in only those states where
they may be lawfully sold.

Purchase orders for shares of each 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. Each 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 each 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 each 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. Each 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 plans $ 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 each 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 also
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 each 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. Service Agents may offer shareholders an
automatic cash withdrawal plan, under which shareholders who own shares of a
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. Each Trust reserves the right to
terminate or modify the exchange privilege in the future with respect to any
Fund. 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).

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 a 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.

* 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.

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each Fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Each Fund distributes capital gains annually.
Normally, income dividends for the Global High Yield Securities Fund, Small Cap
Fund and the Capital Appreciation Fund are distributed quarterly; income
dividends for the International Equity Fund, Pacific Basin Equity Fund and the
Latin American Equity Fund are distributed annually. Income dividends for the
Limited Term U.S. Government Securities Fund and the Intermediate Tax Free Fund
are declared daily and paid monthly.

Unless a shareholder instructs a Trust to pay such dividends and distributions
in cash, they will be automatically reinvested in additional shares of the Fund.

FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account for any taxable year following the year
in which the participant reaches age 70 1/2 are less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the Internal Revenue Service (the "IRS"). The
administrator, trustee or custodian of such a retirement account will be
responsible for reporting distributions from such accounts to the IRS.

When each of the Funds deducts a distribution from its NAV, the reinvestment
price is the applicable Fund's NAV at the close of business that day.
Distribution checks will be mailed within seven days, or longer for a December
ex-dividend date.

TAXES

As with any investment, you should consider how an investment in the Funds could
affect you. Below are some of the Funds' tax implications. If your account is
not a tax-deferred retirement account beware of these tax implications.

TAXES ON DISTRIBUTIONS. Distributions from the Funds are subject to federal
income tax and may also be subject to state or local taxes. Annual statements as
to the federal tax status of distributions, and distributions that are
attributable to state and local income and personal taxes, if applicable, will
be mailed to shareholders shortly after the end of the year. If living outside
the United States, your distributions from the Funds could also be taxed by the
country in which you reside.

For federal tax purposes, income and short-term capital gain distributions from
each of the Funds are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains.

Mutual fund dividends from U.S. government securities are generally free from
state and local income taxes. However, particular states may limit this benefit,
and some types of securities, such as repurchase agreements and some
agency-backed securities, may not qualify for the benefit. In addition, some
states may impose intangible property taxes. You should consult your own tax
adviser for details and up-to-date information on the tax laws in your state.

Distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.

Every January, the Transfer Agent will send the IRS a statement showing the
taxable distributions paid to you in the previous year.

TAXES ON TRANSACTIONS. Your redemptions, including exchanges, are subject to
capital gains tax. A capital gain or loss is the difference between the cost of
your Shares and the price you receive when you sell them.

Whenever you sell Shares of a Fund, the Transfer Agent will send you or your
Investment Professional a confirmation statement showing how many Shares you
sold and at what price. You also receive a consolidated transaction statement at
least quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax to be
paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the information they
contain will be essential in calculating the amount of your capital gains.

"BUYING A DIVIDEND." If you buy Shares just before a Fund deducts a capital gain
distribution or dividend distribution, as applicable, from its NAV, you will pay
the full price for the Shares and then receive a portion of the price back in
the form of a taxable distribution.

CURRENCY CONSIDERATIONS. If a Fund's dividends exceed its taxable income in any
year, which is sometimes the result of currency-related losses, all or a portion
of the Fund's dividends may be treated as a return of capital to shareholders
for tax purposes. To minimize the risk of a return of capital, each of the Funds
may adjust its dividends to take currency fluctuations into account, which may
cause the dividends to vary. Any return of capital will reduce the cost basis of
your Shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your Shares. The statement you receive in
January will specify whether any distributions included a return of capital.

Undistributed net gains from currency transactions, if any, will generally be
distributed as a separate dividend in December.

There are tax requirements that all Funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.

ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund (with the exception of the Limited
Term U.S. Government Securities Fund) is a separate series of BT Investment
Funds, a Massachusetts business trust. The Limited Term U.S. Government
Securities Fund is a separate series of BT Pyramid Mutual Funds, a Massachusetts
business trust. Each of the Global High Yield Securities Portfolio, Small Cap
Portfolio, Pacific Basin Equity Portfolio and Latin American Equity Portfolio is
a separate subtrust of BT Investment Portfolios, a New York master trust fund.
Each of the Capital Appreciation Portfolio, International Equity Portfolio,
Short/Intermediate U.S. Government Portfolio and Intermediate Tax Free Portfolio
is a New York trust.

Each of the Trust and BT Investment Portfolios reserves the right to add
additional series in the future. The Trust also reserves the right to issue more
than one class of shares of each Fund.

Each Trust or a Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio's investment advisory agreement, or for other
purposes. Shareholders not attending these meetings are encouraged to vote by
proxy. Each Trust's Transfer Agent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.

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 one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of a
Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. 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 Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.

Each series of the BT Investment Portfolios will vote separately on any matter
involving the corresponding Portfolio. 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. The series of BT
Investment Portfolios will vote together or separately on matters in the same
manner, and in the same circumstances, as do the series of the Trust. As with
the Trust, the investors in one or more series of BT Investment Portfolios could
control the outcome of these votes.

Each 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.

Each Portfolio was organized as a trust under the laws of the State of New York.
Each Portfolio's Declaration of Trust provides that each Fund and other entities
investing in a 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 a Portfolio itself was unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Funds nor their shareholders will be adversely affected by reason of the Funds'
investing in the Portfolios. No series of BT Investment Portfolios has any
preference over any other series.

<PAGE>

APPENDIX

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future). Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

DESCRIPTION OF S&PS CORPORATE BOND RATINGS:

AAA- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Description of S&P commercial paper ratings:

Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.

Description of Moody's commercial paper ratings:

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.

Description of Fitch Investors Service's commercial paper ratings: F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as
having the strongest degree of assurance for timely payment.

F-1 Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issue.

Description of Duff & Phelps' commercial paper ratings:

Duff 1+ Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.

Duff 1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

Description of IBCA's Long-Term Ratings:

AAA - Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly.

AA - Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business economic or financial conditions may increase investment
risk albeit not very significantly.

A - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BBB - Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.

BB - Obligations for which there is a possibility of investment risk developing.
Capacity for timely repayment of principal and interest exists, but is
susceptible over time to adverse changes in business, economic or financial
conditions.

B - Obligations for which investment risk exists. Timely repayment of principal
and interest is not sufficiently protected against adverse changes in business,
economic or financial conditions.

CCC - Obligations for which there is a current perceived possibility of default.
Timely repayment of principal and interest is dependent on favourable business,
economic or financial conditions.

CC - Obligations which are highly speculative or which have a high risk of
default.

C - Obligations which are currently in default.

Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories.

Ratings of BB and below are assigned where it is considered that speculative
characteristics are present.

Description of IBCA's Short-Term Ratings:

A1+ - Obligations supported by the highest capacity for timely repayment.

A1 - Obligations supported by a strong capacity for timely repayment.

A2 - Obligations supported by a satisfactory capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

A3 - Obligations supported by an adequate capacity for timely repayment. Such
capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.

B - Obligations for which the capacity for timely repayment is susceptible to
adverse changes in business, economic or financial conditions.

C - Obligations for which there is an inadequate capacity to ensure timely
repayment.

D - Obligations which have a high risk of default or which are currently in
default.

Description of Thomson Bank Watch Short-Term Ratings:

TBW-1 - The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.

TBW-2 - The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".

TBW-3 - The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.

TBW-4 - The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.

Description of Thomson BankWatch Long-Term Ratings:

AAA - The highest category; indicates that the ability to repay principal and
interest on a timely basis is extremely high.

AA - The second-highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.

A - The third-highest category; indicates the ability to repay principal and
interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

BBB - The lowest investment-grade category; indicates an acceptable capacity to
repay principal and interest. Issues rated "BBB" are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.

Non-Investment Grade

(Issues regarded as having speculative characteristics in the likelihood of
timely repayment of principal and interest.)

BB - While not investment grade, the "BB" rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations.

B - Issues rated "B" show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse development could well
negatively affect the payment of interest and principal on a timely basis.

CCC - Issues rated "CCC" clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.

CC - "CC" is applied to issues that are subordinate to other obligations rated
"CCC" and are afforded less protection in the event of bankruptcy or
reorganization.

D - Default

These long-term debt ratings can also be applied to local currency debt. In such
cases the ratings defined above will be preceded by the designation "local
currency."

RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR MINUS (-)
DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE ISSUE IS
PLACED.

Description of S&P Municipal Bond Ratings:

AAA - Prime - These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.

General Obligations Bonds - In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.

Revenue Bonds - Debt service coverage has been, and is expected to remain,
substantial, stability of the pledged revenues is also exceptionally strong due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds and debt service reserve requirements) are
rigorous. There is evidence of superior management.

AA - High Grade - The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.

A - Good Grade - Principal and interest payments on bonds in this category are
regarded as safe although the bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. This rating describes the third strongest capacity for payment
of debt service. Regarding municipal bonds, the rating differs from the two
higher ratings because:

General Obligation Bonds - There is some weakness, either in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.

Revenue Bonds - Debt service coverage is good, but not exceptional. Stability of
the pledged revenues could show some variations because of increased competition
or economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appearance appears
adequate.

S&P's letter ratings may be modified by the addition of a plus or a minus sign,
which is used to show relative standing within the major rating categories,
except in the AAA rating category.

Description of Moody's Municipal Bond Ratings:

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Moody's may apply the numerical modifier in each generic rating classification
from Aa through B. The modifier 1 indicates that the security within its generic
rating classification possesses the strongest investment attributes.

Description of S&P Municipal Note Ratings:

Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1, or -2) to distinguish more clearly the credit quality
of notes as compared to bonds. Notes rated SP-1 have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given the designation of SP-1. Notes
rates SP-2 have a satisfactory capacity to pay principal and interest.

Description of Moody's Municipal Note Ratings:

Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Loans bearing the designation MIG2/VMIG2 are of high quality, with ample margins
of protection, although not as large as the preceding group.

S&P's Commercial Paper Ratings:

A is the highest commercial paper rating category utilized by S&P, which uses
the numbers 1, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt ratings is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward tread.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

Moody's Commercial Paper Ratings:

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound,will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rates Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Fitch Investors Service and Duff & Phelps Commercial Paper Ratings:

Commercial paper rated "Fitch-1" is considered to be the highest grade paper and
is regarded as having the strongest degree of assurance for timely payment.
"Fitch-2" is considered very good grade paper and reflects an assurance of
timely payment only slightly less in degree than the strangest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the following
characteristics: very high certainty of timely payment, excellent liquidity
factors supported by strong fundamental protection factors, and risk factors
which are very small. Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small risk factors,
and good access to capital markets.
<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 Trusts' Prospectuses, the
corresponding SAIs or the Trusts' 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 a 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

SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND
INTERMEDIATE TAX FREE FUND
UTILITY FUND

April 29, 1996

STATEMENT OF
ADDITIONAL INFORMATION

BT Investment Funds (the "Trust") is comprised of several funds. The
shares of the following funds--Short/Intermediate U.S. Government Securities
Fund, Intermediate Tax Free Fund and Utility

Fund (each, a "Fund")--are described herein.

As described in the Prospectuses, the Trust seeks to achieve the
investment objectives of each Fund by investing all the investable assets
("Assets") of the Fund in a diversified open-end management investment company
having the same investment objectives as such Fund. These investment companies
are, respectively, Short/Intermediate U.S. Government Securities Portfolio,
Intermediate Tax Free Portfolio and Utility

<PAGE>

Portfolio (collectively, the "Portfolios").

Since the investment characteristics of the Funds will correspond
directly to those of the respective Portfolio in which the Fund invests all of
its assets, the following is a discussion of the various investments of and
techniques employed by the Portfolios.

Shares of the Funds are sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Trust's Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolios' Adviser, and to clients and customers of other organizations.

The Trust's Prospectuses for each Fund, dated April 29, 1996, provide
the basic information investors should know before investing, and may be
obtained without charge by calling the Trust at the telephone number listed
below or by contacting any Service Agent. This Statement of Additional
Information, which is not a Prospectus, is intended to provide additional
information regarding the activities and operations of the Trust and should be
read in conjunction with that Fund's Prospectus. This Statement of Additional
Information is not an offer of any Fund for which an investor has not received a
Prospectus. Capitalized terms not otherwise defined in this Statement of
Additional Information have the meanings accorded to them in the Trust's
Prospectuses.

BANKERS TRUST COMPANY
Investment Adviser of each Portfolio and Administrator
SIGNATURE BROKER-DEALER SERVICES, INC.
Distributor

6 St. James Avenue
Boston, Massachusetts 02116
(800)
730-1313

<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

Investment Objectives

The investment objective(s) of each Fund is described in that Fund's
Prospectus. There can, of course, be no assurance that any Fund will achieve its
investment objective(s).

Investment Policies

Each Fund seeks to achieve its investment objective by investing all of
its Assets in the corresponding Portfolio. The Trust may withdraw a Fund's
investment from the corresponding Portfolio at any time if the Board of Trustees
of the Trust determines that it is in the best interests of the Fund to do so.

Since the investment characteristics of each Fund will correspond
directly to those of the corresponding Portfolio, the following is a discussion
of the various investments of and techniques employed by each Portfolio.

Certificates of Deposit and Bankers' Acceptances. With the exception of
Short/Intermediate U.S. Government Securities Portfolio, each Portfolio may
invest in certificates of deposit, which are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer agrees to pay the
amount deposited plus interest to the bearer of the receipt on the date
specified on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain funds to
finance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

Commercial Paper. With the exception of Short/Intermediate U.S.
Government Securities Portfolio, each Portfolio may invest in commercial paper
which consists of short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current operations. A
variable amount master demand note (which is a type of commercial paper)
represents a direct borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a commercial paper issuer and
an institutional lender pursuant to which the lender may determine to invest
varying amounts.

<PAGE>

For a description of commercial paper ratings, see the Appendix.

Illiquid Securities. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a remaining maturity of longer than seven calendar days.
Securities which have not been registered under the 1933 Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.

The Securities and Exchange Commission the (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.

The Adviser will monitor the liquidity of Rule 144A securities in each
Portfolio's portfolio securities under the supervision of the Portfolio's Board
of Trustees. In reaching

<PAGE>

liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers wishing to purchase or sell
the security; (3) dealer undertakings to make a market in the security and (4)
the nature of the security and of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

Lending of Portfolio Securities. The Portfolios, other than Intermediate
Tax Free Portfolio have the authority to lend portfolio securities to brokers,
dealers and other financial organizations. The Portfolios will not lend
securities to Bankers Trust, Signature or their affiliates. By lending its
securities, a Portfolio can increase its income by continuing to receive
interest on the loaned securities as well as by either investing the cash
collateral in short-term securities or obtaining yield in the form of interest
paid by the borrower when U.S. Government obligations are used as collateral.
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. Each Portfolio will adhere to
the following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100 percent cash collateral or equivalent securities from
the borrower; (ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest rises above the level
of the collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities, and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities.

Intermediate Tax Free Portfolio--Municipal Obligations

Municipal Bonds. Municipal bonds generally fund longer-term
capital needs than municipal notes and have maturities exceeding
one year when issued. Intermediate Tax Free Portfolio may invest
in municipal bonds. Municipal bonds include:

General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be

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levied for the payment of debt service may be limited or unlimited as to the
rate or amount of special assessments.

Revenue Bonds. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities or, in
some cases, the proceeds of a special excise tax or other specific revenue
source. Revenue bonds are issued to finance a wide variety of capital projects,
including electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund that may be used
to make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, certificates
of deposit and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.

Private Activity Bonds. Private activity bonds, which are considered
Municipal Obligations if the interest paid thereon is excluded from gross income
for Federal income tax purposes but is a specific tax preference item for
Federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various
privately-operated facilities such as manufacturing facilities, certain hospital
and university facilities and housing projects. These bonds are also used to
finance public facilities such as airports, mass transit systems and ports. The
payment of the principal and interest on these bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and generally
the pledge, if any, of real and personal property so financed as security for
payment.

Municipal Notes. Municipal notes generally fund short-term
capital needs. Intermediate Tax Free Portfolio may invest in
municipal notes, which include:

Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use and
business taxes, and are payable from these specific future taxes.

Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as Federal revenues
available under Federal revenue sharing programs.

Bond Anticipation Notes. Bond anticipation notes are issued
to provide interim financing until long-term financing can be

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arranged. In most cases, the long-term bonds provide funds for
the repayment of these notes.

Miscellaneous, Temporary and Anticipatory Instruments. These instruments
may include notes issued to obtain interim financing pending entering into
alternate financial arrangements, such as receipt of anticipated Federal, state
or other grants or aid, passage of increased legislative authority to issue
longer-term instruments or obtaining other refinancing.

Construction Loan Notes. Construction loan notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of construction loan notes, is sometimes provided by a commitment
of the GNMA to purchase the loan, accompanied by a commitment by the Federal
Housing Administration to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to purchase
the loan. Intermediate Tax Free Portfolio will only purchase construction loan
notes that are subject to permanent GNMA or bank purchase commitments.

Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term financing.

Standby Commitments. Intermediate Tax Free Portfolio may acquire standby
commitments or "puts" solely to facilitate portfolio liquidity; the Portfolio
intends to exercise its rights thereunder for trading purposes. The maturity of
a Municipal Obligation is not to be considered shortened by any standby
commitment to which the obligation is subject. Thus, standby commitments do not
affect the dollar-weighted average maturity of the Portfolio.

When Municipal Obligations are subject to puts separate from the
underlying securities, no value is assigned to the put. Because of the
difficulty of evaluating the likelihood of exercise or the potential benefit of
a put, the Board of Trustees has determined that puts shall have a fair market
value of zero, regardless of whether any direct or indirect consideration was
paid.

Since the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, the Portfolio's policy is to enter
into put transactions only with put writers who are approved by Bankers Trust.
It is the Portfolio's general policy to enter into put transactions only with
those put writers which are determined to present minimal credit risks. In
connection with this determination, the Board of Trustees will review regularly
Bankers Trust's list of approved put writers, taking into consideration, among
other things, the ratings, if available, of their equity and debt

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securities, their reputation in the municipal securities markets, their net
worth, their efficiency in consummating transactions and any collateral
arrangements, such as letters of credit securing the puts written by them.
Commercial banks normally will be members of the Federal Reserve System, and
other dealers will be members of the National Association of Securities Dealers,
Inc. or members of a national securities exchange. Other put writers will have
outstanding debt rated Aa or better by Moody's or AA or better by S&P, or will
be of comparable quality in Bankers Trust's opinion, or such put writers'
obligations will be collateralized and of comparable quality in Bankers Trust's
opinion. The Board of Trustees has directed Bankers Trust not to enter into put
transactions with any put writer that, in the judgment of Bankers Trust using
the above-described criteria, is or becomes a recognizable credit risk. The
Trust is unable to predict whether all or any portion of any loss sustained
could subsequently be recovered from a put writer in the event that a put writer
should default on its obligation to repurchase an underlying security.

Futures Contracts and Options on Futures Contracts

General. The successful use of such instruments draws upon the Adviser's
skill and experience with respect to such instruments and usually depends on the
Adviser's ability to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, a
Portfolio may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In addition, the correlation
between movements in the price of futures contracts or options on futures
contracts and movements in the price of the securities and currencies hedged or
used for cover will not be perfect and could produce unanticipated losses.

Futures Contracts. A Portfolio may enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices including any index of U.S. Government
securities, foreign government securities or corporate debt securities. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"), and
must be executed through a futures commission merchant, or brokerage firm, which
is a member of the relevant contract market. Futures contracts trade on a number
of exchange markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of the
exchange. A Portfolio may enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. Government,
such as long-term U.S. Treasury Bonds, Treasury Notes, GNMA modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. A
Portfolio may also enter into futures

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contracts which are based on bonds issued by entities other than
the U.S. Government.

At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.

The purpose of the acquisition or sale of a futures contract, in the
case of a Portfolio which holds or intends to acquire fixed-income securities,
is to attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without

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having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio's obligations with respect to such futures contracts will consist of
cash, cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and variation
margin payments made by the Portfolio with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.

In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolios, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, a Portfolio's overall performance would be poorer than if it had not
entered into any such contract. For example, if a Portfolio has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such

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situations, if a Portfolio has insufficient cash, it may have to sell debt
securities from its portfolio to meet daily variation margin requirements. Such
sales of bonds may be, but will not necessarily be, at increased prices which
reflect the rising market. A Portfolio may have to sell securities at a time
when it may be disadvantageous to do so.

Options on Futures Contracts. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.

The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the

<PAGE>

risk that changes in the value of the underlying futures contract will not be
fully reflected in the value of the option purchased.

The Board of Trustees of each Portfolio has adopted the requirement that
futures contracts and options on futures contracts be used only as a hedge and
not for speculation. In addition to this requirement, the Board of Trustees of
each Portfolio has also adopted a restriction that the Portfolio will not enter
into any futures contracts or options on futures contracts if immediately
thereafter the amount of margin deposits on all the futures contracts of the
Portfolio and premiums paid on outstanding options on futures contracts owned by
the Portfolio would exceed 5% of the market value of the total assets of the
Portfolio.

Options on Foreign Currencies. The Utility Portfolio may purchase and
write options on foreign currencies for hedging purposes in a manner similar to
that in which futures contracts on foreign currencies, or forward contracts,
will be utilized. For example, a decline in the dollar value of a foreign
currency in which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the value of portfolio
securities, the Portfolio may purchase put options on the foreign currency. If
the value of the currency does decline, a Portfolio will have the right to sell
such currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on its portfolio which otherwise would have
resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.

The Utility Portfolio may write options on foreign currencies for the
same types of hedging purposes. For example, where the Portfolio anticipates a
decline in the dollar value of foreign currency denominated securities due to
adverse fluctuations in exchange rates it could, instead of purchasing a put
option,

<PAGE>

write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.

The Utility Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by the Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.

The Utility Portfolio also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A call option on a
foreign currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of a
security which the Portfolio owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change in
the exchange rate. In such circumstances, the Portfolio collateralizes the
option by maintaining in a segregated account with its custodian, cash or U.S.
Government securities or other high quality liquid debt securities in an

<PAGE>

amount not less than the value of the underlying foreign currency
in U.S. dollars marked to market daily.

Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines

<PAGE>

that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

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. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter 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.

In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.

Options on Securities. Each Portfolio may write (sell) covered call and
put options to a limited extent on its portfolio securities ("covered options")
in an attempt to increase income. However, the Portfolio may forgo the benefits
of appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Portfolio.

When a Portfolio writes a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying

<PAGE>

security to the option holder at the exercise price. By writing
a covered call option, the Portfolio forgoes, in exchange for

<PAGE>

the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.

When a Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.

A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.

When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.

A Portfolio may purchase call and put options on any securities in which
it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the

<PAGE>

market value of such securities. The purchase of a call option would entitle the
Portfolio, in exchange for the premium paid, to purchase a security at a
specified price during the option period. The Portfolio would ordinarily have a
gain if the value of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if the value of the
securities remained at or below the exercise price during the option period.

A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's portfolio, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. The Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.

Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.

The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.

A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions

<PAGE>

will not fulfill their obligations. To reduce this risk, the Portfolio will
purchase such options only from broker-dealers who are primary government
securities dealers recognized by the Federal Reserve Bank of New York and who
agree to (and are expected to be capable of) entering into closing transactions,
although there can be no guarantee that any such option will be liquidated at a
favorable price prior to expiration. The Adviser will monitor the
creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolios' Trustees.

Options on Securities Indices. In addition to options on securities,
each Portfolio may also purchase and write (sell) call and put options on
securities indices. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between the
exercise price and the value of the index. Such options will be used for the
purposes described above under "Options on Securities."

Options on securities indices entail risks in addition to the risks of options
on securities. The absence of a liquid secondary market to close out options
positions on securities indices is more likely to occur, although the Portfolio
generally will only purchase or write such an option if the Adviser believes the
option can be closed out.

Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase such options unless
the Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.

Price movements in a Portfolio's portfolio securities may not correlate
precisely with movements in the level of an index and, therefore, the use of
options on indices cannot serve as a complete hedge. Because options on
securities indices require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations.

Forward Foreign Currency Exchange Contracts. Because the Utility
Portfolio buys and sells 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

<PAGE>

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.

While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event
the Portfolio's ability to utilize forward contracts in the manner set forth in
the

<PAGE>

Prospectus may be restricted. Forward contracts may reduce the potential gain
from a positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Portfolio than if it had not entered into such
contracts. The use of foreign currency forward contracts may not eliminate
fluctuations in the underlying U.S. dollar equivalent value of the prices of or
rates of return on the Portfolio's foreign currency denominated portfolio
securities and the use of such techniques will subject the Portfolio to certain
risks.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, the Portfolio may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit the Portfolio's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to the Portfolio's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time a poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying the Portfolio's cross-hedges and the movements in the exchange rates
of the foreign currencies in which the Portfolio's assets that are the subject
of such cross-hedges are denominated.

Rating Services

The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, Bankers Trust also makes its own evaluation of these
securities, subject to review by the Board of Trustees. After purchase by a
Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require a Fund to eliminate the obligation from its portfolio, but Bankers Trust
will consider such an event in its determination of whether a Fund should
continue to hold the obligation. A description of the ratings used herein and in
the Funds' Prospectuses is set forth in the Appendix to this Statement of
Additional Information.

Investment Restrictions

The following investment restrictions are "fundamental policies" of each
Fund and each Portfolio and may not be changed with respect to the Fund or the
Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of the
outstanding

<PAGE>

voting securities" under the Investment Company Act of 1940, as amended (the
"1940 Act"), and as used in this Statement of Additional Information and the
Prospectuses, means, with respect to the Fund (or the Portfolio), the lesser of
(i) 67% or more of the outstanding voting securities of the Fund (or of the
total beneficial interests of the Portfolio) present at a meeting, if the
holders of more than 50% of the outstanding voting securities of the Fund or of
the total beneficial interests of the Portfolio) are present or represented by
proxy or (ii) more than 50% of the outstanding voting securities of the Fund (or
of the total beneficial interests of the Portfolio). Whenever the Trust is
requested to vote on a fundamental policy of a Portfolio, the Trust will hold a
meeting of the corresponding Fund's shareholders and will cast its vote as
instructed by that 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 of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote.

As a matter of fundamental policy, each Portfolio (or Fund) may not
(except that no investment restriction of a Fund shall prevent a Fund from
investing all of its Assets in an open-end investment company with substantially
the same investment objectives):

(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (Fund's) net assets, it may borrow money (but only as a temporary
measure for extraordinary or emergency purposes in the case of all Portfolios
(Funds)) and enter into reverse repurchase agreements or dollar roll
transactions, and except that it may pledge, mortgage or hypothecate not more
than 1/3 of such assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to accommodate requests for
the withdrawal of beneficial interests (redemption of shares) while effecting an
orderly liquidation of portfolio securities or to maintain liquidity in the
event of an unanticipated failure to complete a portfolio security transaction
or other similar situations) or reverse repurchase agreements, provided that
collateral arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may be pledged to secure
letters of credit solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "State and Federal Restrictions"
below. (As an operating policy, the Portfolios may not engage in dollar roll
transactions);

(2) underwrite securities issued by other persons except insofar as the
Portfolios (Trust or the Funds) may technically be deemed an underwriter under
the 1933 Act in selling a portfolio security;

<PAGE>

(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b)
through the use of repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of debt securities of
types distributed publicly or privately (under current regulations, the
Portfolio's (Fund's) fundamental policy with respect to 20% risk weighing for
financial institutions prevent the Portfolio (Fund) from engaging in securities
lending);

(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (except
that the Portfolio (Trust) may hold and sell, for the Portfolio's (Fund's)
portfolio, real estate acquired as a result of the Portfolio's (Fund's)
ownership of securities);

(5) except for Utility Portfolio (Utility Fund) which will concentrate
its investments in the utility industry (the Utility Fund may so concentrate by
investing all its Assets in an open-end investment company with substantially
the same investment objectives), concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it is deemed appropriate
for the achievement of a Portfolio's (Fund's) investment objective(s), up to 25%
of its total assets may be invested in any one industry; and

(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.

State and Federal Restrictions. In order to comply with certain state
and Federal statutes and policies each Portfolio (or the Trust, on behalf of
each Fund) will not as a matter of operating policy (except that no operating
policy shall prevent a Fund from investing all of its Assets in an open-end
investment company with substantially the same investment objectives):

(i) borrow money (including through dollar roll transactions) for any
purpose in excess of 10% of the Portfolio's (Fund's) total assets
(taken at cost), except that the Portfolio (Fund) may borrow for
temporary or emergency purposes up to 1/3 of

<PAGE>

its total assets;

(ii) pledge, mortgage or hypothecate for any purpose in
excess of 10% of the Portfolio's (Fund's) total
assets (taken at market value), provided that
collateral arrangements with respect to options
and futures, including deposits of initial deposit
and variation margin, and reverse repurchase
agreements are not considered a pledge of assets
for purposes of this restriction;

(iii) purchase any security or evidence of interest
therein on margin, except that such short-term
credit as may be necessary for the clearance of
purchases and sales of securities may be obtained
and except that deposits of initial deposit and
variation margin may be made in connection with
the purchase, ownership, holding or sale of
futures;

(iv) sell any security which it does not own unless by
virtue of its ownership of other securities it has
at the time of sale a right to obtain securities,
without payment of further consideration,
equivalent in kind and amount to the securities
sold and provided that if such right is
conditional the sale is made upon the same
conditions;

(v) invest for the purpose of exercising control or
management;

(vi) purchase securities issued by any investment
company except by purchase in the open market
where no commission or profit to a sponsor or
dealer results from such purchase other than the
customary broker's commission, or except when such
purchase, though not made in the open market, is
part of a plan of merger or consolidation;
provided, however, that securities of any
investment company will not be purchased for the
Portfolio (Fund) if such purchase at the time
thereof would cause: (a) more than 10% of the
Portfolio's (Fund's) total assets (taken at the
greater of cost or market value) to be invested in
the securities of such issuers; (b) more than 5%
of the Portfolio's (Fund's) total assets (taken at
the greater of cost or market value) to be
invested in any one investment company; or
(c) more than 3% of the outstanding voting
securities of any such issuer to be held for the
Portfolio (Fund); provided further that, except in
the case of a merger or consolidation, the
Portfolio (Fund) shall not purchase any securities

<PAGE>

of any open-end investment company unless the Portfolio (Fund)
(1) waives the investment advisory fee with respect to assets
invested in other open-ended investment companies and (2) incurs
no sales charge in connection with the investment (as an
operating policy, each Portfolio will not invest in another
open-end registered investment company);

(vii) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities that
are illiquid or not readily marketable not including (a) Rule
144A securities that have been determined to be liquid by the
Board of Trustees; and (b) commercial paper that is sold under
section 4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one of
the two highest categories by at least two nationally recognized
statistical rating organizations and the Portfolio's (Fund's)
Board of Trustees have determined the commercial paper to be
liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating agency and the
Portfolio's (Fund's) Board of Trustees have determined that the
commercial paper is equivalent quality and is liquid;

(viii)invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities that
are restricted as to resale under the 1933 Act (other than Rule
144A securities deemed liquid by the Portfolio's (Fund's) Board
of Trustees);

(ix) no more than 5% of the Portfolio's (Fund's) total

<PAGE>

assets are invested in securities issued by issuers which
(including predecessors) have been in operation less than three
years;

(x) with respect to 75% of the Portfolio's (Fund's) total assets,
purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio (Fund) to hold more than 10% of
any class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and all
preferred stock of an issuer shall be deemed a single class,
except that futures or option contracts shall not be subject to
this restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with respect to
75% of its assets, invest more than 5% of its total assets in the
securities (excluding U.S. Government securities) of any one
issuer;

(xii) purchase or retain in the Portfolio's (Fund's) portfolio
securities any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer
or Trustee of the Portfolio (Trust), or is an officer or partner
of the Adviser, if after the purchase of the securities of such
issuer for the Portfolio (Fund) one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or
both, all taken at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities, or
both, all taken at market value;

(xiii)invest more than 5% of the Portfolio's (Fund's) net assets in
warrants (valued at the lower of cost or market) (other than
warrants acquired by the Portfolio (Fund) as part of a unit or
attached to securities at the time of purchase) but not more than
2% of the Portfolio's (Fund's) net assets may be invested in
warrants not listed on the New York Stock Exchange Inc. ("NYSE")
or the American Stock Exchange;

(xiv) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue and equal in amount to, the
securities sold short, and unless not more than 10% of the
Portfolio's (Fund's) net assets (taken at market value) is
represented by such securities, or securities

<PAGE>

convertible into or exchangeable for such securities, at any one
time (the Portfolios (Funds) have no current intention to engage
in short selling);

(xv) write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call
is within the investment policies of the Portfolio (Fund) and the
option is issued by the Options Clearing Corporation, except for
put and call options issued by non-U.S. entities or listed on
non-U.S. securities or commodities exchanges; (b) the aggregate
value of the obligations underlying the puts determined as of the
date the options are sold shall not exceed 50% of the Portfolio's
(Fund's) net assets; (c) the securities subject to the exercise
of the call written by the Portfolio (Fund) must be owned by the
Portfolio (Fund) at the time the call is sold and must continue
to be owned by the Portfolio (Fund) until the call has been
exercised, has lapsed, or the Portfolio (Fund) has purchased a
closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio (Fund's) obligation to deliver
securities pursuant to the call it has sold; and (d) at the time
a put is written, the Portfolio (Fund) establishes a segregated
account with its custodian consisting of cash or short-term U.S.
Government securities equal in value to the amount the Portfolio
(Fund) will be obligated to pay upon exercise of the put (this

<PAGE>

account must be maintained until the put is exercised, has
expired, or the Portfolio (Fund) has purchased a closing put,
which is a put of the same series as the one previously written);
and

(xvi) buy and sell puts and calls on securities, stock index futures or
options on stock index futures, or financial futures or options
on financial futures unless such options are written by other
persons and: (a) the options or futures are offered through the
facilities of a national securities association or are listed on
a national securities or commodities exchange, except for put and
call options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate premiums
paid on all such options which are held at any time do not exceed
20% of the Portfolio's (Fund's) total net assets; and (c) the
aggregate margin deposits required on all such futures or options
thereon held at any time do not exceed 5% of the Portfolio's
(Fund's) total assets.

Each Fund will comply with the state securities laws and regulations of
all states in which it is registered. Each Portfolio will comply with the
permitted investments and investment limitations in the securities laws and
regulations of all states in which the corresponding Fund, or any other
registered investment company investing in the Portfolio, is registered.

Portfolio Transactions and Brokerage Commissions

The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for each Portfolio,
the selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker-dealer or futures commission merchant, including to the
extent and in the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain portfolio securities
on behalf of a Portfolio are frequently placed by the Adviser with the issuer or
a primary or secondary market-maker for these securities on a net basis, without
any brokerage commission being paid by the Portfolio. Trading does, however,
involve transaction costs. Transactions with dealers serving as market-makers
reflect the spread between the bid and asked prices. Transaction costs may also
include fees paid to

<PAGE>

third parties for information as to potential purchasers or sellers of
securities. Purchases of underwritten issues may be made which will include an
underwriting fee paid to the underwriter.

The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for a Portfolio taking into account such factors
as price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.

The Adviser is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for a Portfolio with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.

Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other policies as
the Trustees of the Portfolio may determine, the Adviser may consider sales of
shares of the Fund as a factor in the selection of broker-dealers to execute
portfolio transactions. Bankers Trust will make such allocations if commissions
are comparable to those charged by nonaffiliated, qualified broker-dealers for
similar services.

Higher commissions may be paid to firms that provide research services
to the extent permitted by law. Bankers Trust may use this research information
in managing the Portfolio's assets, as well as the assets of other clients.

Except for implementing the policies stated above, there is no intention
to place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
otherwise.

<PAGE>

Although certain research, market and statistical information from
brokers and dealers can be useful to a Portfolio and to the Adviser, it is the
opinion of the management of the Portfolios that such information is only
supplementary to the Adviser's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than the
Portfolios, and not all such information is used by the Adviser in connection
with the Portfolios. Conversely, such information provided to the Adviser by
brokers and dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to the
Portfolios.

In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for a Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as a Portfolio is concerned. However, it is believed that
the ability of a Portfolio to participate in volume transactions will produce
better executions for the Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Utility Portfolio
paid brokerage commissions in the amount of $57,505, $49,959 and $49,530,
respectively.

For the years ended December 31, 1995, 1994 and 1993

<PAGE>

Short/Intermediate U.S. Government Securities Portfolio and Intermediate
Tax Free Portfolio paid no brokerage commissions.

PERFORMANCE INFORMATION

Standard Performance Information

From time to time, quotations of a Fund's performance may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:

Yield: Yields for a Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
Fund's net asset value per share at the end of the period, and
annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purpose of
yield quotations in accordance with standardized methods applicable to
all stock and bond mutual funds. Dividends from equity investments are
treated as if they were accrued on a daily basis, solely for the purpose
of yield calculations. In general, interest income is reduced with
respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation.

Income calculated for the purposes of calculating a Fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding
assumed in yield calculations, the yield quoted for a Fund may differ
from the rate of distributions of the Fund paid over the same period or
the rate of income reported in the Fund's financial statements.

Tax-Equivalent Yield: The Intermediate Tax Free Fund's
tax-equivalent yield is equal to the Fund's yield divided by
(1-Tax Rate).

As of December 31, 1995, the Intermediate Tax Free Fund's tax equivalent
30-day SEC yield was 5.64%, assuming a maximum Federal tax rate of 31%.

The 30-day SEC yields for the period ended December 31, 1995 were as
follows:

Short/Intermediate U.S. Government Securities Fund 4.73%

<PAGE>

Short/Intermediate U.S. Government Securities Fund 4.73%

Intermediate Tax Free Fund 3.89%
Utility Fund 2.85%

Total return: A Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000 (made
at the maximum public offering price with all distributions reinvested)
to reach the value of that investment at the end of the periods. A Funds
may

<PAGE>

also calculate total return figures which represent aggregate
performance over a period or year-by-year performance.

Short/Intermediate
U.S. Government Intermediate Utility
Securities Fund2 Tax Free Fund Fund1

Total Return for the
One Year Period Ended
12/31/95 9.54% 13.71% 30.12%

Cumulative Total Return
for the Period Commencement
of Operations through 12/31/95 4.62% 5.95% 8.18%

Average Annual Total Return
for the Period Commencement
of Operations through 12/31/95 16.34% 22.08% 30.75%

1Fund commenced operations on August 3, 1992.
2Fund commenced operations on August 24, 1992.
3Fund commenced operations on July 20, 1992.

<PAGE>

Performance Results: Any total return quotation provided for a Fund should not
be considered as representative of the performance of the Fund in the future
since the net asset value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of the securities held
in the corresponding Portfolio, but also on changes in the current value of such
securities and on changes in the expenses of the Fund and the corresponding
Portfolio. These factors and possible differences in the methods used to
calculate total return should be considered when comparing the total return of a
Fund to total returns published for other investment companies or other
investment vehicles. Total return reflects the performance of both principal and
income.

Comparison of Fund Performance

Comparison of the quoted nonstandardized performance of various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effect of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.

In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these

<PAGE>

figures to the performance of other mutual funds tracked by mutual fund rating
services or to unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Evaluations of a Fund's performance made by independent sources may also be used
in advertisements concerning the Fund. Sources for a Fund's performance
information could include the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Barron's, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Global Investor, a European publication that periodically reviews
the performance of U.S. mutual funds investing internationally.

Investor's Daily, a daily newspaper that features financial, economic and
business news.

Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis, a weekly publication of industry-wide mutual fund
averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morningstar, Inc., a publisher of financial information and mutual fund
research.

<PAGE>

New York Times, a nationally distributed newspaper which regularly covers
financial news.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

U.S. News and World Report, a national business weekly that
periodically reports mutual fund performance data.

Value Line, a biweekly publication that reports on the largest 15,000 mutual
funds.

Wall Street Journal, a Dow Jones and Company, Inc. newspaper
which regularly covers financial news.

Weisenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

VALUATION OF SECURITIES; REDEMPTION IN KIND

Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Such market valuations may
represent the last quoted price on the securities major trading exchange or may
be determined through use of matrix pricing. In matrix pricing, pricing services
may use various pricing models, involving comparable securities, historic
relative price movements, economic factors and dealer quotations.
Over-the-counter securities will normally be valued at the bid price.
Short-term debt obligations and money market securities maturing in 60 days or
less are valued at amortized cost, which approximates market.

Securities for which market quotations are not available are

<PAGE>

valued by Bankers Trust pursuant to procedures adopted by each Portfolio's Board
of Trustees. It is generally agreed that securities for which market quotations
are not readily available should not be valued at the same value as that carried
by an equivalent security which is readily marketable.

The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the:

type of security involved, financial statements, cost at date of
purchase, size of holding, discount from market value of unrestricted
securities of the same class at the time of purchase, special reports
prepared by analysts, information as to any transactions or offers with
respect to the security, existence of merger proposals or tender offers
affecting the security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant
matters.

To the extent that the Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
available, the Adviser of the Portfolio will value such securities based upon
all relevant factors as outlined in FRR 1.

The Trust, on behalf of each Fund, and each Portfolio reserve the right,
if conditions exist which make cash payments undesirable, to honor any request
for redemption or repurchase order by making payment in whole or in part in
readily marketable securities chosen by the Trust, or the Portfolio, as the case
may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a redemption in kind). If
payment is made to a Fund shareholder in securities, the shareholder may incur
transaction expenses in converting these securities into cash. The Trust, on
behalf of each Fund, and each Portfolio have elected, however, to be governed by
Rule 18f-1 under the 1940 Act as a result of which each Fund and each Portfolio
are obligated to redeem shares or beneficial interests, as the case may be, with
respect to any one investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund or the Portfolio, as
the case may be, at the beginning of the period.

Each Portfolio has agreed to make a redemption in kind to the
corresponding Fund whenever the Fund wishes to make a

<PAGE>

redemption in kind; therefore Fund shareholders that receive redemptions in kind
will receive portfolio securities of the corresponding Portfolio and in no case
will they receive a security issued by the Portfolio.

Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day that the NYSE is open
for business. As of 4:00 p.m., New York time, on each such day, the value of
each investor's interest in a Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in a Portfolio will
then be recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of such investor's investment in the Portfolio as of 4:00
p.m. on such day plus or minus, as the case may be, the amount of net additions
to or reductions in the investor's investment in the Portfolio effected on such
day and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of 4:00 p.m. on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of 4:00 p.m. on the following day the NYSE is open for trading.

MANAGEMENT OF THE TRUST AND PORTFOLIOS

Each Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Funds or
Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios and
review the Funds' performance.

The Trustees and officers of the Trust and Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts.

<PAGE>

Trustees of the Trust

PHILIP W. COOLIDGE* (age 44) -- President and Trustee;

Chairman, Chief Executive Officer and President, Signature Financial
Group, Inc. ("SFG") (since December, 1988) and Signature (since April, 1989).

S. LELAND DILL (age 65) -- Trustee; Retired; Director, Coutts & Company
Group, Coutts & Co. (U.S.A.) International; Director, Zweig Series Trust;
formerly Partner of KPMG Peat Marwick; Director, Vinters International Company
Inc.; General Partner of Pemco (an investment company registered under the 1940
Act). His address is 5070 North Ocean Drive, Singer Island, Florida 33404.

KELVIN J. LANCASTER (age 71) -- Trustee; Professor, Department of
Economics, Columbia University. His address is 35 Claremont Avenue, New York,
New York 10027.

PHILIP SAUNDERS, JR. (age 60) -- Trustee; Principal, Philip Saunders
Associates (Consulting); former Director of Financial Industry Consulting, Wolf
& Company; President, John Hancock Home Mortgage Corporation; and Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.

Trustees of the Portfolios

CHARLES P. BIGGAR (age 65) -- Trustee; Retired; Director of Chase/NBW
Bank Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.; formerly
Vice President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post

Lane, Chappaqua, New York 10514.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature (since
April, 1989).

PHILIP SAUNDERS, JR. (age 60) -- Trustee; Principal, Philip Saunders
Associates (Consulting); former Director of Financial Industry Consulting, Wolf
& Company; President,

<PAGE>

John Hancock Home Mortgage Corporation; and Senior Vice President of Treasury
and Financial Services, John Hancock Mutual Life Insurance Company, Inc. His
address is 445 Glen Road, Weston, Massachusetts 02193.

Officers of the Trust and Portfolios

Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.

JOHN R. ELDER (age 47) -- Treasurer ; Vice President, SFG (since
April 1995); Treasurer, Phoenix Family of Mutual Funds
(prior to April 1995).

DAVID G. DANIELSON (age 30) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer; Assistant
Treasurer, SFG (since December, 1988) and Signature (since April, 1989).

DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993).

THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President and
Associate General Counsel, SFG (since November, 1989); Assistant Secretary,
Signature (since February, 1991); Attorney, Ropes & Gray (prior to November,
1989).

LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice President, Global
Product Management and Assistant Secretary, SFG (since May, 1992); Assistant
Secretary, Signature (since October, 1992); student, Boston University School of
Law (September, 1989 to May, 1992).

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988);

<PAGE>

Assistant Secretary, Signature (since April, 1989).

ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Assistant Secretary, Signature (since September, 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992) .

Messrs. Coolidge, Danielson, Elder, Lenz, Saldana and Shea and Mss.
Gibson, Mugler and O'Dette also hold similar positions for other investment
companies for which Signature or an affiliate serves as the principal
underwriter.

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolios. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trust
or the Portfolios for serving as an officer or Trustee of the Trust or the
Portfolios. The Trust pays each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses. The Portfolios and Cash Management, Treasury Money, Tax
Free Money, NY Tax Free Money, Equity 500 Index, Asset Management and BT
Investment Portfolios (together with the Trust, the "Fund Complex") collectively
pay each Trustee who is not a director, officer or employee of the Adviser, the
Distributor, the Administrator or any of their affiliates an annual fee of
$10,000, respectively, per annum plus $1,250, respectively, per meeting attended
and reimburses them for travel and out-of-pocket expenses.

For the year ended December 31, 1995, the Short/Intermediate U.S.
Government Securities Fund incurred Trustees fees equal to $2,077. For the same
period, Short/Intermediate U.S. Government Securities Portfolio incurred
Trustees fees equal to $1,917.

For the year ended December 31, 1995, the Intermediate Tax Free Fund
incurred Trustees fees equal to $2,027. For the same period, Intermediate Tax
Free Portfolio incurred Trustees fees equal to $1,867.

For the year ended December 31, 1995, the Utility Fund incurred Trustees
fees equal to $2,030. For the same period, Utility Portfolio incurred Trustees
fees equal to $1,918.

<PAGE>

The following table reflects fees paid to the Trustees of the Trust and the
Portfolios for the year ended December 31, 1995.

TRUSTEE COMPENSATION TABLE

Aggregate Total Compensation
Name of Person, Compensation from Fund Complex
Position from Trust Paid to Trustees

Kelvin J. Lancaster,
Trustee of Trust $12,500 $12,500

S. Leland Dill,
Trustee of Trust
and Portfolios none $12,500

Philip Saunders, Jr.,

Trustee of Trust
and Portfolios $12,500 $12,500

Charles P. Biggar,
Trustee of Portfolios none $12,500

Bankers Trust reimbursed the Funds and Portfolios for a portion of their
Trustees fees for the period above. See "Investment Adviser" and "Administrator"
below.

As of March 31, 1996, the Trustees and officers of the Trust and the
Portfolios owned in the aggregate less than 1% of the shares of any Fund or the
Trust (all series taken together). As of the same date, Bankers Trust on behalf
of its customers is the record owner of the following percentages of the
outstanding shares of the following funds:

<PAGE>

Short/Intermediate U.S. Government Securities Fund ( %); Intermediate Tax Free
Fund ( %); and Utility Fund ( %). As of the same date, Henry Shotmeyer, Sr., 280
Park Avenue, New York, New York and J. Helena Perry and John H. Perry, P.O. Box
4409, Tequesta, Florida were the beneficial owners of 20.65% and 6.43%,
respectively, of the outstanding shares of Intermediate Tax Free Fund and
Reverend John J. Sass Associates L.P., c/o Harlem Churches for Community
Improvement Inc., 2854 Frederick Douglas Blvd., New York, NY 10039 was the
beneficial owner of 5.55% of the Short/Intermediate U.S. Government Securities
Fund.[BT TO UPDATE] Shareholders owning 25% or more of the outstanding shares of
a Fund may take actions without the approval of any other investor in that Fund.

Investment Adviser

Under the terms of each Portfolio's investment advisory agreement with
Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio
subject to the supervision and direction of the Board of Trustees of the
Portfolio. Bankers Trust will: (i) act in strict conformity with each
Portfolio's Declaration of Trust, the 1940 Act and the Investment Advisers Act
of 1940, as the same may from time to time be amended; (ii) manage each
Portfolio in accordance with the Portfolio's investment objectives, restrictions
and policies; (iii) make investment decisions for each Portfolio; and (iv) place
purchase and sale orders for securities and other financial instruments on
behalf of each Portfolio.

Bankers Trust bears all expenses in connection with the performance of
services under each Advisory Agreement. The Trust and each Portfolio bears
certain other expenses incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust or the
Portfolio who are not officers, directors or employees of Bankers Trust,
Signature or any of their affiliates; SEC fees and state Blue Sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses; costs of maintenance of
corporate existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $130,819, $90,050 and $34,664 , respectively, in compensation for
investment advisory services provided to Short/Intermediate U.S. Government
Securities Portfolio. During

<PAGE>

the same periods, Bankers Trust reimbursed $25,406, $31,730 and $34,158 ,
respectively, to that Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $96,572, $117,549 and $82,721 , respectively, in compensation for
investment advisory services provided to Intermediate Tax Free Portfolio. During
the same periods, Bankers Trust reimbursed $18,572, $41,555 and $29,979 ,
respectively, to that Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $95,386, $198,040 and $185,320 , respectively, in compensation for
investment advisory services provided to Utility Portfolio. During the same
periods, Bankers Trust reimbursed $45,535, $82,273 and $73,108,

respectively, to that Portfolio to cover expenses.

Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on behalf
of the Portfolios, including outstanding loans to such issuers which could be
repaid in whole or in part with the proceeds of securities so purchased. Such
affiliates deal, trade and invest for their own accounts in such obligations and
are among the leading dealers of various types of such obligations. Bankers
Trust has informed the Portfolios that, in making its investment decisions, it
does not obtain or use material inside information in its possession or in the
possession of any of its affiliates. In making investment recommendations for
the Portfolios, Bankers Trust will not inquire or take into consideration
whether an issuer of securities proposed for purchase or sale by a Portfolio is
a customer of Bankers Trust, its parent or its subsidiaries or affiliates and,
in dealing with its customers, Bankers Trust, its

<PAGE>

parent, subsidiaries and affiliates will not inquire or take into consideration
whether securities of such customers are held by any fund managed by Bankers
Trust or any such affiliate.

Each Fund's prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including
waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers Trust
shall stay in effect for at least 12 months.

Administrator

Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as the
Board of Trustees of the Trust and each Portfolio reasonably deem necessary for
the proper administration of the Trust or a Portfolio. Bankers Trust will
generally assist in all aspects of the Funds' and Portfolios' operations; supply
and maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), internal auditing,
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring reports and assistance
regarding compliance with Declarations of Trust, by-laws, investment objectives
and policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

Pursuant to a sub-administration agreement (the "Sub-Administration
Agreement"), Signature performs such sub-administration duties for the Trust and
the Portfolios as from time to time may be agreed upon by Bankers Trust and
Signature. The Sub-Administration Agreement provides that Signature will receive
such compensation as from time to time may be agreed upon by Signature and
Bankers Trust. All such compensation will be paid by Bankers Trust.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $108,374, $75,867 and $57,678 , respectively, in compensation for
administrative and other services provided to the Short/Intermediate U.S.
Government Securities Fund. During

<PAGE>

the same periods, Bankers Trust reimbursed $46,084, $61,042 and $34,459,
respectively, to cover expenses. For the years ended December 31, 1995, 1994 and
1993, Bankers Trust earned $26,164, $18,010 and $6,933 , respectively, in
compensation for administrative and other services provided to
Short/Intermediate U.S. Government Securities Portfolio.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $96,355, $117,245 and $82,560 , respectively, in compensation for
administrative and other services provided to the Intermediate Tax Free Fund.
During the same periods, Bankers Trust reimbursed $48,616, $63,823 and $34,528 ,
respectively, to cover expenses. For the years ended December 31, 1995, 1994 and
1993, Bankers Trust earned $12,072, $14,693 and $10,340 , respectively, in
compensation for administrative and other services provided to Intermediate Tax
Free Portfolio.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $94,929, $197,589 and $185,192 , respectively, in compensation for
administrative and other services provided to the Utility Fund. During the same
periods, Bankers Trust reimbursed $49,831, $63,308 and $39,312 , respectively,
to cover expenses. For the years ended December 31, 1995, 1994 and 1993, Bankers
Trust earned $14,675, $30,468 and $28,511 , respectively, in compensation for
administrative and other services provided to Utility Portfolio.

<PAGE>

Bankers Trust has agreed that if in any year the aggregate expenses of any Fund
and its respective Portfolio (including fees pursuant to the Advisory Agreement,
but excluding interest, taxes, brokerage and, if permitted by the relevant state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over a Fund, Bankers Trust will reimburse the Fund
for the excess expense to the extent required by state law. As of the date of
this Statement of Additional Information, the most restrictive annual expense
limitation applicable to any Fund is 2.5% of the Fund's first $30 million of
average annual net assets, 2.0% of the next $70 million of average annual net
assets and 1.5% of the remaining average annual net assets.

Custodian and Transfer Agent

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for each Portfolio pursuant to the administration
and services agreements. As Custodian, it holds the Funds' and each Portfolio's
assets. Bankers Trust also serves as transfer agent of the Trust and of each
Portfolio pursuant to the respective administration and services agreement.
Under its transfer agency agreement with the Trust, Bankers Trust maintains the
shareholder account records for each Fund, handles certain communications
between shareholders and the Trust and causes to be distributed any dividends
and distributions payable by the Trust. Bankers Trust may be reimbursed by the
Funds or the Portfolios for its out-of-pocket expenses. Bankers Trust will
comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.

Use of Name

The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolios. The Trust has acknowledged that the term "BT" is used by and is
a property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term.

The Trust may be required, on 60 days' notice from Bankers Trust at any
time, to abandon use of the acronym "BT" as part of its name. If this were to
occur, the Trustees would select an appropriate new name for the Trust, but
there would be no other

<PAGE>

material effect on the Trust, its shareholders or activities.

Banking Regulatory Matters

Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolios contemplated by the
Advisory Agreements and other activities for the Funds and the Portfolios
described in the Prospectuses and this Statement of Additional Information
without violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust and the Portfolios. 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.
If the circumstances described above should change, the Boards of Trustees
would review the relationships with Bankers Trust and consider taking all
actions necessary in the circumstances.

<PAGE>

Counsel and Independent Accountants

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022-4669, serves as Counsel to the Trust and each Portfolio.
Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City, Missouri
64105 acts as Independent Accountants of the Trust and each Portfolio.

ORGANIZATION OF THE TRUST

Shares of the Trust do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Fund, except
with respect to the election of Trustees and the ratification of the selection
of independent accountants.

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be

<PAGE>

unable to meet its obligations, a possibility that the Trust believes is remote.
Upon payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of the Trust in a manner so
as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Trust.

The Trust was organized under the name BT Tax-Free Investment Trust and
assumed its current name of BT Investment Funds on May 16, 1988.

TAXATION

Taxation of the Funds

The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the

Internal Revenue Code of 1986, as amended (the "Code").

As a regulated investment company, each Fund will not be

<PAGE>

subject to U.S. Federal income tax on its investment company taxable
income and net capital gains (the excess of net long-term capital gains over net
short-term capital losses), if any, that it distributes to shareholders. The
fund intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and net capital gains, and
therefore does not anticipate incurring a Federal income tax liability.

Investment in the Intermediate Tax Free Fund would not be suitable for
tax-exempt institutions, qualified retirement plans, H.R. 10 plans and
individual retirement accounts since such investors would not gain any
additional tax benefit from the receipt of tax-exempt income.

Because the Intermediate Tax Free Fund will distribute exempt-interest
dividends, all or a portion of any interest on indebtedness incurred by a
shareholder to purchase or carry shares of these Funds will not be deductible
for Federal personal income tax purposes. In addition, the Code may require a
shareholder of this Fund, if he receives exempt-interest dividends, to treat as
taxable income a portion of certain otherwise nontaxable social security and
railroad retirement benefit payments. Furthermore, that portion of any
exempt-interest dividend paid by this Fund which represents income from private
activity bonds held by the Fund may not retain its tax-exempt status in the
hands of a shareholder who is a "substantial user" of a facility financed by
such bonds, or a "related person" thereof. Moreover, as noted in the Prospectus
of this Fund, (i) some or all of a Fund's dividends and distributions may be
specific preference items, or a component of an adjustment item, for purposes of
the Federal individual and corporate alternative minimum taxes and (ii) the
receipt of a Fund's dividends and distributions may affect a corporate

<PAGE>

shareholder's Federal "environmental" tax liability. In addition, the
receipt of Fund dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and a Subchapter S
corporate shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are (i)
"substantial users" with respect to a facility or "related" to such users within
the meaning of the Code and (ii) subject to a Federal alternative minimum tax,
the federal "environmental" tax, the Federal "branch profits" tax or the Federal
"excess net passive income" tax.

In the case of the Intermediate Tax Free Fund, 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.

<PAGE>

Distributions

Dividends paid out of the Fund's investment company taxable income will
be taxable to a U.S. shareholder as ordinary income. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S. Federal tax status of distributions.
Shareholders should consult their own tax adviser concerning the application of
federal, state and local taxes to the distributions they receive from the Fund.

<PAGE>

Taxation of the Portfolios

The Portfolios are not subject to the Federal income taxation. Instead,
the Fund and other investors investing in a Portfolio must take into account, in
computing their Federal income tax liability, their share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether they have received any cash

distributions from the Portfolio.

<PAGE>

Foreign Withholding Taxes

Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.

Backup Withholding

A Fund may be required to withhold U.S. Federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal

income tax liability.

Foreign Shareholders

The tax consequences to a foreign shareholder of an investment in a
Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.

<PAGE>

Other Taxation

The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code.

Each Portfolio is organized as a New York trust. Each Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.

<PAGE>

FINANCIAL STATEMENTS

The Annual Report of each Fund dated December 31, 1995 has been filed
with the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder and is hereby incorporated herein by reference. A copy of the Annual
Reports will be provided without charge to each person receiving this Statement
of Additional Information.

Short/Intermediate U.S. Government Securities Fund:

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994
Financial Highlights: Supplemental data for the periods presented
Notes to Financial Statements Report of Independent Accountants

Short/Intermediate U.S. Government Securities Portfolio:
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994
Financial Highlights: Selected ratios and supplemental data for the

<PAGE>

periods presented
Schedule of Portfolio of Investments, December 31, 1995
Notes to Financial Statements
Report of Independent Accountants

Intermediate Tax Free Fund:

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994

Financial Highlights: Supplemental data for the periods

present

Notes to Financial Statements
Report of Independent Accountants

Intermediate Tax Free Portfolio:

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Financial Highlights: Selected ratios and supplemental data for
the periods presented
Schedule of Portfolio of Investments, December 31, 1995
Notes to Financial Statements Report of Independent Accountants

Utility Fund:

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994

Financial Highlights: Supplemental data for the periods
presented

Notes to Financial Statements
Report of Independent Accountants

Utility Portfolio:

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994

Financial Highlights: Selected ratios and supplemental data

58
<PAGE>

for the periods presented
Schedule of Portfolio of Investments, December 31, 1995
Notes to Financial Statements
Report of Independent Accountants

<PAGE>

APPENDIX

BOND, COMMERCIAL PAPER AND MUNICIPAL OBLIGATIONS RATINGS

Set forth below are descriptions of the ratings of Moody's and S&P,
which represent their opinions as to the quality of the Municipal Obligations
and securities which they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and are not absolute standards of
quality.

Moody's Bond Ratings

Aaa. Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa. Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba. Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

A-1

<PAGE>

B. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Caa. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C. Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Unrated. Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or
issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.

S&P's Bond Rating

AAA. Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.

AA. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.

A-2

<PAGE>

A. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.

BBB. Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.

BB, B, CCC, CC, and C. Bonds rated BB, B, CCC, CC, and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of this obligations.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.

C1. The rating C1 is reserved for income bonds on which no interest is
being paid.

D. Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.

Plus (+) or Minus (-). The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

NR. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Fitch Investors Service Bond Ratings

AAA. Securities of this rating are regarded as strictly high-grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than through
changes in the money rate. The factor last named is of importance varying with
the length of maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of an AAA
rating is showing of earnings several times or many times interest requirements
with such stability of applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other features may enter in, such
as a wide margin of protection through collateral security or direct lien on
specific property as in the case of high class equipment certificates or bonds
that are first mortgages on valuable real estate. Sinking funds or

A-3

<PAGE>

voluntary reduction of the debt by call or purchase are often factors,
while guarantee or assumption by parties other than the original debtor may also
influence the rating.

AA. Securities in this group are of safety virtually beyond question,
and as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may be of
junior though strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be the obligation
of a small company, strongly secured but influenced as to ratings by the lesser
financial power of the enterprise and more local type of market.

Description of S&P Municipal Bond Ratings:

AAA - Prime - These are obligations of the highest quality. They have
the strongest capacity for timely payment of debt service.

General Obligation Bonds - In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.

Revenue Bonds - Debt service coverage has been, and is expected to
remain, substantial, stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds and debt service reserve
requirements) are rigorous. There is evidence of superior management.

AA - High Grade - The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues. Bonds
rated AA have the second strongest capacity for payment of debt service.

A - Good Grade - Principal and interest payments on bonds in this
category are regarded as safe although the bonds are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
sbonds in higher rated categories. This rating describes the third strongest
capacity for payment of debt service. Regarding municipal bonds, the rating
differs from the two higher ratings because:

General Obligation Bonds - There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.

A-4

<PAGE>

Revenue Bonds - Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appearance appears adequate.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.

Description of Moody's Municipal Bond Ratings:

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Moody's may apply the numerical modifier in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
within its generic rating classification possesses the strongest investment
attributes.

Description of S&P Municipal Note Ratings:

Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1, or -2) to distinguish more clearly the
credit quality of notes as compared to bonds. Notes rated SP-1 have a very
strong or strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics are given the designation of
SP-1+. Notes rated SP-2 have a satisfactory

A-5

<PAGE>

capacity to pay principal and interest.

Description of Moody's Municipal Note Ratings:

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG2/VMIG2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.

S&P's Commercial Paper Ratings

A is the highest commercial paper rating category utilized by S&P,
which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

Moody's Commercial Paper Ratings

Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively

A-6

<PAGE>

high financial leverage. Adequate alternate liquidity is maintained.

Fitch Investors Service and Duff & Phelps Commercial Paper Ratings

Commercial paper rated "Fitch-1" is considered to be the highest grade
paper and is regarded as having the strongest degree of assurance for timely
payment. "Fitch-2" is considered very good grade paper and reflects an assurance
of timely payment only slightly less in degree than the strangest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the
following characteristics: very high certainty of timely payment, excellent
liquidity factors supported by strong fundamental protection factors, and risk
factors which are very small. Issues rated "Duff 2" have a good certainty of
timely payment, sound liquidity factors and company fundamentals, small risk
factors, and good access to capital markets.

A-7

<PAGE>

Table of Contents

Investment Objectives, Policies and Restrictions . . . . . . . . . 2
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . 24
Valuation of Securities; Redemption in Kind . . . . . . . . . . . . . . 27
Management of the Trust and Portfolios . . . . . . . . . . . . . . . . . . 29
Organization of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . 36
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Appendix (Bond, Commercial Paper and Municipal Obligations Ratings) . . A-1

Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY

Distributor

SIGNATURE BROKER-DEALER SERVICES, INC.

<PAGE>

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 Prospectus, this Statement of
Additional Information or the Trust's official sales literature with respect to
the Fund in connection with the offering of the shares of the Fund 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. --------------------

BT0369C

<PAGE>

BT INVESTMENT FUNDS

CASH MANAGEMENT FUND
LIQUID ASSETS FUND
TREASURY MONEY FUND
100% TREASURY FUND
TAX FREE MONEY FUND

NY TAX FREE MONEY FUND APRIL 29, 1996

STATEMENT OF ADDITIONAL INFORMATION

BT Investment Funds (the "Trust") is an open-end management investment
company that offers investors a selection of investment portfolios, each having
distinct investment objectives and policies. This Statement of Additional
Information relates to the following investment portfolios (each a "Fund" and,
collectively, the "Funds"), each of which seeks a high level of current income
consistent with liquidity and the preservation of capital.

CASH MANAGEMENT FUND - a diversified investment portfolio that
seeks a high level of current income through investment in a
Portfolio of high quality money market instruments.

LIQUID ASSETS FUND - a diversified investment portfolio that
seeks a high level of current income through investment in a
Portfolio of high quality money market instruments.

TREASURY MONEY FUND - a diversified investment portfolio that
seeks a high level of current income through investment in a
Portfolio of direct obligations of the U.S. Treasury and
repurchase agreements in respect of those obligations.

100% TREASURY FUND - a diversified investment portfolio that
seeks a high level of current income through investment only in
direct obligations of the U.S.
Treasury.

TAX FREE MONEY FUND - a diversified investment portfolio that
seeks a high level of current income exempt from Federal income
taxes through investment in a Portfolio primarily of obligations
issued by states and their authorities, agencies,
instrumentalities and political subdivisions.

<PAGE>

NY TAX FREE MONEY FUND - a nondiversified investment portfolio
that seeks a high level of current income exempt from Federal,
New York State and New York City income taxes through investment
in a Portfolio primarily of obligations of the State of New York
and its authorities, agencies, instrumentalities and political
subdivisions.

As described in the Prospectuses, the Trust seeks to achieve the
investment objective of each Fund by investing all the Assets of the Fund in a
diversified (or nondiversified, in the case of the New York Tax Free Money Fund)
open-end management investment company having the same investment objective as
such Fund. These investment companies are, respectively, Cash Management
Portfolio, Liquid Assets Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, 100% Treasury Portfolio and NY Tax Free Money Portfolio
(collectively, the "Portfolios"). Liquid Assets Portfolio is a series of BT
Investment Portfolios.

Since the investment characteristics of each Fund will correspond
directly to those of the respective Portfolio in which the Fund invests all of
its assets, the following is a discussion of the various investments of and
techniques employed by the Portfolios.

The Trust's Prospectuses for the Funds, each dated April 29, 1996, which
provide the basic information investors should know before investing, may be
obtained without charge by calling the Trust at the telephone number listed
below or by contacting any Service Agent. This Statement of Additional
Information, which is not a Prospectus, is intended to provide additional
information regarding the activities and operations of the Trust and should be
read in conjunction with the relevant Prospectus. Capitalized terms not
otherwise defined in this Statement of Additional Information have the meanings
accorded to them in the Trust's Prospectuses.

<PAGE>

BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR

6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(800)

730-1313

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Each Fund's Prospectus discusses the investment objective of the Fund
and the policies to be employed to achieve those objectives by its corresponding
Portfolio. This section contains supplemental information concerning the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and portfolio strategies that the Portfolios may utilize and
certain risks attendant to those investments, policies and strategies.

BANK OBLIGATIONS

For purposes of the Portfolios' investment policies with respect to bank
obligations, the assets of a bank will be deemed to include the assets of its
domestic and foreign branches. Obligations of foreign branches of U.S. banks and
foreign banks may be general obligations of the parent bank in addition to the
issuing bank or may be limited by the terms of a specific obligation and by
government regulation. If Bankers Trust, acting under the supervision of the
Board of Trustees, deems the instruments to present minimal credit risk, each
Portfolio other than Treasury Money Portfolio may invest in obligations of
foreign banks or foreign branches of U.S. banks, which include 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. Foreign branches of U.S. banks and foreign banks may also
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards than those applicable to
domestic branches of U.S. banks.

COMMERCIAL PAPER

Commercial paper obligations in which the Portfolios may invest are
short-term, unsecured negotiable promissory notes of U.S. or foreign
corporations that at the time of purchase meet the rating criteria described in
the Prospectuses. Investments in foreign commercial paper generally involve
risks similar to those described above relating to obligations of foreign banks
or

<PAGE>

foreign branches of U.S. banks.

U.S. GOVERNMENT OBLIGATIONS

The Portfolios may invest in direct obligations issued by the U.S.
Treasury or, in the case of the Portfolios other than Treasury Money Portfolio,
in obligations issued or guaranteed by the U.S. Treasury or by agencies or
instrumentalities of the U.S. Government ("U.S. Government Obligations").
Certain short-term U.S. Government Obligations, such as those issued by the
Government National Mortgage Association ("GNMA"), are supported by the "full
faith and credit" of the U.S. Government; others, such as those of the
Export-Import Bank of the United States, 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 solely the obligations of the issuing entity
but 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 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.

Examples of the types of U.S. Government Obligations that the Portfolios
may hold include, in addition to those described above and direct U.S. Treasury
obligations, the obligations of the Federal Housing Administration, Farmers Home
Administration, Small Business Administration, General Services Administration,
Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Farm Credit
Banks Funding Corp., Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks and Maritime
Administration.

LENDING OF PORTFOLIO SECURITIES

The Portfolios, other than Tax Free Money Portfolio and NY Tax Free
Money Portfolio, have the authority to lend portfolio securities to brokers,
dealers and other financial organizations.
The Portfolios will not lend securities to Bankers Trust, Signature or their
affiliates. By lending its securities, a Portfolio can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term securities or obtaining yield in the
form of interest paid by the borrower when U.S. Government Obligations are used
as collateral. 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. Each
Portfolio will adhere to the following conditions whenever its securities are
loaned: (i) the Portfolio must receive at least 100% cash collateral or
equivalent securities from the borrower; (ii) the borrower must increase this
collateral whenever the market value of the securities including accrued
interest rises above the

<PAGE>

level of the collateral; (iii) the Portfolio must be able to terminate the loan
at any time; (iv) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned securities,
and any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities.

REVERSE REPURCHASE AGREEMENTS

The Portfolios may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not for
leverage, by among other things, agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). At the
time a Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government Obligations or high-grade
debt obligations 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 a Portfolio may decline below the repurchase price of
those securities. Reverse repurchase agreements are considered to be borrowings
by a Portfolio.

PARTICIPATION INTERESTS

Tax Free Money Portfolio and NY Tax Free Money Portfolio may purchase
from financial institutions participation interests in Municipal Obligations. A
participation interest gives the Portfolio an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation
interest bears to the total principal amount of the Municipal Obligation. These
instruments may be variable rate or fixed rate with remaining maturities of one
year or less. If the participation interest is unrated or has been given a
rating below that which otherwise is permissible for purchase by the Portfolio,
the participation interest will be backed by an irrevocable letter of credit or
guarantee of a bank that the Portfolio's Board of Trustees has determined meets
the prescribed quality standards for the Portfolio, or the payment obligation
otherwise will be collateralized by U.S. Government securities or other
securities deemed appropriate by the Portfolio's Board of Trustees, or, in the
case of an unrated participation interest that is not backed or collateralized
as described above, but that otherwise meets the Trustees' procedures and
standards for creditworthiness and high quality, the underlying Municipal
Obligation must be a permissible investment for the Portfolio. For certain
participation interests, the Portfolio will have the right to demand payment, on
seven days' notice, for all or any part of the Portfolio's participation
interest in the Municipal Obligation,

<PAGE>

plus accrued interest. As to these instruments, each Portfolio intends to
exercise its right to demand payment from the issuer of the demand feature only
upon a default under the terms of the Municipal Obligation, as needed to provide
liquidity to meet redemptions or to maintain a high quality investment
portfolio. In the event an issuer of a demand feature defaulted on its payment
obligation, the Portfolio might be unable to dispose of the participation
interest because of the absence of a secondary market and could, for this or
other reasons, suffer a loss to the extent of the default.

Neither Portfolio currently intends to invest more that 5% of its total
assets in participation interests.

STANDBY COMMITMENTS

Tax Free Money Portfolio and NY Tax Free Money Portfolio each may
acquire standby commitments or "puts" solely to facilitate portfolio liquidity;
neither Portfolio intends to exercise its rights thereunder for trading
purposes. The maturity of Municipal Obligation is not to be considered shortened
by any standby commitment to which the obligation is subject. Thus, standby
commitments do not affect the dollar-weighted average maturity of a Portfolio.

Since the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, each Portfolio's policy is to enter
into put transactions only with put writers who are approved by Bankers Trust.
It is the Portfolios' general policy to enter into put transactions only with
those put writers which are determined to present minimal credit risks. In
connection with this determination, the Board of Trustees will review regularly
Bankers Trust's list of approved put writers, taking into consideration, among
other things, the ratings, if available, of their equity and debt securities,
their reputation in the municipal securities markets, their net worth, their
efficiency in consummating transactions and any collateral arrangements, such as
letters of credit securing the puts written by them. Commercial banks normally
will be members of the Federal Reserve System, and other dealers will be members
of the National Association of Securities Dealers, Inc. or members of a national
securities exchange. Other put writers will have outstanding debt rated Aa or
better by Moody's Investors Service, Inc. ("Moody's") or AA or better by
Standard & Poor's Corporation ("S&P"), or will be of comparable quality in
Bankers Trust's opinion, or such put writers'

<PAGE>

obligations will be collateralized and of comparable quality in Bankers Trust's
opinion. The Board of Trustees has directed Bankers Trust not to enter into put
transactions with any put writer that, in the judgment of Bankers Trust using
the above-described criteria, is or becomes a recognizable credit risk. Neither
Portfolio is able to predict whether all or any portion of any loss sustained
could subsequently be recovered from a put writer in the event that a put writer
should default on its obligation to repurchase an underlying security.

Neither Portfolio currently intends to invest more than 5% of its net
assets in standby commitments.

MUNICIPAL OBLIGATIONS

The two principal classifications of Municipal Obligations
are "notes" and "bonds."

MUNICIPAL NOTES. Municipal notes generally fund short-term
capital needs and have maturities of one year or less. Tax Free
Money Portfolio and NY Tax Free Money Portfolio may invest in
municipal notes, which include:

TAX ANTICIPATION NOTES. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use and
business taxes, and are payable from these specific future taxes.

REVENUE ANTICIPATION NOTES. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as Federal revenues
available under Federal revenue sharing programs.

BOND ANTICIPATION NOTES. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds provide funds for the repayment of these notes.

MISCELLANEOUS, TEMPORARY AND ANTICIPATORY INSTRUMENTS. These instruments
may include notes issued to obtain interim financing pending entering into
alternate financial arrangements, such as receipt of anticipated Federal, state
or other grants or aid, passage of increased legislative authority to issue
longer-term instruments or obtaining other refinancing.

CONSTRUCTION LOAN NOTES. Construction loan notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of construction loan notes, is sometimes provided by a commitment
of the GNMA to purchase the loan, accompanied by a commitment by the Federal
Housing Administration to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to purchase
the loan. A Portfolio will only purchase construction loan notes that are
subject to permanent

<PAGE>

GNMA or bank purchase commitments.

TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term financing.

MUNICIPAL BONDS. Municipal bonds generally fund longer-term capital
needs than municipal notes and have maturities exceeding one year when issued.
Tax Free Money Portfolio and NY Tax Free Money Portfolio may invest in municipal
bonds, but only to the extent that their remaining maturities are determined not
to exceed thirteen months under rules promulgated under the Investment Company
Act of 1940, as amended (the "1940 Act").

Municipal bonds include:

GENERAL OBLIGATION BONDS. Issuers of general obligation bonds include
states, counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.

REVENUE BONDS. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities or, in
some cases, the proceeds of a special excise tax or other specific revenue
source. Revenue bonds are issued to finance a wide variety of capital projects,
including electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund that may be used
to make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, certificates
of deposit and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.

PRIVATE ACTIVITY BONDS. Private activity bonds, which are considered
Municipal Obligations if the interest paid thereon is excluded from gross income
for Federal income tax purposes and is not a specific tax preference item for
Federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various privately
operated facilities such as manufacturing facilities,

<PAGE>

certain hospital and university facilities and housing projects. These bonds are
also used to finance public facilities such as airports, mass transit systems
and ports. The payment of the principal and interest on these bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and generally the pledge, if any, of real and personal property so financed as
security for payment.

SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL OBLIGATIONS

Some of the significant financial considerations relating to the Fund's
investment in New York Municipal Obligations are summarized below. This summary
information is not intended to be a complete description and is principally
derived from official statements relating to issues of New York Municipal
Obligations that were available prior to the date of this Statement of
Additional Information. The accuracy and completeness of the information
contained in those official statements have not been independently verified.

STATE ECONOMY. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest metropolitan
area, accounts for a large portion of the State's population and personal
income.

The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation as
a whole, gradually eroding its relative economic position. The recession has
been more severe in the State, owing to a significant retrenchment in the
financial services industry, cutbacks in defense spending, and an overbuilt real
estate market. There can be no assurance that the State economy will not
experience worse-than-predicted results in the 1995-96 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.

The unemployment rate in the State dipped below the national rate in the
second half of 1981 and remained lower until 1991. It stood at 6.9% in 1994. The
total employment growth rate in the State has been below the national average
since 1984 and is expected to slow to less than 0.5% in 1995. State per capita
personal income remains above the national average. State per capita income for
1994 was estimated at $25,999, which was 19.2% above the 1994 estimated national
average of $21,809. During the

<PAGE>

past ten years, total personal income in the State rose slightly faster than the
national average only in 1986 through 1989.

STATE BUDGET. The State Constitution requires the governor (the "Governor") to
submit to the State legislature (the "Legislature") a balanced executive budget
which contains a complete plan of expenditures for the ensuing fiscal year and
all moneys and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the executive budget.
The entire plan constitutes the proposed State financial plan for that fiscal
year. The Governor is required to submit to the Legislature quarterly budget
updates which include a revised cash-basis state financial plan, and an
explanation of any changes from the previous state financial plan.

The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the fiscal
year. Prior to adoption of the budget, the Legislature enacted appropriations
for disbursements considered to be necessary for State operations and other
purposes, including all necessary appropriations for debt service. The State
financial plan for the

1995-96 fiscal year was formulated on June 20, 1995 and was based upon the
State's budget as enacted by the Legislature and signed into law by the Governor
(the "1995-96 State Financial Plan").

The 1995-96 State Financial Plan was the first to be enacted in the
administration of the Governor, who assumed office on January 1. It was the
first budget in over half a century which proposed and, as enacted, projected an
absolute year-over-year decline in disbursements in the General Fund, the
State's principal operating fund. Spending for State operations was projected to
drop even more sharply, by 4.6%. Nominal spending from all State spending
sources (I.E., excluding Federal aid) was proposed to increase by only 2.5% from
the prior fiscal year, in contrast to the prior decade when such spending growth
averaged more than 6.0% annually.

<PAGE>

The 1995-96 State Financial Plan included actions that will have an
effect on the budget outlook for State fiscal year 1996-97 and beyond. The
Division of the Budget estimated that the 1995-96 State Financial Plan contained
actions that provide nonrecurring resources or savings totaling approximately
$900 million while the State comptroller (the "Comptroller") believed that such
amount exceeded $1 billion. In addition to this use of nonrecurring resources,
the 1995-96 State Financial Plan reflected actions that will directly affect the
State's 1996-97 fiscal year baseline receipts and disbursements. The three-year
plan to reduce State personal income taxes will decrease State tax receipts by
an estimated $1.7 billion in State fiscal year 1996-97 in addition to the amount
of reduction in State fiscal year 1995-96. Further significant reductions in the
personal income tax are scheduled for the 1997-98 State fiscal year. Other tax
reductions enacted in 1994 and 1995 are estimated to cause an additional
reduction in receipts of over $500 million in 1996-97, as compared to the level
of receipts in 1995-96. Similarly, many actions taken to reduce disbursements in
the State's 1995-96 fiscal year are expected to provide greater reductions in
the State's fiscal year 1996-97. These include actions to reduce the State
workforce, reduce Medicaid and welfare expenditures and slow community mental
hygiene program development.

The State issued the first of the three required quarterly updates (the
"First Quarter Update") to the 1995-96 State Financial Plan on July 28, 1995.
The First Quarter Update projected continued balance in the State's 1995-96
State Financial Plan. Actual cash receipts and disbursements during the first
quarter of the fiscal year were impacted by the late adoption of the budget, and
fell somewhat short of original monthly cashflow estimates. Receipt variances
were mainly related to timing issues rather than changes in the forecast.
Disbursement variances were also ascribed to timing factors.

On October 2, 1995, the State Comptroller released a report on the
State's financial condition. The report identified several risks to the 1995-96
State Financial Plan and also estimated a potential imbalance in receipts and
disbursements in the 1996-97 fiscal year of at least $2.7 billion and in the
1997-98 fiscal year of at least $3.9 billion. The Governor is required to submit
a balanced budget to the State Legislature and has indicated that he will close
any potential imbalance primarily through General Fund expenditure reductions
and without increases in taxes or deferrals of scheduled tax reductions.

The State issued its second quarterly update to the 1995-96 State
Financial Plan on October 26, 1995. The Mid-Year Update projected continued
balance in the 1995-96 State Financial Plan, with estimated receipts reduced by
a net $71 million and estimated disbursements reduced by a net $30 million as
compared to the First Quarter Update. The resulting General Fund balance
decreased from $213 million in the First Quarter Update to $172

<PAGE>

million in the Mid-Year Update, reflecting the use of $41 million from the
contingency reserve fund for payments of litigation and disallowance expenses.

The Division of the Budget revised the cash-basis 1995-96 State
Financial Plan on December 15, 1995, in conjunction with the release of the
Executive Budget for the 1996-97 fiscal year (the "December Update" and together
with the First Quarter Update and the Mid-Year Update, the "Financial Plan
Updates"). These projections show continued balance in the State's 1995-96
Financial Plan, with estimated receipts reduced by a net $73 million and
estimated disbursements reduced by a net $73 million as compared to the Mid-Year
Update. Reductions in receipts reflect delays in estimated receipts from the
sale of State assets, and other revisions based upon operating results through
November 1995. Disbursement estimates were reduced to reflect
lower-than-expected spending through November, savings from debt refundings, and
other items which more than offset projected increases in disbursements for
school aid and tuition assistance.
The resulting General Fund balance of $172 million was unchanged from the
Mid-Year Update.

The Governor presented his 1996-97 Executive Budget to the Legislature
on December 15, 1995, one month before the legal deadline. There can be no
assurance that the Legislature will enact the Executive Budget into law or that
the projections set forth in the Executive Budget will not differ materially and
adversely from actual results.

The Governor's Executive Budget projected balance on a cash basis in the
General Fund. It reflected a continuing strategy of substantially reduced State
spending, including programming restructurings, reductions in social welfare
spending, and efficiency and productivity initiatives. In his 1996-97 Executive
Budget, the Governor indicated that the 1996-97 General Fund financial plan
(based on current law governing spending and revenues) would have been out of
balance by almost $3.9 billion as a result of the underlying disparity between
receipts and disbursements caused by anticipated spending demands, the effect of
current and prior-year tax changes, and the use of one-time revenues to fund
recurring spending in the 1995-96 State Financial Plan. The Executive Budget
proposes to close this gap primarily through a series of spending reductions and
cost containment measures.

To make progress toward addressing recurring budgetary imbalances, the
1996-97 Executive Budget proposes significant actions to align recurring
receipts and disbursements in future fiscal years. The Governor has proposed
closing the 1996-97 fiscal year imbalance primarily through General Fund
expenditure reductions and without increases in taxes or deferrals of scheduled
tax reductions. However, there can be no assurance that the Legislature will
enact the Governor's proposals or that the State's actions will be sufficient to
preserve budgetary

<PAGE>

balance or to align recurring receipts and disbursements in future fiscal years.
The 1996-97 Executive Budget includes action that will have an effect on the
budget outlook for the State fiscal year 1997-98 and beyond. The net impact of
these and other factors is expected to produce a potential imbalance in receipts
and disbursements in State fiscal year 1997-98, which the Governor proposes to
close with further spending reductions. The Executive Budget contains
projections of a potential imbalance in the 1997-98 fiscal year of $1.4 billion
and in the 1998-99 fiscal year of $2.5 billion, assuming implementation of the
1996-97 Executive Budget recommendations.

The 1995-96 State Financial Plan and the Financial Plan Updates were
based on a number of assumptions and projections. Because it is not possible to
predict accurately the occurrence of all factors that may affect the 1995-96
State Financial Plan or the Financial Plan Updates, actual results could differ
materially and adversely from projections made at the outset of a fiscal year.
There can be no assurance that the State will not face substantial potential
budget gaps in future years resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any potential
budgetary imbalance, the State may need to take significant actions to align
recurring receipts and disbursements in future fiscal years.

A significant risk to the 1995-96 State Financial Plan projections arise
from tax legislation under consideration by Congress and the President.
Congressionally-adopted retroactive changes to federal tax treatment of capital
gains would flow through automatically to the State personal income tax. Such
changes, if ultimately enacted, could produce revenue losses in both the 1995-96
fiscal year and the 1996-97 fiscal year.

RECENT FINANCIAL RESULTS. The General Fund is the principal operating
fund of the State and is used to account for all financial transactions, except
those required to be accounted

<PAGE>

for in another fund. It is the State's largest fund and receives almost all
State taxes and other resources not dedicated to particular purposes.

The State reported a General Fund operating deficit of $1.426 billion
for the 1994-95 fiscal year, as compared to an operating surplus of $914 million
for the prior fiscal year. The

1994-95 fiscal year deficit was caused by several factors, including the use of
$1.026 billion of the 1993-94 cash-based surplus to fund operating expenses in
1994-95 and the adoption of changes in accounting methodologies by the State
Comptroller. These factors were offset by net proceeds of $315 million in bonds
issued by the Local Government Assistance Corporation. The General Fund is
projected to be balanced on a cash basis for the 1995-96 fiscal year.

Total revenues for 1994-95 were $31.455 billion. Revenues decreased by
$173 million over the prior fiscal year, a decrease of less than one percent.
Total expenditures for 1994-95 totaled $33.079 billion, an increase of $2.083
billion, or 6.7 percent over the prior fiscal year.

The State's financial position on a GAAP (generally accepted accounting
principles) basis as of March 31, 1995 showed an accumulated deficit in its
combined governmental funds of $1.666 billion, reflecting liabilities of $14.778
billion and assets of $13.112 billion.

DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by
which the State of New York may incur debt. Under the State Constitution, the
State may not, with limited exceptions for emergencies, undertake long-term
general obligation borrowing

<PAGE>

(I.E., borrowing for more than one year) unless the borrowing is authorized in a
specific amount for a single work or purpose by the Legislature and approved by
the voters. There is no limitation on the amount of long-term general obligation
debt that may be so authorized and subsequently incurred by the State.

The State may undertake short-term borrowings without voter approval (i) in
anticipation of the receipt of taxes and revenues, by issuing tax and revenue
anticipation notes, and (ii) in anticipation of the receipt of proceeds from the
sale of duly authorized but unissued general obligation bonds, by issuing bond
anticipation notes. The State may also, pursuant to specific constitutional
authorization, directly guarantee certain obligations of the State of New York's
authorities and public benefit corporations ("Authorities"). Payments of debt
service on New York State general obligation and New York State-guaranteed bonds
and notes are legally enforceable obligations of the State of New York.

The State employs additional long-term financing mechanisms,
lease-purchase and contractual-obligation financings, which involve obligations
of public authorities or municipalities that are State-supported but are not
general obligations of the State.

Under these financing arrangements, certain public authorities and
municipalities have issued obligations to finance the construction and
rehabilitation of facilities or the acquisition and rehabilitation of equipment,
and expect to meet their debt service requirements through the receipt of rental
or other contractual payments made by the State. Although these financing
arrangements involve a contractual agreement by the State to make payments to a
public authority, municipality or other entity, the State's obligation to make
such payments is generally expressly made subject to appropriation by the
Legislature and the actual availability of money to the State for making the
payments. The State has also entered into a contractual-obligation financing
arrangement with the Local Government Assistance Corporation ("LGAC") in an
effort to restructure the way the State makes certain local aid payments.

In 1990, as part of a State fiscal reform program, legislation was
enacted creating LGAC, a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally funded
through New York State's annual seasonal borrowing. The legislation empowered
LGAC to issue its bonds and notes in an amount not in excess of $4.7 billion
(exclusive of certain refunding bonds) plus certain other amounts. Over a period
of years, the issuance of these long-term obligations, which are to be amortized
over no more than 30 years, was expected to eliminate the need for continued
short-term seasonal borrowing. The legislation also dedicated revenues equal to
one-quarter of

<PAGE>

the four cent State sales and use tax to pay debt service on these bonds. The
legislation also imposed a cap on the annual seasonal borrowing of the State at
$4.7 billion, less net proceeds of bonds issued by LGAC and bonds issued to
provide for capitalized interest, except in cases where the Governor and the
legislative leaders have certified the need for additional borrowing and
provided a schedule for reducing it to the cap. If borrowing above the cap is
thus permitted in any fiscal year, it is required by law to be reduced to the
cap by the fourth fiscal year after the limit was first exceeded. As of June
1995, LGAC had issued bonds to provide net proceeds of $4.7 billion, completing
the program. The impact of LGAC's borrowing is that the State is able to meet
its cash flow needs in the first quarter of the fiscal year without relying on
short-term seasonal borrowings. The 1995-96 State Financial Plan includes no
spring borrowing nor did the 1994-95 State Financial Plan, which was the first
time in 35 years there was no short-term seasonal borrowing.

In June 1994, the Legislature passed a proposed constitutional amendment
that would significantly change the long-term financing practices of the State
and its public authorities. The proposed amendment would permit the State,
within a formula-based cap, to issue revenue bonds, which would be debt of the
State secured solely by a pledge of certain State tax receipts (including those
allocated to State funds dedicated for transportation purposes), and not by the
full faith and credit of the State. In addition, the proposed amendment would
(i) permit multiple purpose general obligation bond proposals to be proposed on
the same ballot, (ii) require that State debt be incurred only for capital
projects included in a multi-year capital financing plan, and (iii) prohibit,
after its effective date, lease-purchase and contractual-obligation financing
mechanisms for State facilities.

Before the approved

<PAGE>

constitutional amendment can be presented to the voters for their consideration,
it must be passed by a separately elected legislature. The amendment must
therefore be passed by the newly elected Legislature in 1995 prior to
presentation to the voters in November 1995. The amendment was passed by the
Senate in June 1995, and the Assembly is expected to pass the amendment shortly.
If approved by the voters, the amendment would become effective January 1, 1996.

On January 13, 1992, Standard & Poor's Corporation ("Standard & Poor's")
reduced its ratings on the State's general obligation bonds from A to A- and, in
addition, reduced its ratings on the State's moral obligation, lease purchase,
guaranteed and contractual obligation debt. Standard & Poor's also continued its
negative rating outlook assessment on State general obligation debt. On April
26, 1993, Standard & Poor's revised the rating outlook assessment to stable. On
February 14, 1994, Standard & Poor's raised its outlook to positive and, on
February 28, 1994, confirmed its A- rating. On January 6, 1992, Moody's
Investors Service, Inc. ("Moody's") reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A to
Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's
general obligation long-term indebtedness.

The State anticipates that its capital programs will be financed, in
part, by State and public authorities borrowings in 1995-96. The State expects
to issue $248 million in general obligation bonds (including $170 million for
purposes of redeeming outstanding bond anticipation notes) and $186 million in
general obligation commercial paper. The Legislature has also authorized the
issuance of up to $33 million in certificates of participation during the
State's 1995-96 fiscal year for equipment purchases and $14 million for capital
purposes. These projections are subject to change if circumstances require.

Principal and interest payments on general obligation bonds and interest
payments on bond anticipation notes and on tax and revenue anticipation notes
were $793.3 million for the 1994-95 fiscal year, and are estimated to be $774.4
million for the 1995-96 fiscal year. These figures do not include interest
payable on State General Obligation Refunding Bonds issued in July 1992 (
"Refunding Bonds") to the extent that such interest was paid from an escrow fund
established with the proceeds of such Refunding Bonds. Principal and interest
payments on fixed rate and variable rate bonds issued by LGAC were $239.4
million for the 1994-95 fiscal year, and are estimated to be $328.2 million for
1995-96. State lease-purchase rental and contractual obligation payments for
1994-95, including State installment payments relating to certificates of

<PAGE>

participation, were $1.607 billion and are estimated to be $1.641 billion in
1995-96.

New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.

LITIGATION. Certain litigation pending against New York State or its
officers or employees could have a substantial or long-term adverse effect on
New York State finances. Among the more significant of these cases are those
that involve (1) the validity of agreements and treaties by which various Indian
tribes transferred title to New York State of certain land in central and
upstate New York; (2) certain aspects of New York State's Medicaid policies,
including its rates, regulations and procedures; (3) action against New York
State and New York City officials alleging inadequate shelter allowances to
maintain proper housing; (4) challenges to the practice of reimbursing certain
Office of Mental Health patient care expenses from the client's Social Security
benefits; (5) alleged responsibility of New York State officials to assist in
remedying racial segregation in the City of Yonkers; (6) challenges by
commercial insurers, employee welfare benefit plans, and health maintenance
organizations to the imposition of 13%, 11% and 9% surcharges on inpatient
hospital bills ; (7) challenges to certain aspects of petroleum business taxes ;
(8) action alleging damages resulting from the failure by the State's Department
of Environmental Conservation to timely provide certain data; (9) a challenge to
the constitutionality of the treatment of certain moneys held in a Supplemental
Reserve Fund; and (10) a challenge to the constitutionality of a State lottery
game.

<PAGE>

Several actions challenging the constitutionality of legislation enacted
during the 1990 legislative session which changed actuarial funding methods for
determining state and local contributions to state employee retirement systems
have been decided against the State. As a result, the Comptroller has developed
a plan to restore the State's retirement systems to prior funding levels. Such
funding is expected to exceed prior levels by $30 million in fiscal 1994-95, $63
million in fiscal 1995-96, $116 million in fiscal 1996-97, $193 million in
fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal
2001-02, State contributions required under the Comptroller's plan are projected
to be less than that required under the prior funding method. As a result of the
United States Supreme Court decision in the case of STATE OF DELAWARE v. STATE
OF NEW YORK, on January 21, 1994, the State entered into a settlement agreement
with various parties. Pursuant to all agreements executed in connection with the
action, the State is required to make aggregate payments of $351.4 million, of
which $90.3 million have been made. Annual payments to the various parties will
continue through the State's 2002-03 fiscal year in amounts which will not
exceed $48.4 million in any fiscal year subsequent to the State's 1994-95 fiscal
year.

<PAGE>

The legal proceedings noted above involve State finances, State programs
and miscellaneous tort, real property and contract claims in which the State is
a defendant and the monetary damages sought are substantial. These proceedings
could affect adversely the financial condition of the State . Adverse
developments in these proceedings or the initiation of new proceedings could
affect the ability of the State to maintain a balanced 1995-96 State Financial
Plan. An adverse decision in any of these proceedings could exceed the amount of
the 1995-96 State Financial Plan reserve for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced 1995-96
State Financial Plan. In its audited financial statements for the fiscal year
ended March 31, 1995, the State reported its estimated liability for awarded and
anticipated unfavorable judgments to be $676 million.

Although other litigation is pending against New York State, except as
described above, no current litigation involves New York State's authority, as a
matter of law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects New York State's power or ability, as a
matter of law, to impose or collect significant amounts of taxes and revenues.

AUTHORITIES. The fiscal stability of New York State is related, in
part, to the fiscal stability of its Authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself, and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. The State's access to the public credit markets
could be impaired, and the market price of its outstanding debt may be
materially and adversely affected, if any of the Authorities were to default on
their respective obligations, particularly with respect to debt that are
State-supported or State-related. As of September 30, 1994, date of the latest
data available, there were 18 Authorities that had outstanding debt of $100
million or more. The aggregate outstanding debt, including refunding bonds, of
these 18 Authorities was $70.3 billion. As of March 31, 1995, aggregate public
authority debt outstanding as State-supported debt was $27.9 billion and as
State-related debt was $36.1 billion.

Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, New
York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the 18 Authorities for operating and
other expenses and, in fulfillment of its commitments on

<PAGE>

moral obligation indebtedness or otherwise, for debt service. This operating
assistance is expected to continue to be required in future years. In addition,
certain statutory arrangements provide for State local assistance payments
otherwise payable to localities to be made under certain circumstances to
certain Authorities. The State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
Authorities under these arrangements. However, in the event that such local
assistance payments are so diverted, the affected localities could seek
additional State funds.

NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State of
New York may also be impacted by the fiscal health of its localities,
particularly the City of New York, which has required and continues to require
significant financial assistance from New York State. The City depends on State
aid both to enable the City to balance its budget and to meet its cash
requirements. The City has achieved balanced operating results for each of its
fiscal years since 1981 as reported in accordance with the then-applicable GAAP.

In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the City
lost access to public credit markets. The City was not able to sell short-term
notes to the public again until 1979.

In 1975, Standard & Poor's suspended its A rating of City bonds. This
suspension remained in effect until March 1981, at which time the City received
an investment grade rating of BBB from Standard & Poor's. On July 2, 1985,
Standard & Poor's revised its rating of City bonds upward to BBB+ and on
November 19, 1987, to A-. On July 2, 1993, Standard & Poor's reconfirmed its A-
rating of City bonds, continued its negative rating outlook assessment and
stated that maintenance of such rating depended upon the City's making further
progress towards reducing budget gaps in the outlying years. Moody's ratings of
City bonds were revised in November 1981 from B (in effect since 1977) to Ba1,
in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in
February 1991 to Baa1. On July 10, 1995, Standard & Poor's downgraded its rating
on the City's $23 billion of outstanding general obligation bonds to "BBB+" from
"A-", citing to the City's chronic structural budget problems and weak economic
outlook. Standard & Poor's stated that New York City's reliance on one-time
revenue measures to close annual budget gaps, a dependence on unrealized labor
savings, overly optimistic

<PAGE>

estimates of revenues and state and federal aid and the City's continued high
debt levels also contributed to its decision to lower the rating.

New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no assurance
that in the future federal and State assistance will enable the City to make up
its budget deficits. To help alleviate the City's financial difficulties, the
Legislature created the Municipal Assistance Corporation ("MAC") in 1975. MAC is
authorized to issue bonds and notes payable from certain stock transfer tax
revenues, from the City's portion of the State sales tax derived in the City
and, subject to certain prior claims, from State per capita aid otherwise
payable by the State to the City. Failure by the State to continue the
imposition of such taxes, the reduction of the rate of such taxes to rates less
than those in effect on July 2, 1975, failure by the State to pay such aid
revenues and the reduction of such aid revenues below a specified level are
included among the events of default in the resolutions authorizing MAC's
long-term debt. The occurrence of an event of default may result in the
acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and
notes constitute general obligations of MAC and do not constitute an enforceable
obligation or debt of either the State or the City. As of June 30, 1995, MAC had
outstanding an aggregate of approximately $4.882 billion of its bonds. MAC is
authorized to issue bonds and notes to refunds its outstanding bonds and notes
and to fund certain reserves, without limitation as to principal amount, and to
finance certain capital commitments to certain authorities in the event the City
fails to provide such financing.

Since 1975, the City's financial condition has been subject to oversight
and review by the New York State Financial Control Board (the "Control Board")
and since 1978 the City's financial statements have been audited by independent
accounting firms. To be eligible for guarantees and assistance, the City is
required during a "control period" to submit annually for Control Board
approval, and when a control period is not in effect for Control Board review, a
financial plan for the next four fiscal years covering the City and certain
agencies showing balanced budgets determined in accordance with GAAP. New York
State also established the Office of the State Deputy Comptroller for New York
City ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
requirements for termination of the control period. This means that the Control
Board's powers of approval are suspended, but the Board continues to have
oversight

<PAGE>

responsibilities.

From time to time, the Control Board staff, OSDC, the City comptroller
and others issue reports and make public statements regarding the City's
financial condition, commenting on, among other matters, the City's financial
plans, projected revenues and expenditures and actions by the City to eliminate
projected operating deficits. Some of these reports and statements have warned
that the City may have underestimated certain expenditures and overestimated
certain revenues and have suggested that the City may not have adequately
provided for future contingencies. Certain of these reports have analyzed the
City's future economic and social conditions and have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet the
costs of its expenditure increases and to provide necessary services.

<PAGE>

The City submitted to the Control Board on July 21, 1995 a fourth
quarter modification to the City's financial plan for the 1995 fiscal year (the
"1995 Modification"), which projects a balanced budget in accordance with GAAP
for the 1995 fiscal year, after taking into account a discretionary transfer of
$75 million. On July 11, 1995, the City submitted to the Control Board the
Financial Plan for the 1996 through 1999 fiscal years (the "1996-1999 Financial
Plan").

The 1996-1999 Financial Plan projected revenues and expenditures for the
1996 fiscal year balanced in accordance with GAAP. The projections for the 1996
fiscal year reflected proposed actions to close a previously projected gap of
approximately $3.1 billion for the 1996 fiscal year. The proposed actions in the
1996-1999 Financial Plan for the 1996 fiscal year included (i) a reduction in
spending of $400 million, primarily affecting public assistance and Medicaid
payment to the City; (ii) expenditure reductions in agencies, totaling $1.2
billion; (iii) transitional labor savings, totaling $600 million; and (iv) the
phase-in of the increased annual pension funding cost due to revisions resulting
from an actuarial audit of the City's pension systems, which would reduce such
costs in the 1996 fiscal year.

The proposed agency spending reductions included the reduction of City
personnel through attrition, government efficiency initiatives, procurement
initiatives and labor productivity initiatives. The substantial agency
expenditure reductions proposed in the 1996-1999 Financial Plan may be difficult
to implement, and the 1996-1999 Financial Plan is subject to the ability of the
City to implement proposed reductions in City personnel and other cost reduction
initiatives. In addition, certain initiatives are subject to negotiation with
the City's municipal unions, and various actions, including proposed anticipated
State aid totaling $50 million are subject to approval by the Governor and the
Legislature.

The 1996-1999 Financial Plan also set forth projections for the 1997
through 1999 fiscal years and outlined a proposed gap-closing program to
eliminate projected gaps of $888 million, $1.5 billion and $1.4 billion for the
1997, 1998 and 1999 fiscal years, respectively, after successful implementation
of the $3.1 billion gap-closing program for the 1996 fiscal year. These actions,
a substantial number of which were not specified in detail, include additional
agency spending reductions, reduction in entitlements, government procurement
initiatives, revenue initiatives and the availability of the general reserve.

Contracts with all of the City's municipal unions either expired in the
1995 fiscal year or will expire in the 1996 fiscal years. The 1996-1999
Financial Plan provided no additional wage increases for City employees after
the 1995 fiscal year. Each 1% wage increase for all union contracts commencing
in the 1995 or

<PAGE>

1996 fiscal year would cost the City an additional $141 million for the 1996
fiscal year and $161 million each year thereafter above the amounts provided for
in the 1996-1999 Financial Plan.

Although the City has balanced its budget since 1981, estimates of the
City's revenues and expenditures, which are based on numerous assumptions, are
subject to various uncertainties. If expected federal or State aid is not
forthcoming, if unforeseen developments in the economy significantly reduce
revenues derived from economically sensitive taxes or necessitate increased
expenditures for public assistance, if the City should negotiate wage increases
for its employees greater than the amounts provided for in the City's financial
plan or if other uncertainties materialize that reduce expected revenues or
increase projected expenditures, then, to avoid operating deficits, the City may
be required to implement additional actions, including increases in taxes and
reductions in essential City services. The City might also seek additional
assistance from New York State.

The City requires certain amounts of financing for seasonal and capital
spending purposes. The City's current monthly cash flow forecast for the 1996
fiscal year shows a need of $2.4 billion of seasonal financing for the 1996
fiscal year. Seasonal financing requirements for the 1995 fiscal year increased
to $2.2 billion from $1.75 billion and $1.4 billion in the 1994 and 1993 fiscal
years, respectively.

Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance . The
potential impact on the State of such requests by localities was not included in
the projections of the State's receipts and disbursements in the State's 1995-96
fiscal year.

Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged
with oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the Legislature to assist Yonkers could result in allocation of New
York State resources in amounts that cannot yet be determined.

<PAGE>

Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of all
localities in New York State other than New York City was approximately $17.7
billion. A small portion (approximately $105 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
enabling New York State legislation. State law requires the comptroller to
review and make recommendations concerning the budgets of those local government
units other than New York City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding. Fifteen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1993.

From time to time, federal expenditure reductions could reduce, or in
some cases eliminate, federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities. If New York State, New York City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within New York State could be adversely affected. Localities also
face anticipated and potential problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Long-range
potential problems of declining urban population, increasing expenditures and
other economic trends could adversely affect localities and require increasing
New York State assistance in the future.

RATING SERVICES

The ratings of Moody's and S&P represent their opinions as to the
quality of the Municipal Obligations and other securities that they undertake to
rate. It should be emphasized, however, that ratings are relative and subjective
and are not absolute standards of quality. Although these ratings are an initial
criterion for selection of portfolio investments, Bankers Trust also makes its
own evaluation of these securities, subject to review by the Board of Trustees.
After purchase by a Portfolio, an obligation may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Portfolio. Neither
event would require a Portfolio to eliminate the obligation from its portfolio,
but Bankers Trust will consider such an event in its determination of whether a
Portfolio should continue to hold the obligation. A description of the ratings
categories of Moody's and S&P is set forth in the Appendix to this Statement of
Additional Information.

THE FOLLOWING FUNDAMENTAL INVESTMENT RESTRICTIONS AND NON-FUNDAMENTAL
INVESTMENT OPERATING POLICIES HAVE BEEN ADOPTED

<PAGE>

BY THE TRUST, WITH RESPECT TO THE RESPECTIVE FUND, AND BY EACH
RESPECTIVE PORTFOLIO BECAUSE OF REQUIREMENTS OF FEDERAL OR STATE SECURITIES LAWS
OR REGULATIONS. UNLESS AN INVESTMENT INSTRUMENT OR TECHNIQUE IS DESCRIBED IN THE
RESPECTIVE PROSPECTUS OR ELSEWHERE HEREIN, THE RESPECTIVE FUND AND THE
CORRESPONDING PORTFOLIO MAY NOT INVEST IN THAT INVESTMENT INSTRUMENT OR ENGAGE
IN THAT INVESTMENT TECHNIQUE.

INVESTMENT RESTRICTIONS

The investment restrictions below have been adopted by the Trust with
respect to each of the Funds and by the Portfolios as fundamental policies.
Under the 1940 Act, a "fundamental" policy may not be changed without the vote
of a majority of the outstanding voting securities of the Fund or Portfolio,
respectively, to which it relates, which is defined in the 1940 Act as the
lesser of (a) 67% or more of the shares present at a shareholder meeting if the
holders of more than 50% of the outstanding shares are present or represented by
proxy, or (b) more than 50% of the outstanding shares. The percentage
limitations contained in the restrictions listed below apply at the time of the
purchase of the securities. Whenever a Fund is requested to vote on a change in
the investment restrictions of a Portfolio, the Trust will hold a meeting of
Fund shareholders and will cast its votes as instructed by the 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 of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.

ALL FUNDS AND PORTFOLIOS (OTHER THAN THE LIQUID ASSETS FUND, LIQUID
ASSETS PORTFOLIO, THE 100% TREASURY FUND AND THE 100% TREASURY PORTFOLIO)

Under investment policies adopted by the Trust, on behalf of each Fund,
and by the Portfolios, each Fund and each Portfolio may not:

1. Borrow money, except for temporary or emergency (not
leveraging) purposes in an amount not exceeding 5% of the value of the
Fund's or the Portfolio's total assets (including the amount borrowed),
as the case may be, calculated in each case at the lower of cost or
market.

2. Pledge, hypothecate, mortgage or otherwise encumber more than
5% of the total assets of the Fund or the Portfolio, as the case may be,
and only to secure borrowings for temporary or emergency purposes.

3. Invest more than 5% of the total assets of the Fund or the
Portfolio, as the case may be, in any one issuer (other than U.S.
Government Obligations) or purchase more than 10% of any class of
securities of any one issuer; provided, however, that (i) up to 25% of
the assets of the

<PAGE>

Cash Management Fund, the Treasury Money Fund and the Tax Free Money
Fund (and Cash Management Portfolio, Treasury Money Portfolio and Tax
Free Money Portfolio), and all of the assets of the NY Tax Free Money
Fund (and NY Tax Free Money Portfolio), may be invested without regard
to this restriction, and (ii) this restriction shall not preclude the
purchase by the Tax Free Money Fund (or Tax Free Money Portfolio) of
issues guaranteed by the U.S. Government, its agencies or
instrumentalities or backed by letters of credit or guarantees of one or
more commercial banks or other financial institutions, even though any
one such commercial bank or financial institution provides a letter of
credit or guarantee with respect to securities which in the aggregate
represent more than 5%, but not more than 10%, of the total assets of
the Fund or the Portfolio, as the case may be; PROVIDED, HOWEVER, that
nothing in this investment restriction shall prevent the Trust from
investing all or part of a Fund's assets in an open-end management
investment company with the same investment objectives as such Fund.

4. Invest more than 25% of the total assets of the Fund or the
Portfolio, as the case may be, in the securities of issuers in any
single industry; provided that (i) this limitation shall not apply to
the purchase of U.S. Government Obligations, (ii) under normal market
conditions more than 25% of the total assets of the Cash Management Fund
(or Cash Management Portfolio) will be invested in obligations of
foreign and U.S. Banks, and (iii) with respect to the Tax Free Money
Fund and the NY Tax Free Money Fund (or Tax Free Money Portfolio or NY
Tax Free Money Portfolio), this limitation shall not apply to the
purchase of Municipal Obligations or letters of credit or guarantees of
banks that support Municipal Obligations; PROVIDED, HOWEVER, that
nothing in this investment restriction shall prevent the Trust from
investing all or part of a Fund's Assets in an open-end management
investment company with the same investment objectives as such Fund.

5. Make short sales of securities, maintain a short position or
purchase any securities on margin, except for such short-term credits as
are necessary for the clearance of transactions.

6. Underwrite the securities issued by others (except to the
extent the Fund or Portfolio may be deemed to be an underwriter under
the Federal securities laws in connection with the disposition of its
portfolio securities) or knowingly purchase restricted securities,
except that the Tax Free Money Fund and the NY Tax Free Money Fund (and
Tax Free Money Portfolio and NY Tax Free Money Portfolio) each may bid,
separately or as part of a group, for the purchase of Municipal
Obligations directly from an issuer for its own portfolio in order to
take advantage of any lower purchase price available. To the extent
these securities are

<PAGE>

illiquid, they will be subject to the Fund's or the Portfolio's 10%
limitation on investments in illiquid securities; PROVIDED, HOWEVER,
that nothing in this investment restriction shall prevent the Trust from
investing all or part of a Fund's Assets in an open-end management
investment company with the same investment objectives as such Fund.

7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil, gas or mineral
interests, but this shall not prevent the Fund or the Portfolio from
investing in obligations secured by real estate or interests therein.

8. Make loans to others, except through the purchase of qualified
debt obligations, the entry into repurchase agreements and, with respect
to the Cash Management Fund, the Treasury Money Fund (or Cash Management
Portfolio and Treasury Money Portfolio), the lending of portfolio
securities.

9. Invest more than an aggregate of 10% of the net assets of the
Fund or the Portfolio's, respectively, (taken, in each case, at current
value) in (i) securities that cannot be readily resold to the public
because of legal or contractual restrictions or because there are no
market quotations readily available or (ii) other "illiquid" securities
(including time deposits and repurchase agreements maturing in more than
seven calendar days); PROVIDED, HOWEVER, that nothing in this investment
restriction shall prevent the Trust from investing all or part of a
Fund's assets in an open-end management investment company with the same
investment objectives as such Fund.

10. Purchase more than 10% of the voting securities of any issuer
or invest in companies for the purpose of exercising control or
management; PROVIDED, HOWEVER, that nothing in this investment
restriction shall prevent the Trust from investing all or part of a
Fund's Assets in an open-end management investment company with the same
investment objectives as such Fund.

11. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act or in connection with a merger,
consolidation, reorganization, acquisition of assets or an offer of
exchange; PROVIDED, HOWEVER, that nothing in this investment restriction
shall prevent the Trust from investing all or part of a Fund's Assets in
an open-end management investment company with the same investment
objectives as such Fund.

12. Issue any senior securities, except insofar as it
may be deemed to have issued a senior security by reason of
(i) entering into a repurchase agreement or (ii) borrowing

<PAGE>

in accordance with terms described in the Prospectus and this Statement
of Additional Information.

13. Purchase or retain the securities of any issuer if any of the
officers or trustees of the Fund or the Portfolio or its investment
adviser owns individually more than 1/2 of 1% of the securities of such
issuer, and together such officers and directors own more than 5% of the
securities of such issuer.

14. Invest in warrants, except that the Fund or the Portfolio may
invest in warrants if, as a result, the investments (valued in each case
at the lower of cost or market) would not exceed 5% of the value of the
net assets of the Fund or the Portfolio, as the case may be, of which
not more than 2% of the net assets of the Fund or the Portfolio, as the
case may be, may be invested in warrants not listed on a recognized
domestic stock exchange. Warrants acquired by the Fund or the Portfolio
as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.

15. As to the Tax Free Money Fund and the NY Tax Free Money Fund
(or Tax Free Money Portfolio and NY Tax Free Money Portfolio), neither
the Fund (or the Portfolio as the case may be) will invest less than 80%
of its net assets in Municipal Obligations under normal market
conditions; PROVIDED, HOWEVER, that nothing in this restriction shall
prevent the Trust from investing all or part of a Fund's Assets in an
open-end management investment company with the same investment
objectives as such Fund.

LIQUID ASSETS FUND, LIQUID ASSETS PORTFOLIO, 100% TREASURY FUND AND
100% TREASURY PORTFOLIO

<PAGE>

1. Borrow money or mortgage or hypothecate assets of the
Portfolio (Fund), except that in an amount not to exceed 1/3 of the
current value of the Portfolio's (Fund's) total assets, it may borrow
money as a temporary measure for extraordinary or emergency purposes and
enter into reverse repurchase agreements or dollar roll transactions,
and except that it may pledge, mortgage or hypothecate not more than 1/3
of such assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to accommodate
requests for the withdrawal of beneficial interests (redemption of
shares) while effecting an orderly liquidation of portfolio securities
or to maintain liquidity in the event of an unanticipated failure to
complete a portfolio security transaction or other similar situations)
or reverse repurchase agreements, provided that collateral arrangements
with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for
purposes of this restriction and except that assets may be pledged to
secure letters of credit solely for the purpose of participating in a
captive insurance company sponsored by the Investment Company Institute;
for additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" below. (As an operating policy, the
Portfolio may not engage in dollar roll transactions);

2. Underwrite securities issued by other persons except insofar
as the Portfolio (Trust or the Fund) may technically be deemed an
underwriter under the Securities Act of 1933, as amended (the "1933
Act"), in selling a portfolio security;

3. Make loans to other persons except (a) through the lending of
the Portfolio's (Fund's) portfolio securities and provided that any such
loans not exceed 20% of the Portfolio's (Fund's) total assets (taken at
market value), (b) through the use of repurchase agreements or the
purchase of short-term obligations or (c) by purchasing a portion of an
issue of debt securities of types distributed publicly or privately;

4. Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts (except futures and option contracts) in the
ordinary course of business (except that the Portfolio (Trust) may hold
and

<PAGE>

sell, for the Portfolio's (Fund's) portfolio, real estate
acquired as a result of the Portfolio's (Fund's) ownership
of securities);

5. Concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it
is deemed appropriate for the achievement of the Portfolio's
(Fund's) investment objective, up to 25% of its total assets
may be invested in any one industry; and

6. Issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including deposits of
initial deposit and variation margin, are not considered to be the
issuance of a senior security for purposes of this restriction.

STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and Federal statutes and policies each Portfolio (or Trust, on behalf of the
Fund) will not as a matter of operating policy (except that no operating policy
shall prevent a Fund from investing all of its Assets in an open-end investment
company with substantially the same investment objectives):

(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the Portfolio's (Fund's) total assets (taken at market value),
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of
this restriction;

<PAGE>

and amount to the securities sold and provided that if
such right is conditional the sale is made upon the
same conditions;

(v) invest for the purpose of exercising control or
management;

(vi) purchase securities issued by any investment company
except by purchase in the open market where no
commission or profit to a sponsor or dealer results
from such purchase other than the customary broker's
commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or
consolidation; provided, however, that securities of
any investment company will not be purchased for the
Portfolio (Fund) if such purchase at the time thereof
would cause (a) more than 10% of the Portfolio's
(Fund's) total assets (taken at the greater of cost or
market value) to be invested in the securities of such
issuers; (b) more than 5% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market
value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities
of any such issuer to be held for the Portfolio (Fund);
and, PROVIDED FURTHER, that the Portfolio shall not
-------- -------
invest in any other open-end investment company
unless the Portfolio (Fund) (1) waives the investment
advisory fee with respect to assets invested in other
open-end investment companies and (2) incurs no sales
charge in connection with the investment (as an
operating policy, each Portfolio will not invest in
another open-end registered investment company);

(vii) invest more than 15% of the Portfolio's (Fund's) total net (taken at
the greater of cost or market value) in securities that are illiquid or not
readily marketable not including (a) Rule 144A securities that have been
determined to be liquid by the Board of Trustees; and (b) commercial paper that
is sold under section 4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one of the two

<PAGE>

highest categories by at least two nationally recognized
statistical rating organizations and the Portfolio's (Fund's)
Board of Trustees have determined the commercial paper to be
liquid; or (iii) is rated in one of the two highest categories by
one nationally recognized statistical rating agency and the
Portfolio's (Fund's) Board of Trustees have determined that the
commercial paper is equivalent quality and is liquid;

(viii) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

(ix) invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities that
are restricted as to resale under the 1933 Act (other than Rule
144A securities deemed liquid by the Portfolio's (Fund's) Board
of Trustees);

(x) with respect to 75% of the Portfolio's (Fund's) total
assets, purchase securities of any issuer if such
purchase at the time thereof would cause the Portfolio
(Fund) to hold more than 10% of any class of securities
of such issuer, for which purposes all indebtedness of
an issuer shall be deemed a single class and all
preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall
not be subject to this restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with
respect to 75% of its assets, invest more than 5% of
its total assets in the securities (excluding U.S.
Government securities) of any one issuer;

(xii) purchase or retain in the Portfolio's (Fund's)
portfolio any securities issued by an issuer any
of whose officers, directors, trustees or security
holders is an officer or Trustee of the Portfolio
(Trust), or is an officer or partner of the
Adviser, if after the purchase of the securities
of such issuer for the Portfolio (Fund) one or
more of such persons owns beneficially more than
1/2 of 1% of the shares or securities, or both,
all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially
more than 5% of such shares or securities, or
both, all taken at market value;

(xiii) invest more than 5% of the Portfolio's (Fund's)

<PAGE>

net assets in warrants (valued at the lower of
cost or market) (other than warrants acquired by
the Portfolio (Fund) as part of a unit or attached
to securities at the time of purchase), but not
more than 2% of the Portfolio's (Fund's) net
assets may be invested in warrants not listed on
the American Stock Exchange or the New York Stock
Exchange, Inc. ("NYSE");

(xiv) make short sales of securities or maintain a short
position, unless at all times when a short
position is open it owns an equal amount of such
securities or securities convertible into or
exchangeable, without payment of any further
consideration, for securities of the same issue
and equal in amount to, the securities sold short,
and unless not more than 10% of the Portfolio's
(Fund's) net assets (taken at market value) is
represented by such securities, or securities
convertible into or exchangeable for such
securities, at any one time (the Portfolio (Fund)
has no current intention to engage in short
selling);

For purposes of diversification under the 1940 Act, identification of
the "issuer" of a Municipal Obligation depends on the terms and conditions of
the obligation. If the assets and

<PAGE>

revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the subdivision, and the
obligation is backed only by the assets and revenues of the subdivision, the
subdivision will be regarded as the sole issuer. Similarly, if a private
activity bond is backed only by the assets and revenues of the nongovernmental
user, the nongovernmental user will be deemed to be the sole issuer. If in
either case the creating government or another entity guarantees an obligation
or issues a letter of credit to secure the obligation, the guarantee or letter
of credit will be considered a separate security issued by the government or
entity and would be separately valued.

PORTFOLIO TURNOVER

Each of the Portfolios may attempt to increase yields by trading to take
advantage of short-term market variations, which results in higher portfolio
turnover. This policy does not result in higher brokerage commissions to the
Portfolios, however, as the purchases and sales of portfolio securities are
usually effected as principal transactions. The Portfolios' turnover rates are
not expected to have a material effect on their income and have been and are
expected to be zero for regulatory reporting purposes.

PORTFOLIO TRANSACTIONS

Decisions to buy and sell securities and other financial instruments for
a Portfolio are made by Bankers Trust, which also is responsible for placing
these transactions, subject to the overall review of the Board of Trustees.
Although investment requirements for each Portfolio are reviewed independently
from those of the other accounts managed by Bankers Trust and those of the other
Portfolios, investments of the type the Portfolios may make may also be made by
these other accounts or Portfolios. When a Portfolio and one or more other
Portfolios or accounts managed by Bankers Trust are prepared to invest in, or
desire to dispose of, the same security or other financial instrument, available
investments or opportunities for sales will be allocated in a manner believed by
Bankers Trust to be equitable to each. In some cases, this procedure may affect
adversely the price paid or received by a Portfolio or the size of the position
obtained or disposed of by a Portfolio.

Purchases and sales of securities on behalf of the Portfolios usually
are principal transactions. These securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. The
cost of securities purchased from underwriters includes an underwriting
commission or concession and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down. U.S. Government
Obligations are generally purchased from underwriters or dealers, although
certain newly issued U.S. Government Obligations may be purchased directly from
the U.S.

<PAGE>

Treasury or from the issuing agency or instrumentality.

Over-the-counter purchases and sales are transacted directly with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere and principal transactions are not entered
into with persons affiliated with the Portfolios except pursuant to exemptive
rules or orders adopted by the Securities and Exchange Commission (the "SEC").
Under rules adopted by the SEC, broker-dealers may not execute transactions on
the floor of any national securities exchange for the accounts of affiliated
persons, but may effect transactions by transmitting orders for execution.

In selecting brokers or dealers to execute portfolio transactions on
behalf of a Portfolio, Bankers Trust seeks the best overall terms available. In
assessing the best overall terms available for any transaction, Bankers Trust
will consider the factors it deems relevant, including the breadth of the market
in the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
addition, Bankers Trust is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage, but not research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Portfolio involved, the other Portfolios and/or other accounts over which
Bankers Trust or its affiliates exercise investment discretion. Bankers Trust's
fees under its agreements with the Portfolios are not reduced by reason of its
receiving brokerage services.

NET ASSET VALUE

The Prospectuses discuss the time at which the net asset values of the
Funds are determined for purposes of sales and redemptions. The net asset value
of a Fund's investment in a Portfolio is equal to the Fund's pro rata share of
the total investment of the Fund and of the other investors in the Portfolio
less the Fund's pro rata share of the Portfolio's liabilities. The following is
a description of the procedures used by the Portfolios in valuing their assets.

The valuation of each Portfolio's securities is based on their amortized
cost, which does not take into account unrealized capital gains or losses.
Amortized cost valuation involves initially valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, generally without regard to the impact of fluctuating interest rates on
the market value of the instrument. Although this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Portfolio would receive if
it sold the instrument.

<PAGE>

The Portfolios' use of the amortized cost method of valuing their
securities is permitted by a rule adopted by the SEC. Each Portfolio will also
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of two years or less and
invest only in securities determined by or under the supervision of the Board of
Trustees to be of high quality with minimal credit risks.

Pursuant to the rule, the Board of Trustees of each Portfolio also has
established procedures designed to allow investors in the Portfolio, such as the
Trust, to stabilize, to the extent reasonably possible, the investors' price per
share as computed for the purpose of sales and redemptions at $1.00. These
procedures include review of each Portfolio's holdings by the Portfolio's Board
of Trustees, at such intervals as it deems appropriate, to determine whether the
value of the Portfolio's assets calculated by using available market quotations
or market equivalents deviates from such valuation based on amortized cost.

The rule also provides that the extent of any deviation between the
value of each Portfolio's assets based on available market quotations or market
equivalents and such valuation based on amortized cost must be examined by the
Portfolio's Board of Trustees. In the event the Portfolio's Board of Trustees
determines that a deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, pursuant to the rule, the
respective Portfolio's Board of Trustees must cause the Portfolio to take such
corrective action as such Board of Trustees regards as necessary and
appropriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or valuing the Portfolio's assets by using available
market quotations.

Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day the Portfolio
determines its net asset value. At the close of each such business day, the
value of each investor's beneficial interest in the Portfolio will be determined
by multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals, which are to be
effected as of the close of business on that day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of net additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the

<PAGE>

aggregate net asset value of the Portfolio as of the close of business on such
day plus or minus, as the case may be, the amount of net additions to or
withdrawals from the aggregate investments in the Portfolio by all investors in
the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio as of the close of the
following business day.

PURCHASE AND REDEMPTION INFORMATION

The Trust may suspend the right of redemption or postpone the date of
payment for shares during any period when: (a) trading on the NYSE is restricted
by applicable rules and regulations of the SEC; (b) the NYSE is closed for other
than customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as determined by the SEC.

Under the terms of a Distribution Agreement, Signature acts as
distributor on a "best efforts" basis to solicit orders for the sale of shares
of the Funds and will undertake such advertising and promotion as it believes
reasonable in connection with soliciting orders. In addition to Signature's
duties as distributor, Signature may, in its discretion, perform additional
functions in connection with transactions in the shares of the Funds. Pursuant
to the terms of the Trust's Distribution Plan (the "Plan"), pursuant to Rule
12b-1 under the 1940 Act, Signature may seek reimbursement in an amount not
exceeding 0.20% or the Trust's net assets annually for expenses incurred in
connection with any activities primarily intended to result in the sale of the
Funds' shares, which are described in the Prospectuses.

The Plan provides that it will continue in effect from year to year only
if its continuance is approved annually by the Trust's Board of Trustees,
including a majority of the Trustees who are not "interested persons," as
defined by the 1940 Act, of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related
thereto (the "Qualified Trustees"). The Plan may not be amended to increase
materially the amount to be spent for the services provided by Signature without
shareholder approval and all material amendments of the Plan must also be
approved by the Trustees in the manner described above. The Plan may be
terminated with respect to a Fund at any time by majority vote of the Qualified
Trustees or a majority of the shares of the Fund outstanding. Pursuant to the
Plan, Signature will provide to the Board of Trustees periodic reports of any
amounts expended under the Plan and the purpose for which expenditures were
made.

Signature did not seek reimbursement under the Plan during the Trust's
fiscal years ended December 31, 1991, 1992, 1993 , 1994 or 1995.

<PAGE>

MANAGEMENT OF THE TRUST AND PORTFOLIOS

The Trustees and officers of the Trust and the Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts 02116.

TRUSTEES OF THE TRUST

KELVIN J. LANCASTER (age 71) -- Trustee; Professor, Department of
Economics, Columbia University. His address is 35

Claremont Avenue, New York, New York 10027.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee;

Chairman, Chief Executive Officer and President, Signature
Financial Group, Inc. ("SFG") (since December, 1988) and
Signature (since April, 1989).

TRUSTEES OF THE PORTFOLIOS

Lane, Chappaqua, New York 10514.

<PAGE>

S. LELAND DILL (age 65) -- Trustee; Retired; Director, Coutts & Company
Group; and Coutts & Co. (U.S.A.) International; Director, Zweig Series Trust;
formerly Partner of KPMG Peat Marwick; Director, Vinters International Company
Inc.; General Partner of Pemco (an investment company registered under the 1940
Act). His address is 5070 North Ocean Drive, Singer Island, Florida 33404.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee of each
Portfolio; Chairman, Chief Executive Officer and President, SFG (since December,
1988) and Signature (since April, 1989).

OFFICERS OF THE TRUST AND THE PORTFOLIOS

Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.

DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).

JOHN R. ELDER (age 47) -- Treasurer; Vice President, SFG (since April
1995); Treasurer, Phoenix Family of Mutual Funds (prior to April 1995).

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer;

Assistant Treasurer, SFG (since December, 1988) and Signature (since April,
1989).

DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993).

<PAGE>

(September, 1989 to May, 1992) .

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature
(since April, 1989).

ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Assistant Secretary, Signature (since September 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992) .

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolios. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trust
or any Portfolio for serving as an officer or Trustee of the Trust or the
Portfolios. The Trust pays each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses. The Portfolios and International Equity, Intermediate
Tax Free, Utility, Short/Intermediate U.S. Government Securities, Capital
Appreciation, Equity 500 Index, Asset Management and BT Investment Portfolios
(together with the Trust, the "Fund Complex") collectively pay each Trustee who
is not a director, officer or employee of the Adviser, the Distributor, the
Administrator or any of their affiliates an annual fee of $10,000, respectively,
per annum plus $1,250, respectively, per meeting attended and reimburses them
for travel and out-of-pocket expenses.

For the fiscal year ended December 31, 1995, the Cash Management Fund,
Liquid Assets Fund, Treasury Money Fund, Tax Free Money Fund and NY Tax Free
Money Fund incurred Trustees fees equal to $2,027, $773, $2,027, $2,077 and
$2,077, respectively. For the same period, Cash Management Portfolio, Liquid
Assets Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio and NY Tax
Free Money Portfolio incurred Trustees fees equal to $1,868, $1,365, $1,868,
$1,918, and $1,918, respectively.

<PAGE>

As of the fiscal year ended December 31, 1995, the 100% Treasury Fund
and 100% Treasury Portfolio had not commenced investment operations and,
therefore, incurred no Trustees fees.

The following table reflects fees paid to the Trustees of the Trust and
the Portfolios for the year ended December 31, 1995.

TRUSTEE COMEPSENSATION TABLE

Aggregate Total Compensation
Name of Person, Compensation from Fund Complex
Position from Trust Paid to Trustees

Kelvin Lancaster,

Trustee of Trust $12,500 $12,500

Philip Saunders, Jr.,

Trustee of Trust
and Portfolios $12,500 $12,500
s

Charles Biggar,

Trustee of Portfolios none $12,500

S. Leland Dill,
Trustee of Trust
and Portfolios none $12,500

Bankers Trust reimbursed the Funds and Portfolios for a portion of
their Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.

As of March 31, 1996, the Trustees and officers of the Trust and the
Trustees of each Portfolio, owned in the aggregate less than 1% of the shares of
any Fund or of the Trust (all series taken together). As of March 31, 1996,
Bankers Trust on behalf of its customers was the record owner of the following
percentage of the outstanding shares of the following funds: Cash Management
Fund 36.98%; Tax Free Money Fund 75.94%; and NY Tax Free Money Fund

<PAGE>

76.92%. As of the same date,

Caribean Resorts/Hurricane Escrow, 280 Park Avenue, New York, New York
and Circuit City Credit Card Master Trust, 4 Albany Street, New York, New York
were the beneficial owners of 11.52% and 8.24%, respectively, of the Cash
Management Fund; Burling Associates, 521 Fifth Avenue, New York, New York was
the beneficial owner of 8.39% of the Tax Free Money Fund; and Vendee 1992-1, 3
Park Plaza, Irving, California was the beneficial owner of 6.40% of the Treasury
Money Fund. Shareholders owning 25% or more of the outstanding shares of a Fund
may diminish the voting power of other shareholders proportionately.

INVESTMENT ADVISER

Under the terms of an investment advisory agreement between each
Portfolio and Bankers Trust (the "Advisory Agreement"), Bankers Trust manages
each Portfolio subject to the supervision and direction of the Board of
Trustees. Bankers Trust will: (i) act in strict conformity with each Portfolio's
Declaration of Trust, the 1940 Act and the Investment Advisors Act of 1940, as
the same may from time to time be amended; (ii) manage each Portfolio in
accordance with the Portfolio's investment objectives, restrictions and policies
as stated in the relevant Prospectus and herein; (iii) make investment decisions
for each Portfolio; and (iv) place purchase and sale orders for securities and
other financial instruments on behalf of each Portfolio.

Bankers Trust bears all expenses in connection with the performance of
services under the Advisory Agreement. The Trust and each Portfolio bears
certain other expenses incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust or the
Portfolio who are not officers, directors or employees of Bankers Trust,
Signature or any of their affiliates; SEC fees and state Blue Sky qualification
fees; administrative and services fees; certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of
shareholders, officers and Trustees of the Trust or the

Portfolio; and any extraordinary expenses.

<PAGE>

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $3,847,729, $3,807,085 and $2,687,216 , respectively, as compensation for
investment advisory services provided to Cash Management Portfolio. During the
same periods, Bankers Trust reimbursed $578,251, $537,651 and $54,176 ,
respectively, to

Cash Management Portfolio to cover expenses.

For the years ended December 31, 1995 and 1994 and the period June 7,
1993 (commencement of operations) through December 31, 1993, Bankers Trust
earned $127,704, $22,347 and $7,355, respectively, as compensation for
investment advisory services provided to Liquid Assets Portfolio. From January
1, 1995 to December 10, 1995, Bankers Trust voluntarily agreed to waive and
reimburse expenses to 0.10 of 1% of the average daily net assets of the
Portfolio. From December 11, 1995 to December 31, 1995 Bankers Trust voluntarily
agreed to waive and reimburse expenses of the Portfolio, to the extent
necessary, to limit all expenses to 0.11 of 1% of the average daily net assets
of the Portfolio. For the period December 11, 1995 to December 31, 1995, Bankers
Trust agreed to waive all expenses incurred by the Portfolio. For the period
January 1, 1995 to December 31, 1995 expenses of the Portfolio were reduced by
$178,381. During the year ended December 31, 1994 and the period June 7, 1993
(commencement of operations) through December 31, 1993, Bankers Trust reimbursed
$44,908 and $27,897, respectively, to Liquid Assets Portfolio to cover

expenses.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $1,764,890, $1,176,759 and $1,676,140 , respectively, as compensation for
investment advisory services provided to Treasury Money Portfolio. During the
same periods, Bankers Trust reimbursed $69,965, $65,359 and $55,599 ,
respectively, to

Treasury Money Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $180,724, $182,954 and $232,055 , respectively, as compensation for
investment advisory services provided to Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $31,541, $33,719 and $35,603 ,
respectively, to Tax

Free Money Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $125,340, $140,928 and $160,781 , respectively, as compensation for
investment advisory services provided to NY Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $29,751, $30,759 and $35,080 ,
respectively, to

NY Tax Free Money Portfolio to cover expenses.

As of the year ended December 31, 1995, 100% Treasury

<PAGE>

Portfolio had not commenced investment operations and, therefore, paid no
advisory fees.

ADMINISTRATOR

Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as the
respective Board of Trustees of the Trust and each Portfolio reasonably deems
necessary for the proper administration of the Trust and each Portfolio. Bankers
Trust will generally assist in all aspects of the Funds' and Portfolios'
operations; supply and maintain office facilities (which may be in Bankers
Trust's own offices), statistical and research data, data processing services,
clerical, accounting, bookkeeping and recordkeeping services (including without
limitation the maintenance of such books and records as are required under the
1940 Act and the rules thereunder, except as maintained by other agents of the
Trust or the Portfolios), internal auditing, executive and administrative
services, and stationery and office supplies; prepare reports to shareholders or
investors; prepare and file tax returns; supply financial information and
supporting data for reports to and filings with the SEC and various state Blue
Sky authorities; supply supporting documentation for meetings of the Board of
Trustees; provide monitoring reports and assistance regarding compliance with
the Trust's and each Portfolio's Declaration of Trust, by-laws, investment
objectives and policies and with Federal and state securities laws; arrange for
appropriate insurance coverage; calculate the net asset value, net income and
realized capital gains or losses of the Trust; and negotiate arrangements with,
and supervise and coordinate the activities of, agents and others retained to
supply services.

Pursuant to a sub-administration agreement (the

<PAGE>

"Sub-Administration Agreement") Signature performs such
sub-administration duties for the Trust and each Portfolio as from time to time
may be agreed upon by Bankers Trust and Signature. The Sub-Administration
Agreement provides that Signature will receive such compensation as from time to
time may be agreed upon by Signature and Bankers Trust. All such compensation
will be paid by Bankers Trust.

Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant to
the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over the Fund,
Bankers Trust will reimburse the Fund for the excess expense to the extent
required by state law. As of the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to any
Fund is 2.5% of the Fund's first $30 million of average annual net assets, 2.0%
of the next $70 million of average annual net assets and 1.5% of the remaining
average annual net assets.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $944,849, $788,596 and $597,471 , respectively, for
administrative and other services provided to the Cash Management Fund and
reimbursed $4,831, $77,629 and $50,731 ,

respectively, to the Cash Management Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $1,282,576, $1,269,028 and $895,738 , respectively, for
administrative and other services provided to the Cash Management

Portfolio.

For the year ended December 31, 1995, 1994 and the period June 7, 1993
(commencement of operations) through December 31, 1993, Bankers Trust earned
$49,088, $81,948 and $26,923, respectively, for administrative and other
services to the Liquid Assets Fund and reimbursed $49,014, $115,389 and $20,387,

respectively, to the Liquid Assets Fund to cover expenses.

For the year ended December 31, 1995, 1994 and the period June 7, 1993
(commencement of operations) through December 31, 1993, Bankers Trust earned
$42,568, $7,449 and $2,452, respectively, for administrative and other services
provided to the Liquid Assets Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $3,438,574, $3,484,843 and $5,327,877 , respectively, for
administrative and other services provided to the Treasury Money Fund and
reimbursed $56,179, $82,095 and $66,485 ,

respectively, to the Treasury Money Fund to cover expenses.

<PAGE>

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $588,297, $392,252 and $558,713 , respectively, for
administrative and other services provided to the Treasury

Money Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $661,345, $669,697 and $837,020 , respectively, for administrative and
other services provided to the Tax Free Money Fund and for the years ended
December 31, 1995, 1994 and 1993 reimbursed $47,614, $64,883 and $39,006 ,
respectively, to the

Tax Free Money Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $60,241, $60,985 and $77,352 , respectively, for administrative and other
services provided to Tax Free Money Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $458,735, $516,009 and $588,572 , respectively, for
administrative and other services provided to the NY Tax Free Money Fund and for
the years ended December 31, 1995, 1994 and 1993 reimbursed $29,518, $39,715 and
$25,270 , respectively, to the NY Tax Free Money Fund to cover

expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $41,780, $46,976 and $53,594 , respectively, for administrative and other
services provided to the NY Tax Free Money Portfolio.

As of the fiscal year ended December 31, 1995, the 100% Treasury Fund
and 100% Treasury Portfolio had not commenced investment operations and,
therefore, paid no administrative

services fees.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
custodian and transfer agent for the Trust and as custodian for each Portfolio
pursuant to the Administration and Services Agreements discussed above. As
custodian, Bankers Trust holds the Funds' and each Portfolio's assets. For such
services, Bankers Trust receives monthly fees from each Fund and Portfolio,
which are included in the administrative services fees discussed above. As
transfer agent for the Trust, Bankers Trust maintains the shareholder account
records for each Fund, handles certain communications between shareholders and
the Trust and causes to be distributed any dividends and distributions payable
by the Trust. Bankers Trust is also reimbursed by the Funds for its
out-of-pocket expenses. Bankers Trust will comply with the

<PAGE>

self-custodian provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser. The
Trust has acknowledged that the term "BT" is used by and is a property right of
certain subsidiaries of Bankers Trust and that those subsidiaries and/or Bankers
Trust may at any time permit others to use that term.

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolios contemplated by the
Advisory Agreements and other activities for the Trust and the Portfolios
described in the Prospectuses and this Statement of Additional Information
without violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust or the Portfolios. If the circumstances described above should change, the
Trust's Board of Trustees would review the Trust's relationship with Bankers
Trust and consider taking all actions necessary in the circumstances. In
addition, state securities laws on this issue may differ from interpretations of
Federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022-4669, serves as Counsel to the Trust and from time to time
provides certain legal services to Bankers Trust. Coopers & Lybrand L.L.P., 1100
Main Street, Suite 900, Kansas City, Missouri 64105 has been selected as
Independent Accountants for the Trust.

ORGANIZATION OF THE TRUST

Shares of the Trust do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are

<PAGE>

transferable but have no preemptive, conversion or subscription rights.
Shareholders generally vote by Fund, except with respect to the election of
Trustees and the ratification of the selection of independent accountants.

The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when in the judgement of the Trustees
it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees without a meeting. Upon liquidation
of a Fund, shareholders of that Fund would be entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders.

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration of Trust provides for indemnification from the
Trust's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of shareholders
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations,
a possibility that the Trust believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in a manner so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Trust.

Whenever the Trust is requested to vote on a matter pertaining to a
Portfolio, the Trust will vote its shares without a meeting of shareholders of
the respective Fund if the proposal is one, if which made with respect to a
Fund, would not require the vote of shareholders of that Fund as long as such
action is permissible under applicable statutory and regulatory requirements.
For all other matters requiring a vote, the Trust will hold a meeting of
shareholders of the respective Funds and, at the meeting of investors in a
Portfolio, the Trust will cast all of its votes in the same proportion as the
votes all its shares at the Portfolio meeting, other investors with a greater
pro rata ownership of the Portfolio could have effective voting control of the
operations of the Portfolio.

The Trust was organized under the name BT Tax-Free Investment Trust and
assumed its current name of BT Investment Funds on May 16, 1988.

<PAGE>

TAXES

The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisers
with specific reference to their own tax situations.

As described above and in the Prospectuses: (i) the Cash Management
Fund, the Liquid Assets Fund, the Treasury Money Fund and the 100% Treasury Fund
are designed to provide investors with current income; (ii) the Tax Free Money
Fund is designed to provide investors with current income excluded from gross
income for Federal income tax purposes and (iii) the NY Tax Free Money Fund is
designed to provide investors with current income excluded from gross income for
Federal income tax purposes and exempt from New York State and New York City
personal income taxes. The Funds are not intended to constitute balanced
investment programs and are not designed for investors seeking capital gains,
maximum income or maximum tax-exempt income irrespective of fluctuations in
principal. Investment in the Tax Free Money Fund or the NY Tax Free Money Fund
would not be suitable for tax-exempt institutions, qualified retirement plans,
H.R. 10 plans and individual retirement accounts since such investors would not
gain any additional tax benefit from the receipt of tax-exempt income.

Each Fund intends to qualify as a separate regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). Provided that
each Fund is a regulated investment company , each Fund will not be liable for
Federal income taxes to the extent all of its taxable net investment income and
net realized long-and short-term capital gains, if any, are distributed to its
shareholders. Although the Trust expects the Funds to be relieved of all or
substantially all Federal income taxes, depending upon the extent of their
activities in states and localities in which their offices are maintained, in
which their agents or independent contractors are located or in which they are
otherwise deemed to be conducting business, that portion of a Fund's income
which is treated as earned in any such state or locality could be subject to
state and local tax. Any such taxes paid by a Fund would reduce the amount of
income and gains

available for distribution to its shareholders.

While each Fund does not expect to realize net long-term capital gains,
any such gains realized will be distributed annually as described in the
Prospectuses. Such distributions ("capital gain dividends"), if any, will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, and will be designated as

<PAGE>

capital gain dividends in a written notice mailed by the Fund to shareholders
after the close of the Fund's prior taxable year.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income or fails to certify
that he or she has provided a correct taxpayer identification number and that he
or she is not subject to "backup withholding," then the shareholder may be
subject to a 31% backup withholding tax with respect to (i) any taxable
dividends and distributions and (ii) the proceeds of any redemptions of Fund
shares. An individual's taxpayer identification number is his or her social
security number. The 31% backup withholding tax is not an additional tax and may
be credited against a taxpayer's regular Federal income tax liability.

Because the Tax Free Money Fund and the NY Tax Free Money Fund will
distribute exempt-interest dividends, all or a portion of any interest on
indebtedness incurred by a shareholder to purchase or carry shares of these
Funds will not be deductible for Federal income and New York State and New York
City personal income tax purposes. In addition, the Code may require a
shareholder of these Funds, if he receives exempt-interest dividends, to treat
as taxable income a portion of certain otherwise nontaxable social security and
railroad retirement benefit payments. Furthermore, that portion of any
exempt-interest dividend paid by one of these Funds which represents income from
private activity bonds held by the Fund may not retain its tax-exempt status in
the hands of a shareholder who is a "substantial user" of a facility financed by
such bonds, or a "related person" thereof. Moreover, as noted in the
Prospectuses for these Funds, (i) some or all of a Fund's dividends and
distributions may be specific preference items, or a component of an adjustment
item, for purposes of the Federal individual and corporate alternative minimum
taxes and (ii) the receipt of a Fund's dividends and distributions may affect a
corporate shareholder's Federal "environmental" tax liability. In addition, the
receipt of Fund dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and a Subchapter S
corporate shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are (i)
"substantial users" with respect to a facility or "related" to such users within
the meaning of the Code and (ii) subject to a Federal alternative minimum tax,
the Federal "environmental" tax, the Federal "branch profits" tax or the Federal
"excess net passive income" tax.

<PAGE>

Each Tax Free Money Fund shareholder will receive after the close of
the calendar year an annual statement as to the Federal income tax status of his
dividends and distributions from the Fund for the prior calendar year. Each NY
Tax Free Money Fund shareholder will receive after the close of the calendar
year an annual statement as to the Federal income and New York State and City
personal income tax status of his dividends and distribution from the Fund for
the prior calendar year. 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. Each shareholder
will also receive, if appropriate, various written notices after the close of
the Funds' prior taxable year as to the Federal income status of his dividends
and distributions which were received from the Funds during the Funds' prior
taxable year. Shareholders should consult their tax advisers as to any state and
local taxes that may apply to these dividends and distributions. The dollar
amount of dividends excluded from Federal income taxation or exempt from New
York State and City personal income taxation, and the dollar amount subject to
such income taxation, if any, will vary for each shareholder depending upon the
size and duration of each shareholder's investment in a Fund. To the extent that
the Funds earn taxable net investment income, each of the Funds intends to
designate as taxable dividends the same percentage of each day's dividend as its
taxable net investment income bears to its total net investment income earned on
that day. Therefore, the percentage of each day's dividend designated as
taxable, if any, may vary from day to day.

PERFORMANCE INFORMATION

From time to time a Fund may quote its performance in terms of "current
yield," "effective yield" or "tax equivalent yield" in reports or other
communications to shareholders or in advertising material.

The effective yield is an annualized yield based on a compounding of
the unannualized base period return. These yields are each computed in
accordance with a standard method prescribed by the rules of the SEC, by first
determining the "net change in account value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period (the
"beginning account value"). The net change in account value equals the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares. The
unannualized "base period return" equals the net change in account value divided
by the beginning account value. Realized gains or losses or changes in
unrealized appreciation or depreciation are not

<PAGE>

taken into account in determining the net change in account value. The
tax equivalent yields of the Tax Free Money Fund and the NY Tax Free Money Fund
are computed by dividing the portion of a Fund's yield which is tax exempt by
one minus a stated income tax rate and adding the product to that portion, if
any, of the Fund's yield that is not tax exempt.

The yields are then calculated as follows:

Base Period Return = NET CHANGE IN ACCOUNT VALUE
Beginning Account Value

Current Yield = Base Period Return x 365/7

Effective Yield = [(1 + Base Period Return)365/7] - 1

Tax Equivalent Yield = CURRENT YIELD
(1 - Tax Rate)

The following table sets forth various measures of the performance for
each of the Funds for the seven days ended December 31, 1995. As of the date
hereof, the 100% Treasury Fund had not commenced investment operations and the
Liquid Assets Fund had ceased investment operations.

Cash
Tax Free NY Tax Free Management Treasury
Money Fund Money Fund Fund Money Fund

Current Yield 3.71% 3.59% 5.03% 4.86%
Effective Yield 3.78% 3.65% 5.16% 4.98%
Tax Equivalent Yield 5.38%* 5.89% **N/A N/A

* Assumes a maximum Federal rate of 31%.
** Assumes a maximum combined Federal, New York State and New York City tax
rate of 39%

<PAGE>

FINANCIAL STATEMENTS

The following financial statements for each Fund or Portfolio are
incorporated herein by reference from its annual report dated December 31, 1995,
a copy of which is attached

hereto:

<PAGE>

CASH MANAGEMENT FUND, TREASURY MONEY FUND, TAX FREE MONEY FUND AND NY TAX
FREE MONEY FUND

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31,

Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994
Financial Highlights: Supplemental data for each of the periods
presented
Notes to Financial Statements
Report of Independent Accountants

LIQUID ASSETS FUND

Financial Highlights: Supplemental data for each of the

periods presented

Notes to Financial Statements
Report of Independent Accountants

CASH MANAGEMENT PORTFOLIO, TREASURY MONEY PORTFOLIO, TAX FREE MONEY
PORTFOLIO, NY TAX FREE MONEY PORTFOLIO

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994
Financial Highlights: Selected ratios and supplemental data for each of
the periods presented
Schedule of Portfolio Investments, December 31, 1995
Notes to Financial Statements Report of Independent Accountants

LIQUID ASSETS PORTFOLIO

Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the period ended December 31, 1995
Statements of Changes in Net Assets for the period ended December 31, 1995
and December 31, 1994
Financial Highlights: Selected ratios and supplemental data for each
of the periods presented
Schedule of Portfolio Investments, December 31, 1995
Notes to Financial Statements
Report of Independent Accountants

<PAGE>

APPENDIX
DESCRIPTION OF RATINGS

DESCRIPTION OF S&P CORPORATE BOND RATINGS:

AAA - Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major categories,
except in the AAA rating category.

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:

Aaa - Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

Moody's applies the numerical modifiers 1, 2 and 3 to each generic
rating classification from Aa through B. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.

DESCRIPTION OF FITCH INVESTORS SERVICE'S CORPORATE BOND RATINGS:

AAA--Securities of this rating are regarded as strictly high-grade,
broadly marketable, suitable for investment by

A-1

<PAGE>

trustees and fiduciary institutions, and liable to but slight market
fluctuation other than through changes in the money rate. The factor last named
is of importance varying with the length of maturity. Such securities are mainly
senior issues of strong companies, and are most numerous in the railway and
public utility fields, though some industrial obligations have this rating. The
prime feature of an AAA rating is showing of earnings several times or many
times interest requirements with such stability of applicable earnings that
safety is beyond reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection through collateral
security or direct lien on specific property as in the case of high class
equipment certificates or bonds that are first mortgages on valuable real
estate. Sinking funds or voluntary reduction of the debt by call or purchase are
often factors, while guarantee or assumption by parties other than the original
debtor may also influence the rating.

AA--Securities in this group are of safety virtually beyond question,
and as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may be of
junior though strong lien - in many cases directly following an AAA security -
or the margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to ratings by
the lesser financial power of the enterprise and more local type of market.

DESCRIPTION OF DUFF & PHELPS' CORPORATE BOND RATINGS:

AAA--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury Funds.

AA+ AA, AA--High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

DESCRIPTION OF S&P'S MUNICIPAL BOND RATINGS:

AAA--Prime--These are obligations of the highest quality. They have the
strongest capacity for timely

payment of debt service.

General Obligation Bonds--In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of

management appears superior.

Revenue Bonds--Debt service coverage has been, and is expected to
remain, substantial; stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,

A-2

<PAGE>

earnings test for issuance of additional bonds and debt service reserve
requirements) are rigorous. There is evidence of superior management.

AA--High Grade--The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues. Bonds
rated AA have the second strongest capacity for payment of debt service.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.

Description of S&P municipal bond ratings:

AAA - Prime - These are obligations of the highest quality. They have
the strongest capacity for timely payment of debt service.

Revenue Bonds - Debt service coverage has been, and is expected to
remain, substantial; stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds and debt service reserve
requirements) are rigorous. There is evidence of superior management.

AA - High Grade - The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues. Bonds
rated AA have the second strongest capacity for payment of debt service.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.

DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:

A-3

<PAGE>

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

Moody's may apply the numerical modifier 1 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
within its generic rating classification possesses the strongest investment
attributes.

DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS:

Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1 or SP-2) to distinguish more clearly the
credit quality of notes as compared to bonds. Notes rated SP-1 have a very
strong or strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics are given the designation of
SP-1+. Notes rated SP-2 have a satisfactory capacity to pay principal and
interest.

DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG-1/VMIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG-1/VMIG-2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.

DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations.

A-4

<PAGE>

DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.

s F-1--Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than the strongest
issue.

DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:

Duff 1+--Highest certainty of timely payment. Short term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk free U.S. Treasury short
term obligations.

Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.

DESCRIPTION OF IBCA'S LONG-TERM RATINGS:

AAA--Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly.

AA--Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business economic or financial conditions may increase
investment risk albeit not very significantly.

A--Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BBB--Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
higher categories.

BB--Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists, but
is susceptible over time to adverse changes in business, economic or financial
conditions.

B--Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes in
business, economic or financial conditions.

CCC--Obligations for which there is a current perceived

A-5

<PAGE>

possibility of default. Timely repayment of principal and interest is
dependent on favourable business, economic or financial conditions.

CC--Obligations which are highly speculative or which have a high risk
of default.

C--Obligations which are currently in default.

Notes: "+" or "-" may be appended to a rating to denote relative status
within major rating categories.

Ratings of BB and below are assigned where it is considered that
speculative characteristics are present.

DESCRIPTION OF IBCA'S SHORT-TERM RATINGS:

A1+--Obligations supported by the highest capacity for timely
repayment.

A1--Obligations supported by a strong capacity for timely repayment.

A2--Obligations supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

A3--Obligations supported by an adequate capacity for timely repayment.
Such capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.

B--Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.

C--Obligations for which there is an inadequate capacity to ensure
timely repayment.

D--Obligations which have a high risk of default or which are currently
in default.

DESCRIPTION OF THOMSON BANK WATCH SHORT-TERM RATINGS:

TBW-1--The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-2--The second-highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".

TBW-3--The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the

A-6

<PAGE>

capacity to service principal and interest in a timely fashion is
considered adequate.

TBW-4--The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

DESCRIPTION OF THOMSON BANKWATCH LONG-TERM RATINGS:

AAA--The highest category; indicates that the ability to repay
principal and interest on a timely basis is extremely high.

AA--The second-highest category; indicates a very strong ability to
repay principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.

A--The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

BBB--The lowest investment-grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings.

NON-INVESTMENT GRADE (ISSUES REGARDED AS HAVING SPECULATIVE
CHARACTERISTICS IN THE LIKELIHOOD OF TIMELY REPAYMENT OF PRINCIPAL AND
INTEREST.)

BB--While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations.

B--Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse development
could well negatively affect the payment of interest and principal on a timely
basis.

CCC--Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial circumstances.

CC--"CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of bankruptcy or
reorganization.

D--Default

These long-term debt ratings can also be applied to local currency
debt. In such cases the ratings defined above will be preceded by the
designation "local currency".

A-7

<PAGE>

RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR
MINUS (-) DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE
ISSUE IS PLACED.

A-8

<PAGE>

CONTENTS

Investment Objectives and Policies...................................... 3
Net Asset
Value...................................................................28
Purchase and Redemption Information.....................................30
Management of the Trust and the Portfolios..............................30
Organization of the Trust...............................................38
Taxes...................................................................39

Performance
Information.............................................................41
Financial Statements .................................................43
Appendix: Description of
Ratings............................................................... A-1

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

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

<PAGE>

been authorized by the Trust. Neither the Prospectuses nor this
Statement of Additional Information constitutes an offer in any state in which,
or to any person to whom, such offer may not lawfully be made.
--------------------

BT0275G
A-10

<PAGE>

BT0329I

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS

To be added by amendment.

(b) EXHIBITS:

(1) (a) Declaration of Trust of the Trust.9
(b) Supplement to Declaration of Trust.9
(c) Second Supplement to Declaration of Trust.9

(2) By-Laws of the Trust.9

(3) Not applicable.

(4) Specimen stock certificates for shares of beneficial interest
of the Trust.1

(5) Not applicable.

(6) Distribution Agreement.7

(7) Not applicable.

<PAGE>

C-2

(8) See Exhibit 9(b).

(9) (a) See Exhibit 9(b).
(b) Administration and Services Agreement.6
(c) Schedule of Fees under Administration and Services
Agreement7

(10) Not applicable.

(11) Consent of Independent Accountants.10

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Plan of Distribution pursuant to Rule 12b-l under the
Investment Company Act of 1940, as amended (the "1940 Act").5

(16) Schedules for Computation of Performance Quotations.2

(17) Financial Data Schedules 10

(25A) Powers of Attorney.3

(25B) Powers of Attorney for the Trustees of the Portfolios.4

1 Incorporated herein by reference from this Registration
Statement as filed with the Securities and Exchange Commission
(the "SEC") on October 24, 1986.

2 Incorporated herein by reference from Post-Effective Amendment
No. 14 to this Registration Statement as filed with the SEC on
February 13, 1992.

3 Incorporated herein by reference from Post-Effective Amendment
No. 16 to this Registration Statement as filed with the SEC on
April 30, 1992.

4 Incorporated herein by reference from Post-Effective Amendment
No. 20 to this Registration Statement as filed with the SEC on
October 9, 1992.

5 Incorporated herein by reference from Post-Effective Amendment
No. 22 to this Registration Statement as filed with the SEC on
February 26, 1993.

6 Incorporated herein by reference from Post-Effective Amendment
No. 23 to this Registration Statement as filed with the SEC on
April 30, 1993.

<PAGE>

C-3

7 Incorporated herein by reference from Post-Effective Amendment
No. 29 to this Registration Statement as filed with the SEC on
November 8, 1993.

8 Incorporated herein by reference from Post-Effective Amendment
No. 33 to this Registration Statement as filed with the SEC on
April 28, 1995.

9 Incorporated herein by reference from Post-Effective Amendment
No. 34 to this Registration Statement as filed with the SEC on
July 31, 1995.

10 Filed herein.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.

Not applicable.

<PAGE>

C-4

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>

Number of Record Holders

TITLE OF CLASS (AS OF APRIL 15, 1996)
<S> <C>

Tax Free Money Fund 149
NY Tax Free Money Fund 213
Cash Management Fund 332
Treasury Money Fund 2020
Liquid Assets Fund 0
100% Treasury Fund 0
Short/Intermediate U.S. Government Securities Fund 165
Intermediate Tax Free Fund 73
Utility Fund 90
Small Cap Fund 240
Pacific Basin Equity Fund 125
European Equity Fund 0
BT Investment Lifecycle Short Range Fund 12
BT Investment Lifecycle Mid Range Fund 14
BT Investment Lifecycle Long Range Fund 15
Latin American Equity Fund 83
International Equity Fund 208
Global High Yield Securities Fund 54
Capital Appreciation Fund 215
International Bond Fund 0

</TABLE>

<PAGE>

C-5

ITEM 27. INDEMNIFICATION.

Under Article XI, Section 2 of the Trust's Declaration of Trust, any
past or present Trustee or officer of the Trust (including persons who
serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a
"Covered Person"]) is indemnified to the fullest extent permitted by
law against liability and all expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a
party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when
it is determined, in the manner specified in the Declaration of Trust,
that such Covered Person has not acted in good faith in the reasonable
belief that his actions were in or not opposed to the best interests of
the Trust. Moreover, this provision does not authorize indemnification
when it is determined, in the manner specified in the Declaration of
Trust, that such Covered Person would otherwise be liable to the Trust
or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties. Expenses may be paid by
the Trust in advance of the final disposition of any action, suit or
proceeding upon receipt of an undertaking by such Covered Person to
repay such expenses to the Trust in the event that it is ultimately
determined that indemnification of such expenses is not authorized
under the Declaration of Trust and either (i) the Covered Person
provides security for such undertaking, (ii) the Trust is insured
against losses from such advances or (iii) the disinterested Trustees
or independent legal counsel determines, in the manner specified in the
Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.

Insofar as indemnification for liability arising under the 1933 Act may
be permitted to Trustees, officers and controlling persons of the Trust
pursuant to the foregoing provisions, or otherwise, the Trust has been
advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the
Trust in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection
with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Not applicable.

<PAGE>

C-6

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Signature Broker-Dealer Services, Inc. is the Distributor (the
"Signature") for the shares of BT Investment Funds. Signature
also serves as the principal underwriter or placement agent for
other registered investment companies.

(b) Set forth below are the names, principal business addresses and
positions of each director and officer of Signature. Unless
otherwise noted, the principal business address of these
individuals is Signature Broker-Dealer Services, Inc., 6 St.
James Avenue, Boston, Massachusetts 02116. Unless otherwise
specified, none of the officers and directors of Signature serve
as officers and Trustees of the Trust.
<TABLE>
<CAPTION>

Position and Offices Position and Offices
NAME WITH SIGNATURE WITH THE REGISTRANT
<S> <C> <C>

Philip W. Coolidge Chief Executive President and Trustee
Officer, President
and Director

Linwood C. Downs Treasurer --

John R. Elder Assistant Treasurer Treasurer

Joan R. Gullinello Secretary --

Thomas M. Lenz Assistant Secretary Secretary

Molly S. Mugler Assistant Secretary Assistant Secretary

Linda T. Gibson Assistant Secretary Assistant Secretary

Andres E. Saldana Assistant Secretary Assistant Secretary

Susan Jakuboski Assistant Treasurer --

Barbara M. O'Dette Assistant Treasurer Assistant Treasurer

Beth A. Remy Assistant Treasurer --

David G. Danielson -- Assistant Treasurer

Daniel E. Shea -- Assistant Treasurer

Julie J. Wyetzner Product Management
Officer --

</TABLE>

<PAGE>

C-7

Position and Offices Position and Offices
NAME WITH SIGNATURE WITH THE REGISTRANT
<S> <C> <C>

Robert G. Davidoff Director --
CMNY Capital, L.P
135 East 57th Street
New York, NY 10022

Donald S. Chadwick Director --
Scarborough & Company
110 East 42nd Street
New York, NY 10017

Leeds Hackett Director --
National Credit
Management Corporation
10155 York Road
Cockeysville, MD 21030

Laurence E. Levine Director --
First International
Capital, Ltd.
130 Sunrise Avenue
Palm Beach, FL 33480
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

BT Investment Funds
6 St. James Avenue
Boston, MA 02116

Bankers Trust Company
4 Albany Street
New York, NY 10006

Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105

Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

<PAGE>

C-8

ITEM 32. UNDERTAKINGS.

(a) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report, with respect to the respective series of the Trust, to
shareholders upon request and without charge.

(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the
Registrant except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the
Registrant, regardless of the net asset value or values of shares
held by such requesting shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the 1933 Act and the Investment Company
Act of 1940, as amended, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the 1933 Act and that it has duly caused this Amendment to
Registrant's Registration Statement on Form N-1A to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 24th day of April, 1996.

BT INVESTMENT FUNDS

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

Pursuant to the requirements of the 1933 Act, this Amendment has been
signed below by the following persons in the capacities indicated with respect
to BT Investment Funds on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

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

KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster

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

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Cash Management Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

CASH MANAGEMENT
PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Investment Funds (File No. 33-7404) has been signed below by the following
persons in the capacities indicated with respect to Cash Management Portfolio on
April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Capital Appreciation Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

CAPITAL APPRECIATION

PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

International Equity Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

INTERNATIONAL EQUITY

PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Short/Intermediate U.S. Government Securities Portfolio has duly caused
this Amendment to the Registration Statement on Form N-1A of BT Investment Funds
(File No. 33-7404) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

SHORT/INTERMEDIATE U.S. GOVERNMENT
SECURITIES PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Investment Funds (File No. 33-7404) has been signed below by the following
persons in the

capacities indicated with respect to Short/Intermediate U.S. Government
Securities Portfolio on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Intermediate Tax Free Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

INTERMEDIATE TAX FREE PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Treasury Money Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

TREASURY MONEY PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

BT Investment Portfolios has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

BT INVESTMENT PORTFOLIOS

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Tax Free Money Portfolios has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

TAX FREE MONEY PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

NY Tax Free Money Portfolios has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 24th day of April,
1996.

NY TAX FREE MONEY PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

<PAGE>

SIGNATURES

Utility Portfolios has duly caused this Amendment to the Registration
Statement on Form N-1A of BT Investment Funds (File No. 33-7404) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on the 24th day of April, 1996.

UTILITY PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE Trustee and President
Philip W. Coolidge

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

S. LELAND DILL* Trustee
S. Leland Dill

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.

BT0329I

<PAGE>

INDEX TO EXHIBITS

11. Consent of Independent Auditors.

17. Financial Data Schedules.