1933 Act File No. 33-07404
1940 Act File No. 811-4760
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. ................
Post-Effective Amendment No. 44 ................ X
------- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 43 ..................................... X
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BT INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Jay S. Neuman, Esquire Copies to: Burton M. Leibert, Esq.
Federated Investors Tower Willkie Farr & Gallagher
Pittsburgh, Pennsylvania 15222-3779 One Citicorp Center
(Name and Address of Agent for Service) 153 East 53rd Street
New York, New York 10022
It is proposed that this filing will become effective
(check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) [ ] on pursuant to
paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on
(date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to
paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) 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.
<PAGE>
Asset Management Portfolio and BT Investment Portfolios (Asset Management
Portfolio II and Asset Management Portfolio III) have also executed this
Amendment to the Registration Statement.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
X filed the Notice required by that Rule on February 28, 1997 or intends to
file the Notice required by that Rule on or about ; or during the most
recent fiscal year did not sell any securities pursuant to Rule 24f-2 under
the Investment Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of BT INVESTMENT FUNDS,
which is comprised of eighteen funds, relates only to BT Investment Lifecycle
Long Range Fund, BT Investment Lifecycle Mid Range Fund, and BT Investment
Lifecycle Short Range Fund and is comprised of the following:
PART A INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................Cover Page.
Item 2. Synopsis......................Summary of Fund Expenses.
Item 3. Condensed Financial
Information..................Financial Highlights; Performance
Information and Reports.
Item 4. General Description of
Registrant....................The Funds; Who May Invest;
Investment Objectives and
Policies; Risk Factors:
Matching the Fund to Your
Investment Needs; Special
Information Concerning
Master-Feeder Fund Structure;
Additional Information.
Item 5. Management of the Fund........Management of the Trust and
Portfolios.
Item 6. Capital Stock and Other
Securities Dividends, Distributions and Taxes.
Item 7. Purchase of Securities Being
Offered.......................Net Asset Value; Purchase and
Redemption of Shares.
Item 8. Redemption or Repurchase....Purchase and Redemption of Shares.
Item 9. Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page..................................Cover Page.
Item 11. Table of Contents...........................Table of Contents.
Item 12. General Information and
History Organization of the Trust.
Item 13. Investment Objectives and
Policies Investment Objectives and Policies.
Item 14. Management of the Fund. ...Management of the Trust and
Portfolios.
Item 15. Control Persons and Principal
Holders of Securities.......................Management of the
Trust and
Portfolios,
Trustee
Compensation Table.
Item 16. Investment Advisory and Other
Services Investment Adviser;
Administrator.
Item 17. Brokerage Allocation.......................Portfolio
Transactions and
Brokerage
Commissions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.....................................Net Asset Value;
Valuation of
Securities;
Redemption in Kind.
Item 20. Tax Status..................................Taxation.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data Performance
Information.
Item 23. Financial Statements.......................Incorporated by
reference to the
Funds' Annual Report
dated March, 1997
pursuant to Rule 411
under the Securities
Act of 1933. (File
Nos. 33-07404 and
811-4760).
o BT INVESTMENT FUNDS o
BT Investment Lifecycle Short Range Fund
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund
A family of asset allocation funds, each investing in stocks, bonds and
short-term instruments to achieve a distinct goal.
PROSPECTUS
June 30, 1997
BT Investment Funds (the "Trust") is an open-end, management investment company
(mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the BT Investment Lifecycle
Short Range Fund, BT Investment Lifecycle Mid Range Fund and BT Investment
Lifecycle Long Range Fund (each a "Fund" and together the "Funds") that you
should know and can refer to in deciding whether the Funds' goals match your
own.
A Statement of Additional Information ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the Funds'
Service Agent at 1-800-730-1313.
Unlike other mutual funds, each Fund seeks to achieve its investment objectives
by investing all of its investable assets ("Assets") in a separate investment
company (a "Portfolio" and together the "Portfolios") 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" herein.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio. Shares of the Funds are not deposits or
obligations of, or guaranteed or endorsed by, Bankers Trust or any other banking
or depository institution. Shares are not federally guaranteed or insured by the
Federal Deposit Insurance Corporation, the U.S. government, the Federal Reserve
Board or any other agency and are subject to investment risk, including the
possible loss of the principal amount invested.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations P.O. Box 897 Pittsburgh, Pennsylvania 15230-0897
<PAGE>
I
TABLE OF CONTENTS
The Funds 3
Who May Invest 3
Summary of Fund Expenses 4
Financial Highlights 5
Investment Objective and Policies 7
Risk Factors: Matching the Fund to Your Investment Needs 10
Net Asset Value 13
Purchase and Redemption of Shares 14
Dividends, Distributions and Taxes 18
Performance Information and Reports 19
Management of the Trust and Portfolios 19
Additional Information 23
<PAGE>
THE FUNDS
Each Fund seeks to achieve its investment objective by allocating investments
among three asset classes: stocks, bonds, and short-term instruments. The Funds'
investment objectives are as follows:
o BT Investment Lifecycle Short Range Fund --seeks high income over the long
term consistent with conservation of capital.
o BT Investment Lifecycle Mid Range Fund -- seeks long term capital growth,
current income, and growth of income, consistent with reasonable investment
risk.
o BT Investment Lifecycle Long Range Fund -- seeks high total return with
reduced risk over the long term.
The Trust seeks to achieve the investment objective of each Fund by investing
all of the Assets of the Fund in the corresponding Portfolio. Each Portfolio has
the same investment objective as the corresponding Fund.
WHO MAY INVEST
The Funds are designed to make investing for your future easy. Each Fund is
diversified across stocks, bonds, and short-term instruments; each Fund is
professionally managed by a team of Bankers Trust experts; and each Fund is
specially designed to meet the investment objectives of investors at different
points in the wealth accumulation cycle. Thus, investing in the Funds is easier
than typical mutual funds, since with the Funds the worry of deciding how much
to put in stocks or bonds is left to professionals. All you decide is how long
it will be until you need your savings.
o BT Investment Lifecycle Short Range Fund: This Fund is designed for investors
with less than five years until they need their savings. Since the Fund seeks
high income over the long term, it may be appropriate for investors who need
current income rather than capital growth and who are not willing to ride out
market fluctuations.
o BT Investment Lifecycle Mid Range Fund: This Fund is designed for investors
who will not need their savings for at least five years. Since the Fund seeks
long term capital growth, current income, and growth of income, it may be
appropriate for investors who can tolerate some short-term market value
fluctuation, but who also need the added stability of share value that can be
derived from investing for income.
o BT Investment Lifecycle Long Range Fund: This Fund is designed for investors
who have more than ten years until they will need their savings. In other words,
since the Fund seeks high total return with reduced risk over the long term, the
Fund is appropriate for investors who are willing to ride out market
fluctuations.
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of the shares of each Fund, and the annual operating expenses of each Fund
and its corresponding Portfolio, as a percentage of average 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
expenses of each Fund and expenses of the corresponding Portfolio, in the
aggregate, will be less than or approximately equal to the expenses which each
Fund would incur if the Trust retained the services of an investment adviser and
the Assets of that Fund were invested directly in the type of securities being
held by the corresponding Portfolio.
BT
Investment BT Investment BT Investment
Lifecycle Lifecycle Lifecycle
Short
Range Mid Range Long Range
Fund
Fund Fund
<TABLE>
<CAPTION>
Annual Operating Expenses
(as a percentage of the average daily net assets of each Fund)
<S> <C> <C> <C> <C>
Investment advisory fee (after waivers) 0.35% 0.39% 0.43%
12b-1 fees 0.00 0.00 0.00
Other expenses (after reimbursements or waivers) 0.65 0.61 0.57
Total operating expenses (after reimbursements or waivers) 1.00% 1.00% 1.00%
Example: 1 year 3 years 5 years 10 years
You would pay the following expenses for each Fund
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period $10 $32 $55 $122
</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 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. If the plan were activated, long-term shareholders may
pay more 12b-1 fees than the economic equivalent of the maximum front-end sales
charge permitted under the rules of the National Association of Securities
Dealers, Inc. Bankers Trust has voluntarily agreed to waive a portion of its
investment advisory fee with respect to the Portfolios. Without such waivers,
each Portfolio's investment advisory fee would have been equal to 0.65% of the
Portfolio's average daily net assets. The expense table and the example reflect
a voluntary undertaking by Bankers Trust to waive or reimburse expenses such
that the total operating expenses will not exceed 1.00% of the Fund's average
net assets. In the absence of this undertaking, for the fiscal year ended March
31, 1997 "Total operating expenses" above of the BT Investment Lifecycle Short
Range Fund, BT Investment Lifecycle Mid Range Fund and BT Investment Lifecycle
Long Range Fund, and corresponding Portfolios, would have been equal to
approximately 1.65%, 1.55% and 1.48%, respectively, of each Fund's average net
assets. 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 distributed by Edgewood Services, Inc. ("Edgewood" or the
"Distributor") to investors including 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 each 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 Funds and the Portfolios, see "Management of the Trust and
Portfolios" herein.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables show selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Funds for the periods indicated and have been audited by Coopers & Lybrand
L.L.P., the Funds' independent accountants, whose report thereon appears in the
Funds' Annual Report which is incorporated by reference in the Funds' SAI.
<TABLE>
<CAPTION>
SHORT RANGE
- -----------------------------------------------------------
FOR THE
PERIOD
FOR THE YEAR ENDED OCTOBER 15,
1993
MARCH 31, (COMMENCEMENT
---------------------------------------- OF OPERATIONS)
TO
1997 1996 1995 MARCH 31,
1994
---------- ---------- ----------
- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $10.03 $ 9.50 $ 9.60 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . 0.48 0.45 0.41 0.13
Net Realized and Unrealized Gain (Loss) on Investments,
Foreign Currencies and Futures Contracts . . . . . . . 0.34 0.54 (0.13) (0.47)
---------- ---------- ---------- ----------
Total from Investment Operations . . . . . . . . . . . . . . 0.82 0.99 0.28 (0.34)
---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . . . . . . (0.54) (0.46) (0.37) (0.06)
Net Realized Gain from Investment Transactions. . . . . . -- -- (0.01) --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . (0.54) (0.46) (0.38) (0.06)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $ 10.31 $ 10.03 $ 9.50 $ 9.60
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 8.32% 10.67% 3.08%
(7.39%)*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . . . . . . $ 32,552 $ 28,899 $ 21,137 $ 17,582
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . . . 4.24% 4.64% 4.47% 3.12%*
Expenses, including expenses of the
Asset Management Portfolio III. . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . . 0.65% 0.65% 0.82% 1.12%*
</TABLE>
- - --------------------
* Annualized
<TABLE>
<CAPTION>
MID RANGE
- -----------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 14,
1993
MARCH 31, (COMMENCEMENT
---------------------------------------- OF OPERATIONS)
<S> <C> <C> <C> <C>
TO
1997 1996 1995 MARCH 31,
1994
---------- ---------- ----------
- -----------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $ 10.48 $ 9.61 $ 9.45 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . 0.42 0.41 0.37 0.11
Net Realized and Unrealized Gain (Loss) on Investments,
Foreign Currencies and Futures Contracts . . . . . . . 0.72 0.96 0.11 (0.60)
---------- ---------- ---------- ----------
Total from Investment Operations . . . . . . . . . . . . . . 1.14 1.37 0.48 (0.49)
---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . . . . . . (0.44) (0.44) (0.32) (0.06)
Net Realized Gain from Investment Transactions. . . . . . (0.38) (0.06) -- --
---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . (0.82) (0.50) (0.32) (0.06)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $ 10.80 $ 10.48 $ 9.61 $ 9.45
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 11.16% 14.65% 5.24%
(10.48%)*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . . . . . . $ 61,867 $ 51,466 $ 25,733 $ 19,170
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . . . 3.48% 4.15% 4.01% 2.77%*
Expenses, including expenses of the
Asset Management Portfolio II . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . . 0.55% 0.58% 0.76% 1.10%*
</TABLE>
- - --------------------
* Annualized
<TABLE>
<CAPTION>
LONG RANGE
- -----------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 16,
1993
MARCH 31,
(COMMENCEMENT
---------------------------------------- OF
OPERATIONS) TO
1997 1996
1995 MARCH 31, 1994
---------- ---------- ----------
- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $ 11.32 $ 10.07 $ 9.68 $ 10.00
- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . 0.35
0.37 0.30 0.02
Net Realized and Unrealized Gain (Loss) on Investments,
Foreign Currencies and Futures Contracts . . . . . . . 1.18 1.54
0.32 (0.34)
----------
- ---------- ---------- ----------
Total from Investment Operations . . . . . . . . . . . . . . 1.53 1.91
0.62 (0.32)
- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . . . . . . (0.39)
(0.38) (0.23) --
Net Realized Gain from Investment Transactions. . . . . . (0.50) (0.28)
- -- --
- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . (0.89)
(0.66) (0.23) --
- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $ 11.96 $ 11.32 $ 10.07 $ 9.68
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 13.88% 19.41% 6.60%
(8.42%)*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . . . . . . $ 78,291 $ 56,012 $ 13,366
$ 5,203
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . . . 2.73%
3.58% 3.41% 2.69%*
Expenses, including expenses of the
Asset Management Portfolio. . . . . . . . . . . . . 1.00% 1.00%
1.00% 1.00%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . . 0.48% 0.60% 0.91% 6.00%*
</TABLE>
*Annualized
Further information about each Fund's performance is contained in the Funds'
Annual Report, dated March 31, 1997, which can be obtained free of charge.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund seeks to achieve its investment objective by allocating investments
among three asset classes: stocks, bonds, and short-term instruments. The Funds'
investment objectives are as follows:
o BT Investment Lifecycle Short Range Fund --seeks high income over the long
term consistent with conservation of capital.
o BT Investment Lifecycle Mid Range Fund -- seeks long term capital growth,
current income, and growth of income, consistent with reasonable
investment risk.
o BT Investment Lifecycle Long Range Fund -- seeks high total return with
reduced risk over the long term.
The Funds offer investors a convenient means of diversifying their holdings in
various classes of assets while relieving those investors of the administrative
burdens typically associated with purchasing and holding these instruments, such
as determining asset class allocations, coordinating maturities and
reinvestments, providing for safekeeping and maintaining detailed records.
The Trust seeks to achieve the investment objective of each Fund by investing
all the Assets of the BT Investment Lifecycle Short Range Fund in the Asset
Management Portfolio III, the BT Investment Lifecycle Mid Range Fund in the
Asset Management Portfolio II, and the BT Investment Lifecycle Long Range Fund
in the Asset Management Portfolio. Each corresponding Portfolio has the same
investment objective as the Fund. There can be no assurances that the investment
objective of any of the Funds or the Portfolios will be achieved. The investment
objective of each of the Funds and the Portfolios is not a fundamental policy
and may be changed upon notice to, but without the approval of, a Fund's
shareholders or a Portfolio's investors, respectively. See "Special Information
Concerning Master Feeder Fund Structure" herein.
Since the investment characteristics of the Funds will correspond directly to
those of the Portfolios, the following is a discussion of the various
investments and investment policies of each Portfolio. Additional information
about the investment policies of the Portfolios appears in the SAI.
All Portfolios
Investment Allocations. In seeking to achieve each Portfolio's investment
objective, the Adviser, allocates the Portfolio's assets among three principal
asset classes (as discussed below): stocks, bonds and short-term instruments.
The asset classes stated below are based on risk characteristics and may not be
identical to the Portfolio's total aggregate holdings of the three types of
instruments. For example, a Portfolio may buy or sell a futures contract to
increase or decrease the Portfolio's exposure to the stock market. Bankers Trust
will normally allocate the assets of each Fund's corresponding Portfolio within
the following parameters:
Short Term Bonds Stocks
BT Investment Lifecycle Short Range Fund 0 - 65% 35 - 70% 0 - 30%
BT Investment Lifecycle Mid Range Fund 0 - 50% 30 - 60% 20 - 50%
BT Investment Lifecycle Long Range Fund 0 - 25% 25 - 55% 40 - 70%
The asset classes of the corresponding Portfolio of each Fund fluctuates around
the following neutral position: BT Investment Lifecycle Short Range Fund -- 30%
to short-term instruments, 55% to bonds and 15% to stocks; BT Investment
Lifecycle Mid Range Fund -- 20% to short-term instruments, 45% to bonds and 35%
to stocks; and BT Investment Lifecycle Long Range Fund -- 10% to short-term
instruments, 35% to bonds and 55% to stocks.
As of March 31, 1997, the asset classes of the corresponding Portfolio of each
Fund were allocated as follows: BT Investment Lifecycle Short Range Fund -- 46%
to short-term instruments, 40% to bonds and 14% to stocks; BT Investment
Lifecycle Mid Range Fund -- 40% to short-term instruments, 27% to bonds and 33%
to stocks; and BT Investment Lifecycle Long Range Fund -- 30% to short-term
instruments, 17% to bonds and 53% to stocks. Each Portfolio may make substantial
temporary investments in cash and money market instruments for defensive
purposes when, in Bankers Trust's judgment, market conditions warrant, or when
the Portfolio has less than $10 million in assets. Bankers Trust
regularly reviews each Portfolio's investment allocations, and will gradually
vary them over time to favor asset classes that, in Bankers Trust's current
judgment, provide the most favorable total return outlook consistent with each
Portfolio's investment objective. In making allocation decisions, Bankers Trust
will evaluate projections of risk, market and economic conditions, volatility,
yields and expected return. Bankers Trust will seek to reduce risk relative to
an investment in common stocks by emphasizing the bond and short-term classes
when stocks appear overvalued. Bankers Trust's management will include use of
database systems to help analyze past situations and trends, research
specialists in each of the asset classes to help in securities selection,
portfolio management professionals to determine asset allocation and to select
individual securities, and its own credit analysis as well as credit analysis
provided by rating services to determine the quality of debt securities.
Short-Term Instruments. These securities include the following types of domestic
and foreign securities and money market instruments with remaining maturities of
thirteen months or less. Bankers Trust will seek to maximize total return within
the short-term class by taking advantage of yield differentials between
different instruments, issuers and currencies. The short-term class consists 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 ("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 a 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 foreign
currencies and will have been determined to be of high quality by a nationally
recognized statistical rating organization ("NRSRO") or, if unrated, by Bankers
Trust Bonds. These securities include investment grade domestic and
foreign fixed income securities with remaining maturities or durations greater
than thirteen months. Bankers Trust seeks to maximize total returns within the
bond class by adjusting each Portfolio's investments in securities with
different credit qualities, maturities, and coupon or dividend rates, as well as
by exploiting yield differentials between securities. The bond class consists of
bonds, notes, adjustable rate preferred stocks, convertible bonds, mortgage
related and asset backed securities, domestic and foreign government and
government agency securities, zero coupon bonds, Rule 144A securities and other
intermediate and long term securities. As with the short-term class, these
securities may be denominated in U.S. dollars or foreign currency. No more than
5% of each Portfolio's net assets (at the time of investment) may be in lower
rated (BB/Ba or lower), high yield bonds. Each Portfolio may retain any bond
whose rating drops below investment grade if it is in the best interest of the
respective Fund's shareholders. Securities rated BB/Ba by a NRSRO are considered
to have speculative characteristics. See the Appendix to the SAI for further
information on these securities. Stocks. These securities include domestic
and foreign equity securities of all types (other than adjustable rate preferred
stocks, included in the bond class). Bankers Trust seeks to maximize total
return within this asset class by actively allocating assets to industry sectors
expected to benefit from major trends, and to individual stocks that it believes
to have superior investment potential. Securities in the stock class may include
common stocks, fixed rate preferred stocks (including convertible preferred
stocks), warrants, rights, depositary receipts, securities of closed end
investment companies, and other equity securities issued by companies of any
size, located anywhere in the world.
Bankers Trust believes that diversification of a Portfolio's investments among
the asset classes will, under most market conditions, better enable each
Portfolio to reduce risk while seeking high total return consistent with the
Portfolio's objectives.
Maturity and Duration. The remaining maturity of a fixed income instrument is
the amount of time left before the bond's principal is due. The duration of an
instrument or a group of instruments measures the instrument's or group of
instruments' value's expected response to changes in interest rates. Foreign
Investments and Currency Management. Each Portfolio focuses on U.S. investment
opportunities, but may invest a portion of its assets in foreign securities.
Each Portfolio will not invest more than 25% of its total assets in equity
securities of foreign issuers under normal conditions. Each Portfolio also will
not invest more than 25% of its total assets in each of the bond and short-term
classes in foreign securities and securities denominated in foreign currencies.
Foreign securities of all types will normally constitute less than 50% of each
Portfolio's assets.
In connection with each Portfolio's investments denominated in foreign
currencies, Bankers Trust may choose to utilize a variety of currency management
strategies. Bankers Trust seeks to take advantage of different yield, risk, and
return characteristics that different currencies, currency denominations, and
countries can provide to U.S. investors. In doing so, Bankers Trust will
consider such factors as the outlook for currency relationships, current and
anticipated interest rates, levels of inflation within various countries,
prospects for relative economic growth, and government policies influencing
currency exchange rates and business conditions.
To manage exposure to currency fluctuations, each Portfolio may enter into
forward currency exchange contracts (agreements to exchange one currency for
another at a future date), may buy and sell options and futures contracts
relating to foreign currencies, and may purchase securities indexed to foreign
currencies. Each Portfolio will use currency exchange contracts in the normal
course of business to lock in an exchange rate in connection with purchases and
sales of securities denominated in foreign currencies. These currency management
strategies allow Bankers Trust to hedge portfolio securities, to shift
investment exposure from one currency to another, or to attempt to profit from
anticipated declines in the value of a foreign currency relative to the U.S.
dollar. Some of these strategies will require the Portfolio to segregate liquid
assets in a custodial account to cover its obligations. For additional
information on foreign investments and currency management, see "Additional
Information" herein and the SAI. Options and Futures Contracts. Each
Portfolio may buy and sell options and futures contracts to manage its exposure
to changing interest rates, security prices and currency exchange rates, and as
an efficient means of managing allocations between asset classes. Each Portfolio
may invest in options and futures based on any type of security or index related
to the Portfolio's investments, including options and futures traded on foreign
exchanges
Some options and futures strategies, including selling futures, buying puts, and
writing calls, hedge the Portfolios' investments against price fluctuations.
Other strategies, including buying futures, writing puts, and buying calls, tend
to increase market exposure. Options and futures may be combined with each
other, or with forward contracts, in order to adjust the risk and return
characteristics of an overall strategy. See "Additional Information" herein for
further information on options on stocks, options and futures contracts on stock
indices, options on futures contracts, foreign currency exchange transactions,
and options on foreign currencies. Investment Company Securities. Securities
of other investment companies may be acquired by each Portfolio to the extent
permitted under the 1940 Act, that is, a Portfolio may invest a maximum of up to
10% of its total assets in securities of other investment companies so long as
not more than 3% of the total outstanding voting stock of any one investment
company is held by the Portfolio. In addition, not more than 5% of a Portfolio's
total assets may be invested in the securities of any one investment company.
Each Portfolio may be permitted to exceed these limitations by an exemptive
order of the SEC. It should be noted that investment companies incur certain
expenses such as management, custodian, and transfer agency fees, and,
therefore, any investment by a Portfolio in shares of other investment companies
would be subject to such duplicate expenses. Other Investments and
Investment Techniques
Each Portfolio may also utilize the following investments and investment
techniques and practices: when issued and delayed delivery securities, short
sales, indexed securities, securities lending, repurchase agreements, Rule 144A
securities, zero coupon debt securities, government securities, mortgage backed
securities, collateralized mortgage obligations, asset backed securities and
foreign investments. See "Additional Information" herein for further
information.
Additional Investment Limitations
As diversified funds, no more than 5% of the assets of each Portfolio may be
invested in the securities of one issuer (other than U.S. government
securities), except that up to 25% of a Portfolio's assets may be invested
without regard to this limitation. Each 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 each Portfolio which may not be changed
without investor approval. No more than 15% of each Portfolio's net assets may
be invested in illiquid or not readily marketable securities (including
repurchase agreements and time deposits maturing in more than seven calendar
days). Additional investment policies of each Portfolio are contained in the
SAI. RISK FACTORS: MATCHING THE FUNDS TO YOUR INVESTMENT NEEDS The Funds are
designed to make investing for your future easy. Each Fund is diversified across
stocks, bonds, and short-term instruments; each Fund is professionally managed
by a team of Bankers Trust experts; and each Fund is specially designed to meet
the investment objectives of investors at different points in the wealth
accumulation cycle. Thus, investing in the Funds is easier than typical mutual
funds, since with the Funds the worry of deciding how much to put in stocks or
bonds is left to professionals. All you decide is how long it will be until you
need your savings.
o BT Investment Lifecycle Short Range Fund: This Fund is designed for investors
with less than five years until they need their savings. Since the Fund seeks
high income over the long term, it may be appropriate for investors who need
current income rather than capital growth and who are not willing to ride out
market fluctuations.
o BT Investment Lifecycle Mid Range Fund: This Fund is designed for investors
who will not need their savings for at least five years. Since the Fund seeks
long term capital growth, current income, and growth of income, it may be
appropriate for investors who can tolerate some short-term market value
fluctuation, but who also need the added stability of share value that can be
derived from investing for income.
o BT Investment Lifecycle Long Range Fund: This Fund is designed for investors
who have more than ten years until they will need their savings. In other words,
since the Fund seeks high total return with reduced risk over the long term, the
Fund is appropriate for investors who are willing to ride out market
fluctuations.
Each Fund is designed for investors seeking to achieve their investment
objectives through a variety of investments selected at the discretion of the
Portfolio's Adviser, yet subject to parameters that generally limit risk and
exposure to any one asset class. Each Portfolio diversifies its investments
among short-term instruments, bonds and stocks as economic conditions change.
Each Fund may also be appropriate for investors who wish to moderate risks over
time by taking advantage of the asset class with the best relative value. Each
Portfolio allocates its investments within the parameters described in
"Investment Objectives, Policies and Risks" herein. Since each Portfolio's asset
allocation involves significant investment in short-term instruments and bonds
over time, it is expected that each Portfolio will be less volatile than a fund
that invests primarily in common stocks. Each 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.
Each Fund's performance may be affected by many different factors depending on
the corresponding Portfolio's emphasis. Short-term instruments are generally the
most stable securities in which each Portfolio will invest. Their returns depend
primarily on current short-term interest rates although currency fluctuations
can also be significant with respect to short-term foreign securities. The
bond class is affected primarily by interest rates: prices of fixed income
securities tend to rise when interest rates fall, and fall when interest rates
rise. Interest rate changes will have a greater impact on a Portfolio if it is
heavily invested in long term or zero coupon bonds. Fixed income securities may
also be affected by changes in credit quality.
The stock class is subject to the risks of stock market investing, including the
possibility of sudden or prolonged market declines as well as the risks
associated with individual companies. These risks may be intensified for
investments in smaller or less well known companies or in foreign securities.
Risks of Investing in Foreign Securities
The investment in foreign securities may involve additional risks. 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 a 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.
Foreign securities may be less liquid or more volatile than domestic
investments. Bankers Trust considers these factors in making investments for
each Portfolio and limits the amount of each Portfolio's assets that may be
invested in foreign securities to 25% of its total assets for each asset class
and to less than 50% for all classes under normal conditions. However, within
each Portfolio's limitations, investments in any one country or currency are not
restricted.
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. The Portfolio may
use futures and options for traditional hedging purposes to attempt to protect
the Portfolio from exposure to changing interest rates, securities prices or
currency exchange rates and for cash management or other investment purposes as
a low cost method of gaining exposure to a particular securities market without
investing directly in those securities. The use of derivatives may result in
some leverage. The Portfolio will limit the leverage created by its use of
derivatives for investment purposes by "covering" such positions as required by
the SEC. The Adviser will use derivatives only in circumstances where the
Adviser believes they offer the most economical means of improving the
risk/reward profile of a 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 indexes that by themselves would not be purchased for a Portfolio. The use of
derivatives for non hedging purposes may be considered speculative. A
description of the derivatives that the Portfolios may use and some of their
associated risks is found under "Additional Information" herein.
Each Portfolio's investment in options, futures or forward contracts, and
similar strategies depend on Bankers Trust's judgment as to the potential risks
and rewards of different types of strategies. Options and futures can be
volatile investments, and may not perform as expected. If Bankers Trust applies
a hedge at an inappropriate time or judges price trends incorrectly, options and
futures strategies may lower a Portfolio's return. Options and futures traded on
foreign exchanges generally are not regulated by U.S. authorities, and may offer
less liquidity and less protection to a Portfolio in the event of default by the
other party to the contract. Each Portfolio could also experience losses if the
prices of 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.
Further descriptions of a number of investments and investment techniques
available to the Portfolios, including foreign investments and the use of
options and futures and other investment techniques which may be considered
"derivatives", and certain risks associated with these investments and
techniques are included under "Additional Information" herein.
Portfolio Turnover
The frequency of portfolio transactions -- a Portfolio's turnover rate -- will
vary from year to year depending on market conditions. For the fiscal years
ended March 31, 1997, and 1996, respectively, each Portfolio's portfolio
turnover rates were as follows: Asset Management Portfolio III -- 307% and 221%;
Asset Management Portfolio II -- 209%, and 208%; and Asset Management Portfolio
- -- 137% and 154%. Because a higher 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.
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 Funds seek to
achieve their investment objectives by investing all of their Assets in the
corresponding Portfolio, a separate registered investment company with the same
investment objectives as the respective Fund. Therefore, an investor's interest
in the Portfolio's securities is indirect. In addition to selling a beneficial
interest to a Fund, a 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
Funds due to variations in sales commissions and other operating expenses.
Therefore, investors in the Funds should be aware that these differences may
result in differences in returns experienced by investors in the different funds
that invest in the Portfolios. Such differences in returns are also present in
other mutual fund structures. Information concerning other holders of interests
in the Portfolios is available by contacting Bankers Trust at 1-800-730-1313.
The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach. Smaller funds investing in the
Portfolios may be materially affected by the actions of larger funds investing
in the Portfolios. 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, the Portfolio may become less diverse, resulting in increased
portfolio risk. Also, funds with a greater pro rata ownership in the Portfolios
could have effective voting control of the operations of the Portfolios.
Whenever the Trust is requested to vote on matters pertaining to the Portfolio,
the Trust will, except as permitted by the SEC, hold a meeting of shareholders
of the corresponding 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 a Portfolio's investment
objectives, policies or restrictions may require the corresponding 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.
A Fund may withdraw its investments 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 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 a 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.
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 the Funds or
the Portfolios. See "Investment Objective and Policies " herein and in the SAI
for a description of the fundamental policies of the Portfolios that cannot be
changed without approval by the holders of "a majority of the outstanding voting
securities" (as defined in the 1940 Act) of each Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolios, see "Investment Objectives and Policies" herein and in the SAI. For
descriptions of the management and expenses of the Portfolios, see "Management
of the Trust and Portfolios" herein and in the SAI.
NET ASSET VALUE
The net asset value ("NAV") 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 NAV per share of each Fund is calculated once on each Valuation Day as of
the close of regular trading on 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 "Valuation Time"). The NAV 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 Portfolio and other assets), less all liabilities, by the total number of
its shares outstanding. Each Portfolio's securities and other assets are valued
on the basis of market quotations or, if market quotations are not readily
available, by a method which that Portfolio's Board of Trustees believes
accurately reflects fair value.
Under procedures adopted by the Board, a NAV for a Fund later determined to have
been inaccurate for any reason will be recalculated. Purchases and redemptions
made at a NAV 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
How To Buy Shares
The Trust accepts purchase orders for shares of each Fund at the NAV per Share
(and, if applicable, of the respective class of shares) next determined after
the order is received on each Valuation Day. See "Net Asset Value" herein.
Shares of each Fund may be available through Investment Professionals, such as
broker/dealers and investment advisers (including Service Agents).
Purchase orders for shares of each Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the "Transfer
Agent"), prior to the Valuation Time on any Valuation Day will be effective at
that day's Valuation Time. The Trust and Transfer Agent reserve the right to
reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. 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 by the following business day (trade date + 1) after an order for
shares is placed. A shareholder must settle with the Service Agent for 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 held with
Bankers Trust to settle transactions with 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 Transfer Agent.
If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
shares of each class to the Transfer Agent before the Valuation Time.
The Transfer Agent must receive payment within one business day after an order
for shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.
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
<PAGE>
If you are new to BT Investment Funds complete and sign an account application
and mail it along with your check to the address listed below. If there is no
account application accompanying this Prospectus, call the BT Service Center at
1-800-730-1313.
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
If you already have money invested in a fund in the BT Family of Funds, you can:
o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT Family of Funds, or
o Contact your Service Agent or Investment Professional.
If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional for more information and a retirement account application.
<PAGE>
Additional Information About Buying Shares
To Open an Account To Add to an Account
By WireCall the BT Service Center at Call your Investment 1-800-730-1313 to
receive Professional or wire additional wire instructions for account
investment to:
establishment.
Routing No.: 021001033
Attn: Bankers Trust/IFTC
DDA No.: 00-226-296 Deposit
FBO: (Account name)
(Account number)
Credit: Fund Number
BT Investment Lifecycle
Short Range Fund - 474
BT Investment Lifecycle
Mid Range Fund - 475
BT Investment Lifecycle Long Range Fund - 476
Specify the complete name of the Fund of your choice, and include your account
number and your name.
By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or
call BT's Service Center at BT's Service Center at
1-800-730-1313. If you are an 1-800-730-1313. If you are an
existing shareholder, you may existing shareholder, you may
exchange from another BT account exchange from another BT
account with the same registration, including, with the same
registration, including, name, address, and taxpayer name,
address, and taxpayer
ID number. ID number.
By Mail Complete and sign the account Make your check payable to the
application. Make your check complete name of the Fund of your
payable to the complete name of the choice. Indicate your Fund account Fund of
your choice. Mail to the number on your check and mail to the appropriate
address indicated on the address printed on your account statement.
application.
<PAGE>
How to Sell Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. 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 and the redemption proceeds
normally will be delivered to the shareholder's account the next day, but in any
event within seven calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Shareholder Servicing Agent does not do so, it may
be liable for any losses due to unauthorized or fraudulent instructions. Such
procedures may include, among others, requiring some form of personal
identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions and/or tape recording of
telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum, but not if an account is below the
minimum due to a change in market value. See "Minimum Investments" above for
minimum balance amounts.
To sell shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions, contact your Service Agent or call the BT Service Center at
1-800-730-1313.
If you are selling some but not all of your non-retirement account shares, leave
at least $1,000 worth of shares in the account to keep it open.
To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.
Certain requests must include a signature guarantee to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:
o Your account registration has changed within the last 30 days, o The check is
being mailed to a different address than the one on your account (record
address), o The check is being made payable to someone other than the account
owner, o The redemption proceeds are being transferred to a BT account with a
different registration, or o You wish to have redemption proceeds wired to a
non-predesignated bank account.
<PAGE>
A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
Additional Information About Selling Shares
By Wire - You must sign up for the wire feature before using it. To verify that
it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire redemption
request must be received by the Transfer Agent before 4:00 p.m. Eastern time for
money to be wired on the next business day.
In Writing - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number of
shares to be redeemed, and mail to one of the following addresses:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide a
copy of the trust document certified within the last 60 days.
For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.
Unless otherwise instructed, the Transfer Agent will send a check to the account
address of record. The Trust reserves the right to close investor accounts via
30 day notice in writing if the Fund account balance falls below the Fund
minimums.
Investor Services
BT Investment Funds provide a variety of services to help you manage your
account.
Information Services
Statements and reports that your Investment Professional or the Transfer Agent
may send to you include the following:
o Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration) o Account
statements (monthly) o Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in a Fund. Call your Investment Professional
or the BT Service Center at 1-800-730-1313 if you need additional copies of
financial reports.
Exchange Privilege
Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. Each Fund reserves the right to
terminate or modify the exchange privilege in the future. To make an exchange,
follow the procedures indicated in "How to Buy Shares" and "How to Sell Shares"
herein. Before making an exchange, please note the following:
o Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
o 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).
o 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 receive a written confirmation of each exchange transaction.
Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you.
Systematic Programs
To move money from your bank account to BT Investment Funds
Minimum Minimum Frequency Setting up or changing
Initial Subsequent
$1,000 $100 Monthly, bimonthly, For a new account, complete the
quarterly or semi- appropriate section
annually on the application.
For existing accounts, call your
Investment Professional for an application. To change the amount or frequency of
your investment, contact your Investment Professional directly or call
1-800-730-1313. Call at least 10 business days prior to your next scheduled
investment date.
<PAGE>
Systematic Withdrawal Program lets you set up periodic redemptions from your
account.
Minimum Frequency Setting up or changing
$100 Monthly, quarterly, To establish, call your Investment Professional
semi-annually or annually or call 1-800-730-1313 after your account is open. The
accounts from which the withdrawals be processed must have a minimum balance of
$10,000.
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 Bankers Trust for further information. Bankers Trust can
set up your new account in a Fund under a number of several tax-savings or
tax-deferred plans. Minimums may differ from those listed elsewhere in this
Prospectus.
o 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.
o Rollover IRAs: tax-deferred retirement accounts that retain the special
tax advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.
o 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.
o 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.
o 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.
o 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.
o 403(b) Custodian Accounts: defined contribution plans open to employees
of most non-profit organizations and educational institutions.
o Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. Each Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
distributed quarterly. In addition, the Fund will distribute net capital gains,
if any, at least annually and potentially semi-annually, if required, to remain
in compliance with the applicable tax regulations. 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. Each Fund intends to qualify 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 Funds' income and short-term capital gains are taxed as
dividends, and long term capital gain distributions are taxed as long term
capital gains. The Funds' 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. Each Fund will send each shareholder a
tax statement by January 31 showing the tax status of the distributions received
in the past year.
Capital Gains. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should keep your regular account statements
to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, each 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. Income
received by the Portfolios from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. 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 Funds' performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include each Fund's investment results
and/or comparisons of its investment results to the Lipper Flexible Funds
Average, S&P 500 Index, Salomon Broad Investment Grade Bond Index, Salomon U.S.
Dollar T Bill Index and various unmanaged indices (or a blended rate of several
of such indices) or results of other mutual funds or investment or savings
vehicles. Each 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 Funds. The "total return" refers to the change in the value of an investment
in each 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. 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. The Trust may
provide annualized "yield" quotations for the Funds. The "yield" of a 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 the investment.
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 Fund's expenses. In addition, during
certain periods for which total return or yield quotations may be provided,
Bankers Trust, as Adviser, Service Agent or Administrator may have voluntarily
agreed to waive portions of its fees on a month to month basis. Such waivers
will have the effect of increasing a 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
Portfolios' financial statements, including listings of investment securities
held by the Portfolios at those dates. Annual reports are audited by independent
accountants.
MANAGEMENT OF THE TRUST AND PORTFOLIOS
Board of Trustees
The affairs of the Trust and each 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 each Portfolio, neither
the Trust nor any Portfolio requires employees other than its officers. None of
the Trust's or any Portfolio's officers devotes full time to the affairs of the
Trust or the respective Portfolio.
The Trustees of each of the Trust and the Portfolios 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. For more information with
respect to the Trustees of the Trust and the Portfolios, see "Management of the
Trust and Portfolios" in the SAI.
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 each Fund in the corresponding Portfolio. Each Portfolio has retained
the services of Bankers Trust, as investment adviser. Mr. Philip Green, and Ms.
Karen Keller are responsible for the day-to-day management of the Portfolios.
Mr. Green, Vice President, is a portfolio manager in the structured product
group. Mr. Green joined Bankers Trust in 1985 and has over thirteen years of
investment experience. During his career, Mr. Green has held a wide variety of
portfolio management assignments including asset allocation portfolios, currency
portfolios, and equity/bond structured portfolios. He received his B.S.E. from
the Wharton School of Business and a M.B.A. from New York University. Mr. Green
managed the Portfolios from January, 1995 to July, 1996, and since March, 1997.
Ms. Keller, Vice President, is a portfolio manager for tactical asset
allocation portfolios. She also provides on going research for model development
and portfolio strategies. Ms. Keller joined Bankers Trust in October, 1988 and
has over eight years of investment experience. Previously, she was a mutual fund
accountant at State Street Bank and Trust Company. She has a B.A. in Economics
from Tufts University and an M.B.A. in Finance from New York University. Ms.
Keller
has been overseeing the management of the Portfolios since their inception
in 1993.
Bankers Trust, a New York banking corporation with principal offices at 130
Liberty Street, New York, New York 10006, 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 March
31, 1997, Bankers Trust New York Corporation was the seventh largest bank
holding company in the United States with total assets of approximately $123
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 50 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 $233 billion in assets under management globally. Of that total,
approximately $4 billion are in tactical asset allocation funds. This makes
Bankers Trust one of the nation's leading managers of tactical asset allocation
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 the respective Portfolio, manages each Portfolio in accordance with that
Portfolio's investment objective 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. Bankers Trust may utilize the expertise of
any of its worldwide subsidiaries and affiliates to assist it in its role as
investment adviser. All orders for investment transactions on behalf of each
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 each 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 or 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 0.65% of the
average daily net assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the 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.
Administrator
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV 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 0.65% 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 the Portfolios and generally assists the Board of Trustees of the Portfolios
in all aspects of the administration and operation of the Portfolios. Each
Administration and Services Agreement provides for the respective Portfolio to
pay Bankers Trust a fee computed daily and paid monthly at the rate of 0.10% 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 Edgewood, at Bankers Trust's expense. For
more information, see the SAI.
For the fiscal year of each Fund ended March 31, 1997, the Funds and their
respective Portfolios, after a partial waiver by Bankers Trust, paid Bankers
Trust total administrative and services fees equal to 0.40%, 0.46% and 0.49%,
respectively, of the average daily net assets of the BT Investment Lifecycle
Short Range Fund, BT Investment Lifecycle Mid Range Fund and BT Investment
Lifecycle Long Range Fund. Distributor Edgewood Services, Inc. is the
principal distributor for shares of the Fund. In addition, Edgewood and its
affiliates provide the Trust with office facilities and currently provide
administration and distribution services for other registered investment
companies. The principal business address of Edgewood and its affiliates is
Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b 1
under the 1940 Act (the "Plan"), Edgewood, as Distributor, 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 Edgewood who, as their
primary activity, engage in or support the distribution of shares; printing the
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 Funds; costs of placing
advertising in various media; services of parties other than Edgewood 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 respective 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 respective Fund. To the extent expenses of
Edgewood 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 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 Trust and each Portfolio
and serves as the Transfer Agent for the Trust and each Portfolio under the
Trust's 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 and was established
and designated on August 12, 1992. The Trust offers shares of beneficial
interest of separate series, par value $0.001 per share. The shares of the other
series of the Trust are offered through separate prospectuses. No series of
shares has any preference over any other series.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of 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 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.
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.
Asset Management Portfolio II and Asset Management Portfolio III are each a
series of BT Investment Portfolios, an open end management investment company.
BT Investment Portfolios and Asset Management Portfolio are each organized as
trusts under the laws of the State of New York. Each Portfolio's Declaration of
Trust provides that the corresponding 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 a Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the corresponding 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 corresponding Portfolios. The interest in BT Investment
Portfolios are divided into separate series, such as Asset Management Portfolio
II and Asset Management Portfolio III. No series of BT Investment Portfolios has
any preference over any other series.
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 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. As of May 28, 1997, BT
Pension Plan c/o Bankers Trust Company, Jersey City, New Jersey, owned 53.44%,
of the voting securities of the BT Investment Lifecycle Short Range Fund, and
therefore, may, for certain purposes, be deemed to control the Fund and be able
to affect the outcome of certain matters presented for a vote of its
shareholders. As of May 28, 1997, BT Pension Plan c/o Bankers Trust Company,
Jersey City, New Jersey, owned 29,17% of the voting securities of the BT
Investment Lifecycle Mid Range Fund, and therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of its shareholders. The series of 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
Each Fund bears its own expenses. Operating expenses for each Fund generally
consist of all costs not specifically borne by Bankers Trust or Edgewood,
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 has agreed to reimburse each Fund to the extent required by
applicable state law for certain expenses that are described in the SAI. Each
Portfolio bears its own expenses. Operating expenses for each Portfolio
generally consist of all costs not specifically borne by Bankers Trust or
Edgewood, including investment advisory and administration and services fees,
fees for necessary professional services, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.
ADDITIONAL INFORMATION When-Issued and Delayed Delivery Securities. Each
Portfolio may buy and sell securities on a when-issued or delayed delivery
basis. These transactions involve a commitment by the Portfolio to buy or sell
securities at a set price, with payment and delivery taking place at a future
date. Purchasing securities in this manner may cause greater fluctuations in the
Portfolio's share price.
Short Sales. Each Portfolio may engage in short sales with respect to securities
that it owns or has the right to obtain (for example, through conversion of a
convertible bond). These transactions, known as short sales "against the box,"
allow the Portfolio to hedge against price fluctuations by locking in a sale
price for securities it does not wish to sell immediately.
Indexed Securities. Each Portfolio may invest in indexed securities whose value
depends on the price of foreign currencies, securities indices or other
financial values or statistics. Examples include debt securities whose value at
maturity is determined by reference to the relative prices of various currencies
or to the price of a stock index. These securities may be positively or
negatively indexed; that is, their value may increase or decrease if the
underlying instrument appreciates. Securities Lending. Each 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. During the term of the loan
the Portfolio continues to bear the risk of fluctuations in the price of the
loaned securities. In lending securities to brokers, dealers and other
organizations, the Portfolio is subject to risk, 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. Repurchase
Agreements. Each Portfolio may invest in 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, a 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.
Rule 144A Securities. Each 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 each Portfolio's 15% limit on illiquid
securities. Under the supervision of the Board of Trustees of each Portfolio,
Bankers Trust determines the liquidity of restricted securities and, through
reports from Bankers Trust, that 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 each Portfolio could be
adversely affected.
Zero Coupon Debt Securities. Zero coupon debt securities 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 dividends, each
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.
Government Securities. Government securities may or may not be backed by the
full faith and credit of the U.S. government. U.S. Treasury bonds, notes and
bills and certain agency securities, such as those issued by the Federal Housing
Administration, are backed by the full faith and credit of the U.S. government
and are the highest quality government securities. Each Portfolio may also
invest a substantial portion of its portfolio in securities issued by government
agencies or instrumentalities (such as executive departments of the U.S.
government or independent Federal organizations supervised by Congress), which
may have different degrees of government backing but which are not backed by the
full faith and credit of the U.S. government. There is no guarantee that the
government will support these types of securities, and therefore they involve
more risk than other government obligations.
Mortgage Backed Securities. Mortgage backed securities are securities
representing interests in a pool of mortgages. Principal and interest payments
made on the mortgages in the underlying mortgage pool are passed through to the
investor. Unscheduled prepayments of principal shorten the securities' weighted
average life and may lower their total return. When a mortgage in the underlying
pool is prepaid, an unscheduled principal prepayment is passed through to the
investor. This principal is returned to the investor at par. As a result, if a
mortgage security were trading at a premium, its total return would be lowered
by prepayments, and if a mortgage security were trading at a discount, its total
return would be increased by prepayments. The value of these securities also may
change because of changes in the market's perception of the creditworthiness of
the Federal agency that issued them. In addition, the mortgage securities market
in general may be adversely affected by changes in governmental regulation or
tax policies.
Collateralized Mortgage Obligations ("CMOs"). 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. CMOs may be issued by governmental or non governmental entities such
as banks and other mortgage lenders. Non government securities may offer a
higher yield but also may be subject to greater price fluctuation than
government securities.
Asset Backed Securities. Asset backed securities consist of undivided fractional
interests in pools of consumer loans (unrelated to mortgage loans) held in a
trust. Payments of principal and interest are passed through to
certificateholders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee or
senior/subordination. The degree of credit enhancement varies, but generally
amounts to only a fraction of the asset backed security's par value until
exhausted. If the credit enhancement is exhausted, certificateholders may
experience losses or delays in payment if the required payments of principal and
interest are not made to the trust with respect to the underlying loans. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the loan pool, the
originator of the loans or the financial institution providing the credit
enhancement. Asset backed securities are ultimately dependent upon payment of
consumer loans by individuals, and the certificateholder generally has no
recourse to the entity that originated the loans. The underlying loans are
subject to prepayments which shorten the securities' weighted average life and
may lower their return. As prepayments flow through at par, total returns would
be affected by the prepayments: if a security were trading at a premium, its
total return would be lowered by prepayments, and if a security were trading at
a discount, its total return would be increased by prepayments. Foreign
Investments. Each 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, but 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 each 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. Each 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 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. A put option sold by a 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, each 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. A 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, each Portfolio may
make a "closing sale transaction," which involves liquidating the Portfolio's
position by selling the option previously purchased.Each 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 SAI.
Options on Stock Indices. Each 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 a 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 a 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 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 securities ("futures contracts"). This investment
technique may be used 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 or as an
efficient means of managing allocations between asset classes. A futures
contract may also be entered into to close out or offset an existing futures
position.
When used for hedging purposes, a 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 a 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.
Futures contracts do involve certain risks. These risks could include a lack of
correlation between the futures contract and the corresponding securities
market, 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 a Portfolio.
Options on Futures Contracts. Each Portfolio may invest in options on such
futures contracts for similar purposes.
Each Portfolio may not purchase or sell a futures contract or option thereon if
immediately thereafter its margin deposits on its outstanding futures contracts
(other than futures contracts entered into for bona fide hedging purposes) and
premiums paid for options thereon would exceed 5% of the market value of the
Portfolio's total assets.
Foreign Currency Exchange Transactions. Because each 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 Portfolios 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. Each 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 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.
Each 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, each 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 each 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. Each 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. Each
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 each 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 each 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 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 the options expire or
are exercised. Similarly, if a 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. Each 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. Each Portfolio's
ability to terminate 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, each 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.
There can be no assurance that the use of these portfolio strategies will
be successful.
Asset Coverage. To reduce the leverage created by each of the Portfolio's use of
futures and related options, as well as when-issued and delayed delivery
securities and foreign currency exchange transactions, each Portfolio will cover
such transactions, as required under applicable interpretations of the SEC,
either by segregating with the Portfolio's custodian liquid securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
<PAGE>
33
33
BT INVESTMENT FUNDS
BT Investment Lifecycle Short Range Fund
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund
Investment Adviser of the Portfolios and Administrator
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
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.
Cusips #055922827
#055922835
#055922843
COMBINV300 (6/97)
16
1630
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1997
BT Investment Funds
o BT Investment Lifecycle Short Range Fund
o BT Investment Lifecycle Mid Range Fund
o BT Investment Lifecycle Long Range Fund
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 only to the BT Investment Lifecycle Short Range Fund, BT Investment
Lifecycle Mid Range Fund and BT Investment Lifecycle Long Range Fund (each, a
"Fund" and collectively, the "Funds"). Each Fund seeks to achieve its investment
objective by allocating investments among three asset classes: stocks, bonds,
and short-term instruments.
As described in the Prospectus, the Trust seeks to achieve the investment
objective of each Fund by investing all the investable assets of the Fund in a
diversified open-end management investment company having the same investment
objective as such Fund. These investment companies are, respectively, Asset
Management Portfolio III, Asset Management Portfolio II, and Asset Management
Portfolio (each a "Portfolio" and collectively, the "Portfolios"). Asset
Management Portfolio II and Asset Management Portfolio III are each a series of
BT Investment Portfolios.
Shares of the Funds are sold by Edgewood Services, Inc. ("Edgewood"), the
Trust's distributor, to clients and customers (including affiliates and
correspondents) of Bankers Trust Company ("Bankers Trust"), the Portfolios'
investment adviser ("Adviser"), and to clients and customers of other
organizations.
The Trust's Prospectus for the Funds is dated June 30, 1997, and provides the
basic information investors should know before investing. The Prospectus 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 Prospectus. Capitalized terms not otherwise defined
in this Statement of Additional Information have the meanings accorded to them
in the Trust's Prospectus.
BANKERS TRUST COMPANY
Investment Adviser of Each Portfolio and Administrator
EDGEWOOD SERVICES, INC.
Distributor
Clearing Operations Pittsburgh, Pennsylvania 15230-0897 (800) 730-1313
P.O. Box 897
<PAGE>
I
TABLE OF CONTENTS
Investment Objectives and Policies......................................1
Performance Information................................................14
Valuation of Securities; Redemptions and Purchases in Kind.............16
Management of the Trust and Portfolios.................................17
Organization of the Trust..............................................22
Taxation...............................................................23
Financial Statements...................................................24
Appendix.............................................................25
<PAGE>
10
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The investment objective of each Fund is described in the Funds' Prospectus.
There can, of course, be no assurance that any Fund will achieve its investment
objective.
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. Certificates of deposit 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. Commercial paper 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.
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 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 calendar days. A mutual fund might also have to
register such restricted securities in order to dispose of them resulting in
additional expenses 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 "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 for 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 under the supervision of the Portfolio's Board of
Trustees. In reaching 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 have the authority to lend
portfolio securities to brokers, dealers and other financial organizations. The
Portfolios will not lend securities to Bankers Trust, Edgewood 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.
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. Each 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. Each 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, Government
National Mortgage Association modified pass-through mortgage-backed securities
and three-month U.S. Treasury Bills. Each Portfolio may also enter into futures
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, a 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 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 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 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 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 also adopted a further 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 (other than those entered into for
bona fide hedging purposes) would exceed 5% of the market value of the total
assets of the Portfolio.
Options on Foreign Currencies. Each 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.
Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a 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,
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.
Each Portfolio intends to write covered call options on foreign currencies. A
call option written on a foreign currency by a 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.
Each 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 amount not less than the value
of the underlying foreign currency in U.S. dollars priced 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 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 security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
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 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. Each 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.
Each 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 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 a 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. Each 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 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 each 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, each 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. 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 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. Each 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.
Each 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, a 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 each
Portfolio's ability to utilize forward contracts in the manner set forth in the
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 a 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 a Portfolio's foreign currency denominated portfolio
securities and the use of such techniques will subject a 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, a
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 a
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 poor correlation may exist between
movements in the exchange rates of the foreign currencies underlying a
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'
Prospectus 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 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 Prospectus, 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.
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 objective):
(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) 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 "Additional 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;
(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;
(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) 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.
Additional Restrictions. In order to comply with certain 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 reverse repurchase or dollar roll
transactions) for any purpose in excess of 5% 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 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 securities it does not own such that the dollar amount of such
short sales at any one time exceeds 25% of the net equity of the Portfolio
(Fund), and the value of securities of any one issuer in which the Portfolio
(Fund) is short exceeds the lesser of 2.0% of the value of the Portfolio's
(Fund's) net assets or 2.0% of the securities of any class of any U.S. issuer
and, provided that short sales may be made only in those securities which are
fully listed on a national securities exchange or a foreign exchange (This
provision does not include the sale of securities of the Portfolio (Fund)
contemporaneously owns or has the right to obtain securities equivalent in kind
and amount to those sold, i.e., short sales against the box.) (The Portfolios
(Funds) have no current intention to engage in short selling.);
(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) unless permitted to exceed
these limitations by an exemptive order of the SEC; provided further that,
except in the case of a merger or consolidation, the Portfolio (Fund) shall not
purchase any securities of any 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;
(vii) 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);
(viii) 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 excluding (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 has determined that the commercial paper
is of equivalent quality and is liquid;
(ix) 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;
(x) 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;
(xi) invest in 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;
(xii) invest in warrants (other than warrants acquired by the Portfolio
(Fund) as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost
or market) would exceed 5% of the value of the Portfolio's (Fund's) net
assets or if, as a result, more than 2% of the Portfolio's (Fund's) net
assets would be invested in warrants not listed on a recognized United
States or foreign stock exchange, to the extent permitted by applicable
state securities laws;
(xiii) 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's (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 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
(xiv) 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.
There will be no violation of any investment restriction if that restriction is
complied with at the time the relevant action is taken notwithstanding a later
change in market value of an investment, in net or total assets, in the
securities rating of the investment, or any other later change.
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 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 Trust and of other investment company clients of Bankers Trust 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.
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 fiscal years ended March 31, 1997, 1996, and 1995, the Asset Management
Portfolio paid brokerage commissions in the amount of $193,354, $132,955 and
$118,748, respectively.
For the fiscal years ended March 31 1997, 1996, and 1995, the Asset Management
Portfolio II paid brokerage commissions in the amount of $23,627, $19,304 and
$25,346, respectively.
For the fiscal years ended March 31, 1997, 1996, and 1995, the Asset Management
Portfolio III paid brokerage commissions in the amount of $7,279, $8,251 and
$15,143, respectively.
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.
The Funds' 30-day SEC yields for the period ended March 31, 1997, were as
follows:
BT Investment Lifecycle Short Range Fund--4.89%
BT Investment Lifecycle Mid Range Fund--3.94%
BT Investment Lifecycle Long Range Fund--2.86%
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 Fund may also calculate total return
figures which represent aggregate performance over a period or year-by-year
performance.
For the fiscal year ended March 31, 1997, and for the period from October 15,
1993 (commencement of operations) to March 31, 1997, the average annual total
returns for BT Investment Lifecycle Short Range Fund were 8.32%, and 5.23%
(annualized), respectively.
For the fiscal year ended March 31, 1997, and for the period from October 14,
1993 (commencement of operations) to March 31, 1997, the average annual total
returns fro BT Investment Lifecycle Mid Range Fund were 11.16%, and 7.26%
(annualized), respectively.
For the fiscal year ended March 31, 1997, and for the period from November 16,
1993 (commencement of operations) to March 31, 1997, the average annual total
returns for BT Investment Lifecycle Long Range Fund were 13.88%, and 10.57%
(annualized), respectively.
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 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 Business 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.
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.
Economic and Market Information
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.
VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES 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. 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 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 a 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, an investor, including the Fund, 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 redemption in kind and therefore shareholders
of the Fund 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. The Portfolio has advised the Trust that the Portfolio
will not redeem in kind except in circumstances in which the Fund is permitted
to redeem in kind or unless requested by the Fund.
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 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
the close of business on the following business day.
Each Fund may, at its own option, accept securities in payment for shares. The
securities delivered in payment for shares are valued by the method described
under "Net Asset Value" as of the day the Fund receives the securities. This is
a taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of Bankers Trust, appropriate
investments for the Fund's corresponding Portfolio. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of the acquiring Fund's corresponding Portfolio; (ii) be acquired by
the applicable Fund for investment and not for resale (other than for resale to
the Fund's corresponding Portfolio); (iii) be liquid securities which are not
restricted as to transfer either by law or liquidity of market; and (iv) if
stock, have a value which is readily ascertainable as evidenced by a listing on
a stock exchange, over-the-counter market or by readily available market
quotations from a dealer in such securities. Each Fund reserves the right to
accept or reject at its own option any and all securities offered in payment for
its shares.
MANAGEMENT OF THE TRUST AND PORTFOLIOS
The Trustees and officers of the Trust and Portfolios, their birthdates, and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Unless otherwise indicated, the
address of each officer is Clearing Operations, P.O. Box 897, Pittsburgh,
Pennsylvania, 15230-0897. An asterisk indicates that Trustee who is an
"interested person" (as defined in the 1940 Act) of either the Trust or the
Portfolios.
Trustees of the Trust
S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director,
Coutts Group, Coutts (U.S.A.) International; Coutts Trust Holdings Ltd;
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 (birthdate: December 10, 1924) -- Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) -- 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.
PHILIP W. COOLIDGE (birthdate: September 2, 1951) -- Trustee; Chairman,
Chief Executive Officer and President, Signature Financial Group, Inc. ("SFG")
(since December, 1988) and Signature (since April, 1989). His address is 6 St.
James Avenue, Boston, Massachusetts 02116.
Trustees of the Portfolios
CHARLES P. BIGGAR (birthdate: October 13, 1930) -- 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.
S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director,
Coutts Group; and Coutts (U.S.A.) International; Coutts Trust Holdings Ltd;
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 SAUNDERS, JR. (birthdate: October 11, 1935) -- 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.
PHILIP W. COOLIDGE (birthdate: September 2, 1951) -- Trustee of each
Portfolio; Chairman, Chief Executive Officer and President, SFG (since December,
1988) and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.
Officers of the Trust and the Portfolios
Unless otherwise specified, each officer listed below holds the same position
with the Trust and each Portfolio.
RONALD M. PETNUCH (birthdate: February 27, 1960) -- President and Treasurer;
Senior Vice President, Federated Services Company ("FSC"); formerly, Director of
Proprietary Client Services, Federated Administrative Services ("FAS"), and
Associate Corporate Counsel, Federated Investors ("FI").
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) -- Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) -- Secretary; Corporate Counsel, FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar positions for
other investment companies for which Signature, or Edgewood, respectively, 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
Edgewood 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.
<PAGE>
Trustee Compensation Table
Aggregate Total Compensation
Name of Person, Compensation from Fund Complex
Position from Trust* Paid to Trustees+**
Philip W. Coolidge,
Trustee of Trust $705 $1,250
and Portfolios
Kelvin Lancaster,
Trustee of Trust $14,000 $26,250
Philip Saunders, Jr.,
Trustee of Trust and
Portfolios $15,000 $28,750
Charles Biggar,
Trustee of Portfolios $2,500 $28,750
S. Leland Dill,
Trustee of Trust
and Portfolios $15,000 $28,750
- ------------------------------------------------------------------------------
* Information is furnished for the fiscal year ended March 31, 1997.
+ Information is provided for the last calendar year.
** Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds, BT
Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management
Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free
Money Portfolio, International Equity Portfolio, Utility Portfolio, Short
Intermediate US Government Securities Portfolio, Intermediate Tax Free
Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio, and
Capital Appreciation Portfolio.
Bankers Trust reimbursed the Funds and Portfolios for a portion of their
Trustees fees for the period above. See "Investment Adviser" and "Administrator"
herein.
As of May 28, 1997, the Trustees and officers of the Trust and the Portfolios
owned in the aggregate less than 1% of the shares of any Fund or of the Trust
(all series taken together).
As of May 28, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of BT Investment Lifecycle Short Range Fund: BT Pension Plan
c/o Bankers Trust Company, Jersey City, New Jersey, owned approximately
1,735,629 shares (53.44%); Bankers Trust Company custodian for 401(k)
Westinghouse Personal Investment, Jersey City, New Jersey, owned approximately
577,730 shares (17.79%); Bankers Trust Company acting as Trustee for Hanson
Industries Plan 401(k), Jersey City, New Jersey, owned approximately 198,393
shares (6.11%); and Bankers Trust Company acting as trustee for Westinghouse
Savannah River/Savannah River Inc. Savings, Jersey City, New Jersey, owned
approximately 192,514 shares (5.93%).
As of May 28, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of BT Investment Lifecycle Mid Range Fund: BT Pension Plan
c/o Bankers Trust Company, Jersey City, New Jersey, owned approximately
1,770,226 shares (29.17%); Bankers Trust Company custodian for 401(k)
Westinghouse Personal Investment, Jersey City, New Jersey, owned approximately
1,224,247 shares (20.50%); Bankers Trust Company acting as trustee for Hanson
Industries Plan 401(k), Jersey City, New Jersey, owned approximately 829,858
shares (13.68%); Bankers Trust Company acting as trustee for Westinghouse
Savannah River/Savannah River Inc. Savings, Jersey City, New Jersey, owned
approximately 536,537 shares (8.84%); Bankers Trust Company acting as trustee
for Millennium Chemicals 401(k), Jersey City, New Jersey, owned approximately
488,123 shares (8.04%); Charles Schwab & Co./Schwab Omnibus Account, San
Francisco, California, owned approximately 347,347 shares (5.72%); and Bankers
Trust Company acting as trustee for Suburban Propane Retirement Savings and
Investment Plan, Jersey City, New Jersey, owned approximately 346,559 shares
(5.71%).
As of May 28, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of BT Investment Lifecycle Long Range Fund: Bankers Trust
Company acting as trustee for Westinghouse Savannah River/Savannah River Inc.
Savings, Jersey City, New Jersey, owned approximately 1,348,187 shares (19.33%);
Bankers Trust Company acting as trustee for Hanson Industries Plan 401(k),
Jersey City, New Jersey, owned approximately 1,340,080 shares (19.21%); Bankers
Trust Company custodian for 401(k) Westinghouse Personal Investment, Jersey
City, New Jersey, owned approximately 1,338,312 shares (19.19%); Bankers Trust
Company acting as trustee for Millennium Chemicals 401(k), Jersey City, New
Jersey, owned approximately 829,408 shares (11.89%); Charles Schwab & Co./Schwab
Omnibus Account, San Francisco, California, owned approximately 725,376 shares
(10.41%); Bankers Trust Company acting as trustee for U.S. Industries Plan
401(k), Jersey City, New Jersey, owned approximately 389,965 shares (5.59%); and
Bankers Trust Company acting as trustee for Suburban Propane Retirement Savings
and Investment Plan, Jersey City, New Jersey, owned approximately 376,023 shares
(5.39%).
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, Edgewood 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 fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$1,882,677, $1,092,488, and $576,146, respectively, for compensation of
investment advisory services provided to Asset Management Portfolio. For the
same periods, Bankers Trust reimbursed $462,108, $279,200, and $169,159,
respectively to the Portfolio to cover expenses.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$371,709, $250,954, and $156,421, respectively, for compensation of investment
advisory services provided to Asset Management Portfolio II. For the same
periods, Bankers Trust reimbursed $111,591, $75,578, and $65,748, respectively
to the Portfolio to cover expenses.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$201,330, $166,563, and $136,199, respectively, for compensation of investment
advisory services provided to Asset Management Portfolio III. For the same
periods, Bankers Trust reimbursed $69,831, $55,645, and $62,017, respectively to
the 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 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 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"),
FSC performs such sub-administration duties for the Trust and the Portfolios as
from time to time may be agreed upon by Bankers Trust and FSC. The
Sub-Administration Agreement provides that FSC will receive such compensation as
from time to time may be agreed upon by FSC and Bankers Trust. All such
compensation will be paid by Bankers Trust.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$201,123, $166,399, and $136,157, respectively, as compensation for
administrative and other services provided to the BT Investment Lifecycle Short
Range Fund. During the same periods, Bankers Trust reimbursed $132,588,
$108,995, and $109,534, respectively, to the Fund to cover expenses.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$371,327, $250,720, and $156,366, respectively, as compensation for
administrative and other services provided to the BT Investment Lifecycle Mid
Range Fund. During the same periods, Bankers Trust reimbursed $200,884,
$144,986, and $116,867, respectively, to the Fund to cover expenses.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$436,826, $235,552, and $69,865, respectively, as compensation for
administrative and other services provided to the BT Investment Lifecycle Long
Range Fund. During the same periods, Bankers Trust reimbursed $218,456,
$155,577, and $77,393, respectively, to the Fund to cover expenses.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$289,643, $168,075, and $88,638, respectively, as compensation for
administrative and other services provided to Asset Management Portfolio.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$57,186, $38,608, and $24,065, respectively, as compensation for administrative
and other services provided to Asset Management Portfolio II.
For the fiscal years ended March 31, 1997, 1996, and 1995, Bankers Trust earned
$30,974, $25,625, and $20,954, respectively, as compensation for administrative
and other services provided to Asset Management Portfolio III.
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 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 2.50% of the
Fund's first $30 million of average annual net assets, 2.00% of the next $70
million of average annual net assets and 1.50% of the remaining average annual
net assets.
Custodian and Transfer Agent
Bankers Trust, 130 Liberty Street, New York, New York 10006, 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 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 investment
advisory agreement and other activities for the Funds and the Portfolios
described in the Prospectus 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.
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 have
been selected as Independent Accountants for 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 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.
Whenever the Trust is requested to vote on a matter pertaining to a Portfolio,
the Trust will vote its shares without a meeting of the respective Fund
shareholders if the proposal, if made with respect to such Fund, would not
require the vote of the Fund shareholders as long as such action is permissible
under applicable statutory and regulatory requirements. The Trust will hold a
meeting of the Fund shareholders for all other matters requiring a vote, and the
Trust will cast all of its votes at the meeting of investors in a Portfolio in
the same proportion as the votes of the respective Fund shareholders. Other
investors with a greater pro rata ownership of a Portfolio could have effective
voting control of the operations of the Portfolio.
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 Code.
As a regulated investment company, each Fund will not be 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.
Distributions
Dividends paid out of a 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.
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.
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.
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.
FINANCIAL STATEMENTS
The financial statements for the Funds and the Portfolios for the fiscal year
ended March 31, 1997, are incorporated herein by reference to the Annual Report
to shareholders of the Fund dated March, 1997 (File Nos. 33-07404 and
811-04760). A copy of the Annual Report may be obtained without charge by
contacting the Funds.
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3030
<PAGE>
APPENDIX
BOND AND COMMERCIAL PAPER RATINGS
Set forth below are descriptions of ratings which represent opinions as to the
quality of the securities. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.
Moody's Investors Service, Inc.'s Corporate 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-edged". 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 risk 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.
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 safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the 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 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.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating 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.
Moody's Investors Service, Inc.'s Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year.
Issuers rated Prime-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated Prime-2 or P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt 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, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Standard & Poor's Ratings Group's Corporate Bond Ratings
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P'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 than bonds in higher rated categories.
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 a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated 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. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
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 or 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.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating 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.
C1: The Rating C1 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 Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.
Standard & Poor's Ratings Group's Commercial Paper Ratings
A: S&P's commercial paper rating is a current assessment of the likelihood
of timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1 ".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
Fitch Investors Service, Inc. Bond Ratings
Investment Grade
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
High Yield Grade
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) or Minus (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion
of a project or the occurrence of a specific event.
Fitch Investors Service, Inc. Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
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 issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the "F-1+" and "F-1 " categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
Duff & Phelps Bond Ratings
Investment Grade
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, and AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, and A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, and BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
High Yield Grade
BB+, BB, and BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B, and B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
Preferred stocks are rated on the same scale as bonds but the preferred rating
gives weight to its more junior position in the capital structure. Structured
financings are also rated on this scale.
Duff & Phelps Paper/Certificates of Deposit Ratings
Category 1: Top Grade
Duff 1 plus: Highest certainty of timely payment. Short-term liquidity including
internal operating factors and/or ready 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.
Duff 1 minus: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
Category 2: Good Grade
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
Category 3: Satisfactory Grade
Duff 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * * * *
Bonds which are unrated expose the investor to risks with respect to capacity to
pay interest or repay principal which are similar to the risks of lower-rated
bonds. The Fund is dependent on the investment adviser's or investment
sub-adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
Note:
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for
the securities listed. Ratings are generally given to securities at the
time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so, and the
ratings indicated do not necessarily represent ratings which would be
given to these securities on the date of the Fund's fiscal year end.
<PAGE>
A-8
Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
Distributor
EDGEWOOD 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 Prospectus, 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. Neither the Prospectus 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. --------------------
Cusips #055922827
#055922835
#055922843
SAILIFE (6/97)
PART C OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits:
(a) Financial Statements:
Incorporated by reference to the Annual Report to
Shareholders of the Funds dated March, 1997, pursuant to
Rule 411 under the Securities Act of 1933.
(File Nos. 33-07404 and 811-4760)
(b) Exhibits:
(1) (i) Conformed Copy of Declaration of Trust of the
Trust; 9
(ii) Supplement to Declaration of Trust; 9
(iii) Second Supplement to Declaration of Trust; 9
(2) Copy of By-Laws of the Trust; 9
(3) Not applicable.
(4) Copy of Specimen stock certificates for shares of beneficial
interest of the Trust; 1
(5) Not applicable.
(6) Conformed Copy of Distributor's Contract; 10
(7) Not applicable.
(8) Conformed copy of Custodian Agreement between the Registrant
and Bankers Trust Company; +
(9) (i) Administration and Services Agreement; 6
(ii) Schedule of Fees under Administration and Services
Agreement; 7
(iii) Exhibit D to the Administration and Services
Agreement; +
(10) Not applicable.
(11) Conformed copy of Consents of Independent Accountants; +
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Conformed Copy of Plan of Distribution; 10
(16) Copy of Schedules for Computation of Performance
Quotations; 2
(17) Copy of Financial Data Schedules; +
(18) Not applicable.
(19) Conformed Copy of Power of Attorney of Registrant; 10
- -----------------------------------
+ All exhibits have been filed electronically.
1. Incorporated by reference to the Registrant's registration statement on
Form N-1A ("Registration Statement") as
filed with the Securities and Exchange Commission ("Commission") on
October 24, 1986.
2. Incorporated by reference to Post-Effective Amendment No. 14 to
egistrant's Registration Statement as filed with the Commission on February 13,
1992.
6. Incorporated by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement as filed with the Commission on April 30,
1993.
7. Incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement as filed with the Commission on November 8,
1993.
9. Incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement as filed with the Commission on July 31,
1995.
10. Incorporated by reference to Post-Effective Amendment No. 40 to
Registrant's Registration Statement as filed with the Commission on January 30,
1997.
<PAGE>
ITEM 25. Persons Controlled by or Under Common Control with Registrant:
Not applicable.
ITEM 26. Number of Holders of Securities:
Title of Class Number of Record Holders
as of July , 1997
Tax Free Money Fund 186
NY Tax Free Money Fund 206
Cash Management Fund 324
Treasury Money Fund 1818
100% Treasury Fund 0
Intermediate Tax Free Fund 80
Utility Fund 80
Small Cap Fund 517
Pacific Basin Equity Fund 191
European Equity Fund 0
BT Investment Lifecycle Short Range Fund 11
BT Investment Lifecycle Mid Range Fund 11
BT Investment Lifecycle Long Range Fund 13
Latin American Equity Fund 163
International Equity Fund 647
Global High Yield Securities Fund 86
Capital Appreciation Fund 333
International Bond Fund 0
ITEM 27. Indemnification; 11
ITEM 28. Business and Other Connections of Investment Adviser:
Bankers Trust serves as investment adviser to the Fund's Portfolio. Bankers
Trust, a New York banking corporation, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of commercial
banking and trust activities and is a major wholesale supplier of financial
services to the international institutional market. To the knowledge of the
Trust, none of the directors or officers of Bankers Trust, except those set
forth below, is or has been at anytime during the past two fiscal years engaged
in any other business, profession, vocation or employment of a substantial
nature, except that certain directors and officers also hold various positions
with and engage in business for Bankers Trust New York Corporation. Set forth
below are the names and principal businesses of the directors and officers of
Bankers Trust who are or during the past two fiscal years have been engaged in
any other business, profession, vocation or employment of a substantial nature.
These persons may be contacted c/o Bankers Trust Company, 130 Liberty Street,
New York, New York 10006.
George B. Beitzel, International Business Machines Corporation, Old Orchard
Road, Armonk, NY 10504. Director, Bankers Trust Company; Retired senior vice
president and Director, International Business machines Corporation; Director,
Computer Task Group; Director, Phillips Petroleum Company; Director, Caliber
Systems, Inc. (formerly, Roadway Services Inc.); Director, Rohm and Haas
Company; Director, TIG Holdings; Chairman emeritus of Amherst College; and
Chairman of the Colonial Willimsburg Foundation.
Richard H. Daniel, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Vice chairman and chief financial officer, Bankers Trust Company and
Bankers Trust New York Corporation; Beneficial owner, general partner, Daniel
Brothers, Daniel Lingo & Assoc., Daniel Pelt & Assoc.; Beneficial owner, Rhea C.
Daniel Trust.
11. Incorporated by reference to Post-Effective Amendment No. 38 to
Registrant's Registration Statement as filed with the Commission on April 29,
1996. Philip A. Griffiths, Bankers Trust Company, 130 Liberty Street, New York,
New York 10006. Director, Institute for Advanced Study; Director, Bankers Trust
Company; Chairman, Committee on Science, Engineering and Public Policy of the
National Academies of Sciences and Engineering & the Institute of Medicine; and
Chairman and member, Nominations Committee and Committee on Science and
Engineering Indicators, National Science Board; Trustee, North Carolina School
of Science and Mathematics and the Woodward Academy.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Plano, TX
75301-0001. Chairman Emeritus, J.C. Penney Company, Inc.; Director, Bankers
Trust Company; Director, Exxon Corporation; Director, Halliburton Company;
Director, Warner-Lambert Corporation; Director, The Williams Companies, Inc.;
and Director, National Retail Federation.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Washington, DC 20036. Senior Partner, Akin, Gump, Strauss,
Hauer & Feld, LLP; Director, Bankers Trust Company; Director, American Express
Company; Director, Dow-Jones, Inc.; Director, J.C. Penney Company, Inc.;
Director, Revlon Group Incorporated; Director, Ryder System, Inc.; Director,
Sara Lee Corporation; Director, Union Carbide Corporation; Director, Xerox
Corporation; Trustee, Brookings Institution; Trustee, The Ford Foundation; and
Trustee, Howard University.
David Marshall, 130 Liberty Street, New York, New York 10006. Chief Information
Officer and Executive Vice President, Bankers Trust New York Corporation; Senior
Managing Director, Bankers Trust Company.
Hamish Maxwell, Philip Morris Companies Inc., 120 Park Avenue, New York, NY
10006. Retired Chairman and Chief Executive Officer, Philip Morris Companies
Inc.; Director, Bankers Trust Company; Director, The News Corporation Limited;
Director, Sola International Inc.; and Chairman, WWP Group pic.
Frank N. Newman, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board, Chief Executive Officer and President, Bankers
Trust New York Corporation and Bankers Trust Company; Director, Bankers Trust
Company; Director, Dow-Jones, Inc.; and Director, Carnegie Hall.
N.J. Nicholas Jr., 745 Fifth Avenue, New York, NY 10020. Director, Bankers
Trust Company; Director, Boston Scientific Corporation; and Director, Xerox
Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group; Director, Bankers Trust Company; Director, Allied-Signal Inc.; Director,
Federal Home Loan Mortgage Corporation; Director, GTE Corporation; Director, The
May Department Stores Company; Director, Safeguard Scientifics, Inc.; and
Trustee, University of Pennsylvania.
Donald L. Staheli, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board and Chief Executive Officer, Continental Grain
Company; Director, Bankers Trust Company; Director, ContiFinancial Corporation;
Director, Prudential Life Insurance Company of America; Director, Fresenius
Medical Care, A.g.; Director, America-China Society; Director, National
Committee on United States-China Relations; Director, New York City Partnership;
Chairman, U.S.-China Business Council; Chairman, Council on Foreign Relations;
Chairman, National Advisor Council of Brigham Young University's Marriott School
of Management; Vice Chairman, The Points of Light Foundation; and Trustee,
American Graduate School of International Management.
Patricia Carry Stewart, c/o Office of the Secretary, 130 Liberty Street, New
York, NY 10006. Director, Bankers Trust Company; Director, CVS Corporation;
Director, Community Foundation for Palm Beach and Martin Counties; Trustee
Emerita, Cornell University.
George J. Vojta, Bankers Trust Company, 130 Liberty Street, New York, NY 10006.
Vice Chairman, Bankers Trust New York Corporation and Bankers Trust Company;
Director, bankers Trust Company; Director; Alicorp S.A.; Director; Northwest
Airlines; Director, Private Export Funding Corp.; Director, New York State
Banking Board; Director, St. Lukes-Roosevelt Hospital Center; Partner, New York
City Partnership; and Chairman, Wharton Financial Services Center.
Paul A. Volcker, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Director, Bankers Trust Company; Director, American Stock Exchange;
Director, Nestle S.A.; Director, Prudential Insurance Company; Director, UAL
Corporation; Chairman, Group of 30; North American Chairman, Trilateral
Commission; Co-Chairman, Bretton Woods Committee; Co-Chairman, U.S./Hong Kong
Economic Cooperation Committee; Director, American Council on Germany; Director,
Aspen Institute; Director, Council on Foreign Relations; Director, The Japan
Society; and Trustee, The American Assembly.
Melvin A. Yellin, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Senior Managing Director and General Counsel of Bankers Trust New York
Corporation and Bankers Trust Company; Director, 1136 Tenants Corporation; and
Director, ABA Securities Association.
ITEM 29. Principal Underwriters a) Edgewood Service, Inc., the principal
underwriter for shares of the Registrant, also acts as principal underwriter for
the following open-end investment companies: BT Investment Funds, BT Advisor
Funds, BT Institutional Funds, Excelsior Institutional Trust (formerly, UST
Master Funds, Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly, UST Master
Tax-Exempt Funds, Inc.), Excelsior Institutional Trust, FTI Funds, FundManager
Portfolios, Marketvest Funds, Marketvest Funds, inc. and Old Westbury Funds,
Inc.
<TABLE>
<CAPTION>
b)
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caracciolo Director, President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, President and Treasurer
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not Applicable.
ITEM 30. Location of Accounts and Records:
BT INVESTMENT FUNDS: Federated Investors Tower
(Registrant) Pittsburgh, PA 15222-3779
BANKERS TRUST COMPANY: 280 Park Avenue,
(Investment Adviser, New York, NY 10017
Administrator, and
Custodian)
INVESTORS FIDUCIARY 127 West 10th Street,
TRUST COMPANY: Kansas City, MO 64105
(Transfer Agent and Dividend
Disbursing Agent)
EDGEWOOD SERVICES, INC.: Clearing Operations, P.O. Box 897,
(Distributor) Pittsburgh, PA 15230-0897
ITEM 31. Management Services:
Not applicable.
ITEM 32. Undertakings:
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.
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 Securities Act of 1933, as amended,
and the Investment Company Act of 1940, the Registrant, BT INVESTMENT FUNDS,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and the Commonwealth of Pennsylvania on
the 1st day of July, 1997.
BT INVESTMENT FUNDS
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
July 1, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact July 1, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/ RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/ PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
*By Power of Attorney
<PAGE>
SIGNATURES
BT INVESTMENT PORTFOLIOS has duly caused this Post-Effective Amendment
No. 44 to the Registration Statement on Form N-1A of BT Investment Funds to be
signed on its behalf by the undersigned thereto authorized in the City of
Pittsburgh and the Commonwealth of Pennsylvania on the 1st day of July, 1997.
TREASURY MONEY PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
July 1, 1997
This Post-Effective Amendment No. 44 to the Registration Statement has been
signed below by the following persons in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact July 1, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/ RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/ PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
*By Power of Attorney
<PAGE>
SIGNATURES
ASSET MANAGEMENT PORTFOLIO has duly caused this Post-Effective
Amendment No. 44 to the Registration Statement on Form N-1A of BT Investment
Funds to be signed on its behalf by the undersigned thereto authorized in the
City of Pittsburgh and the Commonwealth of Pennsylvania on the 1st day of July,
1997.
ASSET MANAGEMENT PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
July 1, 1997
This Post-Effective Amendment No. 44 to the Registration Statement has been
signed below by the following persons in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact July 1, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/ RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/ PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
*By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg. SK
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 44 to the
Registration Statement of BT Investment Lifecycle Funds - Long Range Fund, Mid
Range Fund and Short Range Fund (three of the Funds comprising BT Investment
Funds) on Form N-1A of our report dated May 2, 1997 on our audits of the
financial statements and financial highlights of BT Investment Lifecycle Funds
Long Range Fund, Mid Range Fund and Short Range Fund which report is included in
its Annual Report to Shareholders for the year ended March 31, 1997 which is
incorporated by reference in this Post-Effective Amendment to the Registration
Statement. We also consent to the references to our Firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the captions "Counsel and Independent Accountants."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand
Kansas City, Missouri
June 26, 1997
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg. SK
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 44 to the
Registration Statement of BT Investment Lifecycle Funds - Long Range Fund, Mid
Range Fund and Short Range Fund (three of the Funds comprising BT Investment
Funds) on Form N-1A of our report dated May 2, 1997 on our audits of the
financial statements and financial highlights of Asset Management Portfolio,
Asset Management Portfolio II, and Asset Management Portfolio III which report
is included in its Annual Report to Shareholders for the year ended March 31,
1997 which is incorporated by reference in this Post-Effective Amendment to the
Registration Statement. We also consent to the references to our Firm in the
Prospectus under the caption "Financial Highlights" and in the Statement of
Additional Information under the captions "Counsel and Independent Accountants."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand
Kansas City, Missouri
June 26, 1997
1
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
BANKERS TRUST COMPANY
One Bankers Trust Plaza, New York, New York 10006
Mailing Address:
P.O. Box 318, Church Street Station
New York, New York 10008
Mutual Fund/Business Trust/Series
CUSTODIAN AGREEMENT
AGREEMENT dated as of July 1, 1996 between BANKERS TRUST COMPANY (the
"Custodian") and BT INVESTMENT FUNDS (the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined)(all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
non-cash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the Account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate which Portfolio such Property belongs or if
such Property belongs to more than one Portfolio shall allocate such Property to
the appropriate Portfolio. The Custodian shall allocate such Property to the
Accounts in accordance with the Instructions; provided that the Custodian shall
have the right, in its sole discretion, to refuse to accept any Property that is
not in proper form for deposit for any reason. The Customer on behalf of each
Portfolio, acknowledges its responsibility as a principal for all of its
obligations to the Custodian arising under or in connection with this Agreement,
warrants its authority to deposit in the appropriate Account any Property
received therefor by the Custodian or a Subcustodian and to give, and authorize
others to give, instructions relative thereto. The Custodian may deliver
securities of the same class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for the
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment
upon presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and hold
the cash received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional interest
resulting from a rights issue, stock dividend or stock split is received for an
Account and such rights entitlement or fractional interest bears an expiration
date, if after endeavoring to obtain Instructions such Instructions are not
received in time for the Custodian to take timely action or if actual notice of
such actions was received too late to seek Instructions, sell in the discretion
of the Custodian (which sale the Customer hereby authorizes the Custodian to
make) such rights entitlement or fractional interest and credit the Account with
the net proceeds of such sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the nature of
taxes imposed on interest, dividends or other similar income on the Property in
such Account by any governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies, the Custodian shall
notify the Customer of the amount of the shortfall and the Customer, at its
option, may deposit additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if requested by the
Custodian and required in connection with the payment of any such taxes to
cooperate with the Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agent or system in which the Custodian or
a U.S. Subcustodian participates (individually, a "U.S. Securities System") or
(b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System, collectively, "Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Sub-Custodian or Securities System
shall have been approved by Instructions; provided further that in each case in
which a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a)
such Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval by the Customer of any
Subcustodian or Securities System has been proper under the 1940 Act or any rule
or regulations thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S. Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer, if in the normal course of its custodian
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such
Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be subject only
to the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an account
holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i) the
Account will be adequately indemnified or its losses adequately insured; (ii)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such Subcustodian or its creditors except a claim
for payment in accordance with such agreement for their safe custody or
administration and expenses related thereto, (iii) beneficial ownership of such
Securities be freely transferable without the payment of money or value other
than for safe custody or administration and expenses related thereto, (iv)
adequate records will be maintained identifying the Property held pursuant to
such Agreement as belonging to the Custodian, on behalf of its customers and (v)
to the extent permitted by applicable law, officers of or auditors employed by,
or other representatives of or designated by, the Custodian, including the
independent public accountants of or designated by, the Customer be given access
to the books and records of such Subcustodian relating to its actions under its
agreement pertaining to any Property by it thereunder or confirmation of or
pertinent information contained in such books and records be furnished to such
persons designated by the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its agreement with the Custodian to, identify on its books
such Property as being held for the account of the Custodian
or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of
the Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such Subcustodian, as the
case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole discretion
appoint (or remove) any other U. S. bank or trust company which is itself
qualified under the 1940 Act to act as custodian, as its agent to carry out such
of the provisions of this Agreement as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not relieve
the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. The Custodian shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for each Account.
All accounts, books and records of the Custodian relating thereto shall be open
to inspection and audit at all reasonable times during normal business hours by
any person designated by the Customer. All such accounts shall be maintained and
preserved in the form reasonably requested by the Customer. The Custodian will
supply to the Customer from time to time, as mutually agreed upon, a statement
in respect to any Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with the Custodian by the
Customer of exceptions or objections to any such statement within sixty (60)
days of the mailing thereof, the Customer shall be deemed to have approved such
statement and in such case or upon written approval of the Customer of any such
statement, such statement shall be presumed to be for all purposes correct with
respect to all information set forth therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
securities system or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values in Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting and utilizing such service or furnishing any
information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in the Account
which are held by the Custodian or any Subcustodian may be held by such entity
in the name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
in the Subcustodian or the Securities System in an account for the Customer's or
Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called portion of the respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. Provided
that the Custodian effects transactions in accordance with the customary or
established securities trading or securities processing practice or procedures
in the applicable jurisdiction or market, it shall not be responsible for any
loss arising therefrom. Subject to the exercise of reasonable care, the
Custodian may elect to effect transactions otherwise in a jurisdiction or
market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Investment Manager User Guide provided to the Customer by the Custodian, the
Custodian may, at its sole option, reverse such credits or debits to the
appropriate Account in the event that the transaction does not settle, or the
income is not received in a timely manner, and the Customer agrees to hold the
Custodian harmless from any losses which may result therefrom.
Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with Instructions to settle the
purchase of any Securities for an Account unless there is sufficient Cash in
such Account at the time or to settle the sale of any Securities in such Account
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such securities exceeds the amount of Cash in an
Account at the time of settlement of such purchase, the Custodian may, in its
sole discretion, but in no way shall have any obligation to, permit an overdraft
in such Account in the amount of the difference solely for the purpose of
facilitating the settlement of such purchase of securities for prompt delivery
to such Account. The Customer agrees to immediately repay the amount of any such
overdraft in the ordinary course of business and further agrees to indemnify and
hold the Custodian harmless from and against any and all losses, costs,
including, without limitation the cost of funds, and expenses incurred in
connection with such overdraft. The Customer agrees that it will not use the
Account to facilitate the purchase of securities without sufficient funds in the
Account (which funds shall not include the proceeds of the sale of the purchased
securities).
13. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in
Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
14. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 21 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii) a telephonic or oral communication
by one or more persons as the Customer shall have from time to time authorized
to give the particular class of Instructions in question and whose name has been
filed with the Custodian; or (iv) upon receipt of such other form of
instructions as the Customer may from time to time authorize in writing and
which the Custodian has agreed in writing to accept. Instructions in the form of
oral communications shall be confirmed by the Customer by tested telex or
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reasonable reliance upon such oral instructions prior to the Custodian's receipt
of such confirmation. Instructions may relate to specific transactions or to
types or classes of transactions, and may be in the form of standing
instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
15. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. Where, under applicable law,
regulation, or practice (in order to facilitate the settlement of transactions
related thereto), or where the Customer otherwise elects, Securities are held in
a Securities System in a particular market, the Custodian shall only be
responsible or liable for losses arising from employment of such Securities
System caused by the Custodian's own failure to exercise reasonable care. Where
the Custodian otherwise elects to employ a Securities System for holding
Securities in a particular market, the Custodian shall be liable to the Customer
for any act or omission of any Securities System to the same extent as if the
Custodian committed such act itself. In the event of any loss to the Customer by
reason of the failure of the Custodian or a Subcustodian to utilize reasonable
care, the Custodian shall be liable to the Customer to the extent of the
Customer's actual damages at the time such loss was discovered without reference
to any special conditions or circumstances. In no event shall the Custodian be
liable for any consequential or special damages. The Custodian shall be entitled
to rely, and may act, on advice of counsel (who may be counsel for the Customer)
on all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
16. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or Portfolio pursuant to any contract or any law or
regulation. The provisions of this Section shall survive termination of this
Agreement.
17. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expense related thereto, which may be imposed, or assessed with respect to
any Property in the Account and also agrees to hold the Custodian, its
Subcustodians, and their respective nominees harmless from any liability as a
record holder of Property in the Account. The Custodian is authorized to charge
the applicable Account for such items and the Custodian shall have a lien on the
Property in the applicable Account for any amount payable to the Custodian under
this Agreement, including but not limited to amounts payable pursuant to the
last paragraph of Section 12 and pursuant to indemnities granted by the Customer
under this Agreement. The provisions of this Section shall survive the
termination of this Agreement.
18. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
19. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
20. Termination. (a) Terminaton of Entire Agreement. This Agreement may
be terminated by the Customer or the Custodian by ninety (90) days' written
notice to the other; provided that notice by the Customer shall specify the
names of the persons to whom the Customer shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall, within ninety (90)
days following the giving of such notice, deliver to the Custodian a written
notice specifying the names of the persons to whom the Custodian shall deliver
the Securities in each Account and to whom the Cash in such Account shall be
paid. In either case, the Custodian shall deliver such Securities and Cash to
the persons so specified, after deducting therefrom any amounts which the
Custodian determines to be owed to it under Sections 12, 17, and 23. In
addition, the Custodian may in its discretion withhold from such delivery such
Cash and Securities as may be necessary to settle transactions pending at the
time of such delivery. The Customer grants to the Custodian a lien and right of
setoff against the Account and all Property held therein from time to time in
the full amount of the foregoing obligations. If within ninety (90) days
following the giving of a notice of termination by the Custodian, the Custodian
does not receive from the Customer a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities in each Account and
to whom the Cash in such Account shall be paid, the Custodian, at its election,
may deliver such Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or may continue to hold such Securities and Cash
until a written notice as aforesaid is delivered to the Custodian, provided that
the Custodian's obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may be
terminated by the Customer or the Custodian as to one or more Portfolios (but
less than all of the Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery, or such earlier
time as mutually agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed by
the preceding provisions of Section 20 as to the identification of a successor
custodian and the delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the obligations of the
Custodian and the Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
21. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered to sent by telex,
cable, facsimile or other means of electronic communication agreed upon by the
parties hereto addressed, if to the Customer, to:
BT Investment Funds
Signature Financial
6 St. James Avenue
Boston, MA 02116
Attention: Thomas M. Lenz
Phone: (617) 423-0800
Fax: (617) 542-5815
with a copy to:
Bankers Trust Company
4 Albany Street, 2nd Floor
New York, NY 10006
Attention: William O'Dell
Phone: (212) 250-2838
Fax: (212) 250-4462
if to the Custodian, to:
Bankers Trust Company
16 Wall Street, 4th Floor
New York, NY 10005
Attention: Vince Fiordimondo
Phone: (212) 618-3602
Fax: (212) 618-3823
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
22. Several Obligations of the Portfolios. The respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts. No Portfolio
shall be liable for the obligations or liabilities of any other Portfolio. No
shareholder, trustee, director, officer, employee or agent of any Portfolio
shall be subject to claims against or obligations of any other Portfolio to any
extent whatsoever, but the Portfolio only shall be liable.
23. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against the Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio. Should the Customer fail
to pay promptly any amounts owed hereunder, Custodian shall be entitled to use
available Cash in the Account or such applicable Account, as the case may be,
and to dispose of Securities in the applicable Account as is necessary. In any
such case and without limiting the foregoing, Custodian shall be entitled to
take such other action(s) or exercise such other options, powers and rights as
Custodian now or hereafter has as a secured creditor under the New York Uniform
Commercial Code or any other applicable law.
24. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the terms of this Agreement do not
violate any obligation by which the Customer is bound, whether arising by
contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iii) the Customer will deliver to the Custodian such evidence
of such authorization as the Custodian may reasonably require, whether by way of
a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) its employment as Custodian and the terms of this Agreement do not
violate any obligation by which the Custodian is bound, whether arising by
contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Custodian in
accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether by way of
a certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be so qualified shall promptly notify the Customer in writing.
25. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
26. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 21 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian, provided that the Customer may refer in
its prospectus and other documents to the Custodian in the manner set forth in
Exhibit E attached to this contract. Customer shall not distribute or permit the
distribution of such materials if Custodian reasonably objects in writing within
ten (10) business days of receipt thereof (or such other time as may be mutually
agreed) after receipt thereof. The provisions of this Section shall survive the
termination of this Agreement.
27. Representative Capacity and Binding Obligation. A copy of the
Declaration of Trust of the Customer is on file with The Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
not executed on behalf of the Trustees of the Customer as individuals, and the
obligations of this Agreement are not binding upon any of the Trustees, officers
or shareholders of the Customer individually but are biding only upon the assets
and property of the Portfolios.
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
28. Affiliation Between Custodian and Adviser and Customer. It is
understood that the trustees, officers, employees, agents and shareholders of
the Customer, and the officers, directors, employees, agents and shareholders of
Bankers Trust Company ("Adviser"), the investment adviser to a corresponding
series listed on Appendix A hereto as "Investment Portfolio" in which the
applicable Portfolio invests all of its net investable assets, are or may be
interested in Custodian as directors, officers, employees, agents, stockholders,
or otherwise, and that the directors, officers, employees, agents or
stockholders of Custodian may be interested in the Customer as trustees,
officers, employees, agents, shareholders, or otherwise, or in Adviser as
officers, directors, employees, agents, shareholders or otherwise.
(i) No trustee, officer, employee or agent of the Customer, and no
officer, director, employee or agent of the Adviser acting pursuant to
any provision of the Investment Advisory Agreement (the "Advisory
Agreement") between the Customer and Adviser, shall have physical
access to the assets of the Customer held by Custodian or be authorized
or permitted to withdraw any investments of the Customer, nor shall
Custodian deliver any assets of the Customer to any such person. No
officer, director, employee or agent of Custodian who holds any similar
position with the Customer or who performs duties under the Advisory
Agreement shall have access to the assets of the Trust.
(ii) Subject to Section 14 hereof, nothing in this Section 28 shall
prohibit any officer, employee or agent of the Customer, or any
officer, employee or agent of the Adviser, from giving Instructions to
Custodian as long as no such Instruction results in delivery or of
access to assets of the Customer prohibited by subclause (i) of this
Section 28.
29. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
30. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
31. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
32. Severability. If any provision of this Agreement is determined to be
invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
33. Headings. The heading of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
BT INVESTMENT FUNDS
By: /s/ Thomas M. Lenz
Name: Thomas M. Lenz
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ John P. Zori
Name: John P. Zori
Title: Vice President
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Investment Funds.
LIST OF PORTFOLIOS
Terms used herein as defined terms unless otherwise defined shall have the
meanings ascribed to them in the above-referred to Custodian Agreement.
<TABLE>
<CAPTION>
<S> <C>
The following is a list of Portfolios The following is a list of Investment
referred to in the first WHEREAS Portfolios referred to in Section 28
clause of the Agreement of the Agreement
Cash Management Fund Cash Management Portfolio
Treasury Money Fund Treasury Money Portfolio
Tax Free Money Fund Tax Free Money Portfolio
NY Tax Free Money Fund NY Tax Free Money Portfolio
Utility Fund Utility Portfolio
Short/Intermediate U.S. Government Short/Intermediate U.S. Government
Securities Fund Securities Portfolio
Intermediate Tax Free Fund Intermediate Tax Free Portfolio
BT Investment Lifecycle Short Range Fund BT Investment Lifecycle Short Range Portfolio
BT Investment Lifecycle Mid Range Fund BT Investment Lifecycle Mid Range Portfolio
BT Investment Lifecycle Long Range Fund BT Investment Lifecycle Long Range Portfolio
Capital Appreciation Fund Capital Appreciation Portfolio
International Equity Fund International Equity Portfolio
Small Cap Fund Small Cap Portfolio
Global High Securities Fund Global High Securities Portfolio
Latin American Equity Fund Latin American Equity Portfolio
Pacific Basin Equity Fund Pacific Basin Equity Portfolio
</TABLE>
Dated as of: July 1, 1996 BT INVESTMENT FUNDS
By: /s/ Thomas M. Lenz
Name: Thomas M. Lenz
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ John P. Zori
Name: John P. Zori
Title: Vice President
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Investment
Funds
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in Argentina, Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan, Korea,
Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Poland, Singapore, South
Africa, Spain, Sri Lanka, Sweden, United Kingdom, United States, and Venezuela.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agenda,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or directions (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
second paragraph hereof. The Custodian will notify the Customer as to the
inclusion of additional countries or deletion of existing countries after their
inclusion or deletion and this Exhibit B will be deemed to be automatically
amended to include or delete such countries as the case may be.
Dated as of: July 1, 1996 BT INVESTMENT FUNDS
By: /s/ Thomas M. Lenz
Name: Thomas M. Lenz
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ John P. Zori
Name: John P. Zori
Title: Vice President
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Investment Funds.
CUSTODY FEE SCHEDULE
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Investment Funds.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in the Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Customer will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Customer of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
<PAGE>
Dated as of: July 1, 1996 BT INVESTMENT FUNDS
By: /s/ Thomas M. Lenz
Name: Thomas M. Lenz
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ John P. Zori
Name: John P. Zori
Title: Vice President
<PAGE>
EXHIBIT E
To Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Investment Funds.
APPROVED REFERENCE TO CUSTODIAN
"Bankers Trust acts as Custodian of the assets of the Trust and the
Portfolio..."
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
BT INVESTMENT FUNDS
EXHIBIT D
TO THE
ADMINISTRATION AND SERVICES AGREEMENT
MADE AS OF OCTOBER 28, 1992
BETWEEN
BT INVESTMENT FUNDS AND BANKERS TRUST COMPANY
Cash Management Fund................................................0.55%
Treasury Money Fund.................................................0.55%
Tax Free Money Fund.................................................0.55%
NY Tax Free Money Fund..............................................0.55%
International Equity Fund...........................................0.85%
Utility Fund........................................................0.65%
Intermediate Tax Free Fund..........................................0.40%
100% Treasury Fund..................................................0.55%
Capital Appreciation Fund...........................................0.65%
BT Investment Lifecycle Long Range Fund.............................0.65%
BT Investment Lifecycle Mid Range Fund..............................0.65%
BT Investment Lifecycle Short Range Fund............................0.65%
Global High Yield Securities Fund...................................0.95%
Latin American Equity Fund..........................................0.95%
Small Cap Fund......................................................0.65%
European Equity Fund................................................0.85%
Pacific Basin Equity Fund...........................................0.75%
International Bond Fund.............................................0.70%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Investment Lifecycle Long Range Fund Annual Report dated March 31, 1997, and is
qualified in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000797657
<NAME> BT INVESTMENT FUNDS
<SERIES>
<NUMBER> 12
<NAME> BT INVESTMENT LIFECYCLE LONG RANGE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 78042203
<INVESTMENTS-AT-VALUE> 78042203
<RECEIVABLES> 327692
<ASSETS-OTHER> 8915
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78378810
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87475
<TOTAL-LIABILITIES> 87475
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71307115
<SHARES-COMMON-STOCK> 6547534
<SHARES-COMMON-PRIOR> 4947762
<ACCUMULATED-NII-CURRENT> 221147
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4958823
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1804250
<NET-ASSETS> 78291335
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2100186
<EXPENSES-NET> 268816
<NET-INVESTMENT-INCOME> 1831370
<REALIZED-GAINS-CURRENT> 6543684
<APPREC-INCREASE-CURRENT> (10467)
<NET-CHANGE-FROM-OPS> 8364587
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2216173
<DISTRIBUTIONS-OF-GAINS> 2901114
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21938721
<NUMBER-OF-SHARES-REDEEMED> 8024398
<SHARES-REINVESTED> 5117271
<NET-CHANGE-IN-ASSETS> 22278894
<ACCUMULATED-NII-PRIOR> 605950
<ACCUMULATED-GAINS-PRIOR> 1944977
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 487272
<AVERAGE-NET-ASSETS> 67204059
<PER-SHARE-NAV-BEGIN> 11.32
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> 1.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .89
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.96
<EXPENSE-RATIO> 100
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Investment Lifecycle Mid Range Fund Annual Report dated March 31, 1997, and is
qualified in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000797657
<NAME> BT INVESTMENT FUNDS
<SERIES>
<NUMBER> 13
<NAME> BT INVESTMENT LIFECYCLE MID RANGE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 61775915
<INVESTMENTS-AT-VALUE> 61775915
<RECEIVABLES> 114515
<ASSETS-OTHER> 8913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61899343
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32841
<TOTAL-LIABILITIES> 32841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57669496
<SHARES-COMMON-STOCK> 5728126
<SHARES-COMMON-PRIOR> 4909072
<ACCUMULATED-NII-CURRENT> 295906
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3087695
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 813405
<NET-ASSETS> 61866502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2215078
<EXPENSES-NET> 228509
<NET-INVESTMENT-INCOME> 1986569
<REALIZED-GAINS-CURRENT> 4207234
<APPREC-INCREASE-CURRENT> (257947)
<NET-CHANGE-FROM-OPS> 5935856
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2346426
<DISTRIBUTIONS-OF-GAINS> 2020093
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11583017
<NUMBER-OF-SHARES-REDEEMED> 7118197
<SHARES-REINVESTED> 4366423
<NET-CHANGE-IN-ASSETS> 10400580
<ACCUMULATED-NII-PRIOR> 655763
<ACCUMULATED-GAINS-PRIOR> 1175310
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 429393
<AVERAGE-NET-ASSETS> 57127237
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> .72
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .82
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> 100
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Investment Lifecycle Short Range Fund Annual Report dated March 31, 1997, and is
qualified in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000797657
<NAME> BT INVESTMENT FUNDS
<SERIES>
<NUMBER> 14
<NAME> BT INVESTMENT LIFECYCLE SHORT RANGE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 32541524
<INVESTMENTS-AT-VALUE> 32541524
<RECEIVABLES> 42009
<ASSETS-OTHER> 8676
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32592209
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40692
<TOTAL-LIABILITIES> 40692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31356220
<SHARES-COMMON-STOCK> 3158544
<SHARES-COMMON-PRIOR> 2880500
<ACCUMULATED-NII-CURRENT> 176046
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1423009
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (403758)
<NET-ASSETS> 32551517
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1435869
<EXPENSES-NET> 123768
<NET-INVESTMENT-INCOME> 1312101
<REALIZED-GAINS-CURRENT> 1896801
<APPREC-INCREASE-CURRENT> (778720)
<NET-CHANGE-FROM-OPS> 2430182
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1614074
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6206095
<NUMBER-OF-SHARES-REDEEMED> 4983599
<SHARES-REINVESTED> 1614074
<NET-CHANGE-IN-ASSETS> 3652678
<ACCUMULATED-NII-PRIOR> 478019
<ACCUMULATED-GAINS-PRIOR> (200718)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 256356
<AVERAGE-NET-ASSETS> 30942441
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .54
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 100
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
BT INVESTMENT FUNDS
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
July 1, 1997
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: BT INVESTMENT FUNDS (the "Trust")
BT Investment Lifecycle Short Range Fund
BT Investment Lifecycle Mid Range Fund
BT Investment Lifecycle Long Range Fund(the "Funds")
1933 Act File No. 33-07404
1940 Act File No. 811-4760
Dear Sir or Madam:
Post-Effective Amendment No. 44 under the Securities Act of 1933 and
Amendment No. 43 under the Investment Company Act of 1940 to the Registration
Statement of the above-referenced Trust is hereby electronically transmitted.
This filing has been electronically redlined to indicate the changes from the
Trust's currently effective Registration Statement with respect to the Funds.
This Trust is marketed through banks, savings associations or credit
unions.
The Funds are feeder funds in a master-feeder investment fund
structure.
As indicated on the facing page of the Amendment, the Registrant has
specified that it is to become effective immediately upon filing pursuant to
paragraph (b) of Rule 485 under the Securities Act of 1933.
If you have any questions regarding this filing, please call me at
(412) 288-8635.
Very truly yours,
/s/ Kary Lechner
Kary Lechner
Compliance Analyst
Enclosures
