BT INVESTMENT FUNDS
485BPOS, 1999-04-30
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<PAGE>
 
                                                      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
                                                                 --

   Post-Effective Amendment No. 61.....................          X
                                --                               --

                                    and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940  X
                                                                 --

   Amendment No. 61....................................          X
                 --                                              --

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

                                One South Street
                           Baltimore, Maryland  21202
                    (Address of Principal Executive Offices)

                                 (410) 895-5000
                        (Registrant's Telephone Number)

Daniel O. Hirsch, Esq.          Copies to:      Burton M. Leibert, Esq.
One South Street                                Willkie Farr & Gallagher
Baltimore, Maryland  21202                      787 Seventh Ave
(Name and Address of Agent                      New York, New York 10019
for Service)

Approximate Date of Proposed Public Offering: April 30, 1999

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

[ ] Immediately upon filing pursuant to paragraph (b)
[X] On April 30, 1999 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>
 
Cash Management, Tax Free Money, NY Tax Free Money and Treasury Money Portfolios
have also executed this Registration Statement.
<PAGE>
 
                    PROSPECTUS: APRIL 30, 1999
Cash Management Fund
 
Treasury Money Fund
 
NY Tax Free Money Fund
 
Tax Free Money Fund
 
                    With the goal of
                    achieving a high
                    level of current
                    income
                    consistent with
                    liquidity and
                    the preservation
                    of capital
 
 
                          BT Mutual Funds
                    TRUST: BT INVESTMENT FUNDS
 
                    INVESTMENT ADVISER: BANKERS TRUST COMPANY
 
                    [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.]
<PAGE>
 
 
   Table of Contents
 
<TABLE>   
 <C> <S>
   3 Cash Management Fund
 
  10 Treasury Money Fund
 
  17 NY Tax Free Money Fund
 
  24 Tax Free Money Fund
 
  31 Information Concerning All Funds
 
  31 Management of the Funds
 
  32 Calculating a Fund's Share Price
 
  32 Dividends and Distributions
 
  32 Tax Considerations
 
  33 Buying and Selling Fund Shares
</TABLE>    
 
                                       2
                                       --
<PAGE>
 
Overview
          
Cash Management Fund     
- --                                                                  --
 Goal: The Fund seeks a high level of current income consistent with
 liquidity and the preservation of capital.
 
 Core Strategy: The Fund invests in high quality money market
 instruments.
- --                                                                  --
 
 
     Cash Management Fund
 
     Overview of the Cash Management Fund
 
<TABLE>
 <C> <S>
   3 Goal
 
   3 Core Strategy
 
   3 Investment Policies and Strategies
 
   4 Principal Risks of Investing in the Fund
 
   4 Who Should Consider Investing in the Fund
 
   5 Total Returns, After Fees and Expenses
 
   6 Annual Fund Operating Expenses

     A Detailed Look at the Cash Management Fund

   7 Objective
 
   7 Strategy
 
   7 Principal Investments
 
   7 Risks
 
   9 Financial Highlights
</TABLE>
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment objective as the Fund. The Fund, through the master portfolio,
seeks to achieve that objective by investing in high quality money market
instruments, maintaining a dollar-weighted average maturity of 90 days or
less. The Fund attempts to maintain a stable share price by investing in
securities that are valued in U.S. dollars, have remaining maturities of 397
days or less and are of the highest quality. The Fund invests more than 25% of
its total assets in banks and other financial institutions.
 
                                       3
                                       --
<PAGE>
 
Overview of the Cash Management Fund
 
 
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example:
 . A rise in interest rates could cause the bond market and individual
securities in the Fund's portfolio to decline in value.
 . An issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline.
 . Changes in interest rates or economic downturns could have a negative effect
on issuers in the financial services industry.
 
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Cash Management Fund if you are a
conservative investor who is looking for an investment that offers income
approximating money market rates and preserves the value of your investment.
 
You should not consider investing in the Cash Management Fund if you seek
long-term capital growth. Although it provides a convenient means of
diversifying short-term investments, the Fund by itself does not constitute a
balanced investment program.
 
An investment in the Cash Management Fund is not a deposit of Bankers Trust
Company or any other bank, and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
 
                                       4
                                       --
<PAGE>
 
                                           Overview of the Cash Management Fund
 
Year-by-Year Returns
(for each full calendar year since inception)

[BAR CHART APPEARS HERE]

<TABLE> 
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
<S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C> 
8.85%  7.85%  5.68%  3.05%  2.54%  3.67%  5.35%  4.82%  4.98%  4.93%
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
</TABLE> 

Since inception, the Fund's highest return in any calendar quarter was 1.94%
(second quarter 1990) and its lowest quarterly return was 0.62% (first and
second quarter 1993). Past performance offers no indication of how the Fund
will perform in the future.
 
TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for
each full calendar year since it began selling shares on October 5, 1988 (its
inception date). The table shows the Fund's average annual return over the
last calendar year, the last five calendar years and the last ten calendar
years.
 
As of December 31, 1998, the Fund's 7-day yield was 4.50%. To learn the
current 7-day yield, investors may call the BT Service Center at 1-800-730-
1313.
- -------------------------------------------------------------------------------
The 7-day yield, which is often referred to as the "current yield," is the
income generated by the Fund over a seven-day period. This amount is then
annualized, which means that we assume the Fund generates the same income
every week for a year. The "total return" of the Fund is the change in the
value of an investment in the Fund over a given period. Average annual returns
are calculated by averaging the year-by-year returns of the Fund over a given
period.
 
Average Annual Total Returns
(as of December 31, 1998)
 
<TABLE>
<CAPTION>
                      1 year 5 years 10 years
- ---------------------------------------------
<S>                   <C>    <C>     <C>
Cash Management Fund  4.93%   4.75%   5.16%
- ---------------------------------------------
</TABLE>
 
                                       5
                                       --
<PAGE>
 
Overview of the Cash Management Fund
 
 
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
 
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the Cash Management Fund.
   
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. It assumes that the Fund earned
an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same, and that you sold your shares at the end of the
period.     
 
You may use this hypothetical example to compare the Fund's expense history
with other funds./1/ Your actual costs may be higher or lower.
   
/1/Information on the annual operating expenses reflects the expenses of both
   the Fund and the Cash Management Portfolio, the master portfolio in which the
   Cash Management Fund invests its assets. (A further discussion of the
   relationship between the Fund and the Portfolio appears in the
   "Organizational Structure" section of this prospectus.)     
/2/Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
   year end of December 31, 1998, to waive its fees and reimburse expenses so
   that total expenses will not exceed 0.75%.
/3/Based on expenses, after fee waivers and reimbursements for the first 16
   months only.
Annual Fees and Expenses
 
<TABLE>
<CAPTION>
                                             Percentage of Average
                                              Daily Net Assets/1/
- ------------------------------------------------------------------
<S>                                          <C>
Management Fees                                       0.15%
- ------------------------------------------------------------------
Distribution and Service (12b-1) Fees                 None
- ------------------------------------------------------------------
Other Fund Operating Expenses                         0.66%
- ------------------------------------------------------------------
Total Fund Operating Expenses                         0.81%
- ------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements         (0.06)%/2/
- ------------------------------------------------------------------
Net Expenses                                          0.75%
- ------------------------------------------------------------------
</TABLE>
 
<TABLE>
<CAPTION>
- --                                               --
 Expense Example/3/

  1 year       3 years       5 years       10 years
 --------------------------------------------------
  <S>          <C>           <C>           <C>
  $76           $256          $455          $1,031
- --                                               --
</TABLE>

                                   
 
 
                                       6
                                       --
<PAGE>
 
A detailed look
       
OBJECTIVE
The Cash Management Fund seeks a high level of current income consistent with
liquidity and the preservation of capital by investing in high quality short-
term money market instruments.
 
While we give priority to earning income and maintaining the value of the
Fund's principal at $1.00 per share, all money market instruments, including
U.S. government obligations, can change in value when interest rates change or
an issuer's creditworthiness changes.
 
STRATEGY
The Fund seeks current income by investing in high quality money market
securities and maintains a dollar-weighted average maturity of 90 days or
less. The Fund follows two policies designed to maintain a stable share price:
 
Generally, Fund securities are valued in U.S. dollars and have remaining
maturities of 397 days (about 13 months) or less at the time of purchase. The
Fund may also invest in securities that have features that reduce their
maturities to 397 days or less at the time of purchase.
 
The Fund buys U.S. government debt obligations, money market instruments and
other debt obligations that at the time of purchase:
 . have received the highest short-term rating from two nationally recognized
statistical rating organizations;
   
 . have received the highest short-term rating from one rating organization (if
only one organization rates the security);     
   
 . are unrated, but are determined to be of similar quality by the Fund's
Investment Adviser; or     
 . have no short-term rating, but are rated in one of the top three highest
long-term rating categories, or are determined to be of similar quality by the
Fund's Investment Adviser.
 
PRINCIPAL INVESTMENTS
The Fund may invest in high-quality, short-term, dollar-denominated money
market instruments paying a fixed, variable or floating interest rate. These
include:
 . Debt obligations issued by U.S. and foreign banks, financial institutions,
corporations or other entities, including certificates of deposit, euro-time
deposits, commercial paper (including asset-backed commercial paper), notes,
funding agreements and U.S. government securities. Securities that do not
satisfy the maturity restrictions for a money market fund may be specifically
structured so that they are eligible investments for money market funds. For
example, some securities have features which have the effect of shortening the
security's maturity.
 . U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
 . Repurchase agreements, which are agreements to buy securities at one price,
with a simultaneous agreement to sell back the securities at a future date at
an agreed-upon price.
   
 . Asset-backed securities, which are generally participations in a pool of
assets whose payment is derived from the payments generated by the underlying
assets. Payments on the asset-backed security generally consist of interest
and/or principal.     
 
Because many of the Fund's principal investments are issued or credit-enhanced
by banks or other financial institutions, the Fund may invest more than 25% of
its total assets in the financial services industry.
 
RISKS
Below we set forth some of the prominent risks associated with money market
mutual funds, and we detail our approaches to contain them. Although we
attempt to assess the likelihood that these risks may actually occur and to
limit them, we make no guarantee that we will succeed. If a security no longer
meets the Fund's requirements, we will attempt to sell that security within a
reasonable time, unless selling the security would not be in the Fund's best
interest.
 
Primary Risks
 
Interest Rate Risk. Money market instruments, like all debt securities, face
the risk that the securities will decline in value because of changes in
interest rates. Generally, investments subject to interest rate risk will
decrease in value when interest rates rise and increase when interest rates
decline. To minimize such price fluctuations, the Fund adheres to the
following practices:
   
 . We limit the dollar-weighted average maturity of the securities held by the
Fund to 90 days or less. Generally, rates Cash Management Fund     
 
                                       7
                                       --
<PAGE>
 
A Detailed Look at the Cash Management Fund
 
of short-term investments fluctuate less than longer-term bonds.
 . We primarily buy securities with remaining maturities of 13 months or less.
This reduces the risk that the issuer's creditworthiness will change, or that
the issuer will default on the principal and interest payments of the
obligation.
 
Credit Risk. A money market instrument's credit quality depends on the
issuer's ability to pay interest on the security and repay the debt: the lower
the credit rating, the greater the risk that the security's issuer will
default, or fail to meet its payment obligations. The credit risk of a
security may also depend on the credit quality of any bank or financial
institution that provides credit enhancement for it. The Fund only buys high
quality securities with minimal credit risk.
 
Market Risk. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
 
Security Selection Risk. While the Fund invests in short-term securities,
which by nature are relatively stable investments, the risk remains that the
securities we have selected will not perform as expected. This could cause the
Fund's returns to lag behind those of similar money market funds.
 
Repurchase Agreement Risk. A repurchase agreement exposes the Fund to the risk
that the party that sells the securities defaults on its obligation to
repurchase them. In this circumstance, the Fund can lose money because:
 . it cannot sell the securities at the agreed-upon time and price; or
 . the securities lose value before they can be sold.
 
The Fund seeks to reduce this risk by monitoring, under the supervision of the
Board of Trustees, the creditworthiness of the sellers with whom it enters
into repurchase agreements. The Fund also monitors the value of the securities
to ensure that they are at least equal to the total amount of the repurchase
obligations, including interest and accrued interest.
 
Concentration Risk. Because the Fund may invest more than 25% of its total
assets in the financial services industry, it may be vulnerable to setbacks in
that industry. Banks and other financial service companies are highly
dependent on short-term interest rates and can be adversely affected by
downturns in the U.S. and foreign economies or changes in banking regulations.
 
Prepayment Risk. When a bond issuer, such as an issuer of asset-backed
securities, retains the right to pay off a high yielding bond before it comes
due, the Fund may have no choice but to reinvest the proceeds at lower
interest rates. Thus, prepayment may reduce the Fund's income. It may also
create a capital gains tax liability, because bond issuers usually pay a
premium for the right to pay off bonds early.
   
Secondary Risks     
 
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or issuers in which it invests will not accommodate the
changeover necessary from dates in the year 1999 to dates in the year 2000.
These risks could adversely affect:
 . the issuers in which the Fund invests, which could impact the value of the
Fund's investments;
 . our ability to service your Fund account, including our ability to meet your
requests to buy and sell Fund shares; and
 . our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.
 
We are working both internally and with our business partners and service
providers to address this problem. If we -- or our business partners, service
providers, government agencies or other market participants--do not succeed,
it could materially affect shareholder services or the value of the Fund's
shares.
                                         8
                                         --
<PAGE>
 
                                    A Detailed Look at the Cash Management Fund
 
The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rates of
return that an investor would have earned on an investment in the Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report. The
annual report is available free of charge by calling the BT Service Center at
1-800-730-1313.
 
Financial Highlights
 
<TABLE>
<CAPTION>
                                For the years ended December 31,
                            1998        1997         1996         1995        1994
- ----------------------------------------------------------------------------------------
<S>                       <C>         <C>          <C>          <C>         <C>
Per Share Operating
 Performance:
Net Asset Value,
 Beginning of Year        $   1.00    $   1.00     $   1.00     $   1.00    $   1.00
- ----------------------------------------------------------------------------------------
Income from Investment
 Operations
Net Investment Income         0.05        0.05         0.05         0.05        0.04
- ----------------------------------------------------------------------------------------
Net Realized Gain (Loss)
 from Investment
 Transactions                 0.00/1/    (0.00)/1/     0.00/1/      0.00/1/    (0.01)
- ----------------------------------------------------------------------------------------
Total from Investment
 Operations                   0.05        0.05         0.05         0.05        0.03
- ----------------------------------------------------------------------------------------
Contributions of Capital        --          --        0.001           --        0.01
- ----------------------------------------------------------------------------------------
Distributions to
 Shareholders
Net Investment Income        (0.05)      (0.05)       (0.05)       (0.05)      (0.04)
- ----------------------------------------------------------------------------------------
Net Asset Value, End of
 Year                     $   1.00    $   1.00     $   1.00     $   1.00    $   1.00
- ----------------------------------------------------------------------------------------
Total Investment Return       4.93%       4.98%        4.82%/2/     5.35%       3.67%/2/
- ----------------------------------------------------------------------------------------
Supplemental Data and
 Ratios:
Net Assets, End of Year
 (000s omitted)           $232,586    $138,423     $118,969     $135,998    $159,172
- ----------------------------------------------------------------------------------------
Ratios to Average Net
 Assets:
Net Investment Income         4.80%       4.88%        4.72%        5.22%       3.70%
- ----------------------------------------------------------------------------------------
Expenses, Including
 Expenses of the Cash
 Management Portfolio         0.75%       0.75%        0.75%        0.74%       0.73%
Decrease Reflected in
 Above Expense Ratio Due
 to Absorption of
 Expenses by Bankers
 Trust                        0.06%       0.03%        0.03%        0.02%       0.08%
- ----------------------------------------------------------------------------------------
</TABLE>
 
/1/Less than $0.01 per share.
/2/Increased by approximately 0.08% and 0.96% due to Contributions of Capital
for the years ended December 31, 1996 and 1994, respectively.
 
                                       9
                                       --
<PAGE>
 
   
Treasury Money Fund     
 
           Overview
       
- --                                                                  --
 Goal: The Fund seeks a high level of current income consistent with
 liquidity and the preservation of capital.
 Core Strategy: The Fund invests in debt obligations of the U.S.
 Treasury or repurchase agreements collateralized by U.S. Treasury
 debt obligations.
- --                                                                  --
 
 
     Treasury Money Fund
 
     Overview of the Treasury Money Fund
 
<TABLE>
 <C> <S>
  10 Goal
 
  10 Core Strategy
 
  10 Investment Policies and Strategies
 
  11 Principal Risks of Investing in the Fund
 
  11 Who Should Consider Investing in the Fund
 
  12 Total Returns, After Fees and Expenses
 
  13 Annual Fund Operating Expenses

     A Detailed Look at the Treasury Money Fund

  14 Objective
 
  14 Strategy
 
  14 Principal Investments
 
  14 Risks
 
  16 Financial Highlights
</TABLE>
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment objective as the Fund. The Fund, through the master portfolio,
seeks to achieve that objective by investing in U.S. Treasury obligations,
either directly or through repurchase agreements. The Fund maintains a dollar-
weighted average maturity of 90 days or less. The Fund attempts to maintain a
stable share price by investing in securities that are valued in U.S. dollars
and have remaining maturities of 397 days or less.
 
                                      10
                                       --
<PAGE>
 
                                            Overview of the Treasury Money Fund
 
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example, a
sharp rise in interest rates could cause the bond market and individual
securities in the Fund's portfolio to decline in value.
 
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Treasury Money Fund if you are looking
for an investment that offers income approximating money market rates,
preserves the value of your investment and yet can easily be converted into
cash.
 
You should not consider investing in the Treasury Money Fund if you seek long-
term capital growth. Although it provides a convenient means of diversifying
short-term investments, the Fund by itself does not constitute a balanced
investment program.
 
An investment in the Treasury Money Fund is not a deposit of Bankers Trust
Company or any other bank, and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
 
 
                                      11
                                       --
<PAGE>
 
Overview of the Treasury Money Fund
 
Year-by-Year Returns
(for each full calendar year since inception)
                                        
                                         
                          [BAR GRAPH APPEARS HERE]
<TABLE> 
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
<S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C> 
8.55%  7.61%  5.30%  3.10%  2.43%  3.40%  5.19%  4.71%  4.86%  4.76%
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
</TABLE> 
 
Since inception, the Fund's highest return in any calendar quarter was 1.89%
(first quarter 1990) and its lowest quarterly return was 0.58% (first quarter
1993). Past performance offers no indication of how the Fund will perform in
the future.
TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for
each full calendar year since the Fund began selling shares on November 1,
1988 (its inception date). The table shows the Fund's average annual return
over the last year, the last five calendar years and the last ten calendar
years.
   
As of December 31, 1998, the Fund's 7-DAY YIELD was 4.15%. To learn the
current 7-day yield, investors may call the BT Service Center at 1-800-730-
1313.     
 
- -------------------------------------------------------------------------------
The 7-DAY YIELD, which is often referred to as the "current yield," is the
income generated by the Fund over a seven day period. This amount is then
annualized, which means that we assume the Fund generates the same income
every week for a year. The "total return" of the Fund is the change in the
value of an investment in the Fundover a given period. Average annual returns
are calculated by averaging the year-by-year returns of the Fund over a given
period.
 
Average Annual Returns
(as of December 31, 1998)
 
<TABLE>
<CAPTION>
                     1 year 5 years 10 years
- --------------------------------------------
<S>                  <C>    <C>     <C>
TREASURY MONEY FUND  4.76%   4.58%   4.98%
- --------------------------------------------
</TABLE>
 
 
                                      12
                                       --
<PAGE>
 
                                            Overview of the Treasury Money Fund
 
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
 
The Annual Fees and Expenses table to the right describes the fees and
expenses that you may pay if you buy and hold shares of the Treasury Money
Fund.
 
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the periods shown, that the Fund's
operating expenses remained the same, and that you redeem your shares at the
end of the period.
 
You may use this hypothetical example to compare the Fund's expense history
with other funds./1/ Your actual costs may be higher or lower.
 
/1/Information on the annual operating expenses reflects the expenses of both
   the Fund and the Treasury Money Portfolio, the master portfolio in which the
   Treasury Money Fund invests its assets. (A further discussion of the
   relationship between the Fund and the portfolio appears in the
   "Organizational Structure" section of this prospectus.)
/2/Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
   year end of December 31, 1998, to waive its fees and reimburse expenses so
   that total expenses will not exceed 0.75%.
/3/Based on expenses, after fee waivers and reimbursements for the first 16
   months only.
Annual Fees and Expenses
 
<TABLE>
<CAPTION>
                                             Percentage of Average
                                              Daily Net Assets/1/
- ------------------------------------------------------------------
<S>                                          <C>
Management Fees                                       0.15%
- ------------------------------------------------------------------
Distribution and Service (12b-1) Fees                 None
- ------------------------------------------------------------------
Other Fund Operating Expenses                         0.62%
- ------------------------------------------------------------------
Total Fund Operating Expenses                         0.77%
- ------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements          (0.02)%/2/
- ------------------------------------------------------------------
Net Expenses                                          0.75%
- ------------------------------------------------------------------
</TABLE>


<TABLE>  
<CAPTION> 
- --                                                          --
 Expense Example/3/

  1 year          3 years           5 years           10 years
 -------------------------------------------------------------             
  <S>             <C>               <C>               <C>
   $77             $249              $439               $988

- --                                                          --
</TABLE> 

 
                                      13
                                       --
<PAGE>
 
   
Treasury Money Fund     
 
           A detailed look
 
OBJECTIVE
The Treasury Money Fund seeks a high level of current income consistent with
liquidity and the preservation of capital by investing in debt obligations of
the U.S. Treasury or repurchase agreements collateralized by U.S. Treasury
debt obligations.
 
While we give priority to earning income and maintaining the value of the
Fund's principal at $1.00 per share, all money market instruments, including
U.S. government obligations, can change in value when interest rates change.
 
STRATEGY
The Fund seeks current income, maintaining a dollar-weighted average maturity
of 90 days or less, by investing only in U.S. Treasury obligations and
repurchase agreements backed by obligations of the U.S. Treasury. Fund
securities are valued in U.S. dollars and have remaining maturities of 397
days (about 13 months) or less at the time of purchase. The Fund may also
invest in securities that have features that reduce their maturities to 397
days or less at the time of purchase. Although the U.S. government guarantees
the timely payment of interest and principal, it does not guarantee the market
value of these obligations, which may change in response to changes in
interest rates.
 
PRINCIPAL INVESTMENTS
The Fund invests in U.S. Treasury obligations, either directly or through
repurchase agreements. In a repurchase agreement, the Fund buys securities at
one price with a simultaneous agreement to sell back the securities at a
future date at an agreed-upon price.
 
RISKS
Below we set forth some of the prominent risks associated with "government"
money market mutual funds, and we detail our approaches to contain them.
Although we attempt to assess the likelihood that these risks may actually
occur and to limit them, we make no guarantee that we will succeed. If a
security no longer meets the Fund's requirements, we will attempt to sell that
security within a reasonable time, unless selling the security would not be in
the Fund's best interest.
 
Primary Risks
 
Interest Rate Risk. Money market instruments, like all debt securities, face
the risk that the securities will decline in value because of changes in
interest rates. Generally, investments subject to interest rate risk will
decrease in value when interest rates rise and increase when interest rates
decline. While the Fund seeks to maintain a $1.00 share price, it cannot
guarantee that this will always happen. To minimize such price fluctuations,
the Fund adheres to the following practices:
 . We limit the dollar-weighted average maturity of the securities held by the
Fund to 90 days or less. Generally, rates of short-term investments fluctuate
less than longer-term bonds.
 . We primarily buy securities with remaining maturities of 13 months or less.
 
Market Risk. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
 
Security Selection Risk. While the Fund invests in short-term securities,
which by nature are relatively stable investments, the risk remains that the
securities we have selected will not perform as expected. This, in turn, could
cause the Fund's returns to lag behind those of similar money market funds.
 
Repurchase Agreement Risk. A repurchase agreement exposes the Fund to the risk
that the party that sells the securities defaults on its obligation to
repurchase them. In this circumstance, the Fund can lose money because:
 . it cannot sell the securities at the agreed-upon time and price; or
 . the securities lose value before they can be sold.
 
The Fund seeks to reduce this risk by monitoring, under the supervision of the
Board of Trustees, the creditworthiness of the sellers with whom it enters
into repurchase agreements. The Fund also monitors the value of the securities
to ensure that they are at least equal to the total amount of the repurchase
obligations, including interest and accrued interest.
 
                                      14
                                       --
<PAGE>
 
                                     A Detailed Look at the Treasury Money Fund
   
Secondary Risks     
 
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or issuers in which it invests will not accommodate the
changeover necessary from dates in the year 1999 to dates in the year 2000.
These risks could adversely affect:
 . the issuers in which the Fund invests, which could impact the value of the
Fund's investments;
 . our ability to service your Fund account, including our ability to meet your
requests to buy and sell Fund shares; and
 . our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.
 
We are working both internally and with our business partners and service
providers to address this problem. If we -- or our business partners, service
providers, government agencies or other market participants -- do not succeed,
it could materially affect shareholder services or the value of the Fund's
shares.
 
                                      15
                                       --
<PAGE>
 
A Detailed Look at the Treasury Money Fund
 
 
The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rates of
return that an investor would have earned on an investment in the Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report. The
annual report is available free of charge by calling the BT Service Center at
1-800-730-1313.
 
Financial Highlights
 
<TABLE>
<CAPTION>
                                For the years ended December 31,
                            1998        1997         1996        1995        1994
- ---------------------------------------------------------------------------------------
<S>                       <C>         <C>          <C>         <C>         <C>
Per Share Operating
 Performance:
Net Asset Value,
 Beginning of Year        $   1.00    $   1.00     $   1.00    $   1.00    $   1.00
- ---------------------------------------------------------------------------------------
Income from Investment
 Operations
Net Investment Income         0.05        0.05         0.05        0.05        0.03
- ---------------------------------------------------------------------------------------
Net Realized Gain (Loss)
 from Investment
 Transactions                 0.00/1/    (0.00)/1/     0.00/1/     0.00/1/    (0.00)/1/
- ---------------------------------------------------------------------------------------
Total from Investment
 Operations                   0.05        0.05         0.05        0.05        0.03
- ---------------------------------------------------------------------------------------
Distributions to
 Shareholders
Net Investment Income        (0.05)      (0.05)       (0.05)      (0.05)      (0.03)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of
 Year                     $   1.00    $   1.00     $   1.00    $   1.00    $   1.00
- ---------------------------------------------------------------------------------------
Total Investment Return       4.76%       4.86%        4.71%       5.19%       3.40%
- ---------------------------------------------------------------------------------------
Supplemental Data and
 Ratios:
Net Assets, End of Year
 (000s omitted)           $308,911    $268,274     $554,716    $615,084    $696,915
- ---------------------------------------------------------------------------------------
Ratios to Average Net
 Assets:
Net Investment Income         4.66%       4.74%        4.61%       5.06%       3.36%
- ---------------------------------------------------------------------------------------
Expenses, Including
 Expenses of the
 Treasury Money
 Portfolio                    0.75%       0.75%        0.75%       0.75%       0.75%
Decrease Reflected in
 Above Expense Ratio Due
 to Absorption of
 Expenses by Bankers
 Trust                        0.02%       0.02%        0.01%       0.02%       0.02%
- ---------------------------------------------------------------------------------------
</TABLE>
 
/1/Less than $0.01 per share.
 
                                      16
                                       --
<PAGE>
 
       
Overview
          
NY Tax Free Money Fund     
- --                                                                  --
 Goal: The Fund seeks a high level of current income exempt from
 Federal and New York income tax consistent with liquidity and the
 preservation of capital.
 
 Core Strategy: The Fund invests primarily in municipal bonds and
 notes with remaining maturities of 397 days (about 13 months) or
 less, whose interest payments are exempt from Federal income tax.
- --                                                                  --
 
 
  NY Tax Free Money Fund
 
  Overview of the NY Tax Free Money Fund
 
<TABLE>   
 <C> <S>
  17 Goal
 
  17 Core Strategy
 
  17 Investment Policies and Strategies
 
  18 Principal Risks of Investing in the Fund
 
  18 Who Should Consider Investing in the Fund
 
  19 Total Returns, After Fees and Expenses
 
  20 Annual Fund Operating Expenses

     A Detailed Look at the NY Tax Free Money Fund

  21 Objective
 
  21 Strategy
 
  21 Principal Investments
 
  22 Risks
 
  23 Financial Highlights
</TABLE>    
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment objective as the Fund. The Fund, through the master portfolio,
seeks to achieve that objective by investing primarily in municipal bonds and
notes from New York issuers (or issuers in other locales) whose interest
payments are exempt from New York State and City income taxes. The Fund
maintains a dollar-weighted average maturity of 90 days or less. The Fund
attempts to maintain a stable share price by investing in securities that are
valued in U.S. dollars and have remaining maturities of 397 days or less.
- -------------------------------------------------------------------------------
Municipal bonds and notes: State and local government entities issue bonds
(with maturities of one year or more) and notes (with maturities of less than
one year). The interest investors earn from these obligations is exempt from
Federal income tax. Interest on bonds and notes from New York issuers and
issuers in certain other locales, most notably Puerto Rico, is exempt from New
York State and City income tax as well.
 
                                      17
                                       --
<PAGE>
 
Overview of the NY Tax Free Money Fund
 
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example:
 . A sharp rise in interest rates could cause the bond market and individual
securities in the Fund's portfolio to decline in value.
 . New York's local economy could suffer a reversal that would undermine or cast
doubt on the ability of New York municipal issuers to meet their financial
obligations.
 . An issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline.
 
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the NY Tax Free Money Fund if you are seeking
a highly liquid investment that offers current income exempt from Federal
income taxes while preserving the value of your principal. The Fund offers an
added advantage to New York residents by emphasizing investments whose
interest income is exempt from New York State and City tax.
 
You should not consider investing in the NY Tax Free Money Fund if you seek
long-term capital growth.
 
Although it provides a convenient means of diversifying short-term
investments, the Fund by itself does not constitute a balanced investment
program.
 
An investment in the NY Tax Free Money Fund is not a deposit of Bankers Trust
Company or any other bank, and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
 
 
                                      18
                                       --
<PAGE>
 
                                         Overview of the NY Tax Free Money Fund
 
Year-by-Year Returns
(for each full calendar year since inception)

[GRAPH APPEARS HERE]

<TABLE> 
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
<S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C> 
5.36%  5.17%  4.07%  2.38%  1.68%  2.11%  3.12%  2.68%  2.86%  2.66%
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
</TABLE> 

Since inception, the Fund's highest return in any calendar quarter was 1.31%
(fourth quarter 1990) and its lowest quarterly return was 0.39% (first and
second quarter 1993). Past performance offers no indication of how the Fund
will perform in the future.

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for
each full calendar year since the Fund began selling shares on September 27,
1988 (its inception date). The table shows the Fund's average annual return
over the last calendar year, the last five calendar years and the last ten
calendar years.
 
As of December 31, 1998, the Fund's tax equivalent yield was 5.27%. To learn
the current yield, investors may call the BT Service Center at 1-800-730-1313.
 
- -------------------------------------------------------------------------------
The tax equivalent yield demonstrates the yield on a taxable investment
necessary to produce an after-tax yield equal to a fund's tax free yield.
Yield is the income generated by a fund over a seven-day period. This amount
is then annualized, which means that we assume the fund generates the same
income every week for a year. The "total return" of a fund is the change in
the value of an investment in the fund over a given period. Average annual
returns are calculated by averaging the year-by-year returns of the fund over
a given period.
Average Annual Returns
(as of December 31, 1998)
 
<TABLE>   
<CAPTION>
                        1 year 5 years 10 years
- -----------------------------------------------
<S>                     <C>    <C>     <C>
NY Tax Free Money Fund  2.66%   2.68%   3.20%
- -----------------------------------------------
</TABLE>    
 
                                      19
                                       --
<PAGE>
 
Overview of the NY Tax Free Money Fund
 
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
 
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the NY Tax Free Money Fund.
 
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same, and that you sold your shares at the end of the
period.
 
You may use this hypothetical example to compare the Fund's expense history
with other funds./1/ Your actual costs may be higher or lower.
 
/1/Information on the annual operating expenses reflects the expenses of both
   the Fund and the NY Tax Free Money Portfolio, the master portfolio in which
   the NY Tax Free Money Fund invests its assets. (A further discussion of the
   relationship between the Fund and the portfolio appears in the
   "Organizational Structure" section of this prospectus.)
/2/Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
   year end of December 31, 1998, to waive its fees and reimburse expenses so
   that total expenses will not exceed 0.75%.
/3/Based on expenses, after fee waivers and reimbursements for the first 16
   months only.
Annual Fees and Expenses
 
<TABLE>
<CAPTION>
                                             Percentage of Average
                                              Daily Net Assets/1/
- ------------------------------------------------------------------
<S>                                          <C>
Management Fees                                       0.15%
- ------------------------------------------------------------------
Distribution and Service (12b-1) Fees                 None
- ------------------------------------------------------------------
Other Fund Operating Expenses                         0.70%
- ------------------------------------------------------------------
Total Fund Operating Expenses                         0.85%
- ------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements          (0.10)%/2/
- ------------------------------------------------------------------
Net Expenses                                          0.75%
- ------------------------------------------------------------------
</TABLE>


<TABLE>  
<CAPTION> 
- --                                                   --
 
 Expense Example/3/

  1 year        3 years         5 years        10 years
 ------------------------------------------------------             
  <S>           <C>             <C>            <C>
   $77           $264            $473           $1,076

- --                                                   --   
</TABLE>  
 
                                       20
                                       --
<PAGE>
 
   
NY Tax Free Money Fund     
A detailed look
       
OBJECTIVE
The NY Tax Free Money Fund seeks a high level of current income exempt from
Federal income tax consistent with liquidity and the preservation of capital
by investing in high quality, short-term, tax-exempt money market instruments.
The Fund concentrates its investments in municipal bonds and notes from the
State of New York or governmental issuers in other locales, such as Puerto
Rico, whose interest payments are exempt from New York State and City income
taxes.
 
While we give priority to earning income and maintaining the value of the
Fund's principal at $1.00 per share, all money market instruments can change
in value when interest rates or an issuer's creditworthiness changes.
 
STRATEGY
The Fund seeks current income by concentrating its investments in the bonds
and notes of New York issuers and maintains a dollar-weighted average maturity
of 90 days or less. The Fund follows two policies designed to maintain a
stable share price and to generate income exempt from Federal and New York
State and City income taxes:
 
Generally, Fund securities are valued in U.S. dollars and have remaining
maturities of 397 days (about 13 months) or less at the time of purchase. The
Fund may also invest in securities that have features that reduce their
maturities to 397 days or less at the time of purchase.
 
 
The Fund primarily buys short-term New York municipal obligations that at the
time of purchase:
 . have received one of the top two short-term ratings from two nationally
recognized statistical rating organizations;
   
 . have received one of the top two short-term ratings from one rating
organization (if only one organization rates the security);     
   
 . are unrated, but are determined to be of comparable quality by the Fund's
Investment Adviser; or     
 . have no short-term rating, but are rated in one of the top three highest
long-term rating categories, and are determined to be of similar quality by
the Fund's Investment Adviser.
 
PRINCIPAL INVESTMENTS
The Fund primarily invests in the following types of investments:
 . General obligation notes and bonds, which an issuer backs with its full faith
and credit. That means the government entity will repay the bond out of its
general tax revenues.
 . Revenue notes and bonds, which are payable from specific revenue sources.
These are often tied to the public works project the bonds are financing, but
are not generally backed by the issuer's taxing power.
 . Tax-exempt commercial paper, tax-exempt debt of borrowers that matures in 270
days or less.
 .Short-term municipal notes, such as tax anticipation notes, that are issued
in anticipation of the receipt of tax revenues.
 . Municipal obligations, backed by letters of credit (a document issued by a
bank guaranteeing the issuer's payments for a stated amount), general bank
guarantees or municipal bond insurance.
 . Floating rate bonds, whose interest rates vary with changes in specified
market rates or indexes. The Fund may invest in high quality floating rate
bonds with maturities of one year or more if it has the right to sell them
back at their face value prior to maturity. The Fund may also invest in
securities that have features that reduce their maturities on their purchase
date.
 . Private activity bonds, which are revenue bonds that finance nongovernmental
activities, such as private industry construction. Note that the interest on
these bonds may be subject to local, state and Federal taxes, including the
alternative minimum tax.
 
Under normal conditions, the Fund invests at least 80% of its net assets in
municipal bonds and notes, and at least 65% of its assets in notes and bonds
of the State of New York and its related agencies and authorities and issuers
in certain other locales that are exempt from New York State and City income
tax.
 
The Fund may invest more than 35% of its total assets in notes and bonds that
are exempt from Federal income taxes but not from New York State and City
income tax when money available for investment exceeds the supply of New York
debt securities that meet the Fund's criteria.
 
                                      21
                                       --
<PAGE>
 
A Detailed Look at the NY Tax Free Money Fund
 
 
RISKS
Below we set forth some of the prominent risks associated with tax free money
market mutual funds, and we detail our approaches to contain them. Although we
attempt to assess the likelihood that these risks may actually occur and to
limit them, we make no guarantee that we will succeed. If a security no longer
meets the Fund's requirements, we will attempt to sell that security within a
reasonable time, unless selling the security would not be in the Fund's best
interest.
 
Primary Risks
 
Interest Rate Risk. Money market instruments, like all debt securities, face
the risk that the securities will decline in value because of changes in
interest rates. Generally, investments subject to interest rate risk will
decrease in value when interest rates rise and increase when interest rates
decline. While the Fund seeks to maintain a $1.00 share price, it cannot
guarantee that this will always happen. To minimize such price fluctuations,
the Fund limits the dollar-weighted average maturity of the securities held by
the Fund to 90 days or less. Generally, rates of short-term investments
fluctuate less than longer-term bonds.
 
Credit Risk. A money market instrument's credit quality depends on the
issuer's ability to pay interest on the security and repay the debt: the lower
the credit rating, the greater the risk that the security's issuer will
default, or fail to meet its payment obligations. The credit risk of a
security may also depend on the credit quality of any bank or financial
institution that provides credit enhancement for it. To minimize credit risk,
the Fund only buys high quality securities with minimal credit risk. Also, the
Fund primarily buys securities with remaining maturities of 13 months or less.
This reduces the risk that the issuer's creditworthiness will change, or that
the issuer will default on the principal and interest payments of the
obligation.
 
Market Risk. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
 
Security Selection Risk. While the Fund invests in short-term securities,
which by nature are relatively stable investments, the risk remains that the
securities we have selected will not perform as expected. This could cause the
Fund's returns to lag behind those of similar money market funds. We attempt
to limit this risk by diversifying the Fund's investments so that a single
setback need not undermine the pursuit of its objective and by investing in
money market instruments that receive the highest short-term debt ratings as
described above.
 
Concentration Risk. Because of the Fund's concentration in New York municipal
securities, the Fund has a relatively large exposure to financial stresses
arising from a regional economic downturn. Bankers Trust attempts to limit
this risk by spreading out investments across issuers to the extent possible.
   
Secondary Risks     
 
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or issuers in which it invests will not accommodate the
changeover necessary from dates in the year 1999 to dates in the year 2000.
These risks could adversely affect:
 . the issuers in which the Fund invests, which could impact the value of the
Fund's investments;
 . our ability to service your Fund account, including our ability to meet your
requests to buy and sell Fund shares; and
 . our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.
 
We are working both internally and with our business partners and service
providers to address this problem. If we -- or our business partners, service
providers, government agencies or other market participants -- do not succeed,
it could materially affect shareholder services or the value of the Fund's
shares.
 
Temporary Defensive Position. In response to adverse political, economic or
market events, the Fund may adopt a temporary defensive position in which it
places more than 20% of the Fund's assets in high quality money market
investments that are subject to Federal income tax. To the extent that the
Fund might do so, it may not meet its goal of a high level of current tax-free
income.
 
                                      22
                                       --
<PAGE>
 
                                  A Detailed Look at the NY Tax Free Money Fund
 
 
The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rates of
return that an investor would have earned on an investment in the Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report. The
annual report is available free of charge by calling the BT Service Center at
1-800-730-1313.
 
Financial Highlights
 
<TABLE>
<CAPTION>
                             For the years ended December 31,
                           1998        1997        1996        1995        1994
- -------------------------------------------------------------------------------------
<S>                       <C>         <C>         <C>         <C>         <C>
Per Share Operating
 Performance:
Net Asset Value,
 Beginning of Year        $  1.00     $  1.00        1.00     $  1.00     $  1.00
- -------------------------------------------------------------------------------------
Income from Investment
 Operations
Net Investment Income        0.03        0.03        0.03        0.03        0.02
- -------------------------------------------------------------------------------------
Net Realized Loss from
 Investment Transactions    (0.00)/1/   (0.00)/1/   (0.00)/1/   (0.00)/1/   (0.00)/1/
- -------------------------------------------------------------------------------------
Total from Investment
 Operations                  0.03        0.03        0.03        0.03        0.02
- -------------------------------------------------------------------------------------
Distributions to
 Shareholders
Net Investment Income       (0.03)      (0.03)      (0.03)      (0.03)      (0.02)
- -------------------------------------------------------------------------------------
Net Asset Value, End of
 Year                     $  1.00     $  1.00     $  1.00     $  1.00     $  1.00
- -------------------------------------------------------------------------------------
Total Investment Return      2.66%       2.86%       2.68%       3.12%       2.11%
- -------------------------------------------------------------------------------------
Supplemental Data and
 Ratios:
Net Assets, End of Year
 (000s omitted)           $77,839     $85,364     $75,858     $70,765     $79,101
- -------------------------------------------------------------------------------------
Ratios to Average Net
 Assets:
Net Investment Income        2.63%       2.83%       2.64%       3.07%       2.05%
- -------------------------------------------------------------------------------------
Expenses, Including
 Expenses of the NY Tax
 Free Money Portfolio        0.75%       0.75%       0.75%       0.75%       0.75%
Decrease Reflected in
 Above Expense Ratio Due
 to Absorption of
 Expenses by Bankers
 Trust                       0.10%       0.06%       0.09%       0.07%       0.08%
- -------------------------------------------------------------------------------------
</TABLE>
 
/1/Less than $0.01 per share.
 
                                      23
                                       --
<PAGE>
 
          
Tax Free Money Fund     
       
    Overview     
- --                                                                  --
 Goal: The Fund seeks a high level of current income exempt from
 Federal income tax consistent with liquidity and the preservation
 of capital.
 
 Core Strategy: The Fund invests primarily in municipal bonds and
 notes with remaining maturities of 397 days (about 13 months) or
 less, whose interest payments are exempt from Federal income tax.
- --                                                                  --
 
 
     Tax Free Money Fund
 
     Overview of the Tax Free Money Fund
 
<TABLE>   
 <C> <S>
  24 Goal
 
  24 Core Strategy
 
  24 Investment Policies and Strategies
 
  25 Principal Risks of Investing in the Fund
 
  25 Who Should Consider Investing in the Fund
 
  26 Total Returns, After Fees and Expenses
 
  27 Annual Fund Operating Expenses

     A Detailed Look at the Tax Free Money Fund

  28 Objective
 
  28 Strategy
 
  28 Principal Investments
 
  28 Risks
 
  30 Financial Highlights
</TABLE>    
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment objective as the Fund. The Fund, through the master portfolio, seeks
to achieve that objective by investing in high quality short-term, tax-exempt
money market instruments, maintaining a dollar-weighted average maturity of 90
days or less. The Fund attempts to maintain a stable share price and to
generate tax-exempt income by investing in high quality municipal obligations
that are valued in U.S. dollars and have remaining maturities of 397 days or
less.
- --------------------------------------------------------------------------------
   
Municipal obligations: State and local government entities issue bonds (with
maturities of one year or more) and notes (with maturities of less than one
year). The interest investors earn from these obligations is exempt from
Federal tax.     
 
                                       24
                                       --
<PAGE>
 
                                            Overview of the Tax Free Money Fund
 
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example:
 . A sharp rise in interest rates could cause the bond market and individual
securities in the Fund's portfolio to decline in value.
 . An issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline.
 
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Tax Free Money Fund if you are seeking a
highly liquid investment that offers current income exempt from Federal income
taxes while preserving the value of your principal.
 
You should not consider investing in the Tax Free Money Fund if you seek long-
term capital growth.
 
Although it provides a convenient means of diversifying short-term
investments, the Fund by itself does not constitute a balanced investment
program.
 
An investment in the Tax Free Money Fund is not a deposit of Bankers Trust
Company or any other bank, and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
 
                                      25
                                       --
<PAGE>
 
Overview of the Tax Free Money Fund
 
Year-by-Year Returns
(each full calendar year since inception)

                [BAR CHART APPEARS HERE]
<TABLE> 
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
<S>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C> 
5.98%  5.59%  4.29%  2.69%  1.97%  2.27%  3.34%  2.84%  2.94%  2.75%
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
1989   1990   1991   1992   1993   1994   1995   1996   1997   1998
- -----  -----  -----  -----  -----  -----  -----  -----  -----  -----
</TABLE> 

Since inception, the Fund's highest return in any calendar quarter was 1.40%
(fourth quarter 1990) and its lowest quarterly return was 0.45% (first quarter
1994). Past performance offers no indication of how the Fund will perform in
the future.
 
TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and reward of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for
each of the past ten years. The table shows the Fund's average annual return
over the last calendar year, the last five calendar years and the last ten
calendar years.
 
As of December 31, 1998, the Fund's tax equivalent yield was 4.95%. To learn
the current yield, investors may call the BT Service Center at 1-800-730-1313.
 
- -------------------------------------------------------------------------------
The tax equivalent yield demonstrates the yield on a taxable investment
necessary to produce an after-tax yield equal to a fund's tax free yield.
Yield is the income generated by a fund over a seven-day period. This amount
is then annualized, which means that we assume the fund generates the same
income every week for a year. The "total return" of a fund is the change in
the value of an investment in the fund over a given period. Average annual
returns are calculated by averaging the year-by-year returns of the fund over
a given period.
 
 
Average Annual Total Returns
(as of December 31, 1998)
 
 
<TABLE>
<CAPTION>
                     1 year 5 years 10 years
- --------------------------------------------
<S>                  <C>    <C>     <C>
Tax Free Money Fund  2.75%   2.83%   3.46%
- --------------------------------------------
</TABLE>
 
                                      26
                                       --
<PAGE>
 
                                             Overview of the Tax Free Money Fund
 
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
 
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the Tax Free Money Fund.
 
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same, and that you sold your shares at the end of the
period.
 
You may use this hypothetical example to compare the Fund's expense history
with other funds./1/ Your actual costs may be higher or lower.
 
/1/Information on the annual operating expenses reflects the expenses of both
   the Fund and the Tax Free Money Portfolio, the master portfolio in which the
   Tax Free Money Fund invests its assets. (A further discussion of the
   relationship between the Fund and the portfolio appears in the
   "Organizational Structure" section of this prospectus.)
/2/Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
   year end of December 31, 1998, to waive its fees and reimburse expenses so
   that total expenses will not exceed 0.75%.
/3/Based on expenses, after fee waivers and reimbursements for the first 16
   months only.
Annual Fees and Expenses
 
<TABLE>
<CAPTION>
                                            Percentage of Average
                                             Daily Net Assets/1/
- -----------------------------------------------------------------
<S>                                         <C>
Management fees                                      0.15%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees                None
- -----------------------------------------------------------------
Other fund operating expenses                        0.68%
- -----------------------------------------------------------------
Total fund operating expenses                        0.83%
- -----------------------------------------------------------------
Less: fee waivers or expense reimbursement          (0.08)%/2/
- -----------------------------------------------------------------
Net expenses                                         0.75%
- -----------------------------------------------------------------
</TABLE>

<TABLE>  
<CAPTION> 

- --                                                           --
 
 Expense Example/3/

  1 year         3 years           5 years             10 years
 --------------------------------------------------------------   
  <S>            <C>               <C>                 <C>
   $77            $261              $465                $1,054

- --                                                           --   
</TABLE>
 
 
                                       27
                                       --
<PAGE>
 
        
     Tax Free Money Fund     
 
                    A detailed look
       
OBJECTIVE
The Tax Free Money Fund seeks a high level of current income exempt from
Federal income tax consistent with liquidity and the preservation of capital
by investing in high quality, short-term, tax-exempt money market instruments.
 
While we give priority to earning income and maintaining the value of the
Fund's principal at $1.00 per share, all money market instruments can change
in value when interest rates or an issuer's creditworthiness changes.
 
STRATEGY
The Fund seeks current income by investing in high quality short-term
municipal obligations and maintains a dollar-weighted average maturity of 90
days or less. The Fund follows two policies designed to maintain a stable
share price and to generate income from Federal tax:
 
Generally, fund securities are valued in U.S. dollars and have remaining
maturities of 397 days (about 13 months) or less at the time of purchase. The
Fund may also invest in securities that have features that reduce their
maturities to 397 days or less at the time of purchase.
 
The Fund buys short-term municipal obligations that at the time of purchase:
 . have received the top short-term rating from two nationally recognized
statistical rating organizations;
 . have received the highest short-term rating from one rating organization (if
only one organization rates the security); or
   
 . are unrated, but are determined to be of comparable quality by the Fund's
Investment Adviser;     
 . have no short-term rating, but are rated in one of the top three highest
long-term rating categories, and are determined to be of similar quality by
the Fund's Investment Adviser.
 
PRINCIPAL INVESTMENTS
The Fund primarily invests in the following types of investments:
 . General obligation notes and bonds, which an issuer backs with its full faith
and credit. That means the government entity will repay the bond out of its
general tax revenues.
 . Revenue notes and bonds, payable from specific revenue sources. These are
often tied to the public works project the bonds are financing, but are not
generally backed by the issuer's taxing power.
 . Tax-exempt commercial paper, tax-exempt debt that matures in 270 days or
less.
 . Short-term municipal notes, such as tax anticipation notes, that are issued
in anticipation of the receipt of tax revenues.
 . Municipal obligations, backed by letters of credit (a document issued by a
bank guaranteeing the issuer's payments for a stated amount), general bank
guarantees or municipal bond insurance.
 . Floating rate bonds, whose interest rates vary with changes in specified
market rates or indexes. The Fund may invest in high quality floating rate
bonds with maturities of one year or more if it has the right to sell them
back at their face value prior to maturity. The Fund may also invest in
securities that have features that reduce their maturities on their purchase
date.
 . Private activity bonds, which are revenue bonds that are used to finance
nongovernmental activities, such as private industry construction. Note that
the interest on these bonds may be subject to Federal taxes, including the
alternative minimum tax.
 
Under normal conditions, the Fund invests at least 80% of its net assets in
municipal bonds and notes that pay interest exempt from Federal income tax.
Ordinarily, the Fund expects to invest substantially all of its assets in
municipal bonds and notes that pay interest exempt from Federal income tax.
 
RISKS
Below we set forth some of the prominent risks associated with tax free money
market mutual funds, and we detail our approaches to contain them. Although we
attempt to assess the likelihood that these risks may actually occur and to
limit them, we make no guarantee that we will succeed. If a security no longer
meets the Fund's requirements, we will attempt to sell that security within a
reasonable time, unless selling the security would not be in the Fund's best
interest.
 
                                      28
                                       --
<PAGE>
 
                                     A Detailed Look at the Tax Free Money Fund
 
 
Primary Risks
 
Interest Rate Risk. Money market instruments, like all debt securities, face
the risk that the securities will decline in value because of changes in
interest rates. Generally, investments subject to interest rate risk will
decrease in value when interest rates rise and increase when interest rates
decline. While the Fund seeks to maintain a $1.00 share price, it cannot
guarantee that this will always happen. To minimize such price fluctuations,
the Fund limits the dollar-weighted average maturity of the securities held by
the Fund to 90 days or less. Generally, the price of short-term investments
fluctuate less than longer-term bonds.
 
Credit Risk. A money market instrument's credit quality depends on the
issuer's ability to pay interest on the security and repay the debt: the lower
the credit rating, the greater the risk that the security's issuer will
default, or fail to meet its payment obligations. The credit risk of a
security may also depend on the credit quality of any bank or financial
institution that provides credit enhancement for it. To minimize credit risk,
the Fund only buys high quality securities with minimal credit risk. Also, the
Fund primarily buys securities with remaining maturities of 13 months or less.
This reduces the risk that the issuer's creditworthiness will change, or that
the issuer will default on the principal and interest payments of the
obligation.
 
Market Risk. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
 
Security Selection Risk. While the Fund invests in short-term securities,
which by nature are relatively stable types of investments, the risk remains
that the securities we have selected will not perform as expected. This could
cause the Fund's returns to lag behind those of similar money market funds.
   
Secondary Risks     
 
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or issuers in which it invests will not accommodate the
changeover necessary from dates in the year 1999 to dates in the year 2000.
These risks could adversely affect:
 . the issuers in which the Fund invests, which could impact the value of the
Fund's investments;
 . our ability to service your Fund account, including our ability to meet your
requests to buy and sell Fund shares; and
 . our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.
 
We are working both internally and with our business partners and service
providers to address this problem. If we --  or our business partners, service
providers, government agencies or other market participants -- do not succeed,
it could materially affect shareholder services or the value of the Fund's
shares.
 
Temporary Defensive Position. In response to adverse political, economic or
market events, the Fund may adopt a temporary defensive position in which it
places more than 20% of the Fund's assets in high quality money market
investments that are subject to Federal income tax. To the extent that the
Fund might do so, it may not meet its goal of a high level of current tax-free
income.
 
 
                                      29
                                       --
<PAGE>
 
A Detailed Look at the Tax Free Money Fund
 
 
The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rates of
return that an investor would have earned on an investment in the Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual report. The
annual report is available free of charge by calling the BT Service Center at
1-800-730-1313.
 
Financial Highlights
 
<TABLE>
<CAPTION>
                                For the years ended December 31,
                            1998        1997         1996         1995         1994
- ----------------------------------------------------------------------------------------
<S>                       <C>         <C>          <C>          <C>          <C>
Per Share Operating
 Performance:
Net Asset Value,
 Beginning of Year        $   1.00    $   1.00     $   1.00     $   1.00     $   1.00
- ----------------------------------------------------------------------------------------
Income from Investment
 Operations
Net Investment Income         0.03        0.03         0.03         0.03         0.02
Net Realized Gain (Loss)
 from Investment
 Transactions                 0.00/1/    (0.00)/1/    (0.00)/1/    (0.00)/1/     0.00/1/
- ----------------------------------------------------------------------------------------
Total from Investment
 Operations                   0.03        0.03         0.03         0.03         0.02
- ----------------------------------------------------------------------------------------
Distributions to
 Shareholders
Net Investment Income        (0.03)      (0.03)       (0.03)       (0.03)       (0.02)
- ----------------------------------------------------------------------------------------
Net Asset Value, End of
 Year                     $   1.00    $   1.00     $   1.00     $   1.00     $   1.00
- ----------------------------------------------------------------------------------------
Total Investment Return       2.75%       2.94%        2.84%        3.34%        2.27%
- ----------------------------------------------------------------------------------------
Supplemental Data and
 Ratios:
Net Assets, End of Year
 (000s omitted)           $201,094    $150,483     $117,972     $119,993     $110,043
- ----------------------------------------------------------------------------------------
Ratios to Average Net
 Assets:
Net Investment Income         2.71%       2.90%        2.80%        3.28%        2.21%
- ----------------------------------------------------------------------------------------
Expenses, Including
 Expenses of the Tax
 Free Money Portfolio         0.75%       0.75%        0.75%        0.75%        0.75%
Decrease Reflected in
 Above Expense Ratio Due
 to Absorption of
 Expenses by Bankers
 Trust                        0.08%       0.05%        0.07%        0.07%        0.08%
- ----------------------------------------------------------------------------------------
</TABLE>
 
/1/Less than $0.01 per share.
 
                                      30
                                       --
<PAGE>
 
Information
 
                    concerning all Funds
   
MANAGEMENT OF THE FUNDS     
 
Board of Trustees. Each Fund's shareholders, voting in proportion to the
number of shares each owns, elect a Board of Trustees, and the Trustees
supervise all the Fund's activities on their behalf.
 
Investment Adviser. Under the supervision of the Board of Trustees, Bankers
Trust Company, with headquarters at 130 Liberty Street, New York, NY 10006,
acts as each Fund's Investment Adviser. As Investment Adviser, Bankers Trust
makes the Fund's investment decisions and assumes responsibility for the
securities the Fund owns. It buys and sells securities for the Fund and
conducts the research that leads to the purchase and sale decisions. Bankers
Trust received a fee of 0.15% of each Fund's average daily net assets for its
services in the last fiscal year.
 
As of December 31, 1998, Bankers Trust was the eighth largest bank holding
company in the United States, with total assets of approximately $156 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 96 offices in more than 43 countries.
 
Bankers Trust's officers bring wide experience to managing both the Funds and
their portfolios. The firm's own record dates back to its founding as a trust
company in 1903. It has invested retirement assets on behalf of the nation's
largest corporations and institutions for more than 50 years. Today, the
assets under its global management exceed $338 billion. The scope of the
firm's capability is broad -- it is a leader in both the active and passive
quantitative investment disciplines and maintains a major presence in stock
and bond markets worldwide.
 
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York
to resolve an investigation concerning inappropriate transfers of unclaimed
funds and related record-keeping problems that occurred between 1994 and early
1996. Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust
pleaded guilty to misstating entries in the bank's books and records and
agreed to pay a $60 million fine to federal authorities. Separately, Bankers
Trust agreed to pay a $3.5 million fine to the State of New York. The events
leading up to the guilty pleas did not arise out of the investment advisory or
mutual fund management activities of Bankers Trust or its affiliates.
 
As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
 
Bankers Trust is a wholly owned subsidiary of Bankers Trust Corporation. On
November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation
would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG
is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual funds, retail and
commercial banking, investment banking and insurance. The transaction is
contingent upon various regulatory approvals, and continuation of the Fund's
advisory relationship with Bankers Trust thereafter is subject to the approval
of each Fund's shareholders. If the transaction is approved and completed,
Deutsche Bank AG, as Bankers Trust's new parent company, will control its
operations as investment adviser. Bankers Trust believes that, under this new
arrangement, the services provided to each Fund will be maintained at their
current level.
 
Other Services. Bankers Trust provides administrative services -- such as
portfolio accounting, legal services and others -- for the Funds. In addition,
Bankers Trust, or your broker or financial advisor, performs the functions
necessary to establish and maintain your account. Besides setting up the
account and processing your purchase and sale orders, these functions include:
 . keeping accurate, up-to-date records for your individual Fund account;
 . implementing any changes you wish to make in your account information;
 
                                      31
                                       --
<PAGE>
 
Information Concerning All Funds
 
 . processing your requests for cash dividends and distributions from the Fund;
 . answering your questions on the Fund's investment performance or
administration;
 . sending proxy reports and updated prospectus information to you; and
 . collecting your executed proxies.
 
Brokers and financial advisors may charge additional fees to investors only
for those services not otherwise included in the Bankers Trust servicing
agreement, such as cash management, or special trust or retirement-investment
reporting.
   
Organizational Structure. The Funds are "feeder funds" that invest all of
their assets in a "master portfolio." The Funds and their corresponding master
portfolio are listed below:     
 
<TABLE>
<CAPTION>
Fund                    Master Portfolio
- ---------------------------------------------------
<S>                     <C>
Cash Management Fund    Cash Management Portfolio
- ---------------------------------------------------
Treasury Money Fund     Treasury Money Portfolio
- ---------------------------------------------------
NY Tax Free Money Fund  NY Tax Free Money Portfolio
- ---------------------------------------------------
Tax Free Money Fund     Tax Free Money Portfolio
- ---------------------------------------------------
</TABLE>
 
Each Fund and its master portfolio have the same investment objective. Each
master portfolio is advised by Bankers Trust.
 
A master portfolio may accept investments from other feeder funds. A feeder
bears the master portfolio's expenses in proportion to their assets. Each
feeder can set its own transaction minimums, fund-specific expenses, and other
conditions. This arrangement allows a Fund's Trustees to withdraw the Fund's
assets from the master portfolio if they believe doing so is in the
shareholders' best interests. If the Trustees withdraw a Fund's assets, they
would then consider whether the Fund should hire its own investment adviser,
invest in a different master portfolio or take other action.
   
CALCULATING A FUND'S SHARE PRICE     
We calculate the price of each Fund's shares (also known as the "Net Asset
Value" or "NAV") each day the Fund is open for business, as of 12:00 noon,
Eastern time, and as of
 
- -------------------------------------------------------------------------------
Each Fund is open every week, Monday through Friday, except when the following
holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day (the
third Monday in January), Presidents' Day (the third Monday in February), Good
Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Columbus Day (the second Monday in October), Veterans'
Day (November 11), Thanksgiving Day (the fourth Thursday in November) and
Christmas Day. The markets for a Fund's primary investments may close early on
the business day before each of these holidays. They may also close early on
the day after Thanksgiving and the day before Christmas Eve.
the close of regular trading on the New York Stock Exchange. If the markets
for a Fund's primary investments close early, the Fund will cease taking
purchase orders at that time. In accordance with the standard formula for
valuing mutual fund shares, we deduct all of a Fund's liabilities from the
total value of its assets and divide the result by the number of shares
outstanding.
 
Each Fund uses the amortized cost method to account for any premiums or
discounts above or below the face value of any securities it buys. This method
writes down the premium -- or marks up the discount -- at a constant rate
until maturity. It does not reflect daily fluctuations in market value. Each
Fund's Net Asset Value will normally be $1.00 a share.
 
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares dividends from its net income daily and pays the dividends
on a monthly basis.
 
Each Fund reserves the right to include in the daily dividend any short-term
capital gains on securities that it sells. Also, each Fund will normally
declare and pay annually any long-term capital gains as well as any short-term
capital gains that it did not distribute during the year.
 
Dividends paid by the Tax Free Money Fund and the NY Tax Free Money Fund on
municipal notes and bonds are exempt from Federal income tax. Dividends paid
by the NY Tax Free Money Fund on New York municipal notes and bonds are
excluded from Federal income taxes and exempt from New York City and State
personal income taxes. If the Fund makes a taxable investment, you will have
to pay Federal income taxes on any interest earned.
 
We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.
 
TAX CONSIDERATIONS
 
Cash Management Fund and Treasury Money Fund
 
The Funds do not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based on the amount of capital gain distributions and
dividends paid out by your Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:
 
                                      32
                                       --
<PAGE>
 
                                               Information Concerning All Funds
 
 
<TABLE>
<CAPTION>
Transaction                            Tax Status
- ------------------------------------------------------
<S>                                    <C>
Income dividends                       Ordinary income
Short-term capital gain distributions  Ordinary income
Long-term capital gain distributions   Capital gains
</TABLE>
 
Every year, your Fund will send you information on the distributions for the
previous year.
 
Tax Free Money and NY Tax Free Money
 
The Tax Free Money Fund attempts to invest 100% of its assets in tax-exempt
municipal securities that generate tax-exempt income. The NY Tax Free Money
Fund attempts to invest 100% of its assets in municipal obligations that are
excluded from Federal income taxes and exempt from New York City and State
personal income taxes. However, each Fund may invest up to 20% (or greater
while maintaining a temporary defensive position) of the value of its total
assets in securities that generate income subject to Federal or alternative
minimum tax (and New York City tax, in the case of the NY Tax Free Money
Fund). Income exempt from Federal income tax may be subject to state and local
income tax. Any capital gains distributed by the Funds may be taxable.
   
The tax considerations for tax deferred accounts or non-taxable entities will
be different.     
 
Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about
your investment.
 
BUYING AND SELLING FUND SHARES
 
Contacting the BT Mutual Funds
 
BT SERVICE CENTER
By phone:    1-800-730-1313
 
By mail:     P.O. Box 419210
             Kansas City, MO 64141-6210
 
By overnight mail:
             210 West 10th Street, 8th floor
             Kansas City, MO 64105-1716
 
BT RETIREMENT SERVICES CENTER
By phone:    1-800-677-7596
 
By mail:     P.O. Box 419210
             Kansas City, MO 64141-6210
 
By overnight mail:
             210 West 10th Street, 8th floor
             Kansas City, MO 64105-1716
 
Our representatives are available to assist you personally Monday through
Friday, 9:00 a.m. to 6:00 p.m., Eastern time, each day the New York Stock
Exchange is open for business. You can reach the BT Service Center's automated
assistance line 24 hours a day, 7 days a week.
   
MINIMUM ACCOUNT INVESTMENTS     
<TABLE>   
<S>                                    <C>
To open:
  a standard investment account        $2,500
  a retirement account                    500
  an automatic investment plan account  1,000
</TABLE>    
 
<TABLE>   
<S>                                    <C>
To add to:
  a standard investment account        $250
  a retirement account                  100
  an automatic investment plan account  100
</TABLE>    
 
<TABLE>   
<S>                        <C>
Minimum account balances:
  non-retirement accounts  $1,000
  retirement accounts        none
</TABLE>    
 
HOW TO OPEN YOUR FUND ACCOUNT
If you are new to BT Mutual Funds, mail your completed application, along with
your check payable to the BT Fund you have selected (or to "BT Funds" if you
are investing in more than one fund), to the BT Service Center.
 
If this is your first BT Mutual Fund investment through a tax-sheltered
retirement plan, such as an IRA, you will need a special application form.
This form is available from your financial advisor, or by calling the BT
Retirement Services Center at 1-800-677-7596.
 
Tax Saving Retirement Plans
 
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, non-profit
organizations and other institutions. We can set up your new account in the
Fund under a number of tax-sheltered plans. These plans contain special tax
advantages and let you invest for retirement while sheltering your investment
income from current taxes. Note that minimum Fund investments in retirement
plan accounts may differ from non-retirement plan accounts. Contact your
financial advisor or Bankers Trust for more information.
 
TWO WAYS TO BUY AND SELL SHARES IN YOUR ACCOUNT
 
MAIL:
 
Buying: Send your check, payable to the BT Fund you have selected, to the BT
Service Center. The addresses are shown under "Contacting the BT Mutual
Funds." Be sure to include your Fund number and account number (see your
account
 
                                      33
                                       --
<PAGE>
 
Information Concerning All Funds
 
statement) on your check. We cannot accept starter checks or third-party
checks. If you are investing in more than one fund, make your check payable to
"BT Funds" and include your account number and the names and numbers of the
funds you have selected.
 
Selling: Send a signed letter to the BT Service Center with your name, your
fund number and account number, the fund's name, and either the number of
shares you wish to sell or the dollar amount you wish to receive. You must
leave at least $1,000 invested in your account to keep it open. Unless
exchanging into another BT Fund, you must submit a written authorization to
sell shares in a retirement account.
 
WIRE:
 
Buying: You may buy shares by wire only if your account is authorized to do
so. You or your financial advisor must call the BT Service Center at 1-800-
730-1313 by 12:00 noon Eastern time to notify us in advance of a wire transfer
purchase. Inform the BT Representative of the amount of your purchase and
receive a trade confirmation number. Instruct your bank to send payment by
wire using the wire instructions noted below. All wires must be received by
4:00 p.m. Eastern time.
 
Routing No.: 021001033
 
Attn:        Bankers Trust/BT Funds
 
DDA No.:     00-226-296
 
FBO:         (Account name)
             (Account number)
 
Credit:      (Fund name and number)
 
Refer to your account statement for the account name, number and fund number.
 
Selling: You may sell shares by wire only if your account is authorized to do
so. For your protection, you may not change the destination bank account over
the phone. To sell by wire, contact your financial advisor or the BT Service
Center prior to 12:00 noon Eastern time at 1-800-730-1313. Inform the BT
Representative of the amount of your redemption and receive your trade
confirmation number. The minimum redemption by wire is $1,000. All orders
placed after 12:00 noon Eastern time will be wired the next business day.
 
IMPORTANT INFORMATION ABOUT BUYING AND SELLING SHARES
 . After receiving your order, we buy or sell your shares at the next price
calculated on a day the Fund is open for business.
 . We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. We do not accept starter
or third-party checks.
 . We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").
 . You may place orders to buy and sell by calling your financial advisor or the
BT Service Center at 1-800-730-1313. If you pay for shares by check and the
check fails to clear, or if you order shares by phone and fail to pay for them
by 4:00 p.m. Eastern time, we have the right to cancel your order, hold you
liable or charge you or your account for any losses or fees the Fund or its
agents have incurred. Unless you request a wire, we will send you a check.
 . You may buy and sell shares of the Fund through authorized brokers and
financial advisors as well as from BT Mutual Funds directly. The same terms
and conditions apply. Specifically, once you place your order with a broker or
financial advisor, it is considered received by the BT Service Center. It is
then your broker or financial advisor's responsibility to transmit the order
to the BT Service Center by 12:00 noon Eastern time. You should contact your
broker or financial advisor if you have a dispute as to when your order was
placed with the Fund.
 . If we receive your purchase order before 12:00 noon Eastern time you will
receive the dividends declared that day. If we receive it after 12:00 noon
Eastern time, you will not.
 . If we receive your order to sell shares after 12:00 noon Eastern time you
will receive the dividends declared that day. If we receive it before 12:00
noon Eastern time, you will not.
 . We do not issue share certificates.
 . We process all sales orders free of charge.
 . Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.
 . We reserve the right to close your account on 30 days' notice if it fails to
meet minimum balance requirements. We also reserve the right to reject any
purchase order.
 . If you sell shares by mail or wire, you may be required to obtain a signature
guarantee. Please contact your financial advisor or the BT Service Center for
more information.
 . Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your financial advisor or the
BT Service Center for more information.
 . During periods of heavy market activity, you may have trouble reaching the BT
Service Center by telephone. If this occurs, you should make your request by
mail.
 
                                      34
                                       --
<PAGE>
 
                                               Information Concerning All Funds
 
 
Special Shareholder Services
 
To help make investing with us as easy as possible, and to help you build your
investment, we offer the following special services. You can obtain further
information about these programs by calling the BT Service Center at 1-800-
730-1313.
 
 . Regular Investments: You can make regular investments of $100 or more
automatically from your checking account bi-weekly, monthly, quarterly, or
semi-annually.
 
 . Exchange Privileges: You can exchange all or part of your shares for shares
in another BT Mutual Fund up to four times a year (from the date of your first
exchange). When you exchange shares, you are selling shares in one fund to
purchase shares in another. Before buying shares through an exchange, you
should obtain a copy of that fund's prospectus and read it carefully.
 
Please note the following conditions:
 . The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.
 . You may make the exchange by phone, letter or wire, if your account has the
exchange by phone feature.
 . If you are maintaining a taxable account, you may have to pay taxes on the
exchange.
 . You will receive a written confirmation of each transaction from the BT
Service Center or your investment professional.
 
 . Regular Withdrawals: You can arrange regular monthly, quarterly, semiannual
and annual sales of shares in your account. The minimum transaction is $100,
and the account must have a balance of at least $10,000 to qualify.
 
 . Checkwriting: We issue you a checkbook linked to your Fund account. You can
sell shares by writing a check for the desired amount free of charge, but you
cannot close your account by check. You continue to earn dividends on the
shares you sell by check until the check clears. We return canceled checks for
your records at the end of the month. The minimum check amount is $500.
 
 . Account Statements and Fund Reports: We or your financial advisor will
furnish you with a written confirmation of every transaction that affects your
account balance. You will also receive monthly statements reflecting the
balances in your account. The Fund's Investment Adviser will send you a report
every six months on the Fund's overall performance, its current holdings and
its investing strategies.
 
                                      35
                                       --
<PAGE>
 
[LOGO OF BANKERS TRUST APPEARS HERE]
 
- --                                                                         --
 
 Additional information about each Fund's investments is available in the
 Fund's annual and semi-annual reports to shareholders.
 
 You can find more detailed information about each Fund in the current
 Statement of Additional Information, dated April 30, 1999, which we have
 filed electronically with the Securities and Exchange Commission (SEC) and
 which is incorporated by reference. To receive your free copy of the
 Statement of Additional Information, the annual or semi-annual report, or
 if you have questions about investing in a Fund, write to us at:
 
                    BT Service Center
                    P.O. Box 419210
                    Kansas City, MO 64141-6210
 or call our toll-free number:
                    1-800-730-1313
 
 You can find reports and other information about each Fund on the SEC
 website (http://www.sec.gov), or you can get copies of this information,
 after payment of a duplicating fee, by writing to the Public Reference
 Section of the SEC, Washington, D.C. 20549-6009. Information about each
 Fund, including its Statement of Additional Information, can be reviewed
 and copied at the SEC's Public Reference Room in Washington, D.C. For
 information on the Public Reference Room, call the SEC at 1-800-SEC-0330.
 
- --                                                                         --
 
Cash Management Fund                                     CUSIP #s: 055922108
Treasury Money Fund                                      055922405
NY Tax Free Money Fund                                   055922207
Tax Free Money Fund                                      055922306
BT Investment Funds
                                                            
Distributed By:                                          COMBMONPRO  (4/99)
                                                             
ICC Distributors, Inc.                                   811-4760
Two Portland Square
Portland, ME 04101
<PAGE>
 
          

    
                                                                    STATEMENT OF
                                                          ADDITIONAL INFORMATION
                                                                  April 30, 1999
     
BT Investment Funds
   Cash Management Fund
   Tax Free Money Fund
   NY Tax Free Money Fund

BT Institutional Funds
   Institutional Cash Management Fund
   Institutional Treasury Money Fund

BT Investment Funds and BT Institutional Funds (each, a "Trust" and,
collectively, the "Trusts") are open-end management investment companies that
offer investors a selection of investment portfolios, each having distinct
investment objectives and policies.  The Investment Cash Management Fund,
Investment Tax Free Money Fund, Investment NY Tax Free Money Fund, Institutional
Cash Management Fund and Institutional Treasury Money Fund (each a "Fund" and,
collectively, the "Funds") are described herein.
    
Unlike other mutual funds, the Trusts seek to achieve the investment objectives
of each Fund by investing all the investable assets of the Fund in a diversified
(or nondiversified, in the case of the NY Tax Free Money Fund) open-end
management investment company having the same investment objective as such Fund.
These investment companies are, respectively, Cash Management Portfolio, Tax
Free Money Portfolio, NY Tax Free Money Portfolio and Treasury Money Portfolio
(collectively, the "Portfolios").     
    
Shares of the Funds are sold by ICC Distributors, Inc. ("ICC Distributors"), the
Trust's distributor (the "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 Trusts' Prospectuses for the Funds, dated April 30, 1999, provide the basic
information investors should know before investing.  This Statement of
Additional Information ("SAI"), which is not a Prospectus, is intended to
provide additional information regarding the activities and operations of the
Trusts and should be read in conjunction with the Prospectuses.  You may request
a copy of the Prospectuses or a paper copy of this SAI, if you have received it
electronically, free of charge by calling the Trusts at the telephone number
listed below or by contacting any Bankers Trust service agent ("Service Agent").
Capitalized terms not otherwise defined in this Statement of Additional
Information have the meanings accorded to them in the Trusts' Prospectuses.  The
financial statements for each Fund and the corresponding Portfolio for the
fiscal year ended December 31, 1998, are incorporated herein by reference to the
Annual Report to shareholders for each Fund and each Portfolio dated December
31, 1998.  A copy of each Fund's and the corresponding Portfolio's Annual Report
may be obtained without charge by calling each Fund at the telephone number
listed below.


             Investment Adviser of the Portfolio and Administrator
                             BANKERS TRUST COMPANY

                                  Distributor
                             ICC DISTRIBUTORS, INC.

Two Portland Square         Portland, Maine  04101  1-800-730-1313
<PAGE>
 
                               TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
    
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS.............................1
 Investment Objectives.......................................................1
 Investment Policies.........................................................1
 Additional Risk Factors.....................................................6
 Investment Restrictions....................................................10
 Portfolio Turnover.........................................................13
 Portfolio Transactions.....................................................14
NET ASSET VALUE.............................................................14
PURCHASE AND REDEMPTION INFORMATION.........................................16
 Purchase of Shares.........................................................16
 Redemption of Shares.......................................................18
MANAGEMENT OF THE TRUST AND PORTFOLIOS......................................20
 Trustees of BT Investment Funds............................................22
 Trustees of BT Institutional Funds.........................................22
 Trustees of the Portfolios.................................................23
 Officers of the Trusts and the Portfolios..................................23
 Trustee Compensation Table.................................................24
 Investment Adviser.........................................................26
 Administrator..............................................................27
 Distributor................................................................29
 Service Agent..............................................................29
 Custodian and Transfer Agent...............................................30
 Expenses...................................................................30
 Use of Name................................................................30
 Banking Regulatory Matters.................................................30
 Counsel and Independent Accountants........................................31
ORGANIZATION OF THE TRUST...................................................31
DIVIDENDS AND TAXES.........................................................33
 Dividends..................................................................34
 Taxation of the Funds and Their Investments................................34
 Taxation of Shareholders...................................................34
PERFORMANCE INFORMATION.....................................................35
FINANCIAL STATEMENTS........................................................37
APPENDIX....................................................................38
     

                                      (i)
<PAGE>
 
                INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

                             Investment Objectives

The following is a description of each Fund's investment objective.  There can,
of course, be no assurance that any Fund will achieve its investment objective.

Investment Cash Management Fund seeks a high level of current income consistent
with liquidity and the preservation of capital through investment in a Portfolio
of high quality money market instruments.
    
Investment Tax Free Money Fund seeks a high level of current income exempt from
Federal income taxes consistent with liquidity and the preservation of capital
through investment in a Portfolio primarily of obligations issued by states and
their authorities, agencies, instrumentalities and political subdivisions.     
    
Investment NY Tax Free Money Fund seeks a high level of current income exempt
from Federal and New York income taxes consistent with liquidity and the
preservation of capital through investment in a Portfolio primarily of
obligations of the State of New York and its authorities, agencies,
instrumentalities and political subdivisions.     
    
Institutional Cash Management Fund seeks a high level of current income
consistent with liquidity and the preservation of capital through investment in
a Portfolio of high quality money market instruments.     
    
Institutional Treasury Money Fund seeks a high level of current income
consistent with liquidity and the preservation of capital through investment in
a Portfolio of direct obligations of the U.S. Treasury and repurchase agreements
in respect of those obligations.     

                              Investment Policies

Each Fund seeks to achieve its investment objective(s) by investing all of its
assets in the corresponding Portfolio, which has the same investment objective
as the Fund.  Each 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 respective Portfolio in which the Fund invests all of its assets,
the following is a discussion of the various investments of and techniques
employed by the Portfolios.     
    
Quality and Maturity of the Fund's Securities.  Each Portfolio will maintain a
dollar-weighted average maturity of 90 days or less.  All securities in which
each Portfolio invests will have, or be deemed to have, remaining maturities of
397 days or less on the date of their purchase and will be denominated in U.S.
dollars.  Bankers Trust, acting under the supervision of and procedures adopted
by the Board of Trustees of each Portfolio, will also determine that all
securities purchased by the Portfolios present minimal credit risks.  Bankers
Trust will cause each Portfolio to dispose of any security as soon as
practicable if the security is no longer of the requisite quality, unless such
action would not be in the best interest of the Portfolio.  High-quality, short-
term instruments may result in a lower yield than instruments with a lower
quality or longer term.     

Obligations of Banks and Other Financial Institutions.  For purposes of the
Portfolios' investment policies with respect to bank obligations, the assets of
a bank will be deemed to include the assets of its domestic and foreign
branches.  Obligations of foreign branches of U.S. banks and foreign banks may
be 

                                       1
<PAGE>
 
general obligations of the parent bank in addition to the issuing bank or may be
limited by the terms of a specific obligation and by government regulation. If
Bankers Trust, acting under the supervision of the Board of Trustees, deems the
instruments to present minimal credit risk, each Portfolio other than Treasury
Money Portfolio may invest in obligations of foreign banks or foreign branches
of U.S. banks, which include banks located in the United Kingdom, Grand Cayman
Island, Nassau, Japan and Canada. Investments in these obligations may entail
risks that are different from those of investments in obligations of U.S.
domestic banks because of differences in political, regulatory and economic
systems and conditions. These risks include future political and economic
developments, currency blockage, the possible imposition of withholding taxes on
interest payments, differing reserve requirements, reporting and recordkeeping
requirements and accounting standards, possible seizure or nationalization of
foreign deposits, difficulty or inability of pursuing legal remedies and
obtaining judgments in foreign courts, possible establishment of exchange
controls or the adoption of other foreign governmental restrictions that might
affect adversely the payment of principal and interest on bank obligations.
Foreign branches of U.S. banks and foreign banks may also be subject to less
stringent reserve requirements and to different accounting, auditing, reporting
and recordkeeping standards than those applicable to domestic branches of U.S.
banks.
    
Commercial Paper.  Commercial paper obligations in which the Portfolios may
invest are short-term, unsecured negotiable promissory notes of U.S. or foreign
corporations that at the time of purchase meet the rating criteria described in
the Prospectus.  Investments in foreign commercial paper generally involve risks
similar to those described above relating to obligations of foreign banks or
foreign branches of U.S. banks.     
    
Variable Rate Master Demand Notes.  Variable rate master demand notes are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate.  Because variable rate
master demand notes are direct lending arrangements between a Portfolio and the
issuer, they are not ordinarily traded.  Although no active secondary market may
exist for these notes, a Portfolio will purchase only those notes under which it
may demand and receive payment of principal and accrued interest daily or may
resell the note to a third party.  While the notes are not typically rated by
credit rating agencies, issuers of variable rate master demand notes must
satisfy Bankers Trust, acting under the supervision of the Board of Trustees of
a Portfolio, that the same criteria as set forth above for issuers of commercial
paper are met.  In the event an issuer of a variable rate master demand note
defaulted on its payment obligation, a Portfolio might be unable to dispose of
the note because of the absence of a secondary market and could, for this or
other reasons, suffer a loss to the extent of the default.  The face maturities
of variable rate notes subject to a demand feature may exceed 397 days in
certain circumstances.  (See "Quality and Maturity of the Fund's Securities"
herein.)     

U.S. Government Obligations.  The Portfolios may invest in direct obligations
issued by the U.S. Treasury or, in the case of the Portfolios other than
Treasury Money Portfolio, in obligations issued or guaranteed by the U.S.
Treasury or by agencies or instrumentalities of the U.S. government ("U.S.
Government Obligations").  Certain short-term U.S. Government Obligations, such
as those issued by the Government National Mortgage Association ("GNMA"), are
supported by the "full faith and credit" of the U.S. government; others, such as
those of the Export-Import Bank of the United States, are supported by the right
of the issuer to borrow from the U.S. Treasury; others, such as those of the
Federal National Mortgage Association are solely the obligations of the issuing
entity but are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported by the credit of the
instrumentality.  No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored instrumentalities if it
is not obligated to do so by law.

Examples of the types of U.S. Government Obligations that the Portfolios may
hold include, but are not limited to, in addition to those described above and
direct U.S. Treasury obligations, the obligations of the Federal Housing
Administration ("FHA"), Farmers Home Administration, Small Business
Administration, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Farm Credit Banks Funding Corp., Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks and Maritime Administration.

                                       2
<PAGE>
 
    
Other Debt Obligations.  The Portfolios may invest in deposits, bonds, notes and
debentures and other debt obligations that at the time of purchase have, or are
comparable in priority and security to other securities of such issuer which
have, outstanding short-term obligations meeting the above short-term rating
requirements, or if there are no such short-term ratings, are determined by
Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, to be of comparable quality and are rated in the top three highest
long-term rating categories by the NRSROs rating such security.     

Credit Enhancement.  Certain of a Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance from a third
party.  Any bankruptcy, receivership, default, or change in the credit quality
of the third party providing the credit enhancement could adversely affect the
quality and marketability of the underlying security and could cause losses to
the Portfolio and affect the Portfolio's share price.  Subject to the
diversification limits contained in Rule 2a-7, each Portfolio may have more than
25% of its total assets invested in securities issued by or credit-enhanced by
banks or other financial institutions.
    
Lending of Portfolio Securities.  The Portfolios, other than Tax Free Money
Portfolio and NY Tax Free Money Portfolio, have the authority to lend, up to 30%
of the value of their portfolio securities to brokers, dealers and other
financial organizations. By lending its securities, a Portfolio may increase its
income by continuing to receive payments in respect of dividends and 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 a fee paid by the
borrower when irrevocable letters of credit and U.S. Government Obligations are
used as collateral. Each Portfolio will adhere to the following conditions
whenever its securities are loaned:  (i) the Portfolio must receive at least
100% collateral 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
substitute payments in respect of all dividends, interest or other distributions
on the loaned securities; and (v) 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 retain the right to
terminate the loan and recall and vote the securities.  Cash collateral may be
invested in a money market fund managed by Bankers Trust (or its affiliates) and
Bankers Trust may serve as a Portfolio's lending agent and may share in revenue
received from securities lending transactions as compensation for this service.
     
    
Repurchase Agreements.  The Portfolios may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Portfolio's Board of Trustees.  Under the terms of a typical repurchase
agreement, a Portfolio would acquire U.S. Government Obligations regardless of
maturity any remaining maturity for a relatively short period (usually not more
than one week), subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the obligation at an agreed price and time, thereby
determining the yield during the Portfolio's holding period.  This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Portfolio's holding period.  The value of the underlying securities
will be at least equal at all times to the total amount of the repurchase
obligations, including interest.  Each Portfolio bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
and the Portfolio is delayed in or prevented from exercising its rights to
dispose of the collateralized securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Portfolio seeks to assert these rights.  Bankers Trust, acting under the
supervision of the Board of Trustees of each Portfolio, reviews the
creditworthiness of those banks and dealers with which the Portfolios enter into
repurchase agreements and monitors on an ongoing basis the value of the
securities subject to repurchase agreements to ensure that it is maintained at
the required level.     
    
Reverse Repurchase Agreements.  The Portfolios may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement").  At the time a Portfolio enters into a reverse repurchase agreement
it segregates cash, U.S. Government Obligations or high-grade debt obligations
having a value equal to the repurchase price, including accrued interest.
Reverse repurchase agreements involve the risk that      

                                       3
<PAGE>
 
the market value of the securities sold by a Portfolio may decline below the
repurchase price of those securities. Reverse repurchase agreements are
considered to be borrowings by a Portfolio.
    
When-Issued and Delayed-Delivery Securities.  To secure prices deemed
advantageous at a particular time, the Cash Management Portfolio and Treasury
Money Portfolio may purchase securities on a when-issued or delayed-delivery
basis, in which case delivery of the securities occurs beyond the normal
settlement period; payment for or delivery of the securities would be made prior
to the reciprocal delivery or payment by the other party to the transaction. A
Portfolio will enter into when-issued or delayed-delivery transactions for the
purpose of acquiring securities and not for the purpose of leverage. When-issued
securities purchased by a Portfolio may include securities purchased on a "when,
as, and if issued" basis under which the issuance of the securities depends on
the occurrence of a subsequent event.     
    
Securities purchased on a when-issued or delayed-delivery basis may expose a
Portfolio to risk because the securities may experience fluctuations in value
prior to their actual delivery. A Portfolio does not accrue income with respect
to a when-issued or delayed-delivery security prior to its stated delivery date.
Purchasing securities on a when-issued or delayed-delivery basis can involve the
additional risk that the yield available in the market when the delivery takes
place may be higher than that obtained in the transaction itself. Upon
purchasing a security on a when-issued or delayed-delivery basis, a Portfolio
will segregate cash or liquid securities in an amount at least equal to the
when-issued or delayed-delivery commitment.     
    
Asset-Backed Securities.  The Cash Management Portfolio may also invest in
securities generally referred to as asset-backed securities, which directly or
indirectly represent a participation interest in, or are secured by and payable
from, a stream of payments generated by particular assets such as motor vehicle
or credit card receivables. Asset-backed securities may provide periodic
payments that consist of interest and/or principal payments. Consequently, the
life of an asset-backed security varies with the prepayment and loss experience
of the underlying assets."     
    
Participation Interests.  Tax Free Money Portfolio and NY Tax Free Money
Portfolio may purchase from financial institutions participation interests in
Municipal Obligations.  A participation interest gives the Portfolio an
undivided interest in the Municipal Obligation in the proportion that the
Portfolio's participation interest bears to the total principal amount of the
Municipal Obligation.  These instruments may be variable rate or fixed rate with
remaining maturities of one year or less.  If the participation interest is
unrated or has been given a rating below that which otherwise is permissible for
purchase by the Portfolio, the participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank that the Portfolio's Board
of Trustees has determined meets the prescribed quality standards for the
Portfolio, or the payment obligation otherwise will be collateralized by U.S.
government securities or other securities deemed appropriate by the Portfolio's
Board of Trustees, or, in the case of an unrated participation interest that is
not backed or collateralized as described above, but that otherwise meets the
Trustees' procedures and standards for creditworthiness and high quality, the
underlying Municipal Obligation must be a permissible investment for the
Portfolio.  For certain participation interests, the Portfolio will have the
right to demand payment, on seven days' notice, for all or any part of the
Portfolio's participation interest in the Municipal Obligation, plus accrued
interest.  As to these instruments, each Portfolio intends to exercise its right
to demand payment from the issuer of the demand feature only upon a default
under the terms of the Municipal Obligation, as needed to provide liquidity to
meet redemptions or to maintain a high quality investment portfolio. In the
event an issuer of a demand feature defaulted on its payment obligation, the
Portfolio might be unable to dispose of the participation interest because of
the absence of a secondary market and could, for this or other reasons, suffer a
loss to the extent of the default.     

Neither Portfolio currently intends to invest more than 5% of its total assets
in participation interests.
    
Standby Commitments.  Tax Free Money Portfolio and NY Tax Free Money Portfolio
each may acquire standby commitments or "puts" solely to facilitate portfolio
liquidity; neither Portfolio intends to exercise its rights thereunder for
trading purposes.  The maturity of a Municipal Obligation is not to be
considered shortened by any standby commitment to which the obligation is
subject.  Thus, standby commitments do not affect the dollar-weighted average
maturity of a Portfolio.     

                                       4
<PAGE>
 
When Municipal Obligations are subject to puts separate from the underlying
securities, no value is assigned to the put.  Because of the difficulty of
evaluating the likelihood of exercise or the potential benefit of a put, the
Board of Trustees has determined that puts shall have a fair market value of
zero, regardless of whether any direct or indirect consideration was paid.
    
Since the value of the put is partly dependent on the ability of the put writer
to meet its obligation to repurchase, each Portfolio's policy is to enter into
put transactions only with put writers who are approved by Bankers Trust.  It is
the Portfolios' general policy to enter into put transactions only with those
put writers which are determined to present minimal credit risks.  In connection
with this determination, the Board of Trustees will review regularly Bankers
Trust's list of approved put writers, taking into consideration, among other
things, the ratings, if available, of their equity and debt securities, their
reputation in the municipal securities markets, their net worth, their
efficiency in consummating transactions and any collateral arrangements, such as
letters of credit securing the puts written by them.  Commercial banks normally
will be members of the Federal Reserve System, and other dealers will be members
of the National Association of Securities Dealers, Inc. or members of a national
securities exchange.  Other put writers will have outstanding debt rated Aa or
better by Moody's or AA or better by Standard & Poor's Ratings Group ("S&P"), or
will be of comparable quality in Bankers Trust's opinion, or such put writers'
obligations will be collateralized and of comparable quality in Bankers Trust's
opinion.  The Board of Trustees has directed Bankers Trust not to enter into put
transactions with any put writer that, in the judgment of Bankers Trust using
the above-described criteria, is or becomes a recognizable credit risk.  Neither
Portfolio is able to predict whether all or any portion of any loss sustained
could subsequently be recovered from a put writer in the event that a put writer
should default on its obligation to repurchase an underlying security.     

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

Municipal Obligations.  The two principal classifications of Municipal
Obligations are "notes" and "bonds."  Municipal Obligations are further
classified as "general obligation" and "revenue" issues and the securities held
by the Tax Free Money Portfolio and NY Tax Free Money Portfolio may include
"moral obligations" which are normally issued by special purpose authorities.

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

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

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

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

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

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

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

                                       5
<PAGE>
 
Municipal Bonds.  Municipal bonds generally fund longer-term capital needs than
municipal notes and have maturities exceeding one year when issued.  Tax Free
Money Portfolio and NY Tax Free Money Portfolio may invest in municipal bonds,
but only to the extent that their remaining maturities are determined not to
exceed 397 days under rules promulgated under the Investment Company Act of 1940
(the "1940 Act").  Municipal bonds include:

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

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

Private Activity Bonds.  Private activity bonds, which are considered Municipal
Obligations if the interest paid thereon is excluded from gross income for
Federal income tax purposes and is not a specific tax preference item for
Federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various privately
operated facilities such as manufacturing facilities, certain hospital and
university facilities and housing projects.  These bonds are also used to
finance public facilities such as airports, mass transit systems and ports.  The
payment of the principal and interest on these bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and generally
the pledge, if any, of real and personal property so financed as security for
payment.
    
                            Additional Risk Factors     

In addition to the risks discussed above, the Portfolios' investments may be
subject to the following risk factors:

Special Considerations Relating to New York Municipal Obligations.  The NY Tax
Free Money Portfolio invests in obligations of New York (the "State") issuers
which results in its performance being subject to risks associated with the
overall conditions present within the State. The following information is a
general summary of the State's financial condition and a brief summary of the
prevailing economic conditions. This information is based on official statements
relating to securities that are believed to be reliable but should not be
considered as a complete description of all relevant information.

         

                                       6
<PAGE>
 
         

    
On March 31, 1998, the State recorded, on a GAAP-basis, its first-ever,
accumulated positive balance in its General Fund.  This "accumulated surplus"
was $567 million.  The improvement in the State's GAAP position is attributable,
in part, to the cash surplus recorded at the end of the State's 1997-98 fiscal
year.  Much of that surplus is reserved for future requirements, but a portion
is being used to meet spending needs in 1998-99.  Thus, the State expects some
deterioration in its GAAP position, but expects to maintain a positive GAAP
balance through the end of the current fiscal year.     
    
The State completed its 1997-98 fiscal year with a combined Governmental Funds
operating surplus of $1.80 billion, which included an operating surplus in the
General Fund of $1.56 billion, in Capital Projects Funds of $232 million and in
Special Revenue Funds of $49 million, offset in part by an operating deficit of
$43 million in Debt Service Funds.     
    
The GAAP projections indicate that the State will have three consecutive years
of a GAAP accumulated surplus in the General Fund, eliminating the GAAP deficit
of $3.3 billion that existed on March 31, 1995.  In 1998-99, the General Fund
GAAP Financial Plan projects total revenues of $36.63 billion, total
expenditures of $36.07 billion, and net other financing uses of $106 million.
In 1999-2000, projections reflect total revenues of $36.14 billion, total     

                                       7
<PAGE>
 
    
expenditures of $36.18 billion and net other financing uses of $466 million.
The net impact of the additional 1998-99 cash surplus accounts for most of the
change in projected operating results across the two fiscal years.  At the end
of 1999-2000, the accumulated General Fund GAAP surplus is projected to be $512
million.     
    
The State now projects a 1998-1999 closing balance of $799 million in the
General Fund, a decrease of $899 million from the Mid-Year Update.  The decline
reflects the payment of the $1.04 billion undesignated reserve identified in
October plus additional surplus monies projected in the January Update into the
tax refund reserve.  The projected closing balance of $799 million in the 1998-
1999 General Fund is comprised of $473 million in the Tax Stabilization Reserve
Fund, following a new $73 million deposit in 1998-99; $100 million in the
Contingency Reserve Fund, following a planned $32 million deposit; and the
remaining balance of $226 million in the Community Projects Fund.     
    
The State economic forecast has been modified for 1999 and 2000 from the one
used in earlier updates of the Financial Plan.  Continued growth is projected in
1999 and 2000 for employment, wages, and personal income, although the growth is
expected to moderate from the 1998 pace.  However, a continuation of
international financial and economic turmoil may result in a sharper slowdown
than currently projected.  Personal income is estimated to have grown by 4.9
percent in 1998, fueled in part by a continued large increase in financial
sector bonus payments at the beginning of the year, and is projected to grow by
4.2 percent in 1999 and 4.0 percent in 2000.  Increases in bonus payments in
1999 and 2000 are projected to be modest, a distinct shift from the torrid rate
of the last few years.  Overall employment growth is anticipated to continue at
a modest rate, reflecting the slowing growth in the national economy, continued
spending restraint in government, and restructuring in the manufacturing, health
care, social service and banking sectors.     
    
Over the long-term, uncertainties with regard to the economy present the largest
potential risk to future budget balance in New York State.  For example, a
downturn in the financial markets or the wider economy is possible, a risk that
is heightened by the lengthy expansion currently underway.  The securities
industry is more important to the New York economy than the national economy,
potentially amplifying the impact of an economic downturn.  A large change in
stock market performance during the forecast horizon could result  in wage and
unemployment levels that are significantly different from those embodied in the
forecast.  Merging and downsizing by firms, as a consequence of deregulation or
continued foreign competition, may also have more significant adverse effects on
employment than expected.  Finally, a "forecast error" of one percentage point
in the estimated growth of receipts could cumulatively raise or lower results by
over $1 billion by 2002.     
    
The State's financial health is evidenced by its debt ratings.  S&P recently
affirmed its A rating on the State's outstanding general obligation bonds.  The
State's general obligation bonds are rated A by Moody's.     
    
The Fund's concentration in municipal securities issued by the State and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
State or its municipalities to meet their obligations will depend upon the
availability of tax and other revenues, economic, political, and demographic
conditions within the State, and the underlying fiscal condition of the State,
its counties, and its municipalities.     

         

    
Special Information Concerning Master-Feeder Fund Structure.  Unlike other open-
end management investment companies (mutual funds) which directly acquire and
manage their own portfolio securities, each Fund seeks to achieve its investment
objective by investing all of its assets in      

                                       8
<PAGE>
 
the corresponding Portfolio, a separate registered investment company with the
same investment objective as the corresponding Fund. Therefore, an investor's
interest in the corresponding Portfolio's securities is indirect. In addition to
selling a beneficial interest to the corresponding Fund, each Portfolio may sell
beneficial interests to other mutual funds, investment vehicles or institutional
investors. Such investors will invest in a Portfolio on the same terms and
conditions and will pay a proportionate share of a Portfolio's expenses.
However, the other investors investing in a Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in a Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in each Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in each Portfolio is available
from Bankers Trust at 1-800-730-1313.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio.  For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors).  Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk.  Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio.  Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders.  Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting.  The percentage of the
Trust's votes representing the Fund's shareholders not voting will be voted by
the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.

Certain changes in a Portfolio's investment objectives, policies or restrictions
may require the Fund to withdraw its interest in the Portfolio.  Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio).  If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash.  In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund.  Notwithstanding the above, there are other means for meeting
redemption requests, such as borrowing.

The Fund may withdraw its investment from a Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the
shareholders of the Fund to do so.  Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described herein with respect to the corresponding Portfolio.

Each Fund's investment objective is not a fundamental policy and may be changed
upon notice to, but without the approval of, the Fund's shareholders.  If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs.  The investment objective of each Portfolio is 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
Fund or the corresponding Portfolio.
    
Rating Services.  The ratings of Moody's and S&P 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, the Adviser also makes its own
evaluation of these securities, subject to review by the Board of Trustees.
After purchase by a Portfolio, an obligation may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Portfolio.
Neither event would require a Portfolio to eliminate the obligation from its
portfolio, but the Adviser will consider such an event in its determination of
whether a Portfolio should continue to hold the obligation.  A description of
the ratings categories of Moody's and S&P is set forth in the Appendix to this
SAI.     

                                       9
<PAGE>
 
    
                            Investment Restrictions     
    
Fundamental Policies.  The following investment restrictions have been adopted
by the Trust with respect to each of the Funds and by the Portfolios as
fundamental policies.  Under the 1940 Act, a "fundamental" policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund or Portfolio, respectively, to which it relates, which is defined in
the 1940 Act as the lesser of (a) 67% or more of the shares present at a
shareholder meeting if the holders of more than 50% of the outstanding shares
are present or represented by proxy, or (b) more than 50% of the outstanding
shares.  Whenever a Fund is requested to vote on a change in the investment
restrictions of a Portfolio, the Trust will hold a meeting of Fund shareholders
and will cast its votes as instructed by the shareholders.  Fund shareholders
who do not vote will not affect the Trust's votes at the Portfolio meeting.  The
percentage of the Trust's votes representing Fund shareholders not voting will
be voted by the Trustees of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.     

All Funds and Portfolios

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

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

     2.   Pledge, hypothecate, mortgage or otherwise encumber more than 5% of
          the total assets of the Fund or the Portfolio, as the case may be, and
          only to secure borrowings for temporary or emergency purposes.
    
     3.   Invest more than 5% of the total assets of the Fund or the Portfolio,
          as the case may be, in any one issuer (other than U.S. Government
          Obligations) or purchase more than 10% of any class of securities of
          any one issuer; provided, however, that (i) up to 25% of the assets of
          the NY Tax Free Money Fund (and NY Tax Free Money Portfolio) may be
          invested in the assets of one issuer, and (ii) this restriction shall
          not preclude the purchase by the Tax Free Money Fund (or Tax Free
          Money Portfolio) of issues guaranteed by the U.S. government, its
          agencies or instrumentalities or backed by letters of credit or
          guarantees of one or more commercial banks or other financial
          institutions, even though any one such commercial bank or financial
          institution provides a letter of credit or guarantee with respect to
          securities which in the aggregate represent more than 5%, but not more
          than 10%, of the total assets of the Fund or the Portfolio, as the
          case may be; provided, however, that nothing in this investment
                       -----------------                                 
          restriction shall prevent the Trust from investing all or part of a
          Fund's assets in an open-end management investment company with the
          same investment objectives as such Fund.     
    
     4.   Invest more than 25% of the total assets of the Fund or the Portfolio,
          as the case may be, in the securities of issuers in any single
          industry; provided that (i) this limitation shall not apply to the
          purchase of U.S. Government Obligations, (ii) under normal market
          conditions more than 25% of the total assets of the Cash Management
          Fund (or Cash Management Portfolio) will be invested in obligations of
          U.S. and foreign banks and other financial institutions, and (iii)
          with respect to the Tax Free Money Fund and the NY Tax Free Money Fund
          (or Tax Free Money Portfolio or NY Tax Free Money Portfolio), this
          limitation shall not apply to the purchase of Municipal Obligations or
          letters of credit or guarantees of banks that support Municipal
          Obligations; provided, however, that nothing in this investment
          restriction shall prevent the Trust from investing all or part of a
          Fund's assets in an open-end management investment company with the
          same investment objectives as such Fund.     

                                       10
<PAGE>
 
     5.   Make short sales of securities, maintain a short position or purchase
          any securities on margin, except for such short-term credits as are
          necessary for the clearance of transactions.
    
     6.   Underwrite the securities issued by others (except to the extent the
          Fund or Portfolio may be deemed to be an underwriter under the Federal
          securities laws in connection with the disposition of its portfolio
          securities) or knowingly purchase restricted securities, except that
          the Tax Free Money Fund and the NY Tax Free Money Fund (and Tax Free
          Money Portfolio and NY Tax Free Money Portfolio) each may bid,
          separately or as part of a group, for the purchase of Municipal
          Obligations directly from an issuer for its own portfolio in order to
          take advantage of any lower purchase price available.  To the extent
          these securities are illiquid, they will be subject to the Fund's or
          the Portfolio's 10% limitation on investments in illiquid securities;
          provided, however, that nothing in this investment restriction shall
          -----------------                                                   
          prevent the Trust from investing all or part of a Fund's assets in an
          open-end management investment company with the same investment
          objectives as such Fund.     

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

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

     9.   Invest more than an aggregate of 10% of the net assets of the Fund or
          the Portfolio, respectively, (taken, in each case, at current value)
          in (i) securities that cannot be readily resold to the public because
          of legal or contractual restrictions or because there are no market
          quotations readily available or (ii) other "illiquid" securities
          (including time deposits and repurchase agreements maturing in more
          than seven calendar days); provided, however, that nothing in this
                                     -----------------                      
          investment restriction shall prevent the Trust from investing all or
          part of a Fund's assets in an open-end management investment company
          with the same investment objectives as such Fund.
    
     10.  Purchase more than 10% of the voting securities of any issuer or
          invest in companies for the purpose of exercising control or
          management; provided, however, that nothing in this investment
                      -----------------                                 
          restriction shall prevent the Trust from investing all or part of a
          Fund's assets in an open-end management investment company with the
          same investment objectives as such Fund.     
    
     11.  Purchase securities of other investment companies, except to the
          extent permitted under the 1940 Act or in connection with a merger,
          consolidation, reorganization, acquisition of assets or an offer of
          exchange; provided, however, that nothing in this investment
                    -----------------                                 
          restriction shall prevent the Trust from investing all or part of a
          Fund's assets in an open-end management investment company with the
          same investment objectives as such Fund.     

     12.  Issue any senior securities, except insofar as it may be deemed to
          have issued a senior security by reason of (i) entering into a
          repurchase agreement or (ii) borrowing in accordance with terms
          described in the Prospectus and this SAI.

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

     14.  Invest in warrants, except that the Fund or the Portfolio may invest
          in warrants if, as a result, the investments (valued in each case at
          the lower of cost or market) would not exceed 5% of the value of the
          net assets of the Fund or the Portfolio, as the case may be, of which
          not more than 2% of the net assets of the Fund or the Portfolio, as
          the case may 

                                       11
<PAGE>
 
          be, may be invested in warrants not listed on a recognized domestic
          stock exchange. Warrants acquired by the Fund or the Portfolio as part
          of a unit or attached to securities at the time of acquisition are not
          subject to this limitation.
    
     15.  As to the Tax Free Money Fund and the NY Tax Free Money Fund (or Tax
          Free Money Portfolio and NY Tax Free Money Portfolio), neither the
          Fund (nor the Portfolio as the case may be) will invest less than 80%
          of its net assets in Municipal Obligations under normal market
          conditions; provided, however, that nothing in this restriction shall
                      -----------------                                        
          prevent the Trust from investing all or part of a Fund's assets in an
          open-end management investment company with the same investment
          objectives as such Fund.     

         

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

         

    
     (i)  borrow money (including through dollar roll transactions) for any
          purpose in excess of 10% of the Portfolio's (Fund's) total assets
          (taken at cost), except that the Portfolio (Fund) may borrow for
          temporary or emergency purposes up to 1/3 of 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,
          are not considered a pledge of assets for purposes of this
          restriction;     
    
   (iii)  purchase any security or evidence of interest therein on margin,
          except that such short-term credit as may be necessary for the
          clearance of purchases and sales of securities may be obtained and
          except that deposits of initial deposit and variation margin may be
          made in connection with the purchase, ownership, holding or sale of
          futures;     
    
    (iv)  sell any security which it does not own unless by virtue of its
          ownership of other securities it has at the time of sale a right to
          obtain securities, without payment of      

                                       12
<PAGE>
 
    
          further consideration, equivalent in kind and amount to the securities
          sold and provided that if such right is conditional the sale is made
          upon the same conditions;     
    
     (v)  invest for the purpose of exercising control or management;     
    
     (vi) purchase securities issued by any investment company except by
          purchase in the open market where no commission or profit to a sponsor
          or dealer results from such purchase other than the customary broker's
          commission, or except when such purchase, though not made in the open
          market, is part of a plan of merger or consolidation; provided,
          however, that securities of any investment company will not be
          purchased for the Portfolio (Fund) if such purchase at the time
          thereof would cause (a) more than 10% of the Portfolio's (Fund's)
          total assets (taken at the greater of cost or market value) to be
          invested in the securities of such issuers; (b) more than 5% of the
          Portfolio's (Fund's) total assets (taken at the greater of cost or
          market value) to be invested in any one investment company; or (c)
          more than 3% of the outstanding voting securities of any such issuer
          to be held for the Portfolio (Fund); and, provided further, that the
          Portfolio shall not invest in any other open-end investment company
          unless the Portfolio (Fund) (1) waives the investment advisory fee
          with respect to assets invested in other open-end investment companies
          and (2) incurs no sales charge in connection with the investment (as
          an operating policy, each Portfolio will not invest in another open-
          end registered investment company);     
    
   (vii)  make short sales of securities or maintain a short position, unless
          at all times when a short position is open it owns an equal amount of
          such securities or securities convertible into or exchangeable,
          without payment of any further consideration, for securities of the
          same issue and equal in amount to, the securities sold short, and
          unless not more than 10% of the Portfolio's (Fund's) net assets (taken
          at market value) is represented by such securities, or securities
          convertible into or exchangeable for such securities, at any one time
          (the Portfolio (Fund) has no current intention to engage in short
          selling);     

There will be no violation of any investment restrictions or policies (except
with respect to fundamental investment restriction (1) above) if that
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in net or
total assets, or in the change of 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.

For purposes of diversification under the 1940 Act, identification of the
"issuer" of a Municipal Obligation depends on the terms and conditions of the
obligation.  If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision, and the obligation is backed only by the assets and
revenues of the subdivision, the subdivision will be regarded as the sole
issuer.  Similarly, if a private activity bond is backed only by the assets and
revenues of the nongovernmental user, the nongovernmental user will be deemed to
be the sole issuer.  If in either case the creating government or another entity
guarantees an obligation or issues a letter of credit to secure the obligation,
the guarantee or letter of credit will be considered a separate security issued
by the government or entity and would be separately valued.

                               Portfolio Turnover

Each of the Portfolios may attempt to increase yields by trading to take
advantage of short-term market variations, which results in higher portfolio
turnover.  This policy does not result in higher brokerage commissions to the
Portfolios, however, as the purchases and sales of portfolio securities are
usually effected as principal transactions.  The Portfolios' turnover rates are
not expected to have a material effect on their income and have been and are
expected to be zero for regulatory reporting purposes.

                                       13
<PAGE>
 
                             Portfolio Transactions

Decisions to buy and sell securities and other financial instruments for a
Portfolio are made by Bankers Trust, which also is responsible for placing these
transactions, subject to the overall review of the Board of Trustees.  Although
investment requirements for each Portfolio are reviewed independently from those
of the other accounts managed by Bankers Trust and those of the other
Portfolios, investments of the type the Portfolios may make may also be made by
these other accounts or Portfolios.  When a Portfolio and one or more other
Portfolios or accounts managed by Bankers Trust are prepared to invest in, or
desire to dispose of, the same security or other financial instrument, available
investments or opportunities for sales will be allocated in a manner believed by
Bankers Trust to be equitable to each.  In some cases, this procedure may affect
adversely the price paid or received by a Portfolio or the size of the position
obtained or disposed of by a Portfolio.

Purchases and sales of securities on behalf of the Portfolios usually are
principal transactions.  These securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities.  The cost
of securities purchased from underwriters includes an underwriting commission or
concession and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.  U.S. Government Obligations
are generally purchased from underwriters or dealers, although certain newly
issued U.S. Government Obligations may be purchased directly from the U.S.
Treasury or from the issuing agency or instrumentality.
    
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere and principal transactions are not entered into with persons
affiliated with the Portfolios except pursuant to exemptive rules or orders
adopted by the Securities and Exchange Commission.  Under rules adopted by the
SEC, broker-dealers may not execute transactions on the floor of any national
securities exchange for the accounts of affiliated persons, but may effect
transactions by transmitting orders for execution.     

In selecting brokers or dealers to execute portfolio transactions on behalf of a
Portfolio, Bankers Trust seeks the best overall terms available.  In assessing
the best overall terms available for any transaction, Bankers Trust will
consider the factors it deems relevant, including the breadth of the market in
the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis.  In
addition, Bankers Trust is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage, but not research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Portfolio involved, the other Portfolios and/or other accounts over which
Bankers Trust or its affiliates exercise investment discretion.  Bankers Trust's
fees under its agreements with the Portfolios are not reduced by reason of its
receiving brokerage services.
    
                                NET ASSET VALUE     
    
The net asset value ("NAV") per share of each Fund is calculated on each day on
which the Fund is open (each such day being a "Valuation Day").  The Funds are
currently open on each day, Monday through Friday, except (a) January 1st,
Martin Luther King, Jr.'s Birthday (the third Monday in January), Presidents'
Day (the third Monday in February), Good Friday, Memorial Day (the last Monday
in May), July 4th, Labor Day (the first Monday in September), Columbus Day (the
second Monday in October), Veteran's Day (November 11th), Thanksgiving Day (the
last Thursday in November) and December 25th; and (b) the preceding Friday or
the subsequent Monday when one of the calendar-determined holidays falls on a
Saturday or Sunday, respectively.     
    
The NAV per share of each Fund (except the Institutional Cash Management Fund
and Institutional Treasury Money Fund) is calculated twice on each Valuation Day
as of 12:00 noon, Eastern time, and as of the close of regular trading on the
NYSE, which is currently 4:00 p.m., Eastern time or in the event that the NYSE
closes early, at the time of such early closing. If the markets for the Funds'
primary investments close early, the Funds will cease taking purchase orders at
that time. The NAV of the Institutional Cash Management Fund and Institutional
Treasury Money Fund is calculated on each Valuation Day as of the close of
regular trading on the NYSE, which is currently 4:00 p.m., Eastern time or in
the event that the NYSE closes early, at the time of such early closing (each
time at which the NAV      

                                       14
<PAGE>
 
    
of a Fund is calculated is referred to herein as the "Valuation Time"). If the
markets for the Funds' primary investments close early, the Funds will cease
taking purchase orders at that 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 corresponding Portfolio and other assets), less all liabilities, by the
total number of its shares outstanding. Each Fund's NAV per share will normally
be $1.00.     

The valuation of each Portfolio's securities is based on their amortized cost,
which does not take into account unrealized capital gains or losses.  Amortized
cost valuation involves initially valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, generally without regard to the impact of fluctuating interest rates on
the market value of the instrument.  Although this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Portfolio would receive if
it sold the instrument.

The Portfolios' use of the amortized cost method of valuing their securities is
permitted by a rule adopted by the SEC.  Each Portfolio will also maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of two years or less and invest only in
securities determined by or under the supervision of the Board of Trustees to be
of high quality with minimal credit risks.

Pursuant to the rule, the Board of Trustees of each Portfolio also has
established procedures designed to allow investors in the Portfolio, such as the
Trust, to stabilize, to the extent reasonably possible, the investors' price per
share as computed for the purpose of sales and redemptions at $1.00.  These
procedures include review of each Portfolio's holdings by the Portfolio's Board
of Trustees, at such intervals as it deems appropriate, to determine whether the
value of the Portfolio's assets calculated by using available market quotations
or market equivalents deviates from such valuation based on amortized cost.

The rule also provides that the extent of any deviation between the value of
each Portfolio's assets based on available market quotations or market
equivalents and such valuation based on amortized cost must be examined by the
Portfolio's Board of Trustees.  In the event the Portfolio's Board of Trustees
determines that a deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, pursuant to the rule, the
respective Portfolio's Board of Trustees must cause the Portfolio to take such
corrective action as such Board of Trustees regards as necessary and
appropriate, including:  selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or valuing the Portfolio's assets by using available
market quotations.

Each investor in a Portfolio, including the corresponding Fund, may add to or
reduce its investment in the Portfolio on each day the Portfolio determines its
net asset value.  At the close of each such business day, the value of each
investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio.  Any additions or withdrawals, which are to be
effected as of the close of business on that day, will then be effected.  The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of net additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
net additions to or withdrawals from the aggregate investments in the Portfolio
by all investors in the Portfolio.  The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio as of
the close of the following business day.

                                       15
<PAGE>
 
                      PURCHASE AND REDEMPTION INFORMATION

                               Purchase of Shares

BT Investment Funds accepts purchase orders for shares of each Fund at the NAV
per share next determined after the order is received on each Valuation Day.
Shares may be available through Investment Professionals, such as broker/dealers
and investment advisers (including Service Agents).

Purchase orders for shares (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.  If the purchase order is received by the Service Agent and
transmitted to the Transfer Agent after 12:00 noon (Eastern time) and prior to
the close of the NYSE, the shareholder will receive the dividend declared on the
following day even if Bankers Trust, as the BT Investment Funds' custodian (the
"Custodian"), receives federal funds on that day.  If the purchase order is
received prior to 12:00 noon, the shareholder will receive that Valuation Day's
dividend.  BT Investment Funds and Transfer Agent reserve the right to reject
any purchase order.  If the market for the primary investments in a Fund closes
early, the Fund will cease taking purchase orders at that time.

Another mutual fund investing in the corresponding Portfolio may accept purchase
orders up until a time later than 12:00 noon, Eastern time.  Such orders, when
transmitted to and executed by the Portfolio, may have an impact on the Fund's
performance.

         

    
BT Institutional Funds accepts purchase orders for shares of each Fund at the
NAV per share next determined on each Valuation Day. The minimum initial and
subsequent investment amounts are set forth below. The minimum initial
investment in each Fund may be allocated in amounts not less than $100,000 per
fund in certain funds in the BT Family of Funds. Service Agents may impose
initial and subsequent investment minimums that differ from these amounts.
Shares of the Fund may be purchased in only those states where they may be
lawfully sold.     
    
Purchase orders for shares of each Fund will receive, on any Valuation Day, the
NAV next determined following receipt by the Service Agent and transmission to
Bankers Trust, as BT Institutional Funds' Transfer Agent (the "Transfer Agent")
of such order. If the purchase order for shares of the Institutional Treasury
Money Fund is received by the Service Agent and transmitted to the Transfer
Agent prior to 2:00 p.m. (Eastern time), and if payment in the form of federal
funds is received on that day by Bankers Trust, as BT Institutional Funds'
custodian (the "Custodian"), the shareholder will receive the dividend declared
on that day. If the purchase order is received by the Service Agent and
transmitted to the Transfer Agent after 2:00 p.m. (Eastern time), the
shareholder will receive the dividend declared on the following day even if the
Custodian receives federal funds on that day. If the purchase order for shares
of     

                                       16
<PAGE>
 
the Institutional Cash Management Fund is received by the Service Agent and
transmitted to the Transfer Agent prior to 4:00 p.m. (Eastern time), and if
payment in the form of federal funds is received on that day by the Custodian,
the shareholder will receive the dividend declared on that day. BT Institutional
Funds and the Transfer Agent reserve the right to reject any purchase order. If
the market for the primary investments in a Fund closes early, the Fund will
cease taking purchase orders at that time.

         

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 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.

If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
shares to the Transfer Agent before the applicable Valuation time.

Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.

         

If you have money invested in a fund in the BT Family of Funds, you can:

 .  Mail an account application with a check,

 .  Wire money into your account,

 .  Open an account by exchanging from another fund in the BT Family of Funds, or

 .  Contact your Service Agent or Investment Professional.

                                       17
<PAGE>
 
         

                             Redemption of Shares

         

                                       18
<PAGE>
 
         

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 Service Agent does not do so, it may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.

         

    
The Trust may suspend the right of redemption or postpone the date of payment
for shares of the Fund during any period when: (a) trading on the NYSE is
restricted by applicable rules and regulations of the SEC; (b) the NYSE is
closed for other than customary weekend and holiday closings; (c) the SEC has by
order permitted such suspension; or (d) an emergency exists as determined by the
SEC.     

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.

         

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:

 .       Your account registration has changed within the last 30 days,


 .       The check is being mailed to a different address than the one on your
        account (record address),

                                       19
<PAGE>
 
 .       The check is being made payable to someone other than the account owner,

 .       The redemption proceeds are being transferred to a BT account with a
        different registration, or

 .       You wish to have redemption proceeds wired to a non-predesignated bank
        account.

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.

         

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.

         

                                       20
<PAGE>
 
         

                                       21
<PAGE>
 
         

                    MANAGEMENT OF THE TRUST AND PORTFOLIOS

The Trusts and the Portfolios are governed by their respective Boards of
Trustees which are responsible for protecting the interests of investors. By
virtue of the responsibilities assumed by Bankers Trust, the administrator of
the Trusts and the Portfolios, neither the Trusts nor the Portfolios require
employees other than their executive officers. None of the executive officers of
the Trusts or the Portfolios devotes full time to the affairs of the Trusts or
the Portfolios.

A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of each Trust or Portfolio, as the case may be, have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that some of the same individuals are Trustees of such
Trust and Portfolio, up to and including creating separate boards of trustees.

Each Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the Funds or
Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios and
review the Funds' performance.
    
The Trustees and officers of the Trusts and the Portfolios, their birthdates,
and their principal occupations during the past five years are set forth below.
Their titles may have varied during that period.     

                        Trustees of BT Investment Funds
    
S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director, Coutts
(U.S.A.) International (an Edge Act company); Zweig Series Trust; Vinters
International Company Inc.; Coutts Trust Holdings Ltd; Coutts Group; General
Partner of Pemco (an investment company registered under the 1940 Act); formerly
Partner of KPMG Peat Marwick. His address is 5070 North Ocean Drive, Singer
Island, Florida 33404.     
    
KELVIN J. LANCASTER (birthdate: December 10, 1924) -- Trustee; John Bates Clark
Professor of Economics, Columbia University; Distinguished Fellow, American
Economics Association; Fellow, American Academy of Arts and Sciences; Fellow,
Econometric Society; Former Chairman, Columbia University Department of
Economics; Former Director, National Bureau of Economic Research. 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.

                      Trustees of BT Institutional Funds

CHARLES P. BIGGAR (birthdate: October 13, 1930) --Trustee; Retired; formerly
Vice President of International Business Machines ("IBM") and President of the
National Services and the Field Engineering Divisions of IBM. His address is 12
Hitching Post Lane, Chappaqua, New York 10514.
    
RICHARD J. HERRING (birthdate: February 18, 1946) -- Trustee; Jacob Safra
Professor of International Banking, Professor of Finance, Finance Department and
Vice Dean, The Wharton School, University of     

                                       22
<PAGE>
 
Pennsylvania. His address is The Wharton School, University of Pennsylvania,
Finance Department, 3303 Steinberg Hall/Dietrich Hall, Philadelphia,
Pennsylvania 19104.

BRUCE E. LANGTON (birthdate: May 10, 1931) -- Trustee; Retired; Director, Adela
Investment Co. and University Patents, Inc.; formerly Assistant Treasurer of IBM
Corporation (until 1986). His address is 99 Jordan Lane, Stamford, Connecticut
06903.
    
                          Trustees of the Portfolios     
    
CHARLES P. BIGGAR -- Trustee.     
    
S. LELAND DILL-- Trustee.     
    
PHILIP SAUNDERS, JR. --  Trustee.     
    
                   Officers of the Trusts and the Portfolios     
    
Unless otherwise specified, each officer listed below holds the same position
with each Trust and each Portfolio.     
    
JOHN Y. KEFFER (birthdate: July 14, 1942) -- President and Chief Executive
Officer; President, Forum Financial Group, LLC.; President, ICC Distributors,
Inc. Mr. Keffer also holds executive positions with affiliates of Forum
Financial Group, LLC. His address is ICC Distributors, Inc., Two Portland
Square, Portland, Maine 04101.     
    
JOSEPH A. FINELLI (birthdate: January 24, 1957) --Treasurer; Vice President, BT
Alex. Brown Incorporated and Vice President, Investment Company Capital Corp.
(registered investment adviser), September 1995 to present; formerly, Vice
President and Treasurer, The Delaware Group of Funds (registered investment
companies) and Vice President, Delaware Management Company Inc. (investments),
1980 to August 1995. His address is One South Street, Baltimore, Maryland 
21202.     
    
DANIEL O. HIRSCH (birthdate: March 27, 1954) --Secretary; Principal, BT Alex.
Brown since July 1998; Assistant General Counsel in the Office of the General
Counsel at the United States Securities and Exchange Commission from 1993 to
1998. His address is One South Street, Baltimore, Maryland 21202.     
    
Messrs. Keffer, Finelli and Hirsch also hold similar positions for other
investment companies for which ICC Distributors, 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 ICC
Distributors 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.

                                       23
<PAGE>
 
<TABLE>
<CAPTION>     
                                                    Trustee Compensation Table

                                Aggregate               Aggregate                Aggregate     
Name of Person,                 Compensation from       Compensation from        Compensation     Total Compensation from
Position                        BT Investment           BT Institutional         from             Fund Complex Paid to
                                Funds*+                 Funds**+                 Portfolios+      Trustees***
                                                                                               
<S>                             <C>                     <C>                      <C>              <C>
S. Leland Dill, Trustee of BT   $14,485                   N/A                    $3,882               $36,250
 Investment Funds and the                                                                     
 Portfolios                                                                                   

Kelvin Lancaster, Trustee of    $24,797                   N/A                      N/A                $36,250
 BT Investment Funds                                                                          

Philip Saunders, Jr., Trustee   $14,582                   N/A                    $3,910               $36,250
 of  BT Investment Funds and                                                                   
 the Portfolios                                                                                

Charles Biggar, Trustee of BT     N/A                   $11,107                  $4,590               $36,250
 Institutional Funds and the                                                                   
 Portfolios                                                                                    

Richard J. Herring, Trustee       N/A                   $23,625                    N/A                $35,000
 of  BT Institutional Funds                                                                    

Bruce E. Langton, Trustee of      N/A                   $23,625                    N/A                $35,000
 BT Institutional Funds
</TABLE>      

                                       24
<PAGE>
 
    
*    The information provided is for the BT Investment Funds, which is comprised
     of 16 funds, for the year ended December 31, 1998.     
    
**   The information provided is for the BT Institutional Funds which is
     comprised of 10 funds, for the year ended December 31, 1998.     
    
+    Information provided is for the year ended December 31, 1998.     
    
***  Aggregated information is furnished for the BT Family of Funds which
     consists of the following: BT Investment Funds, BT Institutional Funds, BT
     Pyramid Mutual 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, Intermediate
     Tax Free Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio,
     and Capital Appreciation Portfolio. The compensation provided is for the
     calendar year ended December 31, 1998.     
    
Bankers Trust reimbursed the Funds and Portfolios for a portion of their
Trustees fees for the period above.  See "Investment Adviser" and
"Administrator" below.     
    
As of March 31, 1999, 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 March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of Investment Cash Management Fund: Circuit City Credit
Card Master Trust, Richmond, VA (46.378%); Circuit City Credit Card, Richmond,
VA (7.723%); Private Bank Sweep, Investment Advisory, New York, NY (23.131%);
Private Bank Sweep, Custody, New York, NY (16.083%).     
    
As of March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of Investment Tax Free Money Fund: Private Bank Sweep,
Custody, New York, NY (75.338%); Private Bank Sweep, Investment Advisory, New
York, NY (26.339%); INFID & Co, c/o Bankers Trust, New York, NY (11.203%).     
    
As of March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of Investment NY Tax Free Money Fund: Private Bank Sweep,
Custody, New York, NY (44.896%); Private Bank Sweep, Investment Advisory, New
York, NY (28.909%).     
    
As of March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of the Institutional Cash Management Fund: Equity 500
Index Portfolio, New York, NY (7.967%); Montag & Caldwell Growth Fund, Atlanta,
GA (5.159%); Private Bank Sweep, Custody, New York, NY (5.135%).     
    
As of March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of Institutional Treasury Money Fund: APEX/AFS Escrow,
Canton, OH (13.562%); VCFI-APEX Inc. Escrow, Canton, OH (10.935%); California
ISO BCD Bank Repay Subaccount, Folsom, CA (6.671%); Chevy Chase, New York, NY
(5.630%); Mill Creek Holdings Ltd, Dallas, TX (5.455%).     

                                       25
<PAGE>
 
    
                               Investment Adviser     

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of each of its Funds by investing all
the assets of the Fund in the Portfolio.  The Portfolio has retained the
services of Bankers Trust as Adviser.
    
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street, (One Bankers Trust Plaza), New York, New York 10006, is a
wholly owned subsidiary of Bankers Trust Corporation.  Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
market.  As of December 31, 1998, Bankers Trust Corporation was the eighth
largest bank holding company in the United States with total assets of over $156
billion. 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 over $338 billion in assets under management globally.
     
    
Under the terms of an investment advisory agreement between each Portfolio and
Bankers Trust (the "Advisory Agreements"), Bankers Trust manages each  Portfolio
subject to the supervision and direction of the Board of Trustees.  Bankers
Trust will: (i) act in strict conformity with each Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisors Act of 1940, as the same may
from time to time be amended; (ii) manage each Portfolio in accordance with the
Portfolio's investment objectives, restrictions and policies as stated in the
relevant Prospectus and herein; (iii) make investment decisions for each
Portfolio; and (iv) place purchase and sale orders for securities and other
financial instruments on behalf of each Portfolio.     
    
Bankers Trust bears all expenses in connection with the performance of services
under the Advisory Agreements.  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, ICC Distributors or any
of their affiliates; SEC fees and state Blue Sky qualification fees;
administrative and services fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing Prospectus 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.     

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio.  Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser.  All
orders for investment transactions on behalf of a Portfolio are placed by the
Adviser with broker-dealers and other financial intermediaries that it selects,
including those affiliated with Bankers Trust.  A Bankers Trust affiliate will
be used in connection with a purchase or sale of an investment for the Portfolio
only if Bankers Trust believes that the affiliate's charge for the transaction
does not exceed usual and customary levels.  A Portfolio will not invest in
obligations for which Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank.  Each Portfolio may, however, invest in the
obligations of correspondents and customers of Bankers Trust.  Bankers Trust may
perform the above duties or it may delegate such responsibilities to the Sub-
Investment Adviser as defined herein.

         

                                       26
<PAGE>
 
         

The Investment Advisory Agreements provide for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to 0.15%
of the average daily net assets of each Portfolio for its then-current fiscal
year.
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $8,019,093, $6,544,181 and $4,935,288, respectively, as compensation for
investment advisory services provided to Cash Management Portfolio.  During the
same periods, Bankers Trust reimbursed $1,151,727, $940,530 and $761,230,
respectively, to Cash Management Portfolio to cover expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $250,537, $205,614 and $187,326, respectively, as compensation for
investment advisory services provided to Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $60,545, $37,359 and $43,832,
respectively, to Tax Free Money Portfolio to cover expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $128,675, $141,157 and $129,423, respectively, as compensation for
investment advisory services provided to NY Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $38,835, $29,305 and $41,003,
respectively, to NY Tax Free Money Portfolio to cover expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $3,666,082, $3,067,422 and $2,787,544, respectively, in compensation for
investment advisory services provided to Treasury Money Portfolio. During the
same periods, Bankers Trust reimbursed $52,678, $60,612 and $60,530,
respectively, to Treasury Money 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.
    
                                 Administrator     

Under its Administration and Services Agreements with the Trusts, the Adviser
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trusts in all aspects of the administration and operation of the
Trusts.  The Administration and Services Agreements provides for each Trust to
pay the Adviser a fee, computed daily and paid monthly, equal on an annual basis
to 0.55% of the average daily net assets of Investment Cash Management Fund,
Investment Tax Free Money Fund and Investment NY Tax Free Money Fund, and 0.05%
of the average daily net assets of Institutional Cash Management Fund and
Institutional Treasury Money Fund.

Under Administration and Services Agreements with each Portfolio, the Adviser
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio.  The Administration and Services Agreements provides
for each Portfolio to pay the Adviser a fee, computed daily and paid monthly,
equal on an annual basis to 0.05% of the Portfolio's average daily net assets.
Under the Administration and Services Agreements, the 

                                       27
<PAGE>
 
Adviser may delegate one or more of its responsibilities to others, including
affiliates of ICC Distributors, at the Adviser's expense.

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

         

Bankers Trust has agreed that if in any fiscal year the aggregate expenses of
any Fund and its respective Portfolio (including fees pursuant to the Advisory
Agreement, but excluding interest, taxes, brokerage and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, Bankers Trust
will reimburse the Fund for the excess expense to the extent required by state
law.  As of the date of this SAI, the most restrictive annual expense limitation
applicable to any Fund is 2.5% of the Fund's first $30 million of average annual
net assets, 2.0% of the next $70 million of average annual net assets and 1.5%
of the remaining average annual net assets.
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned compensation of $884,771, $717,130 and $762,676, respectively, for
administrative and other services provided to the Cash Management Fund and
reimbursed $61,113, $12,060 and $19,705, respectively, to the Cash Management
Fund to cover expenses.     

         

                                       28
<PAGE>
 
         

    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $915,978, $752,445 and $685,637, respectively, for administrative and
other services provided to the Tax Free Money Fund and reimbursed $60,384,
$37,359 and $46,825, respectively, to the Tax Free Money Fund to cover expenses.
     

    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned compensation of $470,872, $516,579 and $473,735, respectively, for
administrative and other services provided to the NY Tax Free Money Fund and
reimbursed $45,394, $29,632, and $34,578, respectively, to the NY Tax Free Money
Fund to cover expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $1,143,625, $931,345, and $622,176, respectively, in compensation for
administrative and other services provided to Institutional Cash Management
Fund.  During the same periods, Bankers Trust reimbursed $201,937, $108,093 and
$280,146, respectively, to the Institutional Cash Management Fund to cover
expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $1,034,694, $819,884 and $640,788, respectively, in compensation for
administrative and other services provided to Institutional Treasury Money Fund.
During the same periods, Bankers Trust reimbursed $98,990, $356,801 and $48,531,
respectively, to Institutional Treasury Money Fund to cover expenses.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned compensation of $2,673,031, $2,181,394 and $1,645,096, respectively, for
administrative and other services provided to the Cash Management 
Portfolio.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $83,512, $68,538 and $62,442, respectively, for administrative and other
services provided to Tax Free Money Portfolio.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned $42,892, $47,052 and $43,141, respectively, for administrative and other
services provided to the NY Tax Free Money Portfolio.     
    
For the fiscal years ended December 31, 1998, 1997 and 1996, Bankers Trust
earned compensation of $1,222,027, $1,022,474 and $929,181, respectively, for
administrative and other services provided to the Treasury Money Portfolio.     
    
                                  Distributor     

ICC Distributors is the principal distributor for shares of the Fund.  ICC
Distributors is a registered broker/dealer and is unaffiliated with Bankers
Trust.  The principal business address of ICC Distributors is Two Portland
Square, Portland, Maine 04101.
    
                                 Service Agent     

All shareholders must be represented by a Service Agent.  The Adviser acts as a
Service Agent pursuant to its Administration and Services Agreements with the
Trusts 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 the Adviser 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 Trusts, assisting clients in changing dividend options, account
designations and 

                                       29
<PAGE>
 
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 Trusts 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 Agreements
with the Adviser, or of the type or scope not generally offered by a mutual
fund, such as cash management services or enhanced retirement or trust
reporting. In addition, investors may be charged a transaction fee if they
effect transactions in Fund shares through a broker or agent. Each Service Agent
has agreed to transmit to shareholders, who are its customers, appropriate
disclosures of any fees that it may charge them directly.
    
                          Custodian and Transfer Agent     

Bankers Trust, 130 Liberty Street, (One Bankers Trust Plaza), New York, New York
10006, serves as custodian and transfer agent for the Trust and as custodian for
each Portfolio pursuant to the Administration and Services Agreements discussed
above.  As custodian, Bankers Trust holds the Funds' and each Portfolio's
assets.  For such services, Bankers Trust receives monthly fees from each Fund
and Portfolio, which are included in the administrative services fees discussed
above.  As transfer agent for the Trust, Bankers Trust maintains the shareholder
account records for each Fund, handles certain communications between
shareholders and the Trust and causes to be distributed any dividends and
distributions payable by the Trust.  Bankers Trust is also reimbursed by the
Funds for its out-of-pocket expenses.  Bankers Trust will comply with the self-
custodian provisions of Rule 17f-2 under the 1940 Act.
    
                                    Expenses     

Each Fund bears its own expenses.  Operating expenses for each Fund generally
consist of all costs not specifically borne by the Adviser or ICC Distributors,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
Each Portfolio bears its own expenses.  Operating expenses for each Portfolio
generally consist of all costs not specifically borne by the Adviser or ICC
Distributors, including investment advisory and administration and service fees,
fees for necessary professional services, amortization of organizational
expenses, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.
    
                                  Use of Name     

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

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 Advisory
Agreements and other activities for the Trust and the Portfolios described in
the Prospectus and this SAI without violation of the Glass-Steagall Act or other
applicable banking laws or regulations.  However, counsel has pointed out that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and future
statutes and regulations, might prevent Bankers Trust from continuing to perform
those services for the Trust or the Portfolios.  If the circumstances described
above should change, the Trust's Board of Trustees would review the Trust's
relationship with Bankers Trust and consider taking all actions necessary in the
circumstances.

                                       30
<PAGE>
 
                      Counsel and Independent Accountants
    
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust and from time to time provides certain legal
services to Bankers Trust.  PricewaterhouseCoopers LLP, 250 W. Pratt Street,
Baltimore, Maryland 21201 has been selected as Independent Accountants for the
Trust.     
    
                           ORGANIZATION OF THE TRUSTS     
    
BT Investment Funds was organized on July 21, 1986 and BT Institutional Funds
was organized on March 26, 1990 under the laws of the Commonwealth of
Massachusetts. Each Fund is a mutual fund: an investment that pools
shareholders' money and invests it toward a specified goal.  Each Fund is a
separate series of the respective Trust. Each Trust offers shares of beneficial
interest of separate series, par value $0.001 per share. The interests in each
Portfolio are divided into separate series, no series of which has any
preference over any other series. The shares of each series participate equally
in the earnings, dividends and assets of the particular series.  The shares of
the other series of the Trusts are offered through separate prospectuses and
statements of additional information. The Trusts may create and issue additional
series of shares.  Each Trust's Declaration of Trust permits the Trustees to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interest in a series.  Each share
represents an equal proportionate interest in a series with each other share.
Shares when issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held.  No series of shares
has any preference over any other series.     
    
Each Trust is an entity commonly known as a "Massachusetts business trust."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trusts. However, each
Declaration of Trust disclaims shareholder liability for acts or obligations of
such Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by a Trust or a
Trustee.  Each Declaration of Trust provides for indemnification from such
Trust's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of shareholders
incurring financial loss on account of shareholder liability is limited to
circumstances in which both inadequate insurance existed and the Trust itself
was unable to meet its obligations, a possibility that each Trust believes is
remote.  Upon payment of any liability incurred by a 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 each Trust in a
manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Trusts.     
    
Each of the Cash Management Portfolio, Tax Free Money Portfolio, NY Tax Free
Money Portfolio and Treasury Money Portfolio was organized as a trust under the
laws of the State of New York.  Each Portfolio's Declaration of Trust provides
that each Fund and other entities investing in a Portfolio (e.g., other
investment companies, insurance company separate accounts and common and
commingled trust funds) will each be liable for all obligations of 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 Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of each Trust believe that neither a Fund nor its
shareholders will be adversely affected by reason of the Funds' investing in the
corresponding Portfolio.     
    
The Trusts are not required to hold annual meetings of shareholders but will
hold special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote.  Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees without a meeting.  When matters are
submitted for shareholder vote, shareholders of a Fund will have one vote for
each full share held and proportionate, fractional votes for fractional shares
held.  A separate vote of the Fund is required on any matter affecting the Fund
on which shareholders are entitled to vote. Shareholders of a Fund are not
entitled to vote      

                                       31
<PAGE>
 
on Trust matters that do not affect the Fund. There normally will be no meetings
of shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of such
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.
    
Shares of the Trusts 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.  Upon liquidation of a Fund, shareholders of that Fund would be
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.     
    
Each      

        

                                       32
<PAGE>
 
         

    
series in a Trust will not be involved in any vote involving a Portfolio in
which it does not invest its assets.  Shareholders of all of the series of a
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters.  Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.     
    
The series of each Portfolio 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 could control the outcome of these votes.     
    
Whenever a Trust is requested to vote on a matter pertaining to a Portfolio, the
Trust will vote its shares without a meeting of shareholders of the
corresponding Fund if the proposal is one, if which made with respect to the
Fund, would not require the vote of shareholders of the Fund as long as such
action is permissible under applicable statutory and regulatory requirements.
For all other matters requiring a vote, a Trust will hold a meeting of
shareholders of the Fund and, at the meeting of investors in the Portfolio, the
Trust will cast all of its votes in the same proportion as the votes all its
shares at the Portfolio meeting, other investors with a greater pro rata
ownership of the Portfolio could have effective voting control of the operations
of the Portfolio.     
    
As of March 31, 1999, the following shareholders of record owned 25% or more of
the voting securities of the Investment Cash Management Fund and, therefore,
may, for certain purposes, be deemed to control and be able to affect the
outcome of certain matters presented for a vote of its shareholders: Circuit
City Credit Card Master Trust, Richmond, VA 23233-1463 (46.378%).     
    
As of March 31, 1999, the following shareholders of record owned 25% or more of
the voting securities of the Investment Tax Free Money Fund and, therefore, may,
for certain purposes, be deemed to control and be able to affect the outcome of
certain matters presented for a vote of its shareholders: Private Bank Sweep,
Custody, New York, NY (75.338%); Private Bank Sweep, Investment Advisory, New
York, NY (26.339%).     
    
As of March 31, 1999, the following shareholders of record owned 25% or more of
the voting securities of the Investment NY Tax Free Money Fund, and, therefore,
may, for certain purposes, be deemed to control and be able to affect the
outcome of certain matters presented for a vote of its shareholders: Private
Bank Sweep, Custody, New York, NY (44.896%); Private Bank Sweep, Investment
Advisory, New York, NY (28.909%).     
    
As of March 31, 1999, no shareholders of record owned 25% or more of the voting
securities of the Institutional Cash Management Fund, and, therefore, are not
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of its shareholders.     
    
As of March 31, 1999, no shareholders of record owned 25% or more of the voting
securities of the Institutional Treasury Money Fund, and, therefore, are not
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of its shareholders.     
    
BT Investment Funds was organized under the name BT Tax-Free Investment Trust
and assumed its current name on May 16, 1988.     
    
                              DIVIDENDS AND TAXES     

The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning.  Shareholders are urged to consult their tax advisers
with specific reference to their own tax situations.

                                       33
<PAGE>
 
                                   Dividends

Each Fund declares dividends from its net income daily and pays the dividends
monthly.  Each Fund reserves the right to include realized short-term gains, if
any, in such daily dividends.  Distributions of each Fund's pro rata share of
the corresponding Portfolio's net realized long-term capital gains, if any, and
any undistributed net realized short-term capital gains are normally declared
and paid annually at the end of the fiscal year in which they were earned to the
extent they are not offset by any capital loss carryforwards.  Unless a
shareholder instructs a Trust to pay dividends or capital gains distributions in
cash, dividends and distributions will automatically be reinvested at NAV in
additional shares of the Fund that paid the dividend or distribution.

                  Taxation of the Funds and Their Investments
    
Each Fund intends to continue to qualify as a separate regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code").
Provided that each Fund is a regulated investment company, each Fund will not be
liable for Federal income taxes to the extent all of its taxable net investment
income and net realized long-and short-term capital gains, if any, are
distributed to its shareholders.  Although the Trusts expect the Funds to be
relieved of all or substantially all Federal income taxes, depending upon the
extent of their activities in states and localities in which their offices are
maintained, in which their agents or independent contractors are located or in
which they are otherwise deemed to be conducting business, that portion of a
Fund's income which is treated as earned in any such state or locality could be
subject to state and local tax.  Any such taxes paid by a Fund would reduce the
amount of income and gains available for distribution to its shareholders.     

If for any taxable year a Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders).  In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.

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.
Each Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
corresponding Fund and the other investors in that Portfolio at the time of such
determination.

                            Taxation of Shareholders
    
As described above:  (i) the Cash Management Fund and the Treasury Money Fund
are designed to provide investors with current income; (ii) the Tax Free Money
Fund is designed to provide investors with current income excluded from gross
income for Federal income tax purposes and (iii) the NY Tax Free Money Fund is
designed to provide investors with current income excluded from gross income for
Federal income tax purposes and exempt from New York State and New York City
personal income taxes.  The Funds are not intended to constitute balanced
investment programs and are not designed for investors seeking capital gains,
maximum income or maximum tax-exempt income irrespective of fluctuations in
principal.  Investment in the Tax Free Money Fund or the NY Tax Free Money Fund
would not be suitable for tax-exempt institutions, qualified retirement plans,
H.R. 10 plans and individual retirement accounts since such investors would not
gain any additional tax benefit from the receipt of tax-exempt income.     
    
Distributions of net realized long-term capital gains ("capital gain
dividends"), if any, will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed by the Fund to
shareholders after the close of the Fund's prior taxable year.  Dividends paid
by the Fund from its taxable net investment income and distributions by the Fund
of its net realized short-term capital gains are taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund.  Each Fund's dividends and distributions will not qualify for the
dividends-received deduction for corporations.     

                                       34
<PAGE>
 
Shareholders should consult their tax advisers to assess the consequences of
investing in a Fund under state and local laws and to determine whether
dividends paid by a Fund that represent interest derived from U.S. Government
Obligations are exempt from any applicable state or local income taxes.
    
Exempt-interest dividends may be excluded by shareholders of a Fund from their
gross income for federal income tax purposes.  Because the Tax Free Money Fund
and the NY Tax Free Money Fund will distribute exempt-interest dividends, all or
a portion of any interest on indebtedness incurred by a shareholder to purchase
or carry shares of these Funds will not be deductible for Federal income and New
York State and New York City personal income tax purposes. In addition, the Code
may require a shareholder of these Funds, if he receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise nontaxable
social security and railroad retirement benefit payments. Furthermore, that
portion of any exempt-interest dividend paid by one of these Funds which
represents income from private activity bonds held by the Fund may not retain
its tax-exempt status in the hands of a shareholder who is a "substantial user"
of a facility financed by such bonds, or a "related person" thereof.  Moreover,
as noted in the Prospectus for these Funds, some or all of a Fund's dividends
and distributions may be specific preference items, or a component of an
adjustment item, for purposes of the Federal individual and corporate
alternative minimum taxes.  In addition, the receipt of Fund dividends and
distributions may affect a foreign corporate shareholder's Federal "branch
profits" tax liability and a Subchapter S corporate shareholder's Federal
"excess net passive income" tax liability.  Shareholders should consult their
own tax advisers as to whether they are (i) "substantial users" with respect to
a facility or "related" to such users within the meaning of the Code and (ii)
subject to a Federal alternative minimum tax, the Federal "branch profits" tax
or the Federal "excess net passive income" tax.     
    
If a shareholder fails to furnish a correct taxpayer identification number,
fails to report fully dividend or interest income or fails to certify that he or
she has provided a correct taxpayer identification number and that he or she is
not subject to "backup withholding," then the shareholder may be subject to a
31% backup withholding tax with respect to any taxable dividends and
distributions.  An individual's taxpayer identification number is his or her
social security number.  The 31% backup withholding tax is not an additional tax
and may be credited against a taxpayer's regular Federal income tax 
liability.     

Shareholders should consult their tax advisers as to any state and local taxes
that may apply to these dividends and distributions.
    
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually.  Each shareholder will also receive,
if appropriate, various written notices after the end of a Fund's prior taxable
year as to the federal income tax status of his or her dividends and
distributions which were received from that Fund during that year.  Each Tax
Free Money Fund and NY Tax Free Money Fund shareholder will receive after the
close of the calendar year an annual statement as to the Federal income (and, in
the case of the NY Tax Free Money Fund, New York State and City) personal income
tax status of his dividends and distributions from the Fund for the prior
calendar year.  These statements will also designate the amount of exempt-
interest dividends that is a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes.  The dollar amount
of dividends excluded from Federal income taxation or exempt from New York State
and City personal income taxation, and the dollar amount subject to such income
taxation, if any, will vary for each shareholder depending upon the size and
duration of each shareholder's investment in a Fund.  To the extent that the
Funds earn taxable net investment income, each of the Funds intends to designate
as taxable dividends the same percentage of each day's dividend as its taxable
net investment income bears to its total net investment income earned on that
day.  Therefore, the percentage of each day's dividend designated as taxable, if
any, may vary from day to day.     
    
                            PERFORMANCE INFORMATION     

From time to time, the Trust may advertise "current yield," "effective yield"
and/or "tax equivalent yield" for a Fund.  All yield figures are based on
historical earnings and are not intended to indicate future performance.  The
"current yield" of a Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized;" that is, the amount of income generated by the
investment during that week is assumed to 

                                       35
<PAGE>
 
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in a Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "current yield" because of
the compounding effect of this assumed reinvestment. The "tax equivalent yield"
demonstrates the yield on a taxable investment necessary to produce an after-tax
yield equal to a Fund's tax free yield. It is calculated by increasing the yield
shown for the Fund to the extent necessary to reflect the payment of specified
tax rates. The Trust may include this information in sales material and
advertisements for a Fund.

Yield is a function of the quality, composition and maturity of the securities
held by the corresponding Portfolio and operating expenses of a Fund and the
corresponding Portfolio.  In particular, a Fund's yield will rise and fall with
short-term interest rates, which can change frequently and sharply.  In periods
of rising interest rates, the yield of a Fund will tend to be somewhat lower
than the prevailing market rates, and in periods of declining interest rates,
the yield will tend to be somewhat higher.  In addition, when interest rates are
rising, the inflow of net new money to a Fund from the continuous sale of its
shares will likely be invested by the corresponding Portfolio in instruments
producing higher yields than the balance of that Portfolio's securities, thereby
increasing the current yield of the Fund.  In periods of falling interest rates,
the opposite can be expected to occur.  Accordingly, yields will fluctuate and
do not necessarily indicate future results.  While yield information may be
useful in reviewing the performance of a Fund, it may not provide a basis for
comparison with bank deposits, other fixed rate investments, or other investment
companies that may use a different method of calculating yield.  Any fees
charged by Service Agents for processing purchase and/or redemption transactions
will effectively reduce the yield for those shareholders.

From time to time, advertisements or reports to shareholders may compare the
yield of a Fund to that of other mutual funds with similar investment objectives
or to that of a particular index.  The  yield of the Cash Management Fund might
be compared with, for example, the IBC First Tier All Taxable Money Fund
Average, that of the Treasury Money Fund might be compared with IBC U.S.
Treasury and Repo All Taxable Money Fund Average, and that of Tax Free Money
Fund and the NY Tax Free Money Fund might be compared with IBC State Specific
All Tax Free Money Fund Average and IBC Stockbroker and General Purpose All Tax
Free Money Fund Average, which are averages compiled by IBC Money Fund Report, a
widely recognized, independent publication that monitors the performance of
money market mutual funds.   Similarly, the yield of a Fund might be compared
with rankings prepared by Micropal Limited and/or Lipper Analytical Services,
Inc., which are widely recognized, independent services that monitor the
investment performance of mutual funds.  The yield of a Fund might also be
compared without the average yield reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan areas.  Shareholders may make inquiries
regarding the Funds, including current yield quotations and performance
information, by contacting any Service Agent.

Shareholders will receive financial reports semi-annually that include listings
of investment securities held by a Fund's corresponding Portfolio at those
dates.  Annual reports are audited by independent accountants.

From time to time a Fund may quote its performance in terms of "current yield,"
"effective yield" or "tax equivalent yield" in reports or other communications
to shareholders or in advertising material.

The effective yield is an annualized yield based on a compounding of the
unannualized base period return.  These yields are each computed in accordance
with a standard method prescribed by the rules of the SEC, by first determining
the "net change in account value" for a hypothetical account having a share
balance of one share at the beginning of a seven-day period (the "beginning
account value").  The net change in account value equals the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares.  The unannualized
"base period return" equals the net change in account value divided by the
beginning account value.  Realized gains or losses or changes in unrealized
appreciation or depreciation are not taken into account in determining the net
change in account value. The tax equivalent yields of the Tax Free Money Fund
and the NY Tax Free Money Fund are computed by dividing the portion of a Fund's
yield which is tax exempt by one minus a stated income tax rate and adding the
product to that portion, if any, of the Fund's yield that is not tax exempt.

                                       36
<PAGE>
 
The yields are then calculated as follows:
    
Base Period Return       =           Net Change in Account Value
                                     ---------------------------
                                     Beginning Account Value     
                         
Current Yield            =           Base Period Return x 365/7
                         
Effective Yield          =           [(1 + Base Period Return)365/7] - 1
                             
Tax Equivalent Yield     =           Current Yield
                                     -------------
                                     (1 - Tax Rate)     

The following table sets forth various measures of the performance for each of
the Funds for the seven days ended December 31, 1998.


<TABLE>
<CAPTION>     
                             Investment          Investment Tax     Investment NY        Institutional     Institutional
                                Cash               Free Money      Tax Free Money            Cash            Treasury   
                             Management              Fund*             Fund**              Management       Money Fund
                                Fund                                                         Fund        
<S>                          <C>                 <C>                <C>                  <C>               <C>
Current Yield                  4.50%                2.95%               2.75%               4.96%              4.61%
Effective Yield                4.60%                2.99%               2.79%               5.09%              4.71%
Tax Equivalent Yield           4.60%                4.95%               5.27%                N/A                N/A
</TABLE>      

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

*    Assumes a maximum Federal rate of 31%.
**   Assumes a maximum combined Federal, New York State and New York City tax
     rate of 39%

                              FINANCIAL STATEMENTS

The financial statements for the Funds and the Portfolios for the fiscal year
ended December 31, 1998, are incorporated herein by reference to the Funds'
Annual Report dated December 31, 1998.  A copy of the Funds' Annual Report may
be obtained without charge by contacting the respective Fund.

                                       37
<PAGE>
 
    
                                    APPENDIX     

DESCRIPTION OF RATINGS

Description of S&P corporate bond ratings:

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

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

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

Description of Moody's corporate bond ratings:

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

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

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

Description of Fitch IBCA, Inc. ("Fitch") corporate bond ratings:

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

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

                                       38
<PAGE>
 
Description of Duff & Phelps' corporate bond ratings:

AAA--Highest credit quality.  The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury Funds.

AA+, AA, AA--High credit quality.  Protection factors are strong.  Risk is
modest but may vary slightly from time to time because of economic conditions.

Description of S&P's municipal bond ratings:

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

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

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

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

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

         

Description of Moody's municipal bond ratings:

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

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

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

                                       39
<PAGE>
 
Description of S&P municipal note ratings:
    
Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1 or SP-2) to distinguish more clearly the credit quality
of notes as compared to bonds.  Notes rated SP-1 have a very strong or strong
capacity to pay principal and interest.  Those issues determined to possess
overwhelming safety characteristics are given the designation of SP-1+.  Notes
rated SP-2 have a satisfactory capacity to pay principal and interest.     

Description of Moody's municipal note ratings:

Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG).  This
distinction recognizes the differences between short-term credit risk and long-
term risk.  Loans bearing the designation MIG-1/VMIG-1 are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.  Loans bearing the designation MIG-1/VMIG-2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.

Description of S&P commercial paper ratings:

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

Description of Moody's commercial paper ratings:

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

Description of Fitch commercial paper ratings:

F1+--Exceptionally Strong Credit Quality.  Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F1--Very Strong Credit Quality.  Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issue.

Description of Duff & Phelps' commercial paper ratings:

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

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

Description of Thompson Bank Watch Short-Term Ratings:

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

                                       40
<PAGE>
 
T-2--The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".

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

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

Description of Thompson BankWatch Long-Term Ratings:

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

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

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

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

Non-Investment Grade

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

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

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

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

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

D--Default

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

Ratings in the Long-Term Debt categories may include a plus (+) or Minus (-)
designation, which indicates where within the respective category the issue is
placed.

                                       41
<PAGE>
 
             Investment Adviser of the Portfolios and Administrator

                             BANKERS TRUST COMPANY

                                        

                                  Distributor

                             ICC DISTRIBUTORS, INC.

                                        

                          Custodian and Transfer Agent

                             BANKERS TRUST COMPANY

                                        

                            Independent Accountants

                           PRICEWATERHOUSECOOPERS LLP

                                        

                                    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
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.  Neither the Prospectus nor this SAI constitutes an
offer in any state in which, or to any person to whom, such offer may not
lawfully be made.

                              --------------------
    
Cusip #055922108
Cusip #055922306
Cusip #055922207
Cusip #055924104
Cusip #055924203
COMBMMKT400     
<PAGE>
 
    
(4/99)     

         

                                     A-43
<PAGE>
 
         

                                     A-44
<PAGE>
 
   
     
                                             STATEMENT OF ADDITIONAL INFORMATION

                                                                  April 30, 1999

BT Investment Funds

 .  Treasury Money 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 to the Treasury Money Fund (the "Fund").  The Fund is a separate series
of the Trust.

The Fund's investment objective is to seek a high level of current income
consistent with liquidity and the preservation of capital.  The Trust seeks to
achieve the investment objective of the Fund by investing all the investable
assets of the Fund in the Treasury Money Portfolio (the "Portfolio"), a
diversified open-end management investment company having the same investment
objective as the Fund.  The Portfolio is a series of BT Investment Portfolios.

Shares of the Fund are sold by ICC Distributors, Inc. ("ICC Distributors"), the
Trust's distributor (the "Distributor"), to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolio's investment adviser ("Adviser"), and to clients and customers of
other organizations.

The Fund's Prospectus, dated April 30, 1999, provides the basic information
investors should know before investing.  This Statement of Additional
Information ("SAI"), 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 Fund's Prospectus. You may request a copy
of the Prospectus or a paper copy of this SAI, if you have received it
electronically, free of charge by calling the Trust at the telephone number
listed below or by contacting any Bankers Trust service agent ("Service Agent").
This SAI is not an offer of any Fund for which an investor has not received a
Prospectus.  Capitalized terms not otherwise defined in this SAI have the
meanings accorded to them in the Fund's Prospectus.  The financial statements
for the Fund and the Portfolio for the fiscal year ended December 31, 1998, are
incorporated herein by reference to the Annual Report to shareholders for the
Fund and Portfolio dated December 31, 1998.  A copy of the Fund's and the
Portfolio's Annual Report may be obtained without charge by calling the Fund at
the telephone number listed below.

             Investment Adviser of the Portfolio and Administrator
                             BANKERS TRUST COMPANY

                                  Distributor
                            ICC DISTRIBUTORS, INC.

Two Portland Square         Portland, Maine  04101                1-800-730-1313
     
<PAGE>
 
<TABLE>    
<CAPTION>
                               TABLE OF CONTENTS

                                                                         PAGE
                                                                         ----
<S>                                                                      <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS........................   1
   Investment Objective................................................   1
   Investment Policies.................................................   1
   Additional Risk Factors.............................................   2
   Investment Restrictions.............................................   3
   Portfolio Turnover..................................................   5
   Portfolio Transactions..............................................   5
NET ASSET VALUE........................................................   6
PURCHASE AND REDEMPTION INFORMATION....................................   7
   Purchase of Shares..................................................   7
   Redemption of Shares................................................   8
MANAGEMENT OF THE TRUST AND PORTFOLIO..................................   9
   Trustees of the Trust...............................................   9
   Trustees of the Portfolio...........................................   9
   Officers of the Trust and the Portfolio.............................  10
   Investment Adviser..................................................  11
   Administrator.......................................................  13
   Distributor.........................................................  13
   Service Agent.......................................................  13
   Custodian and Transfer Agent........................................  14
   Expenses............................................................  14
   Use of Name.........................................................  14
   Banking Regulatory Matters..........................................  14
   Counsel and Independent Accountants.................................  15
ORGANIZATION OF THE TRUST..............................................  15
DIVIDENDS, DISTRIBUTIONS AND TAXES.....................................  16
PERFORMANCE INFORMATION................................................  17
FINANCIAL STATEMENTS...................................................  18
APPENDIX...............................................................  19
</TABLE>     

                                       i
<PAGE>
 
                INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

                             Investment Objective

The Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in a portfolio of direct obligations
of the U.S. Treasury and repurchase agreements collateralized by such
obligations.  There can, of course, be no assurance that the Fund will achieve
its investment objective.

                              Investment Policies

Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
of and techniques employed by the Portfolio.
    
U.S. Government Obligations.  The Portfolio may invest in direct obligations
issued by the U.S. Treasury including Treasury bills, notes and bonds ("U.S.
Government Obligations").  Such U.S. Government Obligations are supported by the
"full faith and credit" of the U.S. government.  While U.S. Government
Obligations are guaranteed by the U.S. government as to the timely payment of
principal and interest, the market value of such obligations is not guaranteed
and may rise and fall in response to changes in interest rates.  The shares of
the Fund and the interests in the Portfolio are not guaranteed or insured by the
U.S. government.

Lending of Portfolio Securities.  The Portfolio has the authority to lend up to
30% of the value of its portfolio securities to brokers, dealers and other
financial organizations. By lending its securities, the Portfolio may increase
its income by continuing to receive payments in respect of dividends and
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 a fee paid
by the borrower when irrevocable letters of credit and U.S. Government
Obligations are used as collateral.  The Portfolio will adhere to the following
conditions whenever its securities are loaned:  (i) the Portfolio must receive
at least 100% collateral 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
substitute payments in respect of all dividends, interest or other distributions
on the loaned securities; and (v) 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 retain the right to
terminate the loan and recall and vote the securities.  Cash collateral may be
invested in a money market fund managed by Bankers Trust (or its affiliates) and
Bankers Trust may serve as the Portfolio's lending agent and may share in
revenue received from securities lending transactions as compensation for this
service.

Repurchase Agreements.  The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Portfolio's Board of Trustees.  Under the terms of a typical repurchase
agreement, the Portfolio would acquire U.S. Government Obligations regardless of
maturity any remaining maturity for a relatively short period (usually not more
than one week), subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the obligation at an agreed price and time, thereby
determining the yield during the Portfolio's holding period.  This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Portfolio's holding period.  The value of the underlying securities
will be at least equal at all times to the total amount of the repurchase
obligations, including interest.  The Portfolio bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
and the Portfolio is delayed in or prevented from exercising its rights to
dispose of the collateralized securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Portfolio seeks to assert these rights.  Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, reviews the
creditworthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements and monitors on an ongoing basis the value of the
securities subject to repurchase agreements to ensure that it is maintained at
the required level.  

Reverse Repurchase Agreements.  The Portfolio may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement").  At the time the Portfolio enters into a reverse repurchase
agreement it segregates cash, U.S. Government Obligations or high-grade debt
obligations having a value equal to the repurchase price, including accrued
interest.  Reverse repurchase agreements involve the risk that the market value
of the securities sold by the Portfolio may decline below the repurchase price
of those securities.  Reverse repurchase agreements are considered to be
borrowings by the Portfolio.       

                                       1
<PAGE>
 
    
When-Issued and Delayed-Delivery Securities.  To secure prices deemed
advantageous at a particular time, the Portfolio may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction.  The Portfolio will enter into when-issued or
delayed-delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Portfolio
may include securities purchased on a "when, as, and if issued" basis under
which the issuance of the securities depends on the occurrence of a subsequent
event.

Securities purchased on a when-issued or delayed-delivery basis may expose the
Portfolio to risk because the securities may experience fluctuations in value
prior to their actual delivery. The Portfolio does not accrue income with
respect to a when-issued or delayed-delivery security prior to its stated
delivery date. Purchasing securities on a when-issued or delayed-delivery basis
can involve the additional risk that the yield available in the market when the
delivery takes place may be higher than that obtained in the transaction itself.
Upon purchasing a security on a when-issued or delayed-delivery basis, the
Portfolio will segregate cash or liquid securities in an amount at least equal
to the when-issued or delayed-delivery commitment.

Quality and Maturity of the Portfolio's Securities. The Portfolio will maintain
a dollar-weighted average maturity of 90 days or less.  All securities in which
the Portfolio invests will have, or be deemed to have, remaining maturities of
397 days or less on the date of their purchase and will be denominated in U.S.
dollars.  Bankers Trust, acting under the supervision of and procedures adopted
by the Board of Trustees of the Portfolio, will also determine that all
securities purchased by the Portfolio present minimal credit risks.  Bankers
Trust will cause the Portfolio to dispose of any security as soon as practicable
if the security is no longer of the requisite quality, unless such action would
not be in the best interest of the Portfolio.  High-quality, short-term
instruments may result in a lower yield than instruments with a lower quality or
longer term.  
    
                            Additional Risk Factors

In addition to the risks discussed above, the Portfolio's investments may be
subject to the following risk factors:
   
    
   
Special Information Concerning Master-Feeder Fund Structure.  Unlike other open-
end management investment companies (mutual funds) which directly acquire and
manage their own portfolio securities, the Fund seeks to achieve its investment
objective by investing all of its assets in the Portfolio, a separate registered
investment company with the same investment objective as the Fund.  Therefore,
an investor's interest in the Portfolio's securities is indirect.  In addition
to selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds, investment vehicles or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses.  However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses.  Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from Bankers Trust at 1-800-730-1313.       

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio.  For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors).  Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk.  Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio.  Except as permitted by the SEC, whenever the Trust is
requested to vote on matters pertaining to the Portfolio, the Trust will hold a
meeting of shareholders of the Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders.  Fund shareholders who do
not vote will not affect the Trust's votes at the Portfolio meeting.  The
percentage of the Trust's votes representing the Fund's shareholders not voting
will be voted by the Trustees or officers of the Trust in the same proportion as
the Fund shareholders who do, in fact, vote.
    
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio).  If
securities are distributed, the Fund could incur brokerage, tax or other charges
in converting the securities to cash.  In addition, the distribution in kind may
result in a less      

                                       2
<PAGE>
 
diversified portfolio of investments or adversely affect the liquidity of the
Fund. Notwithstanding the above, there are other means for meeting redemption
requests, such as borrowing.

The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so.  Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described herein with respect to the Portfolio.

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to, but without the approval of, the Fund's shareholders.  If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs.  The investment objective of the Portfolio is also not a
fundamental policy.  Shareholders of the Fund will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
Portfolio.
    
Rating Services.  The ratings of Moody's and Standard & Poor's Ratings Group
("S&P") 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, the
Adviser also makes its own evaluation of these securities, subject to review by
the Board of Trustees.  After purchase by the 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 the Portfolio to eliminate the
obligation from its portfolio, but the Adviser will consider such an event in
its determination of whether the Portfolio should continue to hold the
obligation.  A description of the ratings categories of Moody's and S&P is set
forth in the Appendix to this SAI.
    
   
    
                            Investment Restrictions
   
Fundamental Policies.  The following investment restrictions have been adopted
- --------------------                                                          
by the Trust with respect to the Fund and by the Portfolio as fundamental
policies.  Under the Investment Company Act of 1940 (the "1940 Act"), a
"fundamental" policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund or Portfolio, respectively, which is
defined in the 1940 Act as the lesser of (a) 67% or more of the shares present
at a shareholder meeting if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or (b) more than 50% of the
outstanding shares.  Whenever the Fund is requested to vote on a change in the
investment restrictions of the Portfolio, the Trust will hold a meeting of Fund
shareholders and will cast its votes as instructed by the shareholders.  Fund
shareholders who do not vote will not affect the Trust's votes at the Portfolio
meeting.  The percentage of the Trust's votes representing Fund shareholders not
voting will be voted by the Trustees of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote.

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

   2. Pledge, hypothecate, mortgage or otherwise encumber more than 5% of the
      total assets of the Fund or the Portfolio, as the case may be, and only to
      secure borrowings for temporary or emergency purposes.
    
   3. Invest more than 5% of the total assets of the Fund or the Portfolio, as
      the case may be, in any one issuer (other than U.S. Government
      Obligations) or purchase more than 10% of any class of securities of any
      one issuer; provided, however, that up to 25% of the assets of the Fund
      (and the Portfolio) may be invested without regard to this restriction.

   4. Invest more than 25% of the total assets of the Fund or the Portfolio, as
      the case may be, in the securities of issuers in any single industry;
      provided that this limitation shall not apply to the purchase of direct
      obligations issued by the U.S. Treasury; provided, however, that nothing
                                               -----------------   
      in this investment restriction shall prevent the Trust from investing all
      or part of the Fund's assets in an open-end management investment company
      with the same investment objectives as the Fund.       

                                       3
<PAGE>
 
   5. Make short sales of securities, maintain a short position or purchase any
      securities on margin, except for such short-term credits as are necessary
      for the clearance of transactions.
    
   6. Underwrite the securities issued by others (except to the extent the Fund
      or Portfolio may be deemed to be an underwriter under the Federal
      securities laws in connection with the disposition of its portfolio
      securities) or knowingly purchase restricted securities; provided, 
                                                               ---------
      however, that nothing in this investment restriction shall prevent the
      -------
      Trust from investing all or part of the Fund's assets in an open-end
      management investment company with the same investment objectives as the
      Fund.       

   7. Purchase or sell real estate, real estate investment trust securities,
      commodities or commodity contracts, or oil, gas or mineral interests, but
      this shall not prevent the Fund or the Portfolio from investing in
      obligations secured by real estate or interests therein.
    
   8. Make loans to others, except through the purchase of qualified debt
      obligations, the entry into repurchase agreements and the lending of
      portfolio securities.

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

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

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

  12. Issue any senior securities, except insofar as it may be deemed to have
      issued a senior security by reason of (i) entering into a repurchase
      agreement or (ii) borrowing in accordance with terms described in the
      Prospectus and this SAI.

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

  14. Invest in warrants, except that the Fund or the Portfolio may invest in
      warrants if, as a result, the investments (valued in each case at the
      lower of cost or market) would not exceed 5% of the value of the net
      assets of the Fund or the Portfolio, as the case may be, of which not more
      than 2% of the net assets of the Fund or the Portfolio, as the case may
      be, may be invested in warrants not listed on a recognized domestic stock
      exchange. Warrants acquired by the Fund or the Portfolio as part of a unit
      or attached to securities at the time of acquisition are not subject to
      this limitation.
    
  15. With respect to 75% of the Fund's (Portfolio's) total assets, invest more
      than 5% of its total assets in the securities of any one issuer (excluding
      cash and cash-equivalents, U.S. government securities and the securities
      of other investment companies) or own more than 10% of the voting
      securities of any issuer.  

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

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

                                       4
<PAGE>
 
  (ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the
       Portfolio's (Fund's) total assets (taken at market value), provided that
       collateral arrangements with respect to options and futures, including
       deposits of initial deposit and variation margin, are not considered a
       pledge of assets for purposes of this restriction;

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

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

   (v) invest for the purpose of exercising control or management;
    
  (vi) purchase securities issued by any investment company except by purchase
       in the open market where no commission or profit to a sponsor or dealer
       results from such purchase other than the customary broker's commission,
       or except when such purchase, though not made in the open market, is part
       of a plan of merger or consolidation; provided, however, that securities
       of any investment company will not be purchased for the Portfolio (Fund)
       if such purchase at the time thereof would cause (a) more than 10% of the
       Portfolio's (Fund's) total assets (taken at the greater of cost or market
       value) to be invested in the securities of such issuers; (b) more than 5%
       of the Portfolio's (Fund's) total assets (taken at the greater of cost or
       market value) to be invested in any one investment company; or (c) more
       than 3% of the outstanding voting securities of any such issuer to be
       held for the Portfolio (Fund); and, provided further, that the Portfolio
                                           ----------------
       shall not invest in any other open-end investment company unless the
       Portfolio (Fund) (1) waives the investment advisory fee with respect to
       assets invested in other open-end investment companies and (2) incurs no
       sales charge in connection with the investment (as an operating policy,
       the Portfolio will not invest in another open-end registered investment
       company);

 (vii) make short sales of securities or maintain a short position, unless at
       all times when a short position is open it owns an equal amount of such
       securities or securities convertible into or exchangeable, without
       payment of any further consideration, for securities of the same issue
       and equal in amount to, the securities sold short, and unless not more
       than 10% of the Portfolio's (Fund's) net assets (taken at market value)
       is represented by such securities, or securities convertible into or
       exchangeable for such securities, at any one time (the Portfolio (Fund)
       has no current intention to engage in short selling);       

There will be no violation of any investment restrictions or policies (except
with respect to fundamental investment restriction (1) above) if that
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in net or
total assets, or in the change of securities rating of the investment, or any
other later change.
    
The Fund will comply with the state securities laws and regulations of all
states in which it is registered.  The Portfolio will comply with the permitted
investments and investment limitations in the securities laws and regulations of
all states in which the Fund, or any other registered investment company
investing in the Portfolio, is registered.

                              Portfolio Turnover

The Portfolio may attempt to increase yields by trading to take advantage of
short-term market variations, which results in higher portfolio turnover.  This
policy does not result in higher brokerage commissions to the Portfolio,
however, as the purchases and sales of portfolio securities are usually effected
as principal transactions.  The Portfolio's turnover rate is not expected to
have a material effect on its income and has been and is expected to be zero for
regulatory reporting purposes.
    
                            Portfolio Transactions
   
Decisions to buy and sell securities and other financial instruments for the
Portfolio are made by Bankers Trust, which also is responsible for placing these
transactions, subject to the overall review of the Board of Trustees.  Although
investment requirements for the Portfolio are reviewed independently from those
of the other accounts managed by Bankers Trust, investments of the type the
Portfolio may make may also be made by these other      

                                       5
<PAGE>
 
    
accounts. When the Portfolio and one or more other accounts managed by Bankers
Trust are prepared to invest in, or desire to dispose of, the same security or
other financial instrument, available investments or opportunities for sales
will be allocated in a manner believed by Bankers Trust to be equitable to each.
In some cases, this procedure may affect adversely the price paid or received by
the Portfolio or the size of the position obtained or disposed of by the
Portfolio.

Purchases and sales of securities on behalf of the Portfolio usually are
principal transactions.  These securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities.  The cost
of securities purchased from underwriters includes an underwriting commission or
concession and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down.  U.S. Government Obligations
are generally purchased from underwriters or dealers, although certain newly
issued U.S. Government Obligations may be purchased directly from the U.S.
Treasury or from the issuing agency or instrumentality.

Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere and principal transactions are not entered into with persons
affiliated with the Portfolio except pursuant to exemptive rules or orders
adopted by the Securities and Exchange Commission.  Under rules adopted by the
SEC, broker-dealers may not execute transactions on the floor of any national
securities exchange for the accounts of affiliated persons, but may effect
transactions by transmitting orders for execution.

In selecting brokers or dealers to execute portfolio transactions on behalf of
the Portfolio, Bankers Trust seeks the best overall terms available.  In
assessing the best overall terms available for any transaction, Bankers Trust
will consider the factors it deems relevant, including the breadth of the market
in the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis.  In
addition, Bankers Trust is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage, but not research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Portfolio and/or other accounts over which Bankers Trust or its affiliates
exercise investment discretion.  Bankers Trust's fees under its agreements with
the Portfolio are not reduced by reason of its receiving brokerage services.
    
                                NET ASSET VALUE
   
The net asset value ("NAV") per share is calculated on each day on which the
Fund is open (each such day being a "Valuation Day").  The Fund is currently
open on each day, Monday through Friday, except (a) January 1st, Martin Luther
King, Jr.'s Birthday (the third Monday in January), Presidents' Day (the third
Monday in February), Good Friday, Memorial Day (the last Monday in May), July
4th, Labor Day (the first Monday in September), Columbus Day (the second Monday
in October), Veteran's Day (November 11th), Thanksgiving Day (the last Thursday
in November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar-determined holidays falls on a Saturday or
Sunday, respectively.

The NAV per share of the Fund is calculated twice on each Valuation Day as of
12:00 noon, Eastern time, and as of the close of regular trading on the NYSE,
which is currently 4:00 p.m., Eastern time or in the event that the NYSE closes
early, at the time of such early closing (the "Valuation Time"). If the markets
for the Fund's primary investments close early, the Fund will cease taking
purchase orders at that time. The NAV per share 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 shares
outstanding.  The Fund's NAV per share will normally be $1.00.

The valuation of the Portfolio's securities is based on their amortized cost,
which does not take into account unrealized capital gains or losses.  Amortized
cost valuation involves initially valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, generally without regard to the impact of fluctuating interest rates on
the market value of the instrument.  Although this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Portfolio would receive if
it sold the instrument.

The Portfolio's use of the amortized cost method of valuing its securities is
permitted by a rule adopted by the SEC.  The Portfolio will also maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of two years or less and invest only in
securities determined by or under the supervision of the Board of Trustees to be
of high quality with minimal credit risks.       

                                       6
<PAGE>
 
    
Pursuant to the rule, the Board of Trustees of the Portfolio also has
established procedures designed to allow investors in the Portfolio, such as the
Trust, to stabilize, to the extent reasonably possible, the investors' price per
share as computed for the purpose of sales and redemptions at $1.00.  These
procedures include review of the Portfolio's holdings by the Portfolio's Board
of Trustees, at such intervals as it deems appropriate, to determine whether the
value of the Portfolio's assets calculated by using available market quotations
or market equivalents deviates from such valuation based on amortized cost.

The rule also provides that the extent of any deviation between the value of the
Portfolio's assets based on available market quotations or market equivalents
and such valuation based on amortized cost must be examined by the Portfolio's
Board of Trustees.  In the event the Portfolio's Board of Trustees determines
that a deviation exists that may result in material dilution or other unfair
results to investors or existing shareholders, pursuant to the rule, the
Portfolio's Board of Trustees must cause the Portfolio to take such corrective
action as such Board of Trustees regards as necessary and appropriate,
including:  selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends
or paying distributions from capital or capital gains; redeeming shares in kind;
or valuing the Portfolio's assets by using available market quotations.

Each investor in the Portfolio, including the 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 of the close of the
following business day.
    
                      PURCHASE AND REDEMPTION INFORMATION

                              Purchase of Shares

The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day.  Shares may
be available through Investment Professionals, such as broker/dealers and
investment advisers (including Service Agents).

Purchase orders for shares (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.  If the purchase order is received by the Service Agent and
transmitted to the Transfer Agent after 12:00 noon (Eastern time) and prior to
the close of the NYSE, the shareholder will receive the dividend declared on the
following day even if Bankers Trust, as the Trust's custodian (the "Custodian"),
receives federal funds on that day.  If the purchase order is received prior to
12:00 noon, the shareholder will receive that Valuation Day's dividend.  The
Trust and Transfer Agent reserve the right to reject any purchase order.  If the
market for the primary investments in the Fund closes early, the Fund will cease
taking purchase orders at that time.

Another mutual fund investing in the Portfolio may accept purchase orders up
until a time later than 12:00 noon, Eastern time. Such orders, when transmitted
to and executed by the Portfolio, may have an impact on the Fund's performance.

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 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 

                                       7
<PAGE>
 
Trust to settle transactions with the Fund without incurring the additional
costs or delays associated with the wiring of federal funds.

If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
shares to the Transfer Agent before the applicable Valuation time.

Certificates for shares will not be issued.  Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.
         
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.
         
                             Redemption of 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 12:00 noon (Eastern time) on a
Valuation Day will not receive the dividend declared on the day of redemption;
the redemption proceeds normally will be will be delivered to the shareholder's
account with the Service Agent on that day.  Redemption requests received by the
Service Agent and transmitted to the Transfer Agent after 12:00 noon (Eastern
time) on a Valuation Day and prior to the close of the NYSE will receive the
dividend declared on the day of the redemption; the redemption proceeds normally
will be delivered to the shareholder's account with the Service Agent 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 Service Agent does not do so, it may be liable
for any losses due to unauthorized or fraudulent instructions.  Such procedures
may include, among others, requiring some form of personal identification prior
to acting upon instructions received by telephone, providing written
confirmation of such transactions and/or tape recording of telephone
instructions.

Redemption orders are processed without charge by the Trust. The 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 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.
         
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:

 . Your account registration has changed within the last 30 days,

 . The check is being mailed to a different address than the one on your account
  (record address),

 . The check is being made payable to someone other than the account owner,

 . The redemption proceeds are being transferred to a BT account with a different
  registration, or

 . You wish to have redemption proceeds wired to a non-predesignated bank
  account.

A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.

                                       8
<PAGE>
 
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.
         
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 the Fund under a number of several tax-savings or
tax-deferred plans.  Minimums may differ from those listed elsewhere in this
SAI.       
         
Redemptions
    
The Trust may suspend the right of redemption or postpone the date of payment
for shares during any period when: (a) trading in the Fund's primary markets is
restricted by applicable rules and regulations of the SEC; (b) the Fund's
primary market is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC.

                     MANAGEMENT OF THE TRUST AND PORTFOLIO
     
The Trust and the Portfolio are governed by a Board of Trustees which is
responsible for protecting the interests of investors.  By virtue of the
responsibilities assumed by Bankers Trust, the administrator of the Trust and
the Portfolio, neither the Trust nor the Portfolio require employees other than
its executive officers.  None of the executive officers of the Trust or the
Portfolio devotes full time to the affairs of the Trust or the Portfolio.

A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that some of the same individuals are Trustees of
the Trust and the Portfolio, up to and including creating separate boards of
trustees.
    
Each Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the Fund or Portfolio
they represent.  In addition, the Trustees review contractual arrangements with
companies that provide services to the Fund/Portfolio and review the Fund's
performance.

The Trustees and officers of the Trust and the Portfolio, their birthdates, and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period.
    
                             Trustees of the Trust
   
S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director, Coutts
(U.S.A.) International (an Edge Act company); Zweig Series Trust; Vinters
International Company Inc.; Coutts Trust Holdings Ltd; Coutts Group; General
Partner of Pemco (an investment company registered under the 1940 Act); formerly
Partner of KPMG Peat Marwick. His address is 5070 North Ocean Drive, Singer
Island, Florida 33404.

KELVIN J. LANCASTER (birthdate: December 10, 1924) -- Trustee; John Bates Clark
Professor of Economics, Columbia University; Distinguished Fellow, American
Economics Association; Fellow, American Academy of Arts and Sciences; Fellow,
Econometric Society; Former Chairman, Columbia University Department of
Economics; Former Director, National Bureau of Economic Research.  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.
    
                           Trustees of the Portfolio

CHARLES P. BIGGAR (birthdate: October 13, 1930) -- Trustee; Retired; formerly
Vice President of International Business Machines ("IBM") 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 -- Trustee.

PHILIP SAUNDERS, JR.-- Trustee.       

                                       9
<PAGE>
 
    
                    Officers of the Trust and the Portfolio

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

JOHN Y. KEFFER (birthdate:  July 14, 1942) -- President and Chief Executive
Officer; President, Forum Financial Group, LLC.; President, ICC Distributors,
Inc. Mr. Keffer also holds executive positions with affiliates of Forum
Financial Group, LLC. His address is ICC Distributors, Inc., Two Portland
Square, Portland, Maine 04101.

JOSEPH A. FINELLI (birthdate:  January 24, 1957) -- Treasurer; Vice President,
BT Alex. Brown Incorporated and Vice President, Investment Company Capital Corp.
(registered investment adviser), September 1995 to present; formerly, Vice
President and Treasurer, The Delaware Group of Funds (registered investment
companies) and Vice President, Delaware Management Company Inc. (investments),
1980 to August 1995.  His address is One South Street, Baltimore, Maryland
21202.

DANIEL O. HIRSCH (birthdate:  March 27, 1954) -- Secretary; Principal, BT Alex.
Brown since July 1998; Assistant General Counsel in the Office of the General
Counsel at the United States Securities and Exchange Commission from 1993 to
1998. His address is One South Street, Baltimore, Maryland 21202.

Messrs. Keffer, Finelli and Hirsch also hold similar positions for other
investment companies for which ICC Distributors, 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 Portfolio.  No director, officer or employee of ICC
Distributors or any of its affiliates will receive any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust or the
Portfolio.       

                                       10
<PAGE>
 
                          Trustee Compensation Table

<TABLE>    
<CAPTION>
                          Aggregate       Aggregate     Total Compensation
Name of Person,          Compensation   Compensation    from Fund Complex
Position                 from Trust*+  from Portfolio+  Paid to Trustees**
- -----------------------  ------------  ---------------  ------------------
<S>                      <C>           <C>              <C>
 
Kelvin Lancaster,
Trustee of Trust              $24,797              N/A             $36,250
 
Philip Saunders, Jr.,
Trustee of Trust and
Portfolio                     $14,582           $  977             $36,250
 
Charles Biggar,
Trustee of Portfolio              N/A           $1,148             $36,250
 
S. Leland Dill,
Trustee of Trust
and Portfolio                 $14,485           $  971             $36,250
</TABLE>     
    
*  The information provided is for the BT Investment Funds, which comprises 17
   funds, for the year ended December 31, 1998.

+  Information provided is for the year ended December 31, 1998.

** Aggregated information is furnished for the BT Family of Funds which consists
   of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid
   Mutual 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, Intermediate Tax Free
   Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio, and
   Capital Appreciation Portfolio. The compensation provided is for the calendar
   year ended December 31, 1998.

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

As of March 31, 1999, the Trustees and officers of the Trust and the Portfolio
owned in the aggregate less than 1% of the shares of the Fund or of the Trust
(all series taken together).

As of March 31, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Private Bank Sweep, Custody, New York, NY
(17.923%); Private Bank Sweep, Investment Advisory, New York, NY (13.329%);
AB9401, American Savings, Stockton, CA (10.333%); Vendee 1992-1/Master Reserve,
c/o Bankers Trust Company, Irving, CA (6.091%).
    
                              Investment Adviser

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
assets of the Fund in the Portfolio.  The Portfolio has retained the services of
Bankers Trust as Adviser.
    
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street, (One Bankers Trust Plaza), 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 market.  As of December 31, 1998, Bankers Trust Corporation was
the eighth largest bank holding company in the United States with total assets
of over $156 billion. 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 over $338 billion in assets under
management globally.       

                                       11
<PAGE>
 
    
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions.  In the past, these
clients have been serviced through separate account and commingled fund
structures.  Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise--once available to only the largest institutions
in the U.S.--to individual investors.  Bankers Trust's officers have had
extensive experience in managing investment portfolios having objectives similar
to those of the Portfolio.       

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio.  Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser.  All
orders for investment transactions on behalf of the Portfolio are placed by the
Adviser with broker-dealers and other financial intermediaries that it selects,
including those affiliated with Bankers Trust.  A Bankers Trust affiliate will
be used in connection with a purchase or sale of an investment for the Portfolio
only if Bankers Trust believes that the affiliate's charge for the transaction
does not exceed usual and customary levels.  The Portfolio will not invest in
obligations for which Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank.  The Portfolio may, however, invest in the
obligations of correspondents and customers of Bankers Trust.
             
Under the terms of an investment advisory agreement between the Portfolio and
Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio
subject to the supervision and direction of the Board of Trustees.  Bankers
Trust will: (i) act in strict conformity with the Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisors Act of 1940, as the same may
from time to time be amended; (ii) manage the Portfolio in accordance with the
Portfolio's investment objectives, restrictions and policies as stated in the
Prospectus and herein; (iii) make investment decisions for the Portfolio; and
(iv) place purchase and sale orders for securities and other financial
instruments on behalf of the Portfolio.

Bankers Trust bears all expenses in connection with the performance of services
under the Advisory Agreement.  The Trust and the 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, ICC Distributors or any
of their affiliates; SEC fees and state Blue Sky qualification fees;
administrative and services fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing Prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of
shareholders, officers and Trustees of the Trust or the Portfolio; and any
extraordinary expenses.

Under the Advisory Agreement, Bankers Trust receives a fee from the Portfolio,
computed daily and paid monthly, at the annual rate of 0.15% of the average
daily net assets of the Portfolio.  For the fiscal years ended December 31,
1998, 1997, and 1996, Bankers Trust earned $3,666,082, $3,067,422 and
$2,787,544, respectively, as compensation for investment advisory services
provided to the Portfolio.  During the same periods, Bankers Trust reimbursed
$52,678, $60,612 and $60,530, 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
Portfolio, 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 Portfolio 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
Portfolio, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the 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.       

                                       12
<PAGE>
 
                                 Administrator

Under its Administration and Services Agreement with the Trust, the Adviser
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust.  The Administration and Services Agreement provides for the Trust to pay
the Adviser a fee, computed daily and paid monthly, equal on an annual basis to
0.55% of the average daily net assets of the Fund.

Under Administration and Services Agreement with the Portfolio, the Adviser
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio.  The Administration and Services Agreement provide
for the Portfolio to pay the Adviser a fee, computed daily and paid monthly,
equal on an annual basis to 0.05% of the Portfolio's average daily net assets.
Under the Administration and Services Agreement, the Adviser may delegate one or
more of its responsibilities to others, including affiliates of ICC
Distributors, at the Adviser's expense.
    
Under the Administration and Services Agreements, Bankers Trust is obligated on
a continuous basis to provide such administrative services as the Board of
Trustees of the Trust and the Portfolio reasonably deems necessary for the
proper administration of the Trust and the Portfolio.  Bankers Trust will
generally assist in all aspects of the Fund's and Portfolio's operations; supply
and maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents of the Trust or the
Portfolio), internal auditing, executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or investors;
prepare and file tax returns; supply financial information and supporting data
for reports to and filings with the SEC and various state Blue Sky authorities;
supply supporting documentation for meetings of the Board of Trustees; provide
monitoring reports and assistance regarding compliance with the Trust's and the
Portfolio's Declaration of Trust, by-laws, investment objectives and policies
and with Federal and state securities laws; arrange for appropriate insurance
coverage; calculate the net asset value, net income and realized capital gains
or losses of the Trust; and negotiate arrangements with, and supervise and
coordinate the activities of, agents and others retained to supply services.
    
   
    
   
Bankers Trust has agreed that if in any fiscal year the aggregate expenses of
any Fund and the Portfolio (including fees pursuant to the Advisory Agreement,
but excluding interest, taxes, brokerage and, if permitted by the relevant state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, Bankers Trust will reimburse the
Fund for the excess expense to the extent required by state law.  As of the date
of this SAI, the most restrictive annual expense limitation applicable to any
Fund is 2.5% of the Fund's first $30 million of average annual net assets, 2.0%
of the next $70 million of average annual net assets and 1.5% of the remaining
average annual net assets.

For the fiscal years ended December 31, 1998, 1997, and 1996, Bankers Trust
earned compensation of $2,129,609, $2,204,379 and $3,152,044, respectively, for
administrative and other services provided to the Fund and reimbursed $75,550,
$51,565 and $56,587, respectively, to the Fund to cover expenses.

For the fiscal years ended December 31, 1998, 1997, and 1996, Bankers Trust
earned compensation of $1,222,027, $1,022,474 and $929,181, respectively, for
administrative and other services provided to the Portfolio.
    
                                  Distributor

ICC Distributors is the principal Distributor for shares of the Fund.  ICC
Distributors is a registered broker/dealer and is unaffiliated with Bankers
Trust.  The principal business address of ICC Distributors is Two Portland
Square, Portland, Maine 04101.  In addition to ICC Distributors's duties as
Distributor, ICC Distributors and its affiliates may, in their discretion,
perform additional functions in connection with transactions in the shares of
the Fund.

                                 Service Agent

All shareholders must be represented by a Service Agent.  The Adviser acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services.  The service fees of any other Service Agents, including broker-
dealers, will be paid by the Adviser from its fees.  The services provided by a
Service Agent may include establishing and maintaining shareholder accounts,
processing purchase and redemption transactions, performing shareholder sub-
accounting, answering client inquiries regarding the Trust, investing client
cash account balances automatically 

                                       13
<PAGE>
 
in Fund shares and processing redemption transactions at the request of clients,
assisting clients in changing dividend options, account designations and
addresses, providing periodic statements showing the client's account balance
and integrating these statements with those of other transactions and balances
in the client's other accounts serviced by the Service Agent, transmitting proxy
statements, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting,
tabulating and forwarding to the Trust executed proxies, arranging for bank
wires and obtaining such other information and performing such other services as
the Administrator or the Service Agent's clients may reasonably request and
agree upon with the Service Agent. Service Agents may separately charge their
clients additional fees only to cover provision of additional or more
comprehensive services not already provided under the Administration and
Services Agreement with the Adviser, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker or
agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them directly.

                         Custodian and Transfer Agent
   
Bankers Trust, 130 Liberty Street, (One Bankers Trust Plaza), New York, New York
10006, serves as custodian and transfer agent for the Trust and as custodian for
the Portfolio pursuant to the Administration and Services Agreements discussed
above.  As custodian, Bankers Trust holds the Fund's and the Portfolio's assets.
For such services, Bankers Trust receives monthly fees from the Fund and
Portfolio, which are included in the administrative services fees discussed
above.  As transfer agent for the Trust, Bankers Trust maintains the shareholder
account records for the Fund, handles certain communications between
shareholders and the Trust and causes to be distributed any dividends and
distributions payable by the Trust.  Bankers Trust is also reimbursed by the
Fund for its out-of-pocket expenses.  Bankers Trust will comply with the self-
custodian provisions of Rule 17f-2 under the 1940 Act.       

                                   Expenses

The Fund bears its own expenses.  Operating expenses for the Fund generally
consist of all costs not specifically borne by the Adviser or ICC Distributors,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
The Portfolio bears its own expenses.  Operating expenses for the Portfolio
generally consist of all costs not specifically borne by the Adviser or ICC
Distributors, including investment advisory and administration and service fees,
fees for necessary professional services, amortization of organizational
expenses, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.

                                  Use of Name

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

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 Portfolio contemplated by the Advisory
Agreement and other activities for the Trust and the Portfolio described in the
Prospectus and this SAI without violation of the Glass-Steagall Act or other
applicable banking laws or regulations.  However, counsel has pointed out that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and future
statutes and regulations, might prevent Bankers Trust from continuing to perform
those services for the Trust or the Portfolio.  If the circumstances described
above should change, the Trust's Board of Trustees would review the Trust's
relationship with Bankers Trust and consider taking all actions necessary in the
circumstances.       

                                       14
<PAGE>
 
                      Counsel and Independent Accountants
    
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust and from time to time provides certain legal
services to Bankers Trust.  PricewaterhouseCoopers LLP, 250 W. Pratt Street,
Baltimore, Maryland 21201 has been selected as Independent Accountants for the
Trust.  
    
                           ORGANIZATION OF THE TRUST

The Trust was organized on July 21, 1986 under the laws of the Commonwealth of
Massachusetts.  The Fund is a separate series of the Trust.  The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses and statements of additional information.  No series of shares has
any preference over any other series.
   
The Trust is an entity commonly known as a "Massachusetts business trust."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust.  However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee.  The Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust.  Thus, the risk of shareholders incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was 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 Portfolio, in which all the assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York.  The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio.  However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio.  In addition, whenever the Trust is requested to vote on matters
pertaining to the fundamental policies of the Portfolio, the Trust will hold a
meeting of the Fund's shareholders and will cast its vote as instructed by the
Fund's shareholders.

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.

The Trust is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote.  Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees without a meeting.  Upon liquidation of
the Fund, shareholders would be entitled to share pro rata in the net assets of
the Fund available for distribution to shareholders.
    
Whenever the Trust is requested to vote on a matter pertaining to the Portfolio,
the Trust will vote its shares without a meeting of shareholders of the Fund if
the proposal is one, if which made with respect to the Fund, would not require
the vote of shareholders of the Fund as long as such action is permissible under
applicable statutory and regulatory requirements.  For all other matters
requiring a vote, the Trust will hold a meeting of shareholders of the Fund and,
at the meeting of investors in the Portfolio, the Trust will cast all of its
votes in the same proportion as the votes all its shares at the Portfolio
meeting, other investors with a greater pro rata ownership of the Portfolio
could have effective voting control of the operations of the Portfolio.      

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

                                       15
<PAGE>
 
    
As of March 31, 1999, no shareholders of record owned 25% or more of the voting
securities of the Fund, and, therefore, are not deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of its
shareholders.
    
                      DIVIDENDS, DISTRIBUTIONS AND TAXES
   
The following is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute for
careful tax planning.  Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations.

The Fund is designed to provide investors with current income.  The Fund is not
intended to constitute a balanced investment program and is not designed for
investors seeking capital gains or maximum income irrespective of fluctuations
in principal.

The Fund intends to continue to qualify as a separate regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code").
Provided that the Fund is a regulated investment company, the Fund will not be
liable for Federal income taxes to the extent all of its taxable net investment
income and net realized long-and short-term capital gains, if any, are
distributed to its shareholders.  Although the Trust expects the Fund to be
relieved of all or substantially all Federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, that portion of the
Fund's income which is treated as earned in any such state or locality could be
subject to state and local tax.  Any such taxes paid by the Fund would reduce
the amount of income and gains available for distribution to its shareholders.
     
If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders).  In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.

The Portfolio is not subject to the Federal income taxation. Instead, the Fund
and other investors investing in the 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.
The Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
Fund and the other investors in the Portfolio at the time of such determination.
    
The Fund declares dividends from its net income daily and pays the dividends
monthly.  The Fund reserves the right to include realized short-term gains, if
any, in such daily dividends.  Distributions of the Fund's pro rata share of the
Portfolio's net realized long-term capital gains, if any, and any undistributed
net realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards.  Unless a shareholder instructs the
Trust to pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at NAV in additional shares of
the Fund.       

Distributions of net realized long-term capital gains ("capital gain
dividends"), if any, will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed by the Fund to
shareholders after the close of the Fund's prior taxable year. Dividends paid by
the Fund from its taxable net investment income and distributions by the Fund of
its net realized short-term capital gains are taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
that Fund. The Fund's dividends and distributions will not qualify for the
dividends-received deduction for corporations.

Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually.  Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.

                                       16
<PAGE>
 
    
If a shareholder fails to furnish a correct taxpayer identification number,
fails to report fully dividend or interest income or fails to certify that he or
she has provided a correct taxpayer identification number and that he or she is
not subject to "backup withholding," then the shareholder may be subject to a
31% backup withholding tax with respect to any taxable dividends and
distributions.  An individual's taxpayer identification number is his or her
social security number.  The 31% backup withholding tax is not an additional tax
and may be credited against a taxpayer's regular Federal income tax liability.

                            PERFORMANCE INFORMATION

From time to time, the Trust may advertise "current yield," and/or "effective
yield" for the Fund.  All yield figures are based on historical earnings and are
not intended to indicate future performance.  The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement).  This income is then
"annualized;" that is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment.  The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested.  The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.  The Trust may include this information in sales material and
advertisements for the Fund.
    
Yield is a function of the quality, composition and maturity of the securities
held by the Portfolio and operating expenses of the Fund and the Portfolio.  In
particular, the Fund's yield will rise and fall with short-term interest rates,
which can change frequently and sharply.  In periods of rising interest rates,
the yield of the Fund will tend to be somewhat lower than the prevailing market
rates, and in periods of declining interest rates, the yield will tend to be
somewhat higher.  In addition, when interest rates are rising, the inflow of net
new money to the Fund from the continuous sale of its shares will likely be
invested by the Portfolio in instruments producing higher yields than the
balance of the Portfolio's securities, thereby increasing the current yield of
the Fund.  In periods of falling interest rates, the opposite can be expected to
occur.  Accordingly, yields will fluctuate and do not necessarily indicate
future results.  While yield information may be useful in reviewing the
performance of the Fund, it may not provide a basis for comparison with bank
deposits, other fixed rate investments, or other investment companies that may
use a different method of calculating yield.  Any fees charged by Service Agents
for processing purchase and/or redemption transactions will effectively reduce
the yield for those shareholders.

From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index.  The  yield of the Fund might be
compared with, for example, the IBC U.S. Treasury and Repo All Taxable Money
Fund Average, which is an average compiled by IBC Money Fund Report, a widely
recognized, independent publication that monitors the performance of money
market mutual funds.   Similarly, the yield of the Fund might be compared with
rankings prepared by Micropal Limited and/or Lipper Analytical Services, Inc.,
which are widely recognized, independent services that monitor the investment
performance of mutual funds.  The yield of the Fund might also be compared
without the average yield reported by the Bank Rate Monitor for money market
deposit accounts offered by the 50 leading banks and thrift institutions in the
top five standard metropolitan areas.  Shareholders may make inquiries regarding
the Fund, including current yield quotations and performance information, by
contacting any Service Agent.

Shareholders will receive financial reports semi-annually that include listings
of investment securities held by the Portfolio at those dates.  Annual reports
are audited by independent accountants.
    
The effective yield is an annualized yield based on a compounding of the
unannualized base period return.  These yields are each computed in accordance
with a standard method prescribed by the rules of the SEC, by first determining
the "net change in account value" for a hypothetical account having a share
balance of one share at the beginning of a seven-day period (the "beginning
account value").  The net change in account value equals the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares.  The unannualized
"base period return" equals the net change in account value divided by the
beginning account value.  Realized gains or losses or changes in unrealized
appreciation or depreciation are not taken into account in determining the net
change in account value.
    

                                       17
<PAGE>
 
The yields are then calculated as follows:
   
     Base Period Return    =    Net Change in Account Value
                                ---------------------------
                                Beginning Account Value

     Current Yield         =    Base Period Return x 365/7
 
     Effective Yield       =    [(1 + Base Period Return)365/7] - 1

For the seven days ended December 31, 1998, the Fund's Current Yield was 4.15%
and the Fund's Effective Yield was 4.23%.
    
                              FINANCIAL STATEMENTS
   
The financial statements for the Fund and the Portfolio for the fiscal year
ended December 31, 1998, are incorporated herein by reference to the Fund's
Annual Report dated December 31, 1998.  A copy of the Fund's Annual Report may
be obtained without charge by contacting the Fund.      

                                       18
<PAGE>
 
    
                                   APPENDIX

DESCRIPTION OF RATINGS

Description of S&P corporate bond ratings:

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

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

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

Description of Moody's corporate bond ratings:

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

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

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

Description of Fitch IBCA, Inc. ("Fitch") corporate bond ratings:

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

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

Description of Duff & Phelps' corporate bond ratings:

AAA--Highest credit quality.  The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury Funds.

AA+, AA, AA--High credit quality.  Protection factors are strong.  Risk is
modest but may vary slightly from time to time because of economic conditions.
     

                                       19
<PAGE>
 
    
Description of S&P's municipal bond ratings:

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

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

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

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

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

Description of Moody's municipal bond ratings:

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

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

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

Description of S&P municipal note ratings:

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

Description of Moody's municipal note ratings:

Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG).  This
distinction recognizes the differences between short-term credit risk and long-
term risk.  Loans bearing the designation MIG-1/VMIG-1 are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.  Loans bearing the designation MIG-1/VMIG-2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.

Description of S&P commercial paper ratings:

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

Description of Moody's commercial paper ratings:

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

                                       20
<PAGE>
 
    
Description of Fitch commercial paper ratings:

F1+--Exceptionally Strong Credit Quality.  Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F1--Very Strong Credit Quality.  Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issue.

Description of Duff & Phelps' commercial paper ratings:

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

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

Description of Thompson Bank Watch Short-Term Ratings:

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

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

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

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

Description of Thompson BankWatch Long-Term Ratings:

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

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

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

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

Non-Investment Grade

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

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

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

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

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

D--Default
     

                                       21
<PAGE>
 
    
These long-term debt ratings can also be applied to local currency debt.  In
such cases the ratings defined above will be preceded by the designation "local
currency".

Ratings in the Long-Term Debt categories may include a plus (+) or Minus (-)
designation, which indicates where within the respective category the issue is
placed.
     

                                       22
<PAGE>
 
    
             Investment Adviser of the Portfolio and Administrator
                             BANKERS TRUST COMPANY

                                  Distributor
                            ICC DISTRIBUTORS, INC.
    
                         Custodian and Transfer Agent
                             BANKERS TRUST COMPANY
   
                            Independent Accountants
                          PRICEWATERHOUSECOOPERS LLP
    
                                    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 SAI constitutes an
offer in any state in which, or to any person to whom, such offer may not
lawfully be made.

                             ____________________



Cusip #055922405

PRODUCT CODE (4/99)

                                       23
<PAGE>
 
PART C  OTHER INFORMATION

ITEM 23. Exhibits.
         ---------

(a)     Declaration of Trust dated July 21, 1986; 1
        (i)    Supplement to Declaration of Trust dated October 20, 1986; 1
        (ii)   Second Supplement to Declaration of Trust dated May 16, 1988; 1
(b)     By-Laws; 1
(c)     Incorporated by reference to Exhibit (b) above;
(d)     Investment Advisory Contract dated December 31, 1998; 9
        (i)    Distribution Agreement dated August 11, 1998; 5
        (ii)   Appendix A dated December 9, 1998 to Distribution Agreement; 7
(f)     Bonus or Profit Sharing Contracts - Not applicable;
(g)     Custodian Agreement dated July 1, 1996; 2
        (i)    Amendment No. 2 to Exhibit A of the Custodian Agreement dated
               October 8, 1997; 3
        (ii)   Amendment No. 3 to Exhibit A of the Custodian Agreement dated
               June 10, 1998; 7
        (iii)  Amendment No. 4 to Exhibit A of the Custodian Agreement dated
               December 9, 1998; 7
        (iv)   Cash Services Addendum to Custodian Agreement dated December 18,
               1997; 4
(h)     Administration and Services Agreement dated Oct. 28, 1992; 8    
        (i)    Exhibit D to the Administration and Services Agreement as of
               October 28, 1992, as revised December 9, 1998; 7     
        (ii)   Agreement to Provide Shareholder Services for BT PreservationPlus
               Income Fund as of June 10, 1998; 5
        (iii)  Shareholder Services Plan for BT PreservationPlus Income Fund as
               of June 10, 1998; 5
        (iv)   Expense Limitation Agreement dated September 30, 1998 on behalf
               of Intermediate Tax Free Fund, International Equity Fund, Capital
               Appreciation Fund, Pacific Basin Equity Fund, Latin American
               Equity Fund, Small Cap Fund, International Small Company Equity
               Fund and Global Emerging Markets Equity Fund; 6
        (v)    Expense Limitation Agreement dated December 31, 1998 on behalf of
               Cash Management Fund, Tax Free Money Fund, NY Tax Free Money
               Fund, Treasury Money Fund and Quantitative Equity Fund; 9.

(i)     Legal Opinion - Not applicable;
(j)     Consent of Independent Accountants- filed herewith;
(k)     Omitted Financial Statements - Not applicable;
(l)     Initial Capital Agreements - Not applicable;
(m)     Rule 12b-1 Plans - Not applicable;
(n)     Financial Data Schedules - filed herewith;
(o)     Rule 18f-3 Plan - Not applicable.
___________________________________
<PAGE>
 
1.      Incorporated by reference to Post-Effective Amendment No. 34 to
        Registrant's Registration Statement on Form N-1A ("Registration
        Statement") as filed with the Securities and Exchange Commission
        ("Commission") on July 31, 1995.
2.      Incorporated by reference to Post-Effective Amendment No. 44 to
        Registrant's Registration Statement as filed with the Commission on July
        1, 1997.
3.      Incorporated by reference to Post-Effective Amendment No. 46 to
        Registrant's Registration Statement as filed with the Commission on
        January 28, 1998.
4.      Incorporated by reference to Post-Effective Amendment No. 50 to
        Registrant's Registration Statement as filed with the Commission on June
        30, 1998.
5.      Incorporated by reference to Post-Effective Amendment No. 55 to
        Registrant's Registration Statement as filed with the Commission on
        November 25, 1998.
6.      Incorporated by reference to Post-Effective Amendment No. 56 to
        Registrant's Registration Statement as filed with the Commission on
        January 28, 1999.
7.      Incorporated by reference to Post-Effective Amendment No. 57 to
        Registrant's Registration Statement as filed with the Commission on
        February 8, 1999.
8.      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. 60 to
        Registrant's Registration Statement as filed with the Commission on
        March 15, 1999.

ITEM 24. Persons Controlled by or Under Common Control with Registrant.
         --------------------------------------------------------------

Not applicable.

ITEM 25. Indemnification.
         ----------------

Incorporated by reference to Post-Effective Amendment No. 38 to Registrant's
Registration Statement as filed with the Commission on April 29, 1996.

ITEM 26.  Business and Other Connections of Investment Adviser.
          -----------------------------------------------------

Bankers Trust serves as investment adviser to the 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.
<PAGE>
 
To the knowledge of the Trust, none of the directors or officers of Bankers
Trust, except those set forth below, is 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 Corporation. Set forth below are the names and principal
businesses of the directors and officers of Bankers Trust who are engaged in any
other business, profession, vocation or employment of a substantial nature.

Lee A. Ault III, 62
Director, Bankers Trust and Bankers Trust Corporation since 1997; Private
Investor; Former Chairman and Chief Executive Officer, Telecredit, Inc.; and
Director, Equifax, Inc., Office Depot, Inc., Sunrise Medical Inc. and Pacific
Crest Outward Bound School.

Neil R. Austrian, 59
Director, Bankers Trust and Bankers Trust Corporation since 1997; President and
Chief Operating Officer, National Football League; Director, Rafac Technology
and Office Depot, Inc.; and Trustee of Swarthmore College.

George B. Beitzel, 70
Director, Bankers Trust and Bankers Trust Corporation since 1977; Retired Senior
Vice President and Director, International Business Machines Corporation;
Director, Computer Task Group, Phillips Petroleum Company, and Staff Leasing;
and Chairman Emeritus, Amherst College and Colonial Williamsburg Foundation.

Mark Bieler, 53
Executive Vice President, Bankers Trust Corporation since 1987; Managing
Director, Bankers Trust since 1992; Executive Vice President, Bankers Trust
1987-1992; and Senior Vice President and head of the Human Resources Department
since 1985.

Mary Cirillo, 51
Executive Vice President, Bankers Trust Corporation and Managing Director,
Bankers Trust since June 1997. Ms. Cirillo formerly held many positions in her
20-year career at Citicorp, including division executive from 1989 to 1992;
senior corporate officer for the business evaluation and corporate re-
engineering unit from 1993 to 1994; and Senior Vice President of Global Finance
Operations and Technology from 1994 to 1997. She is head of Bankers Trust's
Global Institutional Services business.

Richard H. Daniel, 52
Vice Chairman and Chief Financial Officer (Principal Financial Officer), Bankers
Trust Corporation and Bankers Trust since 1996; Vice Chairman, Bankers Trust
Corporation since April 1997; 
<PAGE>
 
Controller, Bankers Trust Corporation and Bankers Trust from 1996 to July 1998;
Executive Vice President, Bankers Trust Corporation from 1996 to April 1997;
Vice Chairman, Bankers Trust since September 1997; Managing Director, Bankers
Trust from 1996 to September 1997. Mr. Daniel formerly held the positions of
chief financial officer of Federal Home Loan Mortgage Corporation from 1994 to
1996, and executive vice president and director of financial analysis and
planning at BankAmerica Corporation from 1987 to 1994.

Yves C. de Balmann, 52
Vice Chairman, Bankers Trust Corporation since April 1997; Senior Vice
President, Bankers Trust Corporation from 1995 to 1997; Managing Director,
Bankers Trust from 1988 to September 1997; and Co-Chairman and Co-Chief
Executive Officer, BT Alex. Brown Incorporated.

Robert A. Ferguson, 53
Executive Vice President, Bankers Trust Corporation since April 1997; Senior
Vice President, Bankers Trust Corporation from 1995 to 1997; Managing Director,
Bankers Trust since 1985 and Bankers Trust Australia Limited since 1986.

Phillip A. Griffiths, 60
Director, Bankers Trust and Bankers Trust Corporation since 1994; Director,
Institute for Advanced Study; Chairman, Committee on Science, Engineering and
Public Policy of the National Academies of Sciences and Engineering & the
Institute of Medicine; Member, National Academy of Sciences, American Academy of
Arts and Sciences and American Philosophical Society; 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; and Former Member of the board of
directors, Research Triangle Institute.

Duncan P. Hennes, 42
Executive Vice President, Bankers Trust Corporation since September 1998;
Treasurer, Bankers Trust Corporation and Bankers Trust since September 1998;
Senior Vice President, Bankers Trust Corporation from 1990 to 1998; Managing
Director, Bankers Trust since 1990. Mr. Hennes is head of Bankers Trust's
Trading and Sales business and responsible for Treasury/Funding and Arbitrage.

William R. Howell, 63
Director, Bankers Trust and Bankers Trust Corporation since 1986; Chairman
Emeritus, J.C. Penney Company, Inc.; Director, Exxon Corporation, Halliburton
Company, Warner-Lambert Company, Williams, Inc., Central & South West Corp., and
the National 
<PAGE>
 
Retail Federation; and Chairman, Southern Methodist University Board of
Trustees.

Vernon E. Jordan, Jr., 63
Director, Bankers Trust and Bankers Trust Corporation since 1972; Senior
Partner, Akin, Gump, Strauss, Hauer & Feld, LLP, Attorneys-at-law, Washington,
D.C. and Dallas, Texas; Former President, National Urban League, Inc.; Director,
American Express Company, Chancellor Media Corporation, Dow Jones, Inc., J.C.
Penney Company, Inc., Revlon Group Incorporated, Ryder System, Inc., Sara Lee
Corporation, Union Carbide Corporation and Xerox Corporation; and Trustee, The
Ford Foundation and Howard University.

Eugene A. Ludwig, 52
Vice Chairman, Bankers Trust Corporation and Bankers Trust since May 1998. Mr.
Ludwig formerly held the positions of Comptroller of the Currency of the United
States from 1993 to April 1998, Chairman of the Federal Financial Institutions
Examination Council, Chairman of Neighborhood Housing Services, and director of
the Federal Deposit Insurance Corporation. Mr. Ludwig is head of the Control
Committee and Capital Commitment Committee and responsible for risk and control,
legal, regulatory and other governmental issues central to implementing global
strategies in securities underwriting, lending and related businesses. In
addition, Mr. Ludwig is responsible for the Firm's corporate responsibility
area.

Joseph A. Manganello, Jr., 63
Executive Vice President and Chief Credit Officer, Bankers Trust Corporation
since 1988; Managing Director of Bankers Trust since 1992; and Chief Credit
Officer of Bankers Trust since 1984; Executive Vice President of Bankers Trust
1982-1992; Department Head of the United States Department of Bankers Trust
prior to 1984. He is in charge of the Credit Risk Management Department.

I. David Marshall, 52
Executive Vice President and Chief Information Officer of Bankers Trust
Corporation and Managing Director and Chief Information Officer of Bankers Trust
since October 1996. Mr. Marshall formerly held the positions of executive vice
president and chief information officer of Canadian Imperial Bank of Commerce
from June 1995 to October 1996; group executive for Information Systems &
Operations and a member of the Executive Committee at Unitel Communications,
Inc., the operating arm of AT&T in Canada from 1993 to 1995; and from 1977 to
1993 he served with the Canadian Government consecutively as assistant auditor
general; assistant deputy minister, Information Technology for Revenue Canada
and assistant deputy minister, Information Technology for Employment and
Immigration Canada.
<PAGE>
 
Hamish Maxwell, 72
Director of Bankers Trust and Bankers Trust Corporation since 1984; Retired
Chairman and Chief Executive Officer, Philip Morris Companies Inc.; Director,
Sola International Inc., and Chairman, WPP Group plc.

Rodney A. McLauchlan, 45
Executive Vice President, Bankers Trust Corporation since April 1997; Senior
Vice President, Bankers Trust Corporation from 1992 to April 1997; Managing
Director, BT Alex. Brown since September 1997; Managing Director, BT Securities
Corporation from 1995 to 1997; Managing Director, Bankers Trust from 1987 to
1995. As of 1998, he is Chairman of the Global Banking Group and is head of
Bankers Trust's Latin American Investment Banking business. Mr. McLauchlan also
chairs the Latin American and Asian Advisory Boards and the Client Committee.

Frank N. Newman, 56
Director, Bankers Trust and Bankers Trust Corporation since 1995; Chairman of
the Board, Chief Executive Officer and President, Bankers Trust and Bankers
Trust Corporation; Former Deputy Secretary, United States Treasury; Former Vice
Chairman of the Board and Director, BankAmerica Corporation and Bank of America
NT&SA; Director, Dow Jones, Inc.; Trustee, Carnegie Hall; and Member, Board of
Overseers, Joan & Sanford I Weill Medical College and Joan & Sanford I. Weill
Graduate School of Medical Sciences of Cornell University.

N.J. Nicholas Jr., 59
Director of Bankers Trust and Bankers Trust Corporation since 1989; Investor;
Former Co-chief Executive Officer of Time Warner Inc. Director, Boston
Scientific Corporation, Priceline.com Inc. and Xerox Corporation.

Russell E. Palmer, 64
Director, Bankers Trust and Bankers Trust Corporation since 1988; Chairman and
Chief Executive Officer, The Palmer Group; Former Dean, The Wharton School,
University of Pennsylvania; Former Chief Executive Officer, Touche Ross & Co.
(now Deloitte & Touche). Director, Allied-Signal Inc., Federal Home Loan
Mortgage Corporation, GTE Corporation, The May Department Stores Company and
Safeguard Scientifics, Inc.; and Trustee, the University of Pennsylvania.

Mayo A. Shattuck III, 44
Vice Chairman, Bankers Trust Corporation since September 1997. He formerly held
the positions of President and Chief Operating Officer of Alex. Brown
Incorporated from 1991 to September 1997. 
<PAGE>
 
He is Co-Chairman and Co-Chief Executive Officer of BT Alex. Brown Incorporated.

Donald L. Staheli, 67
Director, Bankers Trust and Bankers Trust Corporation since 1996;Retired
Chairman of the Board and Chief Executive Officer, Continental Grain Company;
Director, Continental Grain Company, ContiFinancial Corporation, Prudential
Insurance Company of America and America's Promise; and Chairman, The Points of
The Light Foundation.

Patricia Carry Stewart, 70
Director, Bankers Trust and Bankers Trust Corporation since 1977; Former Vice
President, The Edna McConnell Clark Foundation (a charitable foundation); Chair,
Community Foundation for Palm Beach and Martin Counties; Trustee Emerita,
Cornell University; and a life member, Board of Overseers, Joan & Sanford I
Weill Medical College and Joan & Sanford I. Weill Graduate School of Medical
Sciences of Cornell University.

G. Richard Thoman, 54
Director, Bankers Trust and Bankers Trust Corporation since 1997; President,
Chief Operating Officer and Director, DaimlerChrysler AG, Union Bancaire Privee
(Switzerland), General Electric Investments Equity Advisory Board, Yale School
of Management Advisory Board, Fletcher School of Law and Diplomacy Advisory
Board, the INSEAD U.S. Advisory Board and The Americas Society; President, Chief
Executive Officer and Director, Fuji Xerox Corporation, Ltd.; and Member,
Council on Foreign Relations.

George J. Vojta, 63
Director, Bankers Trust and Bankers Trust Corporation since 1997; Vice Chairman
of the Board, Bankers Trust and Bankers Trust Corporation; Director, Alicorp,
S.A., Globeset and Private Export Funding Corp.; Member, New York State Banking
Board; Vice Chairman of the Board of Trustees, St. Luke's-Roosevelt Hospital
Center; Partner, New York City Partnership; Chairman, Wharton Financial Services
Center; and Member, Bretton Woods Committee.

Paul A. Volcker, 71
Director, Bankers Trust and Bankers Trust Corporation since 1996; Former
Chairman and Chief Executive Officer, Wolfensohn & Co., Inc.; Former Chairman,
Board of Governors of the Federal Reserve System; Director, Nestle S.A.,
Prudential Insurance Company of America, American Council on Germany, Council on
Foreign Relations and The Japan Society; Trustee, The American Assembly; and
Member, the advisory boards of several international corporations.

Melvin A. Yellin, 56
<PAGE>
 
Executive Vice President and General Counsel, Bankers Trust Corporation and
Managing Director and General Counsel of Bankers Trust since 1996; Senior Vice
President (Chief Legal Officer), Bankers Trust Corporation and Managing Director
(Chief Legal Officer) of Bankers Trust since 1995; Managing Director and Deputy
General Counsel, Bankers Trust from 1992 to 1995; Vice President and Counsel,
Bankers Trust from 1981 to 1992. He is in charge of the Legal Department.

* Certain of the executive officers held the Senior Managing Director title for
a portion of 1996 and 1997. Bankers Trust eliminated the title effective January
1, 1998 and reverted to the use of the Managing Director title as the most
senior title below that of Vice Chairman.

Item 27. Principal Underwriters.
         -----------------------

(a)  ICC Distributors, Inc., the Distributor for shares of the Registrant, also
     acts as principal underwriter for the following open-end investment
     companies: BT Advisor Funds, BT Institutional Funds, BT Pyramid Mutual
     Funds, Cash Management Portfolio, Intermediate Tax Free Portfolio, NY Tax
     Free Money Portfolio, Treasury Money Portfolio, International Equity
     Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio,
     Asset Management Portfolio and BT Investment Portfolio.

(b)  Unless otherwise stated, the principal business address for the following
     persons is Two Portland Square, Portland, Maine 04101.
 
Name and Principal          Positions and Offices       Positions and Offices
Business Address            With Distributor            With Registrant
- ----------------            ----------------            ---------------
 
John Y. Keffer              President                   None
Sara M. Morris              Treasurer                   None
David I. Goldstein          Secretary                   None
Benjamin L. Niles           Vice President              None
Margaret J. Fenderson       Assistant Treasurer         None
Dana L. Lukens              Assistant Secretary         None
Nanette K. Chern            Chief Compliance Officer    None
 
(c) None
 
ITEM 28. Location of Accounts and Records.
         --------------------------------
 
BT Investment Funds:                          BT Alex. Brown
(Registrant)                                  One South Street
                                              Baltimore, MD  21202
 
<PAGE>
 
Bankers Trust Company:                        130 Liberty Street
(Custodian, Investment Adviser                New York, NY 10006
and Administrator)

Investors Fiduciary                           127 West 10th Street,
Trust Company:                                Kansas City, MO 64105.

ICC Distributors, Inc.:                       Two Portland Square
(Distributor)                                 Portland, ME 04101

ITEM 29. Management Services.
         --------------------

Not Applicable

ITEM 30. Undertakings.
         -------------

Not Applicable
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 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,
as amended, and has duly caused this Amendment to its Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and the State of Maryland on this 26th day of April 1999.


                    BT INVESTMENT FUNDS

                    By:  /s/ Daniel O. Hirsch
                         Daniel O. Hirsch, Secretary
                         April 26, 1999

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

/s/ DANIEL O. HIRSCH          Secretary                         April 26, 1999
Daniel O. Hirsch              (Attorney in Fact for the Persons
                              Listed Below)

/s/ JOHN Y. KEFFER*           President and
John Y. Keffer                Chief Executive Officer

/s/ JOSEPH A. FINELLI*        Treasurer (Principal
Joseph A. Finelli             Financial and Accounting Officer)

/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 - Incorporated by reference to Post-Effective Amendment
No. 57 to Registrant's Registration Statement as filed with the Commission on
February 8, 1999.
<PAGE>
 
** By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 45 to Registrant's Registration Statement as filed with the Commission on
September 10, 1997.
<PAGE>
 
                                   SIGNATURES

          TREASURY MONEY PORTFOLIO has duly caused this Post Effective Amendment
No. 61 to the Registration Statement on Form N-1A of BT Institutional Funds to
be signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and the State of Maryland on the 26th day of April, 1999.

                         TREASURY MONEY PORTFOLIO

                   By:   /s/ Daniel O. Hirsch
                         Daniel O. Hirsch, Secretary
                         April 26, 1999

NAME                          TITLE                             DATE
- --------------------------------------------------------------------------------

/s/ DANIEL O. HIRSCH          Secretary                         April 26, 1999
Daniel O. Hirsch              (Attorney in Fact for the Persons
                              Listed Below)

/s/ JOHN Y. KEFFER*           President and
John Y. Keffer                Chief Executive Officer

/s/ JOSEPH A. FINELLI*        Treasurer (Principal
Joseph A. Finelli             Financial and Accounting Officer)

/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 - Incorporated by reference to Post-Effective Amendment
No. 28 to the Registration Statement as filed with the Commission on February 8,
1999.
** By Power of Attorney -- Incorporated by reference to Post-Effective Amendment
No. 18 to the Registration Statement as filed with the Commission on January 3,
1997.
<PAGE>
 
                                   SIGNATURES

          CASH MANAGEMENT PORTFOLIO has duly caused this Post Effective
Amendment No. 61 to the Registration Statement on Form N-1A of BT Institutional
Funds to be signed on its behalf by the undersigned, duly authorized, in the
City of Baltimore and the State of Maryland on the 26th day of April, 1999.

                         CASH MANAGEMENT PORTFOLIO

                    By:  /s/ Daniel O. Hirsch
                         Daniel O. Hirsch, Secretary
                         April 26, 1999

NAME                          TITLE                             DATE
- --------------------------------------------------------------------------------

/s/ DANIEL O. HIRSCH          Secretary                         April 26, 1999
Daniel O. Hirsch              (Attorney in Fact for the Persons
                              Listed Below)

/s/ JOHN Y. KEFFER*           President and
John Y. Keffer                Chief Executive Officer

/s/ JOSEPH A. FINELLI*        Treasurer (Principal
Joseph A. Finelli             Financial and Accounting Officer)

/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 - Incorporated by reference to Post-Effective Amendment
No. 28 to the Registration Statement as filed with the Commission on February 8,
1999.
**  By Power of Attorney -- Incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement as filed with the Commission on
January 3, 1997.
<PAGE>
 
                                   SIGNATURES

          TAX FREE MONEY PORTFOLIO has duly caused this Post Effective Amendment
No. 61 to the Registration Statement on Form N-1A of BT Institutional Funds to
be signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and the State of Maryland on the 26th day of April, 1999.

                         TAX FREE MONEY PORTFOLIO

                    By:  /s/ Daniel O. Hirsch
                         Daniel O. Hirsch, Secretary
                         April 26, 1999

NAME                          TITLE                               DATE
- --------------------------------------------------------------------------------

/s/ DANIEL O. HIRSCH          Secretary                           April 26, 1999
Daniel O. Hirsch              (Attorney in Fact for the Persons
                              Listed Below)

/s/ JOHN Y. KEFFER*           President and
John Y. Keffer                Chief Executive Officer

/s/ JOSEPH A. FINELLI*        Treasurer (Principal
Joseph A. Finelli             Financial and Accounting Officer)

/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 - Incorporated by reference to Post-Effective Amendment
No. 28 to the Registration Statement as filed with the Commission on February 8,
1999.
**  By Power of Attorney -- Incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement as filed with the Commission on
January 3, 1997.
<PAGE>
 
                                   SIGNATURES

          NY TAX FREE MONEY PORTFOLIO has duly caused this Post Effective
Amendment No. 61 to the Registration Statement on Form N-1A of BT Institutional
Funds to be signed on its behalf by the undersigned, duly authorized, in the
City of Baltimore and the State of Maryland on the 26th day of April, 1999.

                         NY TAX FREE MONEY PORTFOLIO

                   By:   /s/ Daniel O. Hirsch
                         Daniel O. Hirsch, Secretary
                         April 26, 1999

NAME                          TITLE                             DATE
- --------------------------------------------------------------------------------

/s/ DANIEL O. HIRSCH          Secretary                         April 26, 1999
Daniel O. Hirsch              (Attorney in Fact for the Persons
                              Listed Below)

/s/ JOHN Y. KEFFER*           President and
John Y. Keffer                Chief Executive Officer

/s/ JOSEPH A. FINELLI*        Treasurer (Principal
Joseph A. Finelli             Financial and Accounting Officer)

/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 - Incorporated by reference to Post-Effective Amendment
No. 28 to the Registration Statement as filed with the Commission on February 8,
1999.
**  By Power of Attorney -- Incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement as filed with the Commission on
January 3, 1997.

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<SERIES>
   <NUMBER> 1
   <NAME> CASH MANAGEMENT FUND
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<INVESTMENTS-AT-COST>                      233,137,653
<INVESTMENTS-AT-VALUE>                     233,137,653
<RECEIVABLES>                                   12,701
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                             233,150,354
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      564,526
<TOTAL-LIABILITIES>                            564,526
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   232,659,014
<SHARES-COMMON-STOCK>                      232,659,014
<SHARES-COMMON-PRIOR>                      138,505,560
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                       (73,205)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                               232,585,828
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                               8,624,381
<EXPENSES-NET>                                 915,469
<NET-INVESTMENT-INCOME>                      7,708,912
<REALIZED-GAINS-CURRENT>                         8,980
<APPREC-INCREASE-CURRENT>                            0
<NET-CHANGE-FROM-OPS>                        7,717,892
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                            0
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                  2,259,953,184
<NUMBER-OF-SHARES-REDEEMED>            (2,168,567,087)
<SHARES-REINVESTED>                          2,767,357
<NET-CHANGE-IN-ASSETS>                    (94,162,434)
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                976,582
<AVERAGE-NET-ASSETS>                       160,763,368
<PER-SHARE-NAV-BEGIN>                             1.00
<PER-SHARE-NII>                                   0.05
<PER-SHARE-GAIN-APPREC>                           0.00
<PER-SHARE-DIVIDEND>                              0.00
<PER-SHARE-DISTRIBUTIONS>                       (0.05)
<RETURNS-OF-CAPITAL>                              0.00
<PER-SHARE-NAV-END>                               1.00
<EXPENSE-RATIO>                                   0.75
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<SERIES>
   <NUMBER> 2
   <NAME> TAX FREE MONEY FUND
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<INVESTMENTS-AT-COST>                      201,601,117
<INVESTMENTS-AT-VALUE>                     201,601,117
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                  15,131
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                             201,616,248
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      522,025
<TOTAL-LIABILITIES>                            522,025
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   201,143,398
<SHARES-COMMON-STOCK>                      201,152,038          
<SHARES-COMMON-PRIOR>                      150,537,600
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                       (49,175)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                               201,094,223
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                               5,433,297
<EXPENSES-NET>                                 915,978
<NET-INVESTMENT-INCOME>                      4,517,319
<REALIZED-GAINS-CURRENT>                         2,973
<APPREC-INCREASE-CURRENT>                            0
<NET-CHANGE-FROM-OPS>                        4,520,292
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                  (4,523,091)
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                  1,182,947,705
<NUMBER-OF-SHARES-REDEEMED>            (1,133,170,578)
<SHARES-REINVESTED>                            837,311
<NET-CHANGE-IN-ASSETS>                      50,611,639
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                976,362
<AVERAGE-NET-ASSETS>                       166,541,588
<PER-SHARE-NAV-BEGIN>                             1.00
<PER-SHARE-NII>                                   0.03
<PER-SHARE-GAIN-APPREC>                           0.00
<PER-SHARE-DIVIDEND>                              0.00
<PER-SHARE-DISTRIBUTIONS>                       (0.03)
<RETURNS-OF-CAPITAL>                              0.00
<PER-SHARE-NAV-END>                               1.00
<EXPENSE-RATIO>                                   0.75
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<SERIES>
   <NUMBER> 3
   <NAME> NY TAX FREE MONEY FUND
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<INVESTMENTS-AT-COST>                       78,054,171
<INVESTMENTS-AT-VALUE>                      78,054,171
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                   3,394
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                              78,057,565
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      218,335
<TOTAL-LIABILITIES>                            218,335
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                    77,859,092
<SHARES-COMMON-STOCK>                       77,859,092
<SHARES-COMMON-PRIOR>                       85,397,419
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                       (19,862)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                                77,839,230
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                               2,720,672
<EXPENSES-NET>                                 470,872
<NET-INVESTMENT-INCOME>                      2,249,800
<REALIZED-GAINS-CURRENT>                         (472)
<APPREC-INCREASE-CURRENT>                            0
<NET-CHANGE-FROM-OPS>                        2,249,328
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                  (2,249,800)
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                    445,725,331
<NUMBER-OF-SHARES-REDEEMED>              (453,807,595)
<SHARES-REINVESTED>                            557,583
<NET-CHANGE-IN-ASSETS>                     (7,525,153)
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                516,266
<AVERAGE-NET-ASSETS>                        85,639,479
<PER-SHARE-NAV-BEGIN>                             1.00
<PER-SHARE-NII>                                   0.03
<PER-SHARE-GAIN-APPREC>                           0.00
<PER-SHARE-DIVIDEND>                              0.00
<PER-SHARE-DISTRIBUTIONS>                       (0.03)
<RETURNS-OF-CAPITAL>                              0.00
<PER-SHARE-NAV-END>                               1.00
<EXPENSE-RATIO>                                   0.75
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 6
<SERIES>
   <NUMBER> 4
   <NAME> TREASURY MONEY FUND
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<INVESTMENTS-AT-COST>                      309,479,551
<INVESTMENTS-AT-VALUE>                     309,479,551
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                  25,480
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                             309,505,031
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      594,101
<TOTAL-LIABILITIES>                            594,101
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   308,792,470
<SHARES-COMMON-STOCK>                      308,792,470
<SHARES-COMMON-PRIOR>                      268,192,162
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                         36,843
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                               308,910,930
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                                    0
<OTHER-INCOME>                              20,135,603
<EXPENSES-NET>                               2,129,609
<NET-INVESTMENT-INCOME>                     18,005,994
<REALIZED-GAINS-CURRENT>                        37,012
<APPREC-INCREASE-CURRENT>                            0
<NET-CHANGE-FROM-OPS>                       18,043,006
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                 (18,996,773)
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                  7,207,567,766
<NUMBER-OF-SHARES-REDEEMED>            (7,508,473,235)
<SHARES-REINVESTED>                         14,463,357
<NET-CHANGE-IN-ASSETS>                   (286,442,281)
<ACCUMULATED-NII-PRIOR>                         81,617
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                              2,205,159
<AVERAGE-NET-ASSETS>                       386,462,371
<PER-SHARE-NAV-BEGIN>                             1.00
<PER-SHARE-NII>                                   0.05
<PER-SHARE-GAIN-APPREC>                           0.00
<PER-SHARE-DIVIDEND>                              0.00
<PER-SHARE-DISTRIBUTIONS>                       (0.05)
<RETURNS-OF-CAPITAL>                              0.00
<PER-SHARE-NAV-END>                               1.00
<EXPENSE-RATIO>                                   0.75
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>

<PAGE>
 
CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 61 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated February 5, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Reports to Shareholders of NY Tax Free Money Fund, Treasury Money Fund, Tax Free
Money Fund, Cash Management Fund (constituting parts of the BT Investment Funds)
and NY Tax Free Money Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, and Cash Management Portfolio, which are incorporated by reference
into the Registration Statement. We also consent to the references to us under
the heading "Financial Highlights" in the Prospectus and under the heading
"Counsel and Independent Accountants" in the Statement of Additional
Information.

PricewaterhouseCoopers LLP
Baltimore, Maryland
April 26, 1999


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